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MUNITIONS INDUSTRY
HEARINGS
BEFORE THE
SPECIAL COMMITTEE
INVESTIGATING THE MUNITIONS INDUSTRY
UNITED STATES SENATE
SEVENTY-THIED CONGRESS
PURSUANT TO
S. Res. 206
A RESOLUTION TO MAKE CERTAIN INVESTIGATIONS
CONCERNING THE MANUFACTURE AND SALE
OF ARMS AND OTHER WAR MUNITIONS
PART 4
SEPTEMBER 10, 11, AND 12, 1934
CURTISS-WRIGHT EXPORT CORPORATION
Printed for the use of the
Special Committee Investigating the Munitions Industry
UNITED STATES
GOVERNMENT PRINTING OFFICE
8387a WASHINGTON : 1934
MUNITIONS INDUSTRY
HEARINGS
BEFORE THE
SPECIAL COMMITTEE
INVESTIGATING 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 4
SEPTEMBER 10, 11, AND 12, 1934
CURTISS-WRIGHT EXPORT CORPORATION
Printed for the use of the
Special Committee Investigating the Munitions Industry
*(%■
UNITED STATES
GOVERNMENT PRINTING OFFICE
83876 WASHINGTON : 1934
tm 13 1935
/ijsM
SPECIAL COMMITTEE INVESTIGATING THE MUNITIONS INDUSTRY
GERALD P. NYE, North Dakota, Chairman
WALTER F. GEORGE, Georgia ARTHUR H. VANDENBERG, Michigan
BENNETT CHAMP CLARK, Missouri W. WARREN BARBOUR, New Jersey
HOMER T. BONE, Washington
JAMES P. POPE, Idaho
Stephen Raushenbush^ Secretary
n
CtMirged to credit acct
«ith SupL of Documents
CONTENTS
Testimony of — Page
AUard, J. S., president Curtiss-Wright Export Corporation. 691, 721, 276, 799
Hotclikiss, Henry G., counsel Curtiss-Wright companies 692, 721
Webster, Clarence W., sales representative of Latin-American
Curtiss-Wright products 704, 721, 767, 799
Corporate organization of Curtiss-Wright companies 691
Sales of military materials 695
Severity and nature of competition faced in foreign markets 706
Commissions paid in connection with foreign sales 723
Relations with foreign officials 738
Negotiations in Mexico 754
Activities in countries engaged in war or fearful of war 767
Curtiss-Wright Co.'s attitude toward embargoes 807
Relations with officials and departments of United States Government 812
War and Navy Departments aid in foreign sales of aircraft 828
m
INVESTIGATION OF MUNITIONS INDUSTRY
MONDAY, SEPTEMBER 10, 1934
United States Senate,
Special Committee to Investigate
THE Munitions Industry,
Washington, D. C.
The hearing was resumed at 10 a. m. in the caucus room, Senate
Office Building, pursuant to taking of recess, Senator Gerald P. Nye
presiding.
Present: Senators Nye (chairman), George, Clark, Bone, Pope,
and Vanclenberg.
Also present : Alger Hiss, investigator.
TESTIMONY OF JOHN S. ALLARD
(The witness was duly sworn by the Chairman.)
The Chairman. Your full name, please.
Mr. Allard. John S. Allard.
The Chairman. A^Hiat is your connection with the Curtiss-Wright
Export Corporation ?
Mr. Allard. I am president.
The Chairman. For the information of those present, Mr. Hiss,
one of the committee's staff, will proceed with the examination of Mr.
Allard. Proceed, Hr. Hiss.
CORPORATE organization OF CURTISS-^\TtIGHT COMPANIES
Mr. Hiss. Mr. Allard, as I understand it, the Curtiss-Wright
Export Corporation, of which you are president, is the selling agent
for foreign sales of the Curtiss-Wright Companies, engaged in the
manufacture of airplanes and airplane engines, is that correct?
Mr. Allard. That is correct.
Mr. Hiss. The principal subsidiaries of the Curtiss-Wright Cor-
poration, which is the parent of your company, are the Curtiss
Airplane & Motor Co. of Buffalo, which manufactures planes, is that
correct ?
Mr. Allard. That is correct.
Mr. Hiss. The Wright Aeronautical Corporation of Paterson,
New Jersey, which manufactures engines?
Mr. Allard. That is correct.
Mr. Hiss. The Curtiss-Wright Airplane Co., of St. Louis, which
manufactures planes ?
Mr. Allard. That is correct.
691
692 MUNITIONS INDUSTRY
Mr. Hiss. The Curtiss -Wright Airports Corporation which owns
a series of airports and runs subsidiary corporations?
Mr. Allard. That is correct.
Mr. Hiss. The Curtiss-Caproni Corporation which has a plant in
Baltimore which has been rented to the General Aviation Corpora-
tion at the present time?
Mr. Allard. It has been up to the present time. I think they are
through now.
i\Ir. Hiss. Then, in addition, the Keystone Aircraft Corporation
of Bristol, Pa., which is at present shut down ; is that correct?
Mr. Allard. That is correct.
Mr. Hiss. What interest does your company consider, or do the
Curtiss-Wright Companies consider, as the major stockholder of the
parent corporation, the Curtiss-Wright Corporation?
Mr. Allard. I have no idea who the major stockholders are.
]Mr. Hiss. The committee was furnished with a list of the Curtiss-
Wright Co.'s stockholders, that is of those having over 5,000 shares,
the majority of whom are brokerage houses carrying stock for
customers.
Mr. Allard. That is right.
Mr. Hiss. We made inquiries of those brokerage houses, asking
for whom they held stock and we found that Mr. Richard F. Hoyt,
who is chairman of the board of the parent corporation, the Curtiss-
Wright Corporation ?
Mr. Allard. That is right.
Mr. Hiss. Holds some 28,000 of the class A stock. Will you
explain to the committee which of the two classes of stock of the
parent corporation is the voting stock, the common or the class A?
Mr. Allard. I honestly don't know. I think class A, but I will
have to check that and furnish the information.
Mr. Hiss. Is there someone here who can furnish that informa-
tion ?
Mr. Allard. I think, Mr. Hotchkiss.
Mr. Hotchkiss. I will be glad to furnish you the certificates on
that. It is common and class A stock.
The Chairman. Why don't you sit right here, Mr. Hotchkiss, and
if Mr. Allard cannot give the information, you may be prepared to
give it for him.
TESTIMONY OF HENRY G. HOTCHKISS
(The witness was duly sworn by the chairman.)
The Chairman. Give the reporter your full name, please.
Mr. Hotchkiss. My full name is Heniy G. Hotchkiss.
The Chairman. And your connection with the Curtiss-Wright
Co.?
Mr. Hotchkiss. Counsel.
Mr. Hiss. Mr. Hotchkiss, you say that both class A and the com-
mon stock of the Curtiss-Wright Co., the parent corporation, have
voting rights ?
Mr. Hotchkiss. Yes, sir.
Senator Bone. Do they have equal voting rights ?
Mr. Hotchkiss. Yes ; one vote to each share.
MUNITIONS INDUSTRY 693
Mr. Hiss. Mr. Allard, if this statement is correct, that Richard F.
Hoyt owns 28,107 shares of class A stock ; that Mr. Hugh D. Auchin-
closs owns 20,000 shares of common stock and 5,000 shares of class A
stock; that Mr. Donald E. McLennan holds 25,204 shares of common
stock and 5,601 shares of class A stock; that there is one addi-
tional shareholder holding approximately 25,000 shares, and that
is Mr. H. Harrison Smith, who holds 24,611 shares of the class A
stock; that the other shareholders all hold 15,000 or less shares,
and the great majority hold considerably less, with the exception of
one shareholder, Mr. John Sanderson, who holds, on behalf of the
Sperry Corporation, 365,951 shares of the common stock and 98,132
shares of class A stock; then that is the largest block of stock, and
seems, in view of the wide-spread holdings of the rest of the stock,
to represent a controlling interest. Do you consider that the Sperry
Corporation's holdings in the Curtiss-Wright Co. are a controlling
interest?^
Mr. Allard. No ; I should say not, not in any sense of the word.
Mr. Hiss. I would like to call your attention to some of the direc-
tors who are on the Curtiss-Wright Corporation board and also on
the Sperry Corporation board. Mr. G. N. Armsby, who is chairman
of the board of directors of the Sperry Corporation, is a member of
the board of directors of the Curtiss-Wright Corporation and all of
the subsidiaries.
Mr. Allard. I know he is of most of the subsidiaries of the parent
corporation, but I do not know whether he is on all of them or not.
Mr. Hiss. Mr. T. A. Morgan, who is president of the parent cor-
poration, is also president of the Sperry Corporation, is he not?
Mr. Allard. That is correct.
Mr. Hiss. I have a chart, Mr. Chairman, I think may be helpful
on this question of control, which I would like to ask the witness a
few questions about. I think probably it is wisest to set it there.
That chart, Mr. Allard, is supposed to represent the interest of
the General Motors Corporation in various airplane manufacturing
companies.
The Chairman. Mr. Hiss, before you start in on that, I would
suggest that the exhibit be offered for the record.
Mr. Hiss. I would like to have this chart offered as an Exhibit
for the record.
(The chart referred to was marked " Exhibit No. 268 ", and
appears in the appendix facing p. 859.)
Mr. Hiss. You will notice, Mr. Allard, that the du Pont Co.,
through a wholly owned subsidiary of the du Pont Co., has a 28
percent interest in the General Motors Co. stock. That appears in
the 1933 annual report of the du Pont Co. The General Motors
Corporation, in turn, has 48 percent of the stock of the General
Aviation Corporation. General Aviation Coi-poration and General
Motors Corporation together own 52 percent of the stock of North
American Aviation. All of the stock of the Sperry Corporation
has been distributed to trustees under a voting-trust agreement and
the certificates of the voting-trust agreement have been distributed
to the stockholders of the North American Co., which means that
^ The list of stockholders in Curtiss-Wright was marked " Exhibit No. 26S-A" and
is on flle with the committee.
694 MUNITIONS INDUSTRY
the stockholders of North American Aviation control the Sperry
Corporation through the voting trust. Is that correct?
Mr, Allard. As you stated it; yes.
Mr. Hiss. The Sperry Corporation, as I stated before, owns
365,951 shares of the Curtiss-Wright parent corporation, which is
shown to the right of this chart, which has been made an exhibit.
Mr. Allard. Yes.
Senator Bone. Is that control?
Mr. Allard. No, sir.
Mr. Hiss. Mr. Allard thinks that is not a controlling interest, and
I pointed out that the president of the Sperry Corporation, T. A.
Morgan, is also the president of the Curtiss-Wright Corporation, and
that G. N. Armsby, the chairman of the Sperry board, is also on
the Curtiss-Wright board.
Now, Mr. Allard, Mr. Armsby, who is on the board of the Curtiss-
Wright parent corporation, has been or is now a director of the
North American Aviation. Mr. J. C. Cowdin, who is a member
of the board of directors of the Curtiss-Wright Corporation and
many of its subsidiaries, has also at one time or another been on
the board of the North American Aviation.
Mr. E. A. Pierce, who is a member of the Curtiss-Wright parent
corporation board, is on the board of directors of the North Ameri-
can Co.
Mr. Allard. No, sir.
Mr. Hiss. He has been until recently?
Mr. Allard. Not to my knowledge.
Mr. Hiss. Mr. J. C. Willson is a member of the board of the
Curtiss-Wright Corporation ?
Mr. Allard. Yes.
Mr. Hiss. He has, according to the Black committee, at one time
or other been a member of the board of directors of the North Amer-
ican Aviation also?
Mr. Allard. Yes, sir.
Mr. Hiss. I would like to call the attention of the committee to
the Douglas Aircraft Co., which also makes planes — 25 percent of its
stock is held by North American Corporation. The Douglas Air-
craft Company you consider one of your competitors, Mr. Allard?
Mr. Allard. Yes, sir.
Mr. Hiss. Mr. J. C. Cowdin is also a member of the board of direc-
tors of the Douglas Corporation, according to Moody's, and he is a
director of the Curtiss-Wright Corporation.
Mr. HoTCHKiss. Mr. Chairman, might I say with reference to the
Exhibit which has been offered as No. 268, if you do not mind, it
appears from the outline there that the North American Aviation,
Inc., as such owns stock in the parent corporation as such. I simply
want that understood, and I want the examiner, Mr. Hiss, to under-
stand that the stock of the Sperry Corporation has been distributed
by certificates to the stockholders of North American Corporation.
Mr. Hiss. To the stockholders of North American, which controls
the Sperry Corporation through a trust arrangement ?
Mr. HoTCHKiss. That is correct.
Mr. Hiss. Of the stock of the North American Corporation, 52
percent is owned by General Motors and General Aircraft.
Mr. HoTCHKiss. I have no knowledge of that.
MUNITIONS INDUSTRY 695
SALES OF MILITARY MATERIAL
Mr. Hiss. Mr. Allard, as to the Curtiss-Wright Go's sales through
your companies of airplane engines and equipment, they are all
primarily for military purposes, are they not?
Mr. Allard. The majority of them; yes.
Mr. Hiss. For example, from figures furnished the committee by
your company, it appears that during the period 1932 to April 30,
1934, out of a total number of planes sold by your company, number-
ing 179, only 8 are listed by your company as commercial planes.
Two of those are listed as being sold in 1933 to Germany and they
are described as HaAvks. What type of plane is the Hawk?
Mr. Allard. That is a single-seat plane that can be used for acro-
batic purposes, stunting, and is probably the best plane in the world
for that ])urpose. used by Al Williams and Jimmy Doolittle, and
people like that, for acrobatic purposes.
Mr. Hiss. You sell it primarily to governments as a pursuit plane ?
Mr. Allard. Not with the same type of equipment and construc-
tion, as a pursuit plane.
Mr. Hiss. In what way do the two planes your company has re-
ferred to as Hawks differ in construction from the Hawk planes
you sell as pursuit planes?
Mr. Allard. The absolute lack of any military equipment or ar-
rangement for military equipment.
Mr. Hiss. Could that be added, or was there any fundamental
difference in the underlying structure?
Mr. Allard. Considerable difference. It could be. after a great
deal of expense in sending it back to the factory here, added if
necessary, but it could not be done in the field.
Mr. Hiss. Is it not true that a great many commercial planes are
convertible into military-purpose planes?
Mr. Allard. I believe any commercial plane can be used for mili-
tary purposes, but not as efficiently, necessarily.
Mr. Hiss. I should like to call your attention to a letter dated
]\Iarch 23, 193-4, from your company's agents in Mexico — Watson,
Phillips & Cia. You will see in the third paragraph there that the
letter says :
We note that we are allowed the agency solely for military airplanes and
engines, and that no mention is made of civil machines. Although it is
scarcely likely that we may obtain an order for civil airplanes, we presume
you will have no objection to our soliciting same, should opportunity offer.
That is correct as far as your company is concerned that your
agencies abroad are primarily interested in making sales of military
planes and that the market is primarily a military market?
]\Ir. Allard. I state this, that the market is primarily a military
market but our agencies have both the right where it is possible to
give the right to one outfit, to sell both commercial and military. In
this particular instance we had another man selling commercial
planes in Mexico.
Mr. Hiss. I offer this letter as " Exhibit No. 269,"
(The letter referred to was marked " Exhibit No. 269 ", and is
included in the appendix on p. 859.)
696 MUNITIONS INDUSTRY
The Chairman. Would an inquiry of Mr. Allard at this time be
out of order?
Mr. Hiss. Certainly not.
The Chairman. Mr. Allard, you spoke of planes being poten-
tiall}?^ for war use.
Mr. Allard. Yes, sir.
The Chairman. We are to understand from that, are we, that to
some degi'ee, however great or however small, but to some degree
nevertheless, all of these planes that are engaged in air-mail service
could be utilized in time of war for war purposes?
Mr. Allard. Yes; that is purely an opinion of mine that they
could.
The Chairman. Are there divergent opinions in the industry on
that subject?
Mr. Allard. I do not know, I am sure.
Mr. Hiss. I would like also to call attention to a letter written
last February, 1934, addressed to you, from Mr. Bruce Leighton,
signed " Bruce ", I judge that is Mr. Bruce Leighton ?
Mr. Allard. That is right.
Mr. Hiss. Mr. Leighton is vice president of your company?
Mr. Allard. That is correct.
Mr. Hiss. And is your European sales representative?
Mr. Allard. Yes; at the present time.
Mr. Hiss. On the second page of this letter, which refers to sales
of European planes in general, that is, planes in Europe, Mr.
Leighton says :
When you sell airplanes in Europe you deol with governments. You are
dealing in military equipment, which is invariably and popularly looked upon
as vital to the personal safety of every individual.
Then he adds:
Remember that in Europe civil air transports are usually looked upon as
military planes in disguise.
Then he repeats at a later part of the letter bringing out the same
point, where he says :
What are the sales arguments to keep Condors there?
They are one of the largest planes j^our company builds ?
Mr. Allard. That is right.
Mr. Hiss. And they are used for large bombers, as well as trans-
port planes?
Mr. Allard. Yes.
Mr. Hiss. Continuing, the letter says :
What are the sales arguments to keep Condors in the picture in the face
of certain Douglas competition and existing United competition?
That is United Aircraft Co. ?
Mr. Allard. Yes, sir.
Mr. Hiss. And then he continues :
Both of which have materially higher specifications to offer and hence appeal
to the military elements strongly. (Don't forget that European transport
planes are in reality considered merely as bombers in disguise).
The Chairman. I suggest we would expedite matters considerably
if you would make it clear that each letter you introduce is to be
an exhibit and whether it is to be made a part of the record or not.
MUNITIONS INDUSTRY 697
Mr. Hiss. It has been my intention in all of these copies handed
to the witness, that they shall actually go in the record unless the
committee decides otherwise.
The Chairman. Very well, the reporter will understand that.
Mr. Hiss. I offer the 'letter referred to as " Exhibit No. 270."
(The letter referred to was marked " Exhibit No. 270 ", and is
included in the appendix on p. 860.)
Mr. Hiss. Mr. Allard, your company has, I believe, one employee
referred to as an "armament engineer": is that correct?
Mr. Allard. No ; that is not correct.
Mr. Hiss. I show you a letter dated May 29. 1934, from Mr,
Hewlett to Mr. Escobar, which letter I offer in evidence.
(The letter referred to was marked '" Exhibit No. 271 ", and is
included in the appendix on p. 865.)
Mr. Hiss. Is the Mr. Hewlett who signed that letter an officer of
the corporation?
Mr. Allard. No; he is an employee.
Mr. Hiss. The letter is addressed to Mr. Roberto Escobar, and he
is, I believe. Consul General of Colombia, in New York.
Mr. Allard. I think he is. I am not sure of the country, but I
believe that is it.
Mr. Hiss. You will notice that in the first paragraph it refers
to the installation of the Driggs 37 mm airplane gun on a Hawk
plane, and Mr. Trimbach, your armament engineer has submitted a
report.
Mr. Allard. Mr. Trimbach is an emploj'ee of the Curtiss Airplane
& Motor Co. and not of the Export Co. I misunderstood j^our ques-
tion when I answered the Export Co. has no such officer.
Mr. Hiss. May I call attention to a letter dated March 31, 1934,
which I offer in evidence.
(The letter referred to was marked " Exhibit No. 272 ", and is
included in the appendix on p. 866.)
Mr. Hiss. This letter, "Exhibit No. 272", appears to be from
William J. Crosswell ; he is an employee of your company ?
Mr. Allard. No; he is an employee of the Curtiss Airplane &
Motor Co.
Mr. Hiss. The letter is written to Mr. Hewlett who is an employee
of your company, I believe?
Mr. Allard. Yes.
Mr. Hiss. In the course of the letter Mr. Crosswell refers to a
discussion with Lt. Comdr. Hugh Sease — he is an officer of the
United States Navy ?
Mr. Allard. I do not know Commander Sease, whether he is an
active officer or retired.
Mr. Hiss. In this letter he refers to a new light machine gun which
has been developed and Mr. Crosswell says to Mr. Hewlett in this
letter addressed to " Dear Parm " the following [reading] :
While he was talking it occurred to me that perhaps it would be good to have
the dope on this gun in case we should ever wish to build a flying arsenal for
export sale with say six guns forward which we could do more readily with
a smaller gun.
Your company is continually experimenting with new types of
military planes?
Mr. Allard. No; I would not say our company was.
698 MUNITIONS INDUSTRY
Mr, Hiss. I befr your pardon, the Curtiss-Wright operating com-
panies, the manufacturing companies.
Mr. Allard. The manufacturing companies, undoubtedly; yes.
Mr. Hiss. I show you a letter dated February 25, 1932, from Mr.
Goulding who signed himself as vice president of the Curtiss-Wright
Export Corporation.
Mr. Allard. That is correct.
Mr. Hiss. I offer this letter in evidence.
(The letter referred to was marked "Exhibit No. 273", and is
included in the appendix on p. 867.)
Mr. Hiss. In this letter Mr. Goulding made this statement with
reference to a Keystone bomber — the Keystone bomber was a large
bomber which you made in those days?
Mr. Allard. Yes, sir ; at the Keystone plant in Bristol.
Mr. Hiss. The statement is as follows [reading] :
This plane powered with a Cyclone engine is used extensively by the United
States Army Air Corps, and we are just eompletius at our factory at Bristol,
Pa., a large contract of these planes for the United States Army. This plane
can carry over two thousand pounds of bombs and is, therefore, a formidable
offensive weapon.
The Chairman. We suggest, Mr. Hiss, as you go along, for the
benefit of the record that you identify the exhibit before quoting any
of it to the witness.
Mr. Hiss. In addition to making planes you sold equipment or
iirmament for many of the planes; that is correct, is it not?
Mr. Allard. That is correct.
Mr. Hiss. Does your company not also sell munitions, as agent for
other companies, which munitions are not an actual part of the
planes you sell ?
Mr. Allard. Well, yes; we sell bombs and machine-gun bullets as
a part of the equipment. The gun is no good without the ammuni-
tion and the bomb racks in the airplane are no good without the
bombs.
Mr. Hiss. The Intercontinent Co. referred to in this correspond-
ence has what relation to your company or the parent company?
Mr. Allard. The only connection it has with the Export Co. is
our agent for sales in China.
Mr. Hiss. It is your agent for sales in China ?
Mr. Allard. Yes.
Mr. Hiss. Seventy-four percent of its stock is held by the Sperry
Corporation ?
Mr. Allard. I do not know that to be a fact,
Mr. Hiss. That is the statement from Moody's Manual.
Mr, Allard, Yes,
Mr. Hiss. Your company, according to a letter in your files, has
since Januar}^ 6, 1933. been the agent for the Remington Co.
Mr. Allard. I do not know that to ])e a fact.
Mr. Hiss. I show you a letter dated March 4, 1933, written by
Curtiss-Wright Exi)ort Corporation, by Owen Shannon, which letter
I offer as an exhibit,
(The letter referred to was marked " Exhibit No. 274 ". and is in-
cluded in the appendix on p. 868.)
MUNITIONS INDUSTRY 699
Mr. Hiss. Was Mr. Shannon at that time an official of the corpo-
ration ?
Mr. Allard. No ; an employee.
Mr. Hiss. The letter is written to Mr. E. J. Faucett. Was Mr.
Faiicett your company's representative in Peru at that time?
Mr. Allard. I do not recall whether he was an actual representa-
tive, but he may have been at that time. Mr. Faucett has been a
representative for us.
Mr. Hiss. In this letter you tell Mr. Faucett you will send him by
the next air mail complete prices on all sizes of loaded and unloaded
bombs, cartridges, and so forth, and that perhaps he could get the
Peru Government to place a substantial order for such equipment to
be sent on such special sailing. That would be in addition to any
complement of bombs you sold?
iNIr. Allard. Yes; I do not mean to imply that we sell bombs as
part of the complement of the airplanes, but they are airplane bombs
and airplane cartridges.
Mr. Hiss. I call your attention to this letter dated January 6, 1933,
taken from the files of your company, signed by F. J. Monaghan
of the Remington Arms Co. to Mr. Pawley who was then with the
Curtiss-Wright Corporation, and I believe he is the president of the
Intercontinent Aviation Corporation ?
Mr. Allard. Yes.
Mr. Hiss. I offer this letter in evidence.
(The letter referred to was marked " Exhibit No. 275 ", and ap-
pears in the appendix on p. 868.)
Mr. Hiss. You w^ill see that letter says [reading] :
We confirm our conversation with you today in respect to the ideas you
discussed on behalf of your company to represent us in the sale of our military
rifles and ammunition to the Chinese Government.
Mr. Allard. That is right.
Mr. Hiss. Military rifles are not a part of a plane equipment?
Mr. Allard. Not at all.
Mr, Hiss. In January your company was representing the Rem-
ington Co. for material not used as equipment for planes?
Mr. Allard. That is right.
Mr. Hiss. Now, your company has purchased bombs from the Fed-
eral Laboratories Co. and from the Lake Erie Chemical Co.; has
it not?
Mr. Allard. Yes.
Mr. Hiss. On August 6, 1932, the Federal Laboratories Co. noti-
fied your company that if you bought muzzle-loaded rifled mortars
from the Lake Erie Co. you would be violating the patents of the
Federal Laboratories Co., if you sold rifled mortars.
Mr. Allard. I do not know.
Mr. Hiss. Have you carried out negotiations looking to their sale ?
Mr. Allard. We may have been requested to make quotations ; but
referring back to your previous question, you asked whether we had
sold any other than aviation equipment. I should say we have made
quotations on other equipment, but have not consummated sales.
Mr. Hiss. I am pretty sure that you have made sales.
I show you a letter dated August 13, 1932, Mr. Allard, from
the Federal Laboratories, Inc., to Mr. Shannon, whom you have
700 MUNITIONS INDUSTRY
identified as an employee of your compaii}^, which gives your com-
pany the exchisive representation on smoke-screen and gas attach-
ments for airplanes and on aerial bombs in Argentina, Colombia,
Chile, Ecuador. Panama, and Turkey; that is, the products of the
Federal Laboratories.
(The letter referred to was marked "Exhibit No. 276" and is
included in the appendix on p. 869.)
Mr. Hiss. This " Exhibit No. 276 ", Avhich I have called to your
attention, came from the files of the Federal Laboratories Co., did
it not ?
Mr. Allard. Yes, sir.
Mr. Hiss. And was sent to your company 'i
Mr. Allard. Yes, sir.
Mr. Hiss. Is that agreement in force?
Mr. Allard. I do not know. I frankly do not know.
Mr. Hiss. Can you find out?
Mr. HoTCHKiss. Suppose we check our records and find out. Do
you want that produced ?
Mr. Hiss. Yes, sir.'
Has your company ever made any sales or any negotiations for
flame throwers ; that is, liquid fire ?
Mr. Allard. Not to my knowledge ; no.
]Mr. Hiss. Here is a letter under date of March 9, 1932, from the
Federal Laboratories, Inc., signed apparently by the president,
bearing the initials J.W.Y., which I believe refers to Mr. John
W. Young, of the Federal Laboratories Co., addressed to the Curtiss-
"Wriizht Export Corporation, attention of Mr. Shannon.
Mr. Allard. That is right.
Mv. Hiss. That letter will be " Exhibit No. 277."
(The letter referred to was marked "Exhibit No. 277" and is
included in the appendix on p. 869.)
Mr. Hiss. That letter, exhibit no. 277, reads as follows :
lipplying to your letter of February 23 relative to flamethrower, please
be advised that inasmuch as we have only had one inquiry for this from
Turkey, we prefer making flame throwers only on request. We do not
believe there would be a popular demand for the product sufiicieDt to warrant
our developing it and pushing it as we have our other products.
Mr. Allard. I should think not.
Senator Bone. Is there a popular demand, Mr. Allard, for war
products? Of any kind?
Mr. Allard. I would not say that there was for any kind of war
products.
Senator Bone. How could you throw flames from an airplane?
Mr. Allard. I have not any idea. I never heard of a flame
thrower from an airplane. The only flame thrower I heard of
was in the last World War.
Mr. Hiss. Has your firm had quotations on tanks?
Mr. Allard. I do not know. The records would show that.
1 111 rp^ponse to tlio abnvp rpqiiest. Mr. Alhird informed the committee on Nov. 3. 1934,
as follows : " Tile Export Co. dirt not sign tlie agreement from Federal Laboratories
dated Aug. 13. 1932 (Exhibit No. 27C), or a subsequent agreement submitted to the
Eximrt <'o. However, the Export Co. did have an understanding with Federal Lab-
orarories in 19:;2 that the Export Co. was to handle Federal Laboratories' smoke-screen
efinipuiPiit in Argentina. The Export Co. sold two of these to the Argentine Govern-
ment for I'xperinuMital purposes.
MUNITIONS INDUSTRY 701
Mr. Hiss. Just to refresh your memory, here is a letter of Octo-
ber 1, 1932, written to Mr. J. W. Young of the Federal Labora-
tories, Inc., Pittsburgh, Pa., signed by Curtiss- Wright Export
Corporation, by Mr. Owen Shannon, which I will offer as " Exhibit
No. 278."
(The letter referred to was marked '' Exhibit No. 278.")
Mr. Hiss. That letter, '' Exhibit No. 278 ", reads as follows :
Dear Mb. Young : I was very much surprised when I telephoned your
office this morning to find that you had returned to Pittsburgh without-
leaving a message for me regarding the tank.
I was even more surprised when I talked with the Bolivian consul and he
told me confidentially he had already been quoted a price of $34,000 on this
particular tank.
I would appreciate your telephoning me Monday morning just what we
can do about offering this or any other tanks to Bolivia.
Mr. Allard. The letter speaks for itself.
Mr. Hiss. Does your company represent the Colt Fire Arms Co.
for the sale of any firearms as a part of planes or not as a com-
ponent part of planes sold by yourself?
Mr. Allaed. No; I do not think so.
Mr. Hiss. To refresh your memory, I call your attention to a
letter of February 23, 1933, from Mr. Goulding, of your company,
to Mr. F. C. Nichols, who I believe is a vice president of the Colt
Patent Fire Arms Manufacturing Co. [handing paper to witness],
Mr. Allard. Yes, sir.
(The letter referred to was marked " Exhibit No. 279 " and is
included in the appendix on p. 870.)
Mr. Hiss. That letter reads in part as follows :
We have been i;ctively, through our China representative, pushing the sale
of our equipment in the Canton section, with the result that we now have,
and are holding subject to the issuance of export license, an order for ten
of your guns. This would, I think, convince you of the active steps we are
taking to develop sales for your products in China.
Mr. Allard. I think that refers to airplane guns, ten guns.
Mr. Hiss (reading).
You appreciate, I believe,
the letter goes on to state,
the disadvantage of several people offering the same customer the same article.
It always leads to confusion on the part of the customer, with the result
that some one else usually gets the business. We hope, therefore, that you will
in the future work through us exclusively in China.
Mr. Allard. Correct; on airplane equipment.
Senator Pope. What position does Mr. Goulding hold ?
Mr. Allard. Vice president of the Export Co.
Senator Bone. Do you know what concern owns the Colt Patent
Fire Arms Manufacturing Co.
Mr. Allard. No ; I do not.
Senator Bone. The stock control is vested in some one of the
bigger companies, is it not?
Mr. Allard. Not to my knowledge. I do not know anything
about it.
The Chairman. Do we have any information, Mr. Hiss, as to the
ownership of the Colt Co.
702 MUNITIONS INDUSTRY
Mr. Hiss. No, we have not. As to the Remington Co., as to which
a prior letter was put in, the record shows that the Cnrtiss-Wnght
Export Co. is their agent in China, and we do have information
that they are one of the subsidiaries of the du Pont Co.
The Ohairman. It is the view or impression of those here around
the tabk^ that the DuPonts are very heavy OAvners of Colt.
Mr. Hiss. I have no information at the present time.
Also on this question of vour relations with the Colt Co. I intro-
duce a letter of October 21, 1932, from Mr. Nichols, who signs himself
as a vice president of the Colt's Patent Fire Arms Manufacturing
Co., addressed to the Curtiss-Wnght Export Corporation, attention
of Mr. O. A. Shannon. That will be " Exhibit No. 280."
(The letter referred to was marked " Exhibit No. 280 " and is
included in the appendix on p. 870.)
Mr. Hiss. That letter reads in part as follows :
As to your offering the arms referred to, you are at liberty to negotiate
in Peru knd Bolivia, Turkey after Jan. 15, 1933, and regarding China and
Japan, we cannot at this writing include these markets, l)ut should anything
transpire whereby our joint interests would be served through your offering
quotations, if you will duly notify us in advance we wall endeavor to afford
you every assistance and protection possible.
Then the next paragraph, you will note, particularly, reads as
follows :
On any business you might obtain from the governments named, w'e would
allow you a confidential commission of 5 percent; this of course does not
include aircraft guns to be mounted on your planes; regarding which you
already enjoy a confidential arrangement.
Mr. Allard. Yes, sir.
Mr. Hiss. I judge from that that your company represents the
Colt Co. or has a commission understanding.
Mr. Allard. That is correct. It is not an agency agreement, as
I understood your question.
Mr. Hiss. But you have a commission understanding?
Mr. Allard. That is correct.
Mr. Hiss. That you may represent them ?
Mr. Allard. Yes, sir.
Mr. Hiss. And if you do sell any of their equipment, other than for
planes, you receive a confidential commission?
Mr. Allard. That is correct.
Senator Pope. Just what is the position of Mr. Shannon in your
company? Just what does he do?
Mr. Allard. Formerly he was office manager, general clerk in the
office with the Export Co., up until he left the Export Co.
Senator Pope. Apparently all these letters relating to military
matters are addressed to Mr. Shannon. Why is that?
Mr. Allard. Because most of the correspondence cleared through
him. He made a great many of the contacts ; the people saw him, who
would come in to try to get some information, and possibly Avhen I
might not be in the office or anyone else.
Mr. Hiss. On the same subject, there is a letter of October 27, 1932,
from Mr. Goulding, addressed to the Automobile Tire & Tractor Co.
at Istanbul, Turkey. Are they your representatives in Turkey?
Mr. Allard. They are.
MUNITIONS INDUSTRY 703
Mr. Hiss. It is directed "Attention : Ahmet Emin Bey." Is he an
official of that firm?
Mr. Allard. He is.
Mr. Hiss. Mr. Ahmet Emin Bey's name was mentioned in Mr.
Drifjgs' testimony the other day, and was identified as being in one
of the photographs taken on board the cruiser Raleigh., and there
was testimony that the Automobile Tire & Tractor Co. has repre-
sented munition concerns in general. Do you know anything about
their representation of other companies than yours?
Mr. Allard. I know they represent the Goodyear Tire & Rubber
Co., and I think Chrj^sler and Dodge products, motor cars, and they
have a store in Turkey which I have been in, with radios and all sorts
of automobile accessories.
Mr. Hiss. You do not know of any other munition firms which they
represent ?
Mr. Allard. No, I do not believe I do. They represent Colt.
Mr. Hiss. Do you know Mr. Ahmet Emin Bey when you see him
[handing, photograph to witness] ? '
Mr. Allard. Very well.
Mr. Hiss. Will you see if you can identify him there?
Mr. Allard. Yes, sir.
Mr. Hiss. Which one is he?
]\Ir. Allard. This one right here [indicating on photograph].
Mr. Hiss. That was taken in 1928, at which time he w^as repre-
senting the Driggs Co.
The Chairman. That is what we were talking to Mr. Driggs about.
Mr. Hiss. This letter to Mr. Ahmet Emin Bey will be " Exhibit
No. 281."
(The letter referred to was marked " Exhibit No. 281 " and is in-
cluded in the appendix on p. 871.)
Mr. Hiss. That letter in the fourth paragraph reads as follows
[reading] :
Turkey is beiiis released from Viekers arrangements with Colt as of .January
1, 1933, so that we will he free to quote you on any inquiries for their equip-
ment which you can develop on and after that date.
Mr. Allard. Right.
Mr. Hiss. That is the arrangement, I assume, which is referred to
in Mr. Nichols' letter, in the preceding exhibit.
Mr. Allard. That is right.
Mr. Hiss. That you could get in Turkey after a certain date in
January 1933.
Mr. Allard. Yes, sir.
Mr. Hiss. In other words, your company took the place of the
Vickers Co. as the Colt representative in Turkey?
Mr. Allard. I do not know that Vickers was the Colt representa-
tive in Turkey at any time. My recollection is that Vickers sold
their own goods and had an exclusive territory down there. I do
not know whether they represented Colt.
Mr. Hiss. This particular paragraph which I have read before,
Mr. Allard, says :
Turkey is being released from Vickers arrangements with Colt as of .January
1, 1933, so that we will be free to quote * * * after that date.
83876 — 34— PT 4 2
704 MUNITIONS INDUSTRY
Mr. Allard. That is correct, but, as I said, I think the arrange-
ment was that Vickers were selling their own guns under an arrange-
ment with Colt, and Colt kept out of the territory. I do not think
Vickers ever sold Colt guns.
Mr. Hiss. Has your company ever sold any police equipment, tear
gas, and things of that sort?
Mr. Allard. It is possible that we have sold police equipment,
tear gas. I do not know.
Mr. Hiss. I show you a letter dated November 3, 1933, signed by
" Owen ", which I judge is Mr. Shannon. [Handing paper to
witness.]
Mr. Allard. Yes, sir.
Mr. Hiss. Addressed to Mr. C. W. Webster, who at that time
represented your company in South America. Is not that correct?
Mr. Allard. That is right.
Mr. Hiss. That will be " Exhibit Xo. 282."
(The letter referred to was marked " Exhibit No. 282 "' and is
included in the appendix on p. 872.)
Mr. Hiss. On the second page of that letter Mr. Webster says:
Cable me what you do with Gaudara and I can start sending them data and
prices on some of the misceUaneous equipment.
Gandara was a firm representing your company in Argentina?
Mr. Allard. No, I never heard the name " Gandara " before. I
do not know it. I woidcl like to retract that statement. I have
heard the name, but I can not identify Gandara.
Mr. Hiss. I wonder if we can not ask Mr. Webster if he knows.
Mr. Allard. Mr. Webster is here, if he knows.
The Chairman. Mr. Webster, will you come forward and take the
oath ?
Mr. Webster. Yes, sir.
The Chairman. Mr. Webster, pull up one of the chairs and give
the reporter your full name.
Mr. Webster. Clarence W. Webster.
TESTIMONY OF CLARENCE W. WEBSTER
(The witness was duly sworn by the chairman.)
The Chairman. What is your connection with the Export
Corporation ?
Mr. Webster. Distributor for Latin America.
Mr. Hiss. Mr. Webster, the question was whether Gandara, who
is referred to in a letter written Mr. Shannon to you on November 3,
1933, is a representative of the Export Co. in South America, and,
if so, would you please identify the country ?
Mr. Webster. That is Argentina.
Mr. Hiss. And they did at one time represent the Export Co. in
Argentina ?
Mr. Webster. Yes, sir.
Mr. Hiss. Mr. Webster, Mr. Shannon in that letter goes on to
state [reading] :
My idea would be, if they are to purchase from us and resell to the
govenuneiit —
MUNITIONS INDUSTRY 705
That is Gandara to purchase from the Curtiss-Wright Export
'Co.—
to give them prices that would net you ten percent at least, and wherever pos-
sible, as much more as I find it will stand in comparison to prices they could
get direct from manutacturers or others such as Air Associates, etc.
Find out just wliat they are doing on bombs and police gas equipment and,
perhaps, we can chisel in on it here as I understand the Argentine police have
bought large quantities of that kind of stuff.
Was there any sale of any police gas?
Mr. Webster. No, sir, -we never attempted to sell anything of that
nature.
Mr. Hiss. Does your company represent the Sperry Gyroscope Co.
in any foreign territories, Sir. Allard?
Mr. Allard. I believe we do.
Mr. Hiss. Is it correct that you represent them in Brazil, Uruguay,
Paraguay, Ecuador. Colombia, Venezuela, Mexico, Siam, Peru, Chile,
Bolivia, and Central America ?
Mr. Allard. May I ask Mr. Webster to answer the question? I
■cannot answer it, Mr. Hiss, accurately, without checking in the files.
We have at some time or other represented them. Whether we are
representing them in all of those countries now is another thing.
Senator Bone. The Sperry Co. makes fire-control apparatus do
they not?
Mr. Allard. Yes, sir; and also they make aeronautical instru-
ments, directorial gyros, and instruments used in aviation, airplanes.
Senator Bone. They manufacture blind-flying apparatus?
Mr. Allard. Yes, sir ; they are the originators of that.
Mr. Hiss. Your company does represent them in several countries ?
Mr. Allard. Yes, sir.
Mr. Hiss. The Sperry Co. has also developed and marketed a fire-
control apparatus for antiaircraft equipment?
Mr. Allard. Yes, sir.
Mr. Hiss. As well as for naval batteries and so forth?
Mr. Allard. Yes, sir.
Mr. Hiss. Does that mean, therefore, that your company would
be interested in the promotion and sale of antiaircraft equipment
as well as of aircraft?
Mr. Allard. I would have to refresh mj^ memory again from the
records as to what the Sperry Gyroscope Co. allows us to sell. I
think it is all aeronautical instruments and not antiaircraft or fire-
control equipment.
Mr. Hiss. I call your attention to a letter dated December 8, 1933,
written to Mr. Joaquin Samper H, at Bogota, Colombia, and signed
by Mr. Goulding. That will be " Exhibit No. 283."
(The letter referred to was marked " Exhibit No. 283 " and is
included in the appendix on p. 873.)
Mr. Hiss. Does Mr. Samper represent, or did he on December 8,
1933, represent the Export Co. in Bogota ?
Mr. Allard. His company, Urueta & Samper, did and do.
Mr. Hiss. On page 2 of the letter you will note the following
[reading] :
Yesterday I had the opportunity of meeting General Angel, Chief of Staff,
who was here briefly following a trip to Europe. With him was General
"Cortes who, I understand, is the ranking Colombian general, stationed tern-
706 MUNITIONS INDUSTRY
porarily in the le.iration in Wasliin^'toii as military advisdr. General Angel
seems interested only in aviation in a general way so that we did not discuss
any of the more technical or detailed features at present involved. He was,
however, very interested in antiaircraft defense, and Mr. Miranda, together
with Commander Strong, explained the Sperry fire control and the necessity
for this defense, which he readily admitted and it is probable that following
his return to Colombia he will push for several antiaircraft batteries complete
with Sperry fire control to make them effective. These are, of course, expensive
installations, but in my opinion there is no cpiestion but that Colombia, in the
event of hostilities, should have this protection, particularly at the port of
Buenaventura. We would, of cour.se, like to see this Inisiness developed in
view of our connections with the Sperry Co. and look to you to further this
business.
Mr. Allard. Yes, sir.
Senator Pope. Who wrote that letter?
Mr. Hiss. It was written by Mr. Goiilcling. the vice president of
the Ciirtiss- Wright Export Corporation, in connection with your
company's connection with Sperry, which is referred to by Mr.
Goulding in this letter by simply stating : " In view of our con-
nections with the Sperry Co.", Avhich company in certain countries
you represent as agent.
Mr. Allard. That is right.
Mr. Hiss. I would like to call your attention to a telegram dated
May 2, 1933, from Mr. T. A. Morgan, the president of the parent
company, to Mr. Pawley in Shanghai, which will be " Exhibit
No. 284.""
(The telegram referred to was marked " Exhibit No. 284 " and
is included in the appendix on p. 875.)
Mr. Hiss. The latter states [reading] :
New company has been formed, Sperry Corporation, T. A. Morgan president,
John Sanderson vice president, which holds Sperry Gyroscope Co., Ford
Instrument Co., Intercontinent Aviation, Inc., Curtiss-Wright Corporation
shares formerly owned by North American Aviation.
SEVERITY AND NATURE OF COMPETITION FACED IN FOREIGN MARKETS
Mr. Webster, you were formerly president and a director of the
Curtiss-Wright Export Corporation. Is that correct?
Mr. Webster. Yes, sir.
Mr. Hiss. And you resigned in June 1933 ?
Mr. Webster. Yes, sir.
Mr. Hiss. At which time your relationship with the company
was what?
Mr. Webster. Distributor for Latin America.
Mr. Hiss. You have the exclusive sales representation of the Latin
American Curtiss-Wright products?
Mr. Webster. That is right.
Mr. Hiss. Will you please explain to the committee just how you
function with respect to the Curtiss-Wright companies? Do you
purchase from them?
Mr. Webster. I purchase from Export at a definite price and then
deal with agents in Latin America.
Mr. Hiss. Does the Export Co. make advances to you for your
expenses?
Mr. Webster. When necessary, up to a certain amount.
MUNITIONS INDUSTRY 707
Mr. Hiss. And those are to cover the expenses of your sales
or<?anization ?
Mr, Webster. Yes, sir.
Mr. Hiss. How large an organization do you have, Mr. Webster?
Mr. Webster. In addition to myself there are, I believe, five.
Mr. Hiss. Could you just give their names so that we will have
them identified later?
Mr. Webster. Mr. Owen Shannon
Mr, Hiss, He is no longer a member of the Export Co,?
Mr, Webster. No ; he is an employee of mine.
Mr. Hiss. He was formerl}'^ an employee of the Export Co.?
Mr. Webster. He was formerly an employee of the Export Co.
This is the New York office organization. There is Mr. Owen
Shannon, Mr. John Shannon, Albert Mulady, and then in South
America there is Mr. Richard Pierrot in Argentina.
Senator Bone. What is his official position down there?
Mr. Webster. Prior to his connection with me?
Senator Bone. Did he have any connection with the Government?
Mr. Webster. Yes; prior to that he was American trade commis-
sioner in Rio, in Brazil.
Then we have another man b}^ the name of Travis, Clifton Travis.
Mr. Hiss. Was he formerly an employee of the Export Co. before
he became associated with you ?
Mr. Webster. No, sir ; he did not go out as such.
Mr. Hiss. Did he not go out as a sales representative for the
Export Co. and as a pilot?
Mr. Allard. He did at times. He was on our pay roll from time
to time on special missions,
Mr. Webster. At the jiresent time he is on the west coast of South
America, I believe in Lima.
Mr. Hiss. Are the selling costs of your organization rather large,
Mr. Webster?
Mr. Webster, I should not say they are unusually large,
Mr, Hiss, Just what do those expenses consist of?
Mr, Webster, Salaries, traveling expenses,
Mr, Hiss, Could you state the salaries of the five men which you
have named as ^^our assistants?
Mr, Webster, I could not. I could check up on it and let you
know. I could not tell you exactly, now.
Mr. Hiss. I would like to state for the record here, for your in-
formation, that the Export Co. has furnished the committee a state-
ment that for the 7 months ending December 31, 1933, the advances
of the Export Co. to your organization for expenses totalled $55,-
599.66, and that your own personal drawings during that period
of time were an additional $11,221.32.
The Chairman. Was that on an expense account or was the
$11,000 plus inclusive of salary?
Mr, AVebster. I could not say, sir. Whatever the record shows,
Mr. Hiss, It was advances for expenses and his personal draw-
ing account. Do you have a fixed salary from the Export Co.?
Mr. Webster. No.
Mr. Allard. May I say something there, Mr. Hiss ?
Mr. Hiss. Certainly.
708 MUNITIONS INDUSTRY
Mr. Allard. That information for the 7 months furnished the-
committee is all the money advanced to Mr. Webster for his organi-
zation. It is not just traveling expenses and that, but it is salaries
and office expenses, et cetera.
Mr. Hiss. The expenses of your organization are supposed to be
met by the difference between the price at which you buy from the
Export Co. and the price at which you resell ?
Mr. Webster. That is correct.
Mr. Hiss. Prior to your becoming a distributor for the company,,
and while you were president, were you in general familiar with
the foreign sales of the Export Co. ?
Mr. Webster. In a general way. I devoted most of my time to
Latin America.
Mr. Hiss. So that for some time you have been engaged in the
Latin American export field?
Mr. Webster. Yes, sir.
Mr. Hiss. In that field have you found that in selling military
planes and whatever munitions your company may have sold, as
was indicated by Mr. Allard's testimony, the Export Co. was and
still is faced with competition from such people as Vickers in
Great Britain, Junkers in Germany, Schneider in France, and
Skoda in Czechoslovakia, and other armament and airplane manu-
facturers ?
Mr. Webster. Other aircraft manufacturers. I would not say
armament. I do not believe we have ever encountered any com-
petition from Skoda. We have not dealt in a similar line of ma-
terial that Skoda sells. Ours is strictly aircraft equipment and
accessories that go with aircraft.
Mr. Hiss. In December of 1933 a letter written to your com-
pany refers to the fact that the Curtiss prices in Peru for bombs
were still higher than the Vickers prices. Would that refer to
bombs sold for general use?
Mr. Webster. No. That is aircraft bombs.
Mr. Hiss. But bombs sold apart from specific units of planes^
sold by your company?
Mr. Webster. Yes; it might possibly be.
Mr. Hiss. You would say in general that the competition in
South America and in the world field is severe in the aircraft
business, would you?
Mr. Webster. Yes, sir; I would.
Mr. Hiss. Have you found that your competitors, because of
the severity of that competition, are sometimes forced to resort
to what you might consider unfair tactics.
Mr. Webster. We believe that that has been done. Just what
would you refer to as unfair tactics?
Mr. Hiss. May I call your attention to a letter of July 25, 1933,.
signed by Jerry Clark? I will offer this letter in evidence as
" Exhibit No. 285."
(The letter referred to was marked " Exhibit No. 285 " and is
included in the appendix on p. 876.)
Mr. Hiss. Can j-ou identify Mr. Jerry Clark? This is on the let-
terhead of the Intercontinent Aviation, Inc. ?
Mr. Webster. I believe Jerry Clark at one time was an employee
of Export. He is now in China.
MUNITIONS INDUSTRY 709
Mr. Hiss. It is on the letterhead of the Intercontinent Aviation
Co., which we have discussed before, which is controlled by the
Sperr}^ Corporation, in Shanghai and is addressed to Mr. Goulding.
Mr, Webster. This is in connection with China, is it not?
Mr. Hiss. Yes.
Mr. Webster. That is after I left the Export organization. This
letter is July 25, 1933. I was no longer an officer of the Export
Corporation at the time this letter was written.
Mr. Hiss. If Mr. Allard wishes to answer this particular question,
on page 2 of this letter I refer you to the first complete paragraph
which reads as follows:
I just found out yesterday that Dr. H. H. Kung, the present no. 1, was
informed by the Italian air attache that the CurtiS'S Hawk was an old dis-
carded Caproni design. I understand that this perturbed Dr. Kung to quite
an extent. This is an illustration of one of the various difficulties encoun
tered by agents here. The whole thing is dirty business and intrigue.
The reference to Dr. H. H. Kung, the present no. 1, is a reference
to Chinese aviation circles.
Mr. Allard. That is right.
Mr. Hiss. The reference to the Caproni design is a reference to
the Caproni Italian plane ?
Mr. Allard. That is true.
Mr. Hiss. Then in the third complete paragraph, referring to a
Fiat pursuit ship he says :
I am hoping that we will get a chance to have a competitive demonstra-
tion between this ship and the Hawk, but I don't think the Italians will want
to play. They are a dirty cut-throat bunch of business iieople and do not
hesitate to knock our equipment at every possible opportunity.
Have you found, Mr. Allard or Mr. Webster, that your competi-
tion is cut-throat and that the matter of selling airplanes is dirty
business and intrigue?
Mr. Allard. I do not think I would describe the competition in
those words.
Mr. Hiss. May I call your attention also to the next sentence
which says :
I am glad to say that it has not been necessary for us to resort to this
practice as the statement of facts is all that is necessary in regard to the
Italian equipment now on hand.
If the competition had been severer, do you think it would have
been necessary for your company to resort to that kind of com-
petition ?
Mr. Allard. We never have and never will as long as I am
president of the company.
Senator Pope. Who wrote that letter?
Mr. Hiss. Jerry Clark, who is identified as a former employee
of the company. Is he still an employee of the Curtiss Co.?
Mr. Allard. Xo, sir; he is not.
Mr. Hiss. Was he on July 25, 1933 ?
Mr. Allard. No, sir.
Mr. Hiss. He was not?
Mr. Allard. No, sir.
Mr. Hiss. Why was he so interested in the sale of the Hawk,
if he was not an employee at that time ?
710 MUNITIONS INDUSTRY
Mr. Allard. Being an American, and a member of the American
Aviation Mission that was emphn'ed by the Chinese Government
to instruct the Chinese in the air operations and aviation in general,
naturally he was trying to have American ])roducts sold in prefer-
ence to Italian.
Mr. Hiss. P^ven though he was not an employee of your company?
Mr. Allard. That is right; having at one time been an employee.
Senator Bone. What were his connections with the Government
at that time?
JSIr, Allard. Do you mean the Chinese Government ?
Senator Bone. No; our Government.
Mr. Allard. None whatsoever; none that I know of.
Senator Bone. What was this mission to which you refer?
Mr. Allard. The Chinese Government asked, I believe, the De-
partment of Commerce here, to select a group of American aviation
people to come over to China on the Chinese Government's pay roll
at their expense, to organize a Chinese Air Force. That is the
National Government, the Nanking Government. Clark was a mem-
ber of that. There were five or six Americans chosen; not service
people.
Senator Bone. Did this man come out of civilian walks of life?
Mr. Allard. He had been in the Navy. I do not know what his
history background is. He had at one tinue been in the Nav}^, I
know that.
Senator Pope. What Navy?
Mr. Allard. The United States Nav3^ He was a naval aviator.
Mr. Hiss. At the time that he wrote this letter he was then in
the employ of the Chinese Government?
Mr. Allard. I believe that is correct; yes, according to the date.
Mr. Hiss. Mr. Webster, I show you a letter dated October 19, 1933,
addressed to Mr. Allard. It seems to be an interoffice communica-
tion and I will offer it as " Exhibit No. 286.''
(The communication referred to was marked " Exhibit No. 286 "
and is included in the appendix on p. 877.)
Mr. Hiss. This refers to a report received from you regarding
the situation in Peru. The report is signed by Mr. Shannon. The
first paragraph quoted from your report refers to the situation in
Peru and is as follows :
Tlie British have been very active and have a very clever man on the job
here, who has managed to grease certain officials in order to put across sales.
They have sold 6 Fairey Gordons with Panther engines and 6 Fairey Fox
single .seaters with Rolls-Kestrel engines.
Who produces the Fairey plane?
:Mr. Webster. That is the Fairey Co. in England.
The Chairman. Who is the writer of this?
Mr. Hiss. This is Mr. Webster's report being quoted by Mr. Shan-
non in an interoffice memoi-andum to Allard.
Senator Bone. What company did this clever gentleman represent?
Mr. Wehster. The Fairey Co. in England. I might say, Mr.
Chairman, that I have no actual proof of such a thing, but it was
my opinion that that is what happened.
The Chairman. You are not reciting anything that is new to
us, because I think we have not yet laid our hands on any transaction
MUNITIONS INDUSTRY 711
in certain countries that have not had somewhere in it a men-
tioned necessity of having to grease the way.
Senator Pope. From Sir Basil on down or up.
The Chairman. Yes; or up.
Senator Bone. I would be constrained to believe it would be
" up ", from now on;
Mr. Hiss. Continuing with this same communication, further on,
it says :
The officers wbo put through the first 12 British planes have been sent to
England to take care of inspection, etc.
That means the Peruvian officers?
Mr. Webster. Yes, sir.
Mr. Hiss (continuing) :
* * * have been sent to England to take care of the inspection, etc., and
all went over well heeled with " commission " money.
You mean those officers had received commissions?
Mr. Webster. That was my impression.
Mr. Hiss. From the Fairey Co. ?
Mr. Webster. Evidently from the Fairey Co.
Mr. Hiss. I show you a letter of October 20, 1933, which I will
ask to have marked " Exhibit No. 287."
(The letter referred to was marked " Exhibit No. 287 " and is
included in the appendix on p. 878.)
Mr. Hiss. 'This letter is addressed "Dear Dan."
That refers probably to Mr. Tobin, who was then in Peru?
Mr. Webster. Yes, sir.
Mr. Hiss. This letter does not bear a signature. I wonder if you
will read it and see if you can identify it. I am under the impres-
sion that it was probably written by you.
Senator Pope. If I may refer to the last previous letter, with refer-
ence to " commission " and the officers being well heeled, I notice that
you put quotation marks around " commission ".
Mr. Webster. Yes, that meant commissions to the officers.
Mr. Hiss. Can you identify the writer of that letter, Mr. Webster ?
Mr. Webster. I believe I wrote that letter. I am quite sure I
did.
Mr. Hiss. I call your attention to the last paragraph. The prior
lettej- was in October, October 19, the one referring to the Fairey
Co. This is dated October 20. This says :
For your information we had a long talk with Romano this after-
noon * * *
Who is Romano?
Mr. Webster. Romano was the material officer of the Peruvian
Naval Air corps.
Mr. Hiss (continuing reading) :
* * * and looked over the contract for the six Fairey, 2-place observation
jobs, which is the last contract signed. We were under the impression that
they ordered single-seat pursuit planes but this is not correct. It was six
2-place jobs. The contract price in dollars was $33,000 each and a little more
than $7,000 per set for pontoons. This makes the entire job about $10,000
more per unit than our Falcon. It would do no harm to mention figures to
the Minister, but of course do not say where you got your information from.
712 MUNITIONS INDUSTRY
Was the Falcon a 2-place observation machine ?
Mr. Webster. Yes.
Mr. Hiss. Which was competitive with these Fairey planes?
Mr. Webster. Yes.
Mr. Hiss. Was there any reason why the Peruvian Government
would have preferred the Fairey at $7,000 more per plane.
Mr. Webster. Unless they were better satisfied with it than with
our ship.
Mr. Hiss. On a comparison of performance, how did the two ships
show up?
JNIr. Webster. Our performance I would say — the performance
of the Falcon was superior to the Fairey job.
Mr. Hiss. This letter goes on.
It would do no harm to mention figures to the Minister
That is the Minister of Peru in Charge of Aviation ?
]Mr. Webster. The Minister of Marine.
Mr. Hiss (continuing) :
* * * but of course do not say where you got your information from. It
sounds like highway robbery to me and someone collected at least $100,000
on the contract as " commission."
Can you explain the kind of commission they are referring to
there ?
Mr. Webster. I am afraid it was a sort of underhanded com-
mission, paying a commission to officers being not the usual kind
of commission.
Mr. Hiss. This letter also puts " commission " in quotation marks.
Mr. Webster. Yes, sir.
Mr. Hiss. You mean an officer's commission rather than an or-
dinary agent's commission?
Mr. Webster. Yes.
Senator Pope. Were these officers in active service at the time?
Mr. Webster. I believe they were.
Mr. Hiss. As another example of the kind of competition your
companies face, I show you a letter of September IT, 1932, which
I will ask to be marked as " Exhibit No. 2188."
(The letter referred to was marked "Exhibit No. 288", and is
included in the appendix on p. 878.)
Mr. Hiss. This letter is from Ahmet Emin. That is the Ahmet
Eniin Bey whom Mr. AUard has identified. The letter is addressed
to Mr. T. Morgan, president of the Curtiss-Wright Corporation.
He is the president of the Parent Corporation is he not ?
Mr. Webster. Yes.
Mr. Hiss. In this letter the statement is made that —
From such distance, a delay may easily be attributed to lack of means. You
may rest assured that for any financial engagement taken for aviation matters,
the money does not only exist theoretically in the budget, but is actually
deposited in cash at the bank. Statements to the contrary are only spread by
competitors who hope to scare away American competitors from the Turkish
market. A clear example of this was recently delivered by Vickers Arm'strong.
The latter persuaded the Colt people that it would be unsafe for them "to
do business in Turkey, and that themselves did not care to arrange for a
Browning demonstration in Turkey, because they did not care to solicit business
there, having a great deal of money outstanding. The business mentioned
in this connection was the sale of 48 machine guns, making a total of about
MUNITIONS INDUSTRY 713
•$25,(100. Within a few weeks of this statement, Vi<"kers Armstrong obtained
after most strenuous efforts, an order of eight Supermarine seaplanes of $600,000
to be paid half in pounds sterling, half in Turkish pounds. * * *
These supermarine airplanes are made by the Vickers Company,
Mr. Webster. They are made by Armstrong, I think.
Mr. Hiss. Which is affiliated with the Vickers interests?
Mr. Webster. I am not sure. It is a British firm.
Mr. Hiss. This letter says :
This proves that Vickers-Armstrong which has a permanent factory branch
in Ankara and has an exact knowledge * * *.
That is a city in Turkey?
Mr. Allard. Yes. That is the capital.
Mr. Hiss (continuing) :
* * * and has an exact knowledge of local conditions considers safe to do
business for its own account, but does not hesitate to use unclean methods to
deceive American competitors and keep them away from the m'arket.
Have you had severe competition from American competitors also ?
Mr. Webster. I think Mr. Allard can answer that better than I
can. He was handling that particular territory at the time.
Mr. Allard. You mean as a general thing, Mr. Hiss ?
Mr. Hiss. Yes.
Mr. Allard. A general practice throughout the world?
Mr. Hiss. Yes.
Mr. Allard. We have had severe competition ; yes.
Mr. Hiss. Who is your strongest American competitor ?
Mr. Allard. I would say United Aircraft were.
Mr. Hiss. In size, how does that company compare with Curtiss-
Wrio;ht Corporation?
]V^. Allard. I do not know. Do you mean in capital set-up ?
Mr. Hiss. In actual turn-over of products.
Mr. Allard. I think we run along pretty closely together. They
probably sell a little more than we do one year and we a little more
than they do in the other.
Mr. Hiss. How do these two companies, the Curtiss companies
•considered as one unit and the United companies considered as
another unit, compare in bulk with European countries?
Mr. Allard. With European companies in the export field, you
mean ?
Mr. Hiss. Yes.
Mr. Allard, I think we are much larger than any other European
manufacturer at the present time, but it has taken us some 10 or 12
years to get up to that point.
Mr. Hiss. Your tw^o companies or these two companies constitute
the largest aviation companies in the export field, you would say?
Mr. Allard. Throughout the world?
Mr. Hiss. Those two groups of companies; yes?
Mr. Allard. Yes.
Mr. Hiss. The two American companies?
Mr. Allard. That is right.
Mr. Hiss. I have here a letter dated Februarv 5, 1931, from Mr.
Allard to Mr. Burclette S. Wright, which I will offer as " Exhibit
No. 289."
(The letter referred to was marked " Exhibit No. 289 " and is
included in the appendix on p. 880.)
714 MUNITIONS INDUSTRY
Mr. Hiss. Mr. Biirdette S. Wright was vice president of the
parent company ?
Mr. Allard. That is right.
Mr. Hiss. And a director of the Export Co.?
Mr, Allard. I do not think he is now. He may have been at
that time — just a minute. He is not a director of the Export
Co. now.
Mr. Hiss. This letter says in part:
Thanks for yours of the 3d with attached copy of letter to Leighton Rogers
on the subject of the cable to be sent to Osborn Watson about Cyclone tests*.
Also thanks for the dope about Love's reaction to whatever statements Major
Hall is making.
Can you identify Mr. Love?
Mr. Allard. Mr. Love was the president of the United Aircraft
Export.
Mr. Hiss. Corresponding to your position with the Curtiss Co.?
Mr. AiiLARD. Correct.
Mr. Hiss (repeating) :
Love's reaction to whatever statements Major Hall is making.
Who is Major Hall?
Mr. Allard. He was the European representative of the Export
Co. at that time.
Mr. Hiss. Curtiss Export?
Mr. Allard. Yes, sir.
Mr. Hiss (continuing reading) :
Needless to say, I do not believe Hall's statements are at all radical or
unethical, as all cables and correspondence that he has had with the Finnish
officials in which he had discussed 182'0-E's have been based entirely upon in-
formation furnished direct from the Wright Co. or from this office. Love
has been made to stop his unethical tactics of running down competitive-
products, and I think this is just a sample of a method he is pursuing to
meet real competition.
What unethical tactics did Mr. Love adopt?
Mr. Allard. As I recall it at that time that I wrote this letter-
to Burdette S. Wright, Mr. Love was making statements that Avere-
not true about the financial condition of the Curtiss-Wright Export
Co. and about the products themselves, making statements that they
were not used by various large users of aeronautical engines through-
out the world.
Mr. Hiss. Will you look at this next document, Avhich is dated
March 30, 1932, and which I will ask to have marked "Exhibit
No. 290."
(The document referred to was marked " Exhibit No. 290 " and
is included in the appendix on p. 880.)
Mr. Hiss. This is a telegram addressed to Aeroexco. That is the
cable address of the Export Co. ?
Mr. Allard. Yes.
Mr. Hiss. It is from Melvin Hall, whom you have already iden-
tified, and says on the second page that Turkey has acted in good
faith on our — that is, the Export Co.'s — behalf and are accei)ting
our — that is, the Export Co.'s — statement regarding Curtiss Hawk
one-place Cyclone engine ignoring official information United States
Government to the contrary in addition to foul intrigue of our
competitors and especially United Aircraft & Transport.
MUNITIONS INDUSTRY 715
Now, at one time, I think in the year 1930, your company sent
ii tour of planes for exhibition purposes throughout Europe; is
that correct?
Mr. Allard. Yes, sir.
Mr. Hiss. Do you know whether Mr. Love was present at or soon
after these exhibitions that your company put on?
Mr. Allard. I understand that he was. I was not present on that
tour.
Mr. Hiss. Do you know why Mr. Love followed your tour?
Mr. Allard. No ; I do not know why.
Mr. Hiss. Did you get any reports of what Mr. Love did or said
while following that tour ?
Mr. Allard. Possibly, but they would be in the files if there were
jiny reports.
Mr. Hiss. Do you remember any reports?
Mr. Allard. I do not remember any written report on it.
Mr. Hiss. May I just refresh your recollection with a telegram
from the files of your company dated June 3, 1930, signed Melvin
Hall, which I will offer as " Exhibit No. 291."
(The telegram referred to was marked " Exhibit No. 291 " and is
included in the appendix on p. 881.)
Mr. Hiss. This says :
Love tactics following us with insidious derogatory comment obsolete equip-
ment impossible dispose of in America
Does that mean that Mr. Love was following the Curtiss tour and
saying that the planes displayed were obsolete ?
Mr. Allard. Apparently.
Mr. Hiss. What kind of planes were being shown on that tour?
Mr. Allard. Hawk and Falcon and Fledgling.
Mr. Hiss. What model in point of time? Were they up-to-date
models ?
Mr. Allard. Yes. They were the latest models released by the
Government, the United States Government, the Army and Navy,
for export sales.
Mr. Hiss. Were they obsolete in any commercial sense?
Mr. Allard. No.
Mr. Hiss. They were the best products available that you then had ?
Mr. Allard. Absolutely.
Senator Bone. Could they be said to have been obsolete in any
'degree in a military sense ?
Mr. Allard. They could be as far as our Army and Navy were
■concerned, because those products are not released for export until
something better has been developed and adopted by our Army and
Navy.
Senator Bone. What form would this obsolescence take — the ele-
ment of speed?
Mr. Allard. Oh, yes; speed, weight, general characteristics, rate
of climb, altitude, ceilings, and militar}^ performance in general.
Senator Pope. In all those respects you felt that these planes were
the best that there were ?
Mr. Allard. They were the best that we could offer at the time;
yes, sir.
716 MUNITIONS INDUSTRY
Mr. Hiss. I have a letter here dated October 1(5, 1933. signed W. D.
Pawlev, from Shanghai, addressed to Mr. Morgan, Avhich I will offer
as " Exhibit No. 292."
(The letter referred to was marked " Exhibit No. 292 " and is in-
cluded in the api)endix on p. 881.)
Mr. Hiss. This encloses a statement which can be marked sepa-
rately as " Exhibit No. 293.'*
(The statement referred to was marked " Exhibit No. 293 ", and
is included in the appendix on p. 882.)
Mr. Hiss. The statement reads:
Today Bill Brookes stopped in to see if I had heard from you ; he told me
the Chinese in Chinatown had a lot of cash tliey were going to send to China,
but when the treaty with Japan was signed they got peeved and didn't send it.
He also told me that the Curtiss planes Jimmy Doolittle went over there with
were the same old crates they tried to sell China last year. The only dif-
ference was a coat of paint and other motors and they are another year old.
If you run into them, watch out. They are supposed to be awful
That is enclosed in the letter from Mr. Pawley to Mr. Morgan and
Mr. Pawley explains that by saying that this was received by a Mr.
Keavney who is an ex-aviator and that he received a letter from his
wife making the statements just read and that the contents of this
letter were immediately transmitted to Carl Nahmmacher, United's
agent. That is the United Aircraft?
Mr. Allard. Yes.
Mr. Hiss. And this " Exhibit No. 292 " says that he has passed it
around to everyone in Shanghai interested in aircraft with the story
that the man who received the letter was stopping at the Metropole
Hotel and could furnish definite proof that the ships sold to the
Chinese were old equipment.
Do you remember the planes that were sent at this time with Major
Doolittle?
Mr. Allard. Very well.
Mr. Hiss. What model were they ?
Mr. Allard. They were the type, what we called the Type-1
Hawk, which is the Cyclone Hawk as released by the Army and
Navy at that time for export sale.
Mr. Hiss. A pursuit plane?
Mr. Allard. A pursuit plane.
Mr. Hiss. Were they, as the letter to Mr. Keavney said, " Planes
that you tried to sell to China the year before " ?
Mr. Allard. Absolutely not. The planes were built on this order.
Mr. Hiss. Did the United representatives make any inquiry so far
as you know of your company to find out whether this letter which
Mr. Pawley says they spread around Shanghai was correct or not?
Mr. Allard. Not to my knowledge ; no.
Senator Pope. So far as you know, did they do anything about
correcting that impression ?
Mr. Allard. So far as I know they did not; no. Unfortunately,
Carl Nahmmacher is now dead. He was killed in an aviation acci-
dent out there.
Mr. Hiss, Did your company attempt to approach United and ask
them to stop spreading such stories?
Mr. Allard. Yes.
Mr. Hiss. Did you have any success?
Mr, Allard. I do not know ; it is hard to tell.
MUNITIONS INDUSTRY 717
Senator Bone. When developing some new principle in aerial
navigation that can be applied to an airplane, how do you protect
yourselves to keep other companies from using it?
Mr. Allard. a new principle of aviation?
Senator Bone. Some new principle in the ship itself that can
be incorporated in the structure of the ship or its engine; how do
you protect yourselves against others using it?
Mr. Allard. May I ask Mr. Hotchkiss about that ? I think there
is an organization into which all patents are pooled for manu-
facturers.
Mr. Hotchkiss. Aircraft patents; yes.
Senator Bone. Then, after the manner of the automobile com-
panies, you pool the patents?
Mr. Hotchkiss. Aircraft patents, Senator.
Senator Bone. Yes.
Mr. Hotchkiss. Patents are also taken out on engines, but they
do not fall in this cross-license agreement.
Senator Bone. So that in reality, in this country the aircraft
companies have a policy whereby they pool all their patents on air-
plane construction and all are free to use that new device, if they
wish.
Mr. Hotchkiss. All those who are members of the Manufac-
turers' Aircraft Association.
Senator Bone. Would that include all the major companies?
Mr. Hotchkiss. I think it does, substantially all.
Senator Bone. Those patents are protected by filing in the
United States Patent Office^
Mr. Hotchkiss. That is so.
Senator Bone. They are matters of public records.
Mr. Hotchkiss. That is so.
Senator Bone. Is there anything to prevent me as a private
citizen from going down there and looking over those records?
Mr. Hotchkiss. The patents, themselves?
Senator Bone. Yes.
Mr. Hotchkiss. None whatever.
Senator Bone. So that as a practical proposition there is no
concealment possible in a patent, is there ?
Mr. Hotchkiss. Not in a patent, certainly not.
Senator Bone. That is what I mean. So that if any foreign
power wanted to see what was new in the way of airplane construc-
tion, all in the world they would have to do would be to have
some American attorney or draftsman go down there and look
over the particular design.
Mr. Webster. Or buy an airplane.
Senator Bone. Yes ; or buy one of the late planes.
Mr. Hiss. Mr. Allard, Mr. T. A. Morgan, the president of the
Curtiss-Wright Co. is also president of the Aeronautical Chamber
of Commerce.
Mr. Allard. That is correct; yes.
Mr. Hiss. And he is also on the executive committee of the St.
Louis Post of the Army Ordnance Association.
Mr. Allard. I do not know that to be a fact.
Mr. Hiss. That is so stated in the Army ordnance record.
718 MUNITIONS INDUSTRY
j\lr. Allard. I did not know that.
Mr. Hiss. I have had phiced before you a document, which I will
offer as " Exhibit No. 294."
(The document referred to was marked " Exhibit No. 294 " and
is included in the appendix on p. 882.)
Mr. Hiss. The document is headed " Situation Summary— Turkey "
and is dated February 27, 1933. Referring to a Mr. Selahetin Bey,
an official of the Turkish Government, Mr. Hall says :
It is quite evident that he receives his anti-C.W. inforiuatiou
That is Curtiss Wright?
Mr. Allard. Yes.
Mr. Hiss (reading) :
information from Hamilton of United
Mr. Hamilton is the European representative of the United Air-
craft.
Mr. Allard. He has been in Europe. I do not know that he is
the European representative.
Mr. Hiss (reading) :
and it was told Emen Bey a few days ago by Hanidi that Selahetin had a
definite " arrangement " with United. This ties in with the statement to
Gillespie
Can you identify Gillespie?
Mr. Allard. Gillespie is the American commercial attache at
Istanbul.
Mr. Hiss (reading) :
by the United mechanic Butterfield that though they hadn't been able to do
much for themselves in Turkey they at least had queered C.W.'s game here
permanently.
Have you had any reason to believe that United, when they could
not make a sale, were interested in preventing your company from
making the sale?
Mr. Allard. I think that speaks for itself, Mr. Hiss.
Mr. Hiss. Have you any information indicating that what this
says is incorrect?
Mr. Allard. No.
Mr. Hiss (continuing reading) :
What the " arrangement " may be is problematical
That is the arrangement with Selahetin and Mr. Hamilton is
problematical.
possibly promise of a good commission on all United engines sold to power
Selahetin's ships
That means United engines sold to the Turkish Government?
Mr. Allard. Yes, sir.
Mr. Hiss. Then Mr. Selahetin Bey, a Turkish official, would be
receiving a commission, according to this.
Mr, Allard. Yes. I do not think Selahetin Bey was a Turkish
official. I think he was an engineer, as I recall it.
Mr. Hiss. He was not a Turkish official?
Mr. Allard. No; I do not think he was; a government employee,
an engineer.
MUNITIONS INDUSTRY 719
Mr. Hiss (continuing reading) :
But at all events it would appear from this letter that United are persisting
with their destructive policy of endeavoring to turn C-W business in Europe
when they, themselves, cannot get it, to the hands of the French, Poles, or,
indeed, anyone else.
Senator Bone, May I ask one other question?
I am referring now to this question of patents. Do you file these
patents, or do tliese companies that pool their patents file them in all
foreign countries to protect their j^atent rights ?
Mr. HoTCHKiss. I cannot answer that definitely. I think under
the cross-license agreement there is no such obligation. In certain
instances, of course, I know the patents are also filed in the foreign
country.
Senator Bone. If you did not file your patents there and claim
protection of the laws of those nations any firm over there might very
readily manufacture your plane without any interference from you ?
Mr. HoTCHKiss. That is true. I say I do not know as to what the
practice of all the companies is. I know in one case one company
that I am most familiar with filed them in all the important countries
for their protection.
Senator Bone. That is the general practice, not confined to airplane
companies because naturally any concern that wants to protect its
product will claim a patent in a foreign country.
Mr. HoTCHKiss. That is correct.
Mr. Hiss. Mr. Allard, I want to refer you to one more document,
a letter of June 4, 1930, which I will ask to have marked " Exhibit
No. 295."
(The letter referred to was marked " Exhibit No. 295 " and is
included in the appendix on p. 885.)
Mr. Hiss. This is a letter from Randolph Cautley and is a report
marked " confidential."
Can you identify Randolph Cautley?
Mr. Allard. He was an employee of Wright Aeronautical Co. at
one time. I do not know what position he held, I think it was in
sales or advertising.
Mr. Hiss. The subject is Wright-engines business in Jugoslavia
and in the fifth paragraph Mr. Cautley says :
Tlie immediate order for 180 Whirlwinds has
Whirlwinds are Wright aeronautical engines?
Mr. Allard. Yes.
Mr. Hiss (reading) :
The immediate order for 180 Whirlwinds has evaporated into thin, hot air.
Jugoslavia will insist on going through the motions at least of taking a manu-
facturing license before ordering any such quantity. This does not mean that
the 18,0 cannot eventually be resuscitated. Conditions change, depending upon
who gets the graft and how much. For example, Lorraine and Potez, Salmson
and Hauriot
Are they all French companies?
Mr. Allard. Yes.
Mr, Hiss (reading) :
were first in the field here and cleaned up for a while. Now it is Gnome Rhone
and Breguet sitting on top, with Renault coming up and Lorraine going down.
83876 — 34— PT 4 3
720 MUNITIONS INDUSTRY
Those are all French companies?
Mr. Allard. Yes.
Mr. Hiss. The reference to conditions, it depending on who gets
the graft and how much, plus the reference that it does not mean
that the order for 180 Whirlwinds cannot eventually be resusci-
tated— those two follow each other, does that mean that Mr. Cautley
thought that by the use of graft he could secure a contract for 180
Wright engines?
Mr. Allard. I do not know what Mr. Cautley thought of this.
It was his idea.
Mr. Hiss. Did your company approve any such method of doing
business ?
Mr. Allard. No.
Mr. Hiss. That is all, Mr. Chairman.
The Chairman. Gentlemen, we will ask you to return here at 10
o'clock in the morning, to which time we will stand in recess.
(Whereupon at 5 p.m., the committee took a recess until Tuesday,
September 11, 1934, at 10 a.m.)
INVESTIGATION OF MUNITIONS INDUSTEY
TUESDAY, SEPTEMBEB 11, 1934
United States Senate,
Special Committee to In^t:stigate
the Munitions Industry,
Washington, D.C.
The hearing was resumed at 10 a.m., pursuant to the taking of
recess. Senator Gerald P. Nye presiding.
Present: Senators Nye (chairman), Pope, George.
Also present : Alger Hiss, investigator.
The Chairman. The committee will be in order. Mr. Hiss, you
may proceed.
FURTHER TESTIMONY OF J. S. ALLARD, HENRY G. HOTCHKISS,
AND CLARENCE W. WEBSTER
Mr. Hotchkiss. Mr. Chairman, I wonder if I may at this point
refer to the chart which we spoke about ^^esterday, and certain of
the testimony which I have examined and which I think does not
give a correct picture as I understand it. If I may, I would like to
clear that up.
The Chairman. Surely.
Mr. Hotchkiss. The Sperry Corporation was formed in April
1933. All of its stock was delivered to North American Aviation,
Inc., shown on that chart above, in exchange for the stock of Sperry
Gyroscope Co., Ford Instrument Co., and approximately 5 percent
of the Curtiss-Wright stock owned by the North American and the
stock of Intercontinent Aviation.
Now at the time when that exchange was made General Motors
had no stock interest whatever in North American, neither General
Motors nor General Aviation Corporation.
The Chairman. Prior to that time?
Mr. Hotchkiss. At the time when this exchange which I am
speaking of was made. Following that. North American Aviation
delivered to its some 25,000 stockholders voting-trust certificates rep-
resenting all of the stock of the Sperry Corporation. Now, none of
the 25,000 stockholders at that time included either General Motors
Corporation or General Aviation Corporation.
The result was, then, that Sperry Corporation owned the com-
panies that I have mentioned — Sperry Gyroscope Co., Ford Instru-
ment Co., Intercontinent Aviation, and approximately 5 percent of
stock interest in Curtiss-Wright.
Subsequent to that transaction it is my information that General
Aviation Corporation and General Motors Corporation acquired a
stock interest in North American Aviation.
721
722 MUNITIONS INDUSTRY
Senator Pope. How long subsequently ?
Mr. HoTCHKiss. I do not know how lonj; after that, but North
American Aviation, in which the General Motors and the General
Aviation Corporation acquired an interest, was one which had trans-
portation interests which they had retained. Eastern Air Transport
was one of the principal ones, I think, not shown there.
Mr. Hiss. Mr. Hotchkiss, are you saying that the North American
stockholders represented as holding 52 percent of its stock, i.e., Gen-
eral Aviation and General Motors, do not hold any of the voting
trust certificates of the Sperry Corporation ?
Mr. Hotchkiss. Let me make this clear ; They issued out the vot-
ing trust certificates of the Sperry Co., I believe, in the nature of a
stock dividend to the stockholders. That was a certificate of Sperry
and a certificate of North American. Now, at that time General
Motors and General Aviation were not, as I am informed, stock-
holders of North American, and therefore did not receive the stock
dividend of the Sperry Corporation.
Now, subsequently, when General Motors acquired a stock interest
in North American it was after the stock dividend to which I have
referred, and did not, therefore, carry with it, in the nature of
things, the voting trust certificate of the Sperry Corporation.
Mr. Hiss. In other words, you are saying that General Motors
Corporation and General Aviation Corporation have not acquired
any of the voting trust certificates of the Sperry Corporation?
Mr. Hotchkiss. I do not know whether they have acquired any
voting trust certificates in the open market. I simply want to
point out that they did not acquire them in connection with the
formation of the Sperry Corpoj-ation in the major reorganization at
that time.
Mr. Hiss. I should like again to call the committee's attention,
Mr. Chairman, to the directors of the Curtiss-Wright Corporation
and of the Sperry Corporation, who are also on the General Aviation
or the North American Aviation. Mr. Hoyt, who is on the board of
directors of the Curtiss-Wright, parent corporation, and of several
of the subsidiaries, is also a director of the Bendix Aviation, which
is shown over there on the chart, in which General Motors has a
25-percent interest.
The Chairman. The point, Mr. Hiss, is that the control exercised
here is as largely through interlocking directorates as it is through
stock ownership.
Mr. Hiss. That is correct.
Senator Pope. One question here. It appears that whatever may
have been the condition at the time to which you refer, the Gen-
eral Aviation Corporation owns 43 percent plus and General Motors
8 percent plus, making a total of 52 percent. Now is it the condi-
tion that this stock now owned by General Aviation and General
Motors does not possess voting power so that they can control the
affairs ?
Mr. Hotchkiss. No; I am afraid I have not made that clear.
That stock, to which you refer, under the North American Avia-
tion block, is, as I understand it. North American stock having
full voting rights.
Senator Pope. Yes.
MUNITIONS INDUSTRY 723
Mr. HoTCHKiss. But it does not include and does not so state
any of the voting trust certificates of the Sperry Corporation.
Mr. Hiss. I think the way to clear that up is to ask General
Aviation Corporation and General Motors Corporation specifically
whether, when they acquired stock in North American, they also
acquired any of the voting trust certificates of the North Anierican
Aviation. " Exhibit No. 296 " is a letter dated April 6, 1934, bearing
the initials J. S. A., Mr. AUard's initials.
Mr. Allard. That is right.
Mr. Hiss (continuing). Addressed to Mr. Leighton.
(The letter referred to was marked "Exhibit No. 296", and is
included in the appendix on p. 886.)
Mr. Hiss. You will recall that yesterday the witnesses stated
that the Curtiss-Wright Export Co., which is the foreign selling
agency for the Curtiss-Wright group, sold military planes and also
sold munitions apart from various planes which they sold. The
statement was made that the munitions sold to date all were con-
nected with aviation, although the testimony showed that the
Curtiss-Wright Export Co. has received quotations and has nego-
tiated for various munition products not usable in connection with
aviation. For example, there was a bid for tanks and various other
articles of munitions.
This letter of April 6, 1934, reads as follows [reading] :
To : Mr. B. G. Leighton.
Dear Bruce: Mr. B. C. Goss, who is prosdent of the U.S. Ordnance Engi-
neers, Inc., who manufacture chemical warfare munitions, has been approached
by an individual in Istanbul in connection ^^■ith the possible sale of chemical
munitions to the Turkish Government and, more recently, with a plan which
this Turk has submitted to Mr. Goss for U.S. Ordnance Engineers, Inc., to
build a chemical munitions plant in Turkey.
Mr. Goss is very much interested in the proposition, and, incidentally, he
tells me it is the only way that Turkey can have successful chemical warfare
equipment — by building a factory.
Mr. Goss is planning on going to Turkey in the very near future, probably
sailing within the next week or two, and may, possibly, sail with me. How-
ever, in the event that we do not arrive together, I am writing him a letter
of introduction to you and have suggested that he get in touch with you before
he gets in touch with anyone else in Turkey, i^o that you can give him the
benefit of your experience and advice, and see if there is any way in which
Curtiss-Wright can participate on a commission basis in his projected business
with Turkey. Obviously, we do not want to be involved in any financing or
anything else, but merely to get a commission for the assistance which you
will give him.
It is true, is it not, Mr. Allard, that the Curtiss-Wright Export
Corporation, having a widely flung world selling organization which
deals with the military departments of various governments, is avail-
able for the sale of munitions on a commission basis, whenever it is
profitable to the company?
Mr. Allard. That is correct.
COMMISSIONS PAID IN CONNECTION WITH FOREIGN SALES
Mr. Hiss. Yesterday it was also developed that, for in.stance, Cur-
tiss competes both with European companies and the United Aircraft
group, an American group of companies which resorted to what wa.s
characterized yesterday as " unfair tactics ", and the Curtiss com-
petitors indulge in what Mr. Webster referred to in quotations as
724 MUNITIONS INDUSTRY
" commissions " to various agents, and Mr. Allard stated that his
company, so long as he was president and so long as he had been
connected with it — which is 6 years, Mr. Allard ?
Mr. xVllard. Correct.
Mr. Hiss (continuing). Had not engaged in any such practices.
Mr. Allard, do you remember a Mr. Gordon B. Enders?
Mr. Allard. In China?
Mr. Hiss. In connection with China; yes, sir.
Mr. Allard. Yes; I do.
Mr. Hiss. Did Mr. Enders approach your company for some kind
of business?
Mr. Allard. I do not remember. I would have to refresh my
memorv, if you have something there.
Mr. Hiss. This will be " Exhibit No. 297." It is a letter of July 21,
1930, signed "Jack." That is you, Mr. Allard?
Mr. Allard. That is right.
Mr. Hiss. It is addressed to Mr. Burdette S. Wright, who is a
vice president of the parent corporation in Washington.
(The letter referred to was marked " Exhibit No. 297 " and is
included in the appendix on p. 886.)
Mr. Hiss. That letter reads as follows [reading] :
Thanks for yours of the 17th regarding Mr. Gordon B. Enders and E. F.
Baskey. The information is most interesting, and, while I realize that the
ethics of the transaction are very questionable, from all I gather most Chinese
business is iniethical, and I still think that I would like to have had a chance
at the Chinese business that Enders apparently had in his hand.
This, of course, is not official, but it is confidential between you and me.
I do think that if Enders had come in here with cash to buy a lot of aviation
equipment to be sent to China and the State Department gave us approval, I
would not care much who Enders was as long as I got the cash, and the State
Department approved the shipment of the aeroplanes. Under present condi-
tions we did not get a chance to contact with him ; therefore, we can stick up
our noses in the air and say that we prefer not to associate with men of his
calibre, but the truth of the matter is, I wish we had gotten the order.
Do you remember what that business was ?
Mr. Allard. I have not any idea what the details of the business
were. We did not get the business, obviously.
Mr. Hiss. Mr. Webster, you were engaged in selling in South
America and are, I assume, familiar with the business transactions
which your company has carried on in Bolivia.
Mr. Webster. Yes, sir.
Mr. Hiss. Do you remember a Mr. Cueto Pozo ?
Mr. Webster. Yes, sir.
Mr. Hiss. Was he an agent of the Export Co. ?
Mr. Webster. Yes, sir ; he was, for a short time.
Mr. Hiss. Did the Export Co. pay him any commissions?
Mr. AVehster. Yes; they did.
Mr. Hiss. Was he at the same time an employee of the Bolivian
Government ?
Mr. Webster. Yes, sir.
Mr. Hiss. Was he discharged by the Bolivian Government when
they discovered that he was receiving commissions from the Curtiss-
WrightCo.?
Mr. Webster. I believe that he was either asked to resign or did
resign when Ave were advised that the Government did not wish to
MUNITIONS INDUSTEY 725
have anyone in their employ act as agents for any manufacturing
company.
Mr. Hiss. Wliat was his position with the Bolivian Government,
Mr. Webster?
Mr. Webster. I am not exactly sure. I could not tell you ex-
actly what his position was. It was a minor position.
Mr. Hiss. Was he in the Foreign Office of the Bolivian Govern-
ment?
Mr. Webster. I believe it was some connection with the Foreign
Office.
Mr. Hiss. " Exhibit No. 298 " is a letter of March 24, 1933, to Mr.
Webster, signed " Cliff." Is that Mr. Travis?
Mr. Webster. Tliat is Mr. Travis.
Mr. Hiss. Who at that time was an employee of the Export Co. ?
Mr. Webster. Yes; he was an employee of the Export Corpora-
tion.
(The letter referred to was marked " Exhibit No. 298 " and is in-
cluded in the appendix on p. 887.)
Mr. Hiss. This letter contains the following statement by Mr.
Travis with reference to Cueto Pozo:
I got a look at some documents yesterday that bear authority, and although
they were confidential, I took some notes, Cueto files the following information
regarding himself and his business :
Importer of manufactured articles ; exporter of national articles ; agent of
foreign manufacturers ; languages — English, Spanish, French. * * * ; organi-
zation— private; business done on own account on commission basis.
* * * Commercial references — Bell & Howell, Chicago ; Curtiss-Wrigbt
Export ; Mack Motor Truck Corporation, N.Y. ; * * * Bellanca Aircraft,
New Castle, Del.
There was no references from any of the commercial firms mentioned, but
the two banks here were requested to send in their recommendations and we
find the following :
Banco Central — Feb. 25, 1933 : " Mr. Cueto Pozo has an agency to act occa-
sionally for Curtiss Airplanes on a commission basis. At the time of taking
this agency Mr. Cueto Pozo was in the Ministry of Foreign Affairs. In order
to safeguard Government money he was discharged from the position in the
Ministry of Foreign Affairs. As a private person he does not own any real
estate, nor does he have any money. At present there is a commission ap-
pointed by the Government to investigate concerning the sales of airplanes and
trucks to the Government and establish whether Mr. Cueto Pozo and others
have been unduly zealous in their private dealings with the Government."
Mr. Webster. Have you finished with that, Mr. Hiss?
Mr. Hiss. That is all. Do you want to make a statement on it?
Mr. Webster. I would like to explain that at the time we made a
connection with Mr. Cueto Pozo it was with the knowledge of the
Government, and in conversation after I arrived in La Paz — we en-
gaged Mr. Cueto Pozo before we had met him. We engaged him
more or less by mail or cable. He said that he was in a position to
represent us there and we made a temporary arrangement with him.
Later, when I arrived in Bolivia, I found, in talking with Govern-
ment officials, that it was not their desire to have an employee of
the Government act as an agent for manufacturers. Therefore, we
severed our connections with Mr. Cueto Pozo. He was paid a cer-
tain commission because we had an agreement with him, and then his
services were terminated.
Mr. Hiss. At the time that you had this arrangement with him,
did you know that he was an employee of the Bolivian Government ?
726 MUNITIONS INDUSTRY
Mr. Webster. Oh, yes ; and it was more or less ^Yith the approval
of, that is, the Government knew he was acting for us because he
handled the representatives there.
Mr. Hiss. Did the Export Corporation also employ an agent in
Bolivia whose name was Pancho Echenique?
Mr. Webster. We did not employ Mr. Echenique. Mr. Echenique,
who was a Chilean national and who was well known in Bolivia,
went to Bolivia at his own expense, and after arriving in Bolivia
cabled us that he was in a position to handle certain business, which
was apparently pending, and we told Mr. Echenique if he was respon-
sible for handling any business there for us, that we would take
care of him on a commission basis. He was not an employee of the
company.
Mr. Hiss. Was he an employee of the Bolivian Government at the
time?
Mr. Webster. No, sir.
Mr. Hiss. May I call your attention to " Exhibit No. 299 ", being a
letter dated February 9, 1933, from yourself, Mr. Webster, to Mr.
Echenique?
Mr. Webster. Do you know where that was written from ?
Mr. Hiss. No; I am afraid I do not. That is all that appears
in your files. Probably from South America.
Mr. Webster. I think so ; yes, sir.
(The letter referred to was marked " Exhibit No. 299 " and is in-
cluded in the appendix on p. 888.)
Mr. Hiss. That letter reads as follows, in part [reading] :
The Bolivian Government business has been handled and controlled entirely
by Mr. Lopez, comptroller general, * * *
Was he comptroller general of Bolivia ?
Mr. Webster. Yes, sir.
Mr. Hiss. And in charge of the purchases ?
Mr. Webster. No; he was not in charge of purchases. He was
comptroller general, and in that way all contracts passed through
his hands and payment was authorized through the comptroller's
office.
Mr. Hiss. He had charge of certifying to payment on Government
contracts ?
Mr, Webster. Yes, sir.
Mr. Hiss (continuing reading) :
and when I was in La Paz, he was very much upset and concerned because of
the fact that we had been dealing through an agent and paying a commission
on tlie business. He insisted that all business be handled directly between the
Government and ourselves, and that no commissions would be permitted by the
Government. He took immediate steps to discharge from Government service
Mr. Cueto Pozo, and deducted from our bills the commissions which were
supposed to have been paid. * * *
I told you when I was in Santiago that I would do the best I could for you
but that it was impossible for me to name a definite amount and this arrange-
ment will have to stand until we have concluded our business dealings with tlie
Government.
The reason for your not being able to pay Mr. Echenique ; that is,
to enter into an agreement with Mr. Echenique as to commissions, was
because Mr. Lopez was opposed to the Bolivian Government dealing
through an agent?
MUNITIONS INDUSTRY 727
Mr. Webster. Not necessarily. It was because we had not yet
terminated, or rather arranged, a settlement with Mr. Cueto Pozo.
We did not know what expense we would be forced to pay in order
to terminate our contract or arrangement with Mr. Cueto Pozo.
Mr. Hiss. You wrote this letter in 1933, Mr. Webster, and you state
that " he ", Mr. Lopez, " insisted that all business be handled directly
between the Government and ourselves, and that no commissions
would be permitted by the Government."
Mr. Webster. That is correct.
Mr. Hiss. Is that the reason?
Mr. Webster. That is partially the reason ; yes, sir. The fact that
the situation was somewhat unsettled and we could not make an
arrangement with the agent for the commissions.
Mr. Hiss. What is the name of the firm in Bolivia that represents
the export company, the permanent agent in Bolivia ?
Mr, Webster. Webster & Ashton.
Mr. Hiss. Do you pay them a commission ? Does the export com-
pany pay them a commission on sales ?
Mr. Webster. Either a commission or a definite set amount on
certain contracts ; not always on a commission basis.
Mr. Hiss. I offer as " Exhibit No. 300 " a letter of March 29, 1933,
signed " Cliff." That is Mr. Travis. The letter is to Mr. Webster.
(The letter referred to was marked " Exhibit No. 300 ", and is in-
cluded in the appendix on p. 888.)
Mr. Hiss (reading) :
There is a flnli here in La Paz, Webster & Ashton, formerly Webster & Finni-
gan, Casilla 144, that is a local business outfit with a branch in Oruro. They
have the agency for International Harvester Export and have done considerable
business with the Bolivian Government in trucks. They carry on national busi-
ness as well. They want the agency for us in Bolivia and I have thoroughly
looked up the standing of the firm, find it O.K., have talked with the American
Minister, Feely, and have known both Webster and Ashton personally since my
first arrival here. Lopez called me in to talk it over and informed me that
the Government was willing to do business with an accredited firm but not with
an individual, and that they were willing to pay a reasonable commission on
business with us for the convenience of having some one here at all times.
Did Mr. Lopez have any interest in the firm of Webster & Ashton,
which he recommended ?
Mr. Webster. To my knowledge he has no interest. I have heard
it said that he was a partner with Webster & Ashton on possibly
not their entire business, but in a gmall manufacturing company
which they had there; and I believe this was even prior to the
trouble, or the war then between Bolivia and Paraguay. To my
personal knowledge I do not know whether he is a partner of Web-
ster & Ashton. I have heard it said that he is.
Mr. Hiss. May I call your attention to a further part of this letter
which says :
There is one thing that comes to my attention with regard to this, although
I believe everything is above board and on the level. Lopez is in with Webster
& Ashton on a hat factory and a retail clothing and furniture business here
and it is extremely difficult in view of the control board to get dollars for the
necessary imports for their business. Having an agency for American goods
would enable them to carry their commission in dollars in New York. There
may be some kind of a combination between the parties but the thing as put
up to me sounds O.K. and on the level.
728 MUNITIONS INDUSTEY
Mr. Webster. Also in the next sentence he says, " Feely thinlis
it is square." Feely was the American Minister.
Mr. Hiss. That is correct. The next sentence is, "Feely thinks
it is square."
I will offer as " Exhibit No. 301 " a letter from Mr. Travis, signed
" Cliff ", to Mr. Webster, from Bolivia, dated September 21, 1933.
(The letter referred to was marked " Exhibit No. 301 " and is in-
cluded in the appendix on p. 890.)
Mr. Hiss (reading) :
Regarding the commission to be paid Activos, * * *
Is that the cable name of Webster & Ashton ?
Mr. Webster. That i^ correct.
Mr. Hiss (continues reading) :
* * * I cabled that my recommendation was 5 percent of the total amount of
the last order. That would be 5 percent of $97,180.00, or nearly $5,000.00 As you
know, that order was put through by me some time ago but Activos were
darned helpful on the final details of the deal and were entirely responsible
for getting the money in cash ; something that no one else without their con-
tacts and influence could have done so easily, if at all. For your own in-
formation, Lopez is, and has been for some time, a silent partner of Activos,
and is interested to quite an extent in the agency and their textile and hat
factories. That is not common knowledge but it makes it necessary to play
ball with the tall friend. * * *
By the " tall friend " he had reference to Mr. Lopez ?
Mr. Webster. Yes.
Mr. Hiss (reading) :
* * * as he is the deciding factor in all purchases — more so than the Presi-
dent himself. Do not mistake me — Loijez is one of the few honest men in this
country, and although he has a personal interest in the sale of Curtiss planes
and equipment, he would not let the order go through unless the stuff was
entirely satisfactory. Let me give you some extremely confidential dope that I
picked up, no matter where, but it was in writing :
1. Jorge Zalles, vice pres. of Grace & Co., used the Cueto affair as a lever
to try to influence Lopez through the New York consul to eliminate Curtiss
and take up United Aircraft through Grace. They told Lopez that they could
supply Hawks at $23,000 and Ospreys at $17,000.
2. When the last three planes (that have just been delivered) were on order
the purchase was nearly cancelled because of interference of the Kundt-Bilbao
combination * * *."
Were they Germans connected with the Bolivian Government ?
Mr. Webster. Kundt was General Kundt, in command of the
Bolivian Army.
Mr. Hiss. Was he a German?
Mr. Webster. And Bilbao is a native Bolivian pilot who was
recently killed — about 3 weeks ago.
Mr. Hiss (continues reading) :
* * * through the Minister of "War, Hertzog, to the President. Except for
Lopez and the pilots (as well as my visit here at the time to straighten out
the complaints), the order would have been cancelled and the business given
to United Aircraft and Fokker.
3. Due to Lopez and Activos we were able to arrange full payment on the
last order through irrevocable credit. The President's instructions were to
make payment in the same form as before — 35 percent only after planes were
tested and delivered.
4. Lopez has been offered 10 percent on planes and 20 percent on spares if
he will help swing the business to Fokker. Vickers made him the same offer.
(I have told Activos that we cannot pay more than a flat 5 percent on all
Curtiss business at the present quotations.)
MUNITIONS INDUSTRY 729
5. Lopez and Activos have practically assured our future by combatting the
competition, although they could have cleaned up by putting in United or
Vickers.
6. Colonel Williams, American fiscal agent for Bolivia, has told the Govern-
ment that United is much bigger than Curtiss. I can't quite see where that
comes in nor whei'e it fits into the picture.
Colonel Williams was an American representative in Bolivia ?
Mr. Webster. Yes, sir.
Mr. Hiss. And an officer employed by Bolivia ?
Mr. Webster. An officer, I believe, emploj^ed in Bolivia. I do not
know just what the arrangements were.
Senator Pope. Was he also employed by the United States
Government?
Mr. Webster. I do not believe so, Senator. I think he was an
American employed by the Bolivian Government as a fiscal agent —
to assist them in their financial affairs.
The Chairman. Was it a case of a loan of this agent by our Gov-
ernment to Bolivia ?
Mr. Webster. I do not know, sir.
Mr. Hiss. Had he formerly been in the State Department of the
United States?
Mr. Webster. I do not know. I have never met Colonel Williams ;
I do not know who he is.
The Chairman. Mr. Hiss, has the full name of Mr. Lopez been
given, or does the record just carry him as Lopez?
Mr. Hiss. Just as Lopez. Can you give his full name, Mr.
Webster ?
Mr. Webster. I do not know his full name. It is very easily ob-
tained, but I could not tell you off hand.
Mr. Hiss (continuing with this letter) :
So in view of the strong combination working in our behalf. I think we
should allow the 5 percent on the last order in order to keep the machinery
well oiled. Our prices can stand it, although our selling costs have been
rather high. Spare parts selling at list should make a fair margin for us,
and I understand that the Osprey carries a fair margin at $18,000 with 10 per-
cent allowed for conunission. (I should know more about the internal work-
ings of that side of the game if I am to be of maximum value to the company.)
We have never had a chance to get together for a good old instru^-tive critique
in the year that I have been with the company, and I am looking forward with
much enthusiasm to our meeting in Lima next month. Naturally, I want to
put out everything I've got for you and there are a few dark corners — dark
as far as I am concerned — that I would like to get an inside glimpse of.
I don't know whether I have mentioned it before, but be careful what dope
50U put out to Decker.
Who is Decker?
Mr. Webster. Decker is the consul general in New York.
Mr. Hiss (continuing reading) :
Contact Activos before quoting any prices to anyone and get together with
them. They are on the up and up, but I know the situation here well enough
to tell you to do this. There is a hell of a lot of intrigue down here, and an
unwise word to Decker might start a lot of unpleasantness for us. You know
the game, so you understand the situation.
I offer as " Exhibit No. 302 " a letter dated May 23, 1933, from
Owen Shannon to Captain Travis in Bolivia.
(The letter referred to was marked " Exhibit No. 302 " and is in-
cluded in the appendix on p. 892.)
730 MUNITIONS INDUSTRY
Mr. Hiss (reading) :
The Consul General here — a good old scout named Decker * ♦ *
That is the Consul General of Bolivia in New York?
Mr. Webster. Yes.
Mr. Hiss (continues reading) :
* * * keeps on asking us what they are doing with the Hawks and Ospreys —
we keep telling him we don't know, as you never discuss their activities in your
letters, whicli is just as well because I am sure anything we told him would
be cabled down to La Paz prompto. He seems to have a mania for saving
the Government money and passing everything he hears on to them.
Did Mr. Lopez also have a mania for saving the Bolivian Govern-
ment money, Mr. Webster ?
Mr. Webster. I believe he did; yes.
Mr. Hiss. Would you say that the desire on the part of a govern-
ment official to save his government money was a inania ?
Mr. Webster. Pardon me, what is that question?
Mr. Hiss. Would you say the desire on the part of a government
oiRcial to save the government money was a mania?
Mr. Webster. I would not exactly call it a mania ; no, sir.
Mr. Hiss. Mr. Shannon did.
Mr. Webster. I do not believe I would express it that way.
Mr. Hiss. I offer as " Exhibit No. 303 " a letter dated May 30, 1933,
signed by " Cliff ", that is Mr. Travis, to " Dear Web." That is
yourself, Mr. Webster?
Mr. Webster. Yes, sir.
(The letter referred to was marked " Exhibit No. 303 ", and is
included in the appendix on p. 892.)
Mr. Hiss (reading) :
I have already informed Ashton that, in view of the fact that the present
pending order was negotiated by myself and that no commission was included
in the quotations, he will not be entitled to much, if anything, on the deal.
Naturally, he will have to be given something as well as a couple of others.
* « «
Did others have to receive commissions besides your regular agent?
Was that the situation in Bolivia, Mr. Webster?
Mr. Webster. I am not sure, but I assume possibly that Webster
& Ashton took care of other people. I do not know of my personal
knowledge, but I assume that they did take care of other people.
Mr. Hiss. What kind of other people, Mr. Webster?
Mr. Webster. Well, possibly people with a .greater technical
knowledge than they had of aviation. Webster & Ashton were not
entirely familiar — in fact, they were not familiar at all, you might
sa}', with the technical part of airplanes ; and I believe it would be
necessary at times for them to employ others who could discuss the
technical parts of airplanes.
The Chairman. Might thej, by any chance, have been agents of
the Government, officials of the Government?
Mr. Websi'er. They could have, sir. But I could not state for
sure.
The Chairman. I think it has been said here repeatedly that your
company did not ai:)prove ?
Mr. Webster, We do not approve of that, sir; no. But we cannot
very well control the acts of our agents at all times. They may do
something: we do not know of.
MUNITIONS INDUSTRY 731
The Chairman. Is there of record, any place, a scolding by your
company officials of agents who have been known to employ these
methods ?
Mr. Webster. I do not know that there is any record, Senator;
but I know that in many of our conversations we have made it plain
that we do not like to do that thing, if it is possible. It involves
unpleasantness sometimes.
The Chairman. Your policy is one of employing, in many in-
stances, men who have connections with the Government. Can that
be said to be true ?
Mr. Webster. Yes, sir ; that is correct. That is, men employed by
the Government, Mr. Chairman?
The Chairman. Yes.
Mr. Webster. There are very few instances where we have em-
ployed or taken anybody on, who are employed by governments.
The Chairman. How can we put two and two together and say
that while you employ, in instances, this kind of help, yet you do
not approve?
Mr. Webster. Sometimes it is necessary to employ people who
know the country and the customs to handle our affairs there.
The Chairman. If you were to employ an admiral, or if you
were to pay commissions to an admiral, or to a general, or to some-
one connected with the War or Navy Departments to help persuade
the Government to enter into a contract, that would be helpful to
vour company, would you call that a commission ?
Mr. Webster. That would be a very polite word for it, Mr.
Chairman.
The Chairman. In fact, it would be bribery, would it not?
Mr. Webster. It would. It is a rather harsh word, but it would
be, strictly speaking.
The Chairman. Why do you call it by any other name than
that, when you resort to that method in other countries?
]\Ir. Webster. It is a nicer Avay of putting it. Senator.
Senator Pope. In the statement made by Mr. Travis in the letter
which has been referred to, he puts it this way :
I think we should allow the 5 percent ou the last order in order to keep
the machinery well oiled.
Mr. Webster. That is expressing it a different way.
Senator Pope. That was a letter received by you from him?
Mr. Webster. Yes.
Senator Pope. Do you recall in your reply that you made any
reference to that statement?
Mr. Webster. I do not believe so. I do not recollect it.
I might state in connection with Mr. Lopez, it is my understand-
ing that Mr. Lopez, for several years, a number of years, had been
interested in commercial line of business with Webster & Ashton and
possibly before he assumed his official position with the Govern-
ment. My experience has been that Mr. Lopez is a very fine type of
man.
Mr. Hiss. You, at the time of this correspondence, were president
of the Export Co., were you not, Mr. Webster?
Mr. Webster. At this time; yes.
Mr. Hiss. Prior to June 1933?
Mr. Webster. Yes.
732 MUNITIONS INDUSTRY
Mr, Hiss. And Mr. Travis recommended Webster & Ashton be
made your agents, in part at least on the ground that Mr. Lopez
favored that particular firm.
Mr. Webster. Yes, sir. It is quite logical, if they were purchas-
ing from us, that we should have somebody there at all times to
represent our interests and form a closer contact. In fact, the con-
nection with Webster & Ashton was discussed with the American
Minister there and the American Minister recommended Webster &
Ashton.
Mr. Hiss. Mr. Lopez also specifically recommended Webster &
Ashton, did he not?
Mr. Webster. I think so; I am not sure. I think Mr. Travis
refers to it in one of his letters.
Mr. Hiss. That is correct — in an exhibit that has been introduced.
In the postscript to " Exhibit No. 303 ", from which we were reading,
the letter of May 30, 1933, Mr. Travis says :
Just got notice from the President through Lopez that the Bolivian Consul
in N.y. cabled that Hawks and Osyreys be secured for 23,000 and 17,000, respec-
tively. I cabled the office today about it. Sure threw a wrench in the ma-
chinery and raised Hell in general. May spoil our business but will do all I
can to save the situation and our prices.
Does that mean that the consul general had gotten the direct
quotation in New York from the Curtiss group ?
Mr. Webster. No, sir. Apparently somebody had told him that
he could purchase at a cheaper price, which was not so.
Mr. Hiss. If the Bolivian Government had dealt directly with
your company, could they have secured Hawks and Ospreys at a
cheaper price than they did secure them through Webster & Ashton ?
Mr. Webster. I do not believe they could, sir, because it would
have been necessary then to maintain our own people in Bolivia to
handle our business.
Mr. Hiss. I offer as " Exhibit No. 304 " a letter dated November 6,
1933, from Mr. Shannon to J. A. B. Smith and Mr. J. S. Allard.
Mr. Smith is an officer of the Export Co. ?
Mr, Allard, No.
Mr. Hiss. Is he a director of the Export Co. ?
Mr. Allard. Yes ; he is treasurer of the parent company.
Mr. Hiss. This letter quotes a letter received from Mr. Webster
in regard to Bolivia.
(The letter referred to was marked " Exhibit No. 304 " and is
included in the appendix on p. 894.)
Mr. Hiss. This letter says in regard to Bolivia as follows :
Here the situation is also very interesting. I have had one long joint session
with the Minister of Finance, Lopez, the Minister of War, and the Minister of
Transportation, and another one is scheduled for 6 o'clock tonight. My one
great job is to sell from three to 10 Condors. The matter has been talked over
with the President, and it looks very favorable. The Minister of War and
the Chief of Staff is leaving tomorrow for the Chaco. to be gone a week or two,
and they are taking down all the specifications, photographs, and drawings to
discuss with General Kundt. The one big problem will be the financing, and
we are to go into that this evening. The order may be split up to satisfy
Gen. Kundt and the Lloyd Boliviano Company, and possibly three out of the
10 ships may have to go to Junkers, although our performance, etc., is better.
Any price I quote will include 5% for Ashton & Webster, and in this connec-
tion we will allow them the 5% on past sales. It seems highly advisable as
Lopez who is the President's right arm, is a silent partner of the company. His
MUNITIONS INDUSTEY 733
attitude now is entirely different than it was a year ago and hie is sure pushing
our stuff.
Mr. Webster, I might say in that connection that the inference
I believe you are drawing is that Mr. Lopez was favoring us because
of his connection witli Webster & Asliton. In this connection I
might say that I am quite convinced that Mr. Lopez was favoring
us because of the service and the performance that we were able to
give with that material. We kept two of our men down there — a
service man and a pilot — representatives of ours, in order to see
that our material did give good service. They were entirely satisfied
with the performance of our planes. They had had some very unsat-
isfactory experiences with other types and I think they were entirely
satisfied with ours. I think that is the reason Mr. Lopez was in
favor of our equipment.
Senator Pope. I should like to refer back to exhibit 301, at the top
of the first page where it says :
Shorty is going to tlie Chaco next Friday to loolc tilings over to give some
much needed instructions to the mechanics.
Who was Shorty?
Mr. Webster. That is a mechanic, Mr. Harry Berger, a service
mechanic of ours, in South America.
Senator Pope. That was during the time of the hostilities between
Paraguay and Bolivia?
Mr. Webster. Yes, sir. It says instructions, but what he refers
to there is how to take care properly of those engines and not to
burn them up. It was necessary to use very high-test gasoline and
they had had some engine trouble due to overheating, etc. They had
not been using the proper gasoline. It was in our own protection,
to see that our own equipment was operating properly. You know,
you can burn an engine up very quickly if you do not take care
of it.
Senator Pope. You did not consider the element of neutrality there
at that time?
Mr. Webster. No, sir. I really do not think that is involved there.
This is one of our mechanics, on our own payroll, simply correcting
a possible fault in one of our engines.
Mr. Hiss. Mr. Allard, your company has sold planes to the Swiss-
air, a Swiss commercial transport company?
Mr. Allard. That is correct.
Mr. Hiss. Do you know Mr. Zimmermann of that company?
Mr. Allard. I have met him in this country.
Mr. Hiss. What is his connection with that company?
Mr. Allard. I understand he is managing director of Swissair.
Mr. Hiss. Has your company ever paid Mr. Zimmermann, manag-
ing director of Swissair, a commission on sales?
Mr. Allard. I believe we have; commercial sales.
Mr. Hiss. I offer as " Exhibits No. 305 and No. 306 " two letters,
one of January 4, 1932, and one of January 26. 1933.
(The letter of Jan. 4, 1932, was marked "Exhibit No. 305", and
is included in the appendix on p. 894.)
(The letter of Jan. 26, 1933, was marked " Exhibit No. 306 ", and
IS included in the appendix on p. 895.)
Mr. Hiss. We can take up both these exhibits at the same time.
In ' Exhibit No. 305 ", a letter from Philip Shepley, dated January
734 MUNITIONS INDUSTRY
4, 1932— Mr. Shepley was an employee of the Curtiss-Wright Export
Co., stationed in Europe at that time?
Mr. Allard. No; in New York.
Mr. Hiss. This is to Mr. Allard, and it says:
I understand verbally from Mr. Goulding that * * *
He was an official of the Export Co.?
Mr. Allard. Yes.
Mr. Hiss (reading) :
* * * that from now on we are to reserve a o-percent commission for Mr.
Zimmermann on all purchases by Swissair both for their own use as well as
for resale.
To whom did the Swissair Co. resell?
Mr. Allard. Possibly to other transport companies.
Mr. Hiss. To transport companies in Switzerland?
Mr. Allard. Or individuals; I imagine so.
Mr. Hiss. Do you know of any other Swiss transport companies?
Mr. Webster. I do not know offhand; no.
Mr. Hiss (continuing reading) :
I am not sure, however, how Mr. Zimmermann wants this handled — whether
confidentially or otherwise. When you find this out in your conversations with
him, please let me know.
Do you know how it was handled?
Mr. Allard. No; I do not. I think it is a matter of record on
our books.
Mr. Hiss. " Exhibit No. 306 ", which is dated January 26, 1933, is
from Mr. Goulding to Mr. Woodling.
Who is Mr. Woodling?
Mr. Allard. He was an emploj^ee of the Export Co., a book-
keeper.
Mr. Hiss. It is headed " Switzerland — Commissions." It reads :
A special, confidential arrangement has been made with Mr. B. Zimmermann
to pay him a commission of five percent of the list price on all Curtiss-Wright
engines or spart parts sold in Switzerland.
That means to any company in Switzerland; any purchaser?
Mr. Allard. Yes, sir.
Mr. Hiss (continuing reading) :
This commission is to be five percent on the list price on such sales.
While I am paying Mr. Zimmerman, in cash, commission to which he is
entitled on sales order no. 1902, invoice #2946, namely, $76.99, because he
happens to be in this country at the present time, the regular procedure which
I have arranged with him is to send bankers drafts drawn to the order of B.
Zimmerman, and addressed to him at his home address. * * *
Mr. Allard. That is correct.
Mr. Hiss. Not to his official address?
Mr. Allard. That is correct.
Mr. Hiss. Do you approve paying commissions to directors of
companies purchasing from you, Mr. Allard?
Mr. Allard. Under certain circumstances; yes.
Mr. Hiss. Do you not consider that it is a director's duty to dis-
close all commissions to his company?
Mr. Allard. I do not know what the laws or business practice^
are as to firms in foreign countries.
MUNITIONS INDUSTRY 735
Mr. Hiss. Did you inquire before you entered into a confidential
arrangement with Mr. Zimmermann ?
Mr. Allard. No. Mr. Zimmermann was the top man in his com-
pany and requested that. It seemed perfectly in order.
Mr. Hiss. Has your company done busines3 in Greece, Mr. Allard ?
Mr. Allard. I do not recall any orders — possibly one airplane,
one commercial airplane; maybe some odds and ends of smaller
things.
Mr. Hiss. Have you a permanent agency in Greece?
Mr. Allard. I believe we have.
Mr. Hiss. Do you remember the name of it?
Mr. Allard. No ; but I would recognize it if I heard it.
Mr. Hiss. Is it the Societe Financiere at Technique de Grece.
Mr. Allard. I believe that is it.
Mr. Hiss. And is Mr. Artemis Denaxas an official of that com-
pany ?
Mr. Allard. I believe he is.
Mr. Hiss. I offer as " Exhibit No. 307 " a letter of August 22, 1933,
by Mr. Artemis Denaxas to Mr. Goulding, vice president of the
Curtiss-Wright Export Corporation.
(The letter referred to was marked " Exhibit No. 307 ".)
Mr. Hiss. That letter reads :
Referring to the copies of correspondence we have sent yo\i and by which
we tried to give you an idea of the possibilities of doing some business here,
I am happy today to be able to communicate to you a very important but strictly
confidential infonnation.
I have succeeded to persuade the Air Minister through a common friend to
give his preference to your material.
As, however, he did not like to commit himself with a corporation like ours
we decided the following :
You should address by return of mail a letter to the Societe Financiere et
Technique de Grece 10, Metropole Street and write them that on all orders of
your material you will allow a commission of 5 percent.
At the same time you write to me a private letter saying that on all orders
of your material either through the Societe Financiere et Technique de Grece
or direct by the Greek Government you will allow me a commission of 5 percent.
I shall transfer this letter to the friend of the Minister in order to guarantee
him that he shall get his profits without this transaction being disclosed to
thirds.
Please therefore be kind enough to let us have by return of mail the above
two letters.
Was any such agreement ever entered into with your agent in
Greece ?
Mr. Allard. I do not know. The files would show it if there
were.
Mr. Hiss. They are still your agents at the present time, the Societe
Financiere et Technique de Grece?
Mr. Allard. I believe the}^ are ; yes.
Mr. Hiss. To refresh your memory, I might call your attention to a
letter of November 14, 1933, in which you are quoted by Mr. Emory
Flynn — an employee of the Export Co.
Mr. Allard. Yes.
Senator Pope. Does that mean, Mr. Hiss, that this secret commis-
sion was to be paid to the Air Minister of Greece ?
Mr. Hiss. Either to him or to his friend. It is not clear from
the letter.
83876 — 34— pt4 4
736 MUNITIONS INDUSTRY
Mr. Allard. It is not quite clear. It is not known to us, as a mat-
ter of fact. It probably was paid to the friend or would have been
had we made a sale. We never made any sale.
Mr. Hiss. You have made no sale^
Mr. Allard. No.
Mr. Hiss. Did your company inquire whether this commission
would go to the Minister or to a friend ?
Mr. Allard. Not to my knowledge ; no.
Mr. Hiss. Has your company done business in San Salvador, Cen-
tral America?
Mr. Allard. I think so.
Mr. Hiss. Do you know who your resident agents are there?
Mr. Allard. I could not tell you, offhand ; no.
Mr. Hiss. I offer as " Exhibit No. 308 " a letter dated May 6, 1933,
from Dada-Dada & Co. to Curtiss-Wright Export Corporation; and
I offer as " Exhibit No. 309 " a letter dated May 13, 1933, signed
" Dada-Dada & Co.", addressed to Curtiss-Wright Export Corpo-
ration,
(The letter dated May 6, 1933, was marked " Exhibit No. 308 " ;
and the letter dated May 13, 1933, was marked " Exhibit No. 309 " ;
both letters are included in the appendix on pp. 895, 896.)
Mr. Hiss. In the leter, " Exhibit No. 308 ", Mr. George M. Dada,
the writer of the letter, says :
In answer to your cablegram of May 3rd, we have cabled you on May 4th
as follows : 'Quote nineteen thousand f.o.b. factory — full payment New York.
Writing."
And then the letter proceeds :
Due to so many offers from other manufacturers, we are working hard, and
we offered commission to different intermediaries in this business. This is why
we asked you to quote the price given above, as more than 70% of our own
commission and discount will be distributed to intermediaries.
And in " Exhibit No. 309 ", the letter dated May 13, 1933, and
directed to the kind attention of Mr. Owen Shannon, the writer says :
Confidential : To get such order we had to use many intermediaries and
friends to whom we are to pay a commission, consequently about 75%
of our commission will be paid out to intermediaries, but we do not care for
that if we get the order. We know that this first order will bring us many
more orders in the near future.
What intermediaries were Dada-Dada & Co. having to pay to
secure business in San Salvador?
Mr. Webster. We assume in this particular case, inasmuch as
Dada-Dada & Co. were not familiar with aircraft, they would have
to employ someone of technical training or experience in order to
handle that business intelligently.
Mr, Hiss. Is that what an intermediary is, a technical adviser ?
Mr. Webster. It could be.
Mr. Hiss. Do you think in this letter an intermediary means a
technical adviser?
Mr. Webster. I think it would be in this case, because I know
Dada-Dada & Co. were not at all familiar with aircraft.
Mr. Hiss. You referred earlier to the commissions which Webster
& Ashton, your agents in Bolivia, said they would have to pay. Do
you also think the commissions they had to pay were for technical
advisers rather than to governmental employees?
MUNITIONS INDUSTRY 737
Mr. Webster. I know that they must have paid something for tech-
nical advice. Whether they paid it to others or not, I do not know,
but I know they must have paid for technical assistance.
Mr. Hiss. Would you think if they were paying for technical
assistance there would be any reason for them to fail to disclose or
attempt to keep confidential the names of persons who were giving
the technical advice?
Mr. Webster. I should not think it would be necessary.
Mr. Hiss. Senator Pope suggests that from the letter of May 13,
1933, which I believe is " Exhibit No. 309 ", the following extract
should also be read into the record, to wit :
As you see, we liave to pay all charges for freight, insurance, etcetera; the
commission left will not even cover our efforts, as we have to pay so much for
intermediaries.
I offer as Exhibits 310, 311, and 312 the following letters and
cablegrams ; as " Exhibit No. 310 ", cablegram from La Paz dated
September 26, 1933, sent by Activos to the Export Co. ; as " Exhibit
No. 311" a letter signed "Webster & Ashton dated September 27,
1933, addressed to Curtiss-Wright Export Corporation : and as " Ex-
hibit No. 312 " a cablegram from the Export Corporation addressed
to Activos, La Paz, dated September 29, 1933.
(The documents referred to were, respectively, marked " Exhibit
No. 310 ", " Exhibit No. 311 ", and " Exhibit No. 312 ", and are in-
cluded in the appendix on pp. 896, 897.)
Mr. Hiss. " Exhibit No. 310 ", the cablegram dated September 26,
1933, reads as follows:
Please deposit Anglo South American Trust Company order of Luis Tver
Vergara four thousand five hundred dollars without mentioning our name.
Confirm.
" Exhibit No. 311 ", the letter dated September 27, 1933, confirm-
ing the cable, is signed by Webster & Ashton, I take it, as it is signed
" W. & A."
Mr. Webster. Yes, sir.
Mr. Allard. Yes, sir.
Mr. Hiss. In this letter, " Exhibit No. 311 ", appears the following
statement :
This sum of $4,500 — USC, will go against our commission of 5% on the 2
Hawks and 1 Osprey, plus $31,180.04 worth of spares, as per arrangement
with Captain Travis.
You will no doubt have noted that we do not wish to appear, and it would
also be a good thing if you do not appear either.
Why did you think, Mr. Webster, it would be a good thing if the
company's name and your name should not appear in any payment to
a technical adviser ?
Mr. Webster. I have not the slightest idea. I know at the time
they requested us to deposit this amount, and apparently there are
a cable or two missing in between the one of September 26 and the
one of September 29, in which we told them that we did not wish
to make any such transaction without their written authority, and I
think that is the reason they confirmed it in writing. I believe the
reason for paying this deposit was on account of some of their busi-
ness. It is very difficult at times in South American countries to get
dollar exchange, and business people are very anxious in those
countries to be able to get dollar exchange.
738 MUNITIONS INDUSTRY
Mr, Hiss. Does your company frequently make payments to your
agents under such circumstances as these, without knowing where the
commissions will have to go?
Mr. Webster. Yes, sir. They were entitled to this money, the
money belonged to them, and if they cabled us and told us to pay it
to some bank or some person, there is no reason why we should not
pay it, because the funds belonged to them.
Mr. Hiss. Faucett and Tobin in Peru represented your company on
a commission basis?
Mr. Webster. Yes, sir.
Mr. Hiss. I offer as " Exhibit No. 313 " a letter dated October 27,.
1933, from Mr. Shannon to Mr. Allard.
(The letter referred to was marked "Exhibit No. 313'" and is
included in the appendix on p. 897.)
Mr. Hiss. In this letter, " Exhibit No. 313 ", the writer quotes a
report from Web ; that is Mr. Webster ?
Mr. Webster. Yes, sir.
Mr. Hiss. I read from the report which is quoted in this letter, as
follows :
Have given them a price of $26,400 witliout armament, f.o.b. New York — for
tlie standard landplaue, $28,500 each for the same ship with armament c.i.f.
Callao — for the Falcon attack withont armament, $26,900 f.o.b. New York and
$30,000 with armament c.i.f. Callao. These prices include 5 percent for Faucett
and Tobin.
Tobin has been interested in handling your sales ?
Mr. Webster. Yes, sir.
Mr. Hiss. Eeading further, the letter says :
I deliberately increased the price of pontoons to $4,900 per set f.o.b. New
York and $5,400 c.i.f. Callao, as they will require them, and it will provide
funds to pay additional " commissions " which will undoubtedly be necessary.
This is the way the Fairey Company handled their last business. They held
the complete ship down in price and raised the price of floats, it is not so
noticeable.
You stated yesterday that the Fairey Co., " has managed to grease "
certain gentlemen. In this letter, which is quoting a report from
you, Mr. Webster, you say that you needed additional money for
additional commissions, and you quote the word " commissions ",
which wall undoubtedly be necessary.
Mr. Webster. Tobin and Faucett told me they would have to go to
considerable expense in setting up and assembling the planes, and
they also had to pay commissions to others on that job.
RELATIONS WITH FOREIGN OFFICIALS
Mr. Hiss. In addition to the commissions which your company
had to pay, has your company found it advisable to establish friendly
relations with officials of foreign governments with which you do
business ?
Mr. Webster. How do you mean, " friendly relations "?
Mr. Hiss. Have you had officials of foreign governments visit your
plant, and have you entertained them, and have you made it a point
for your agents to be on personal and friendly relations with them?
Mr. Webster. Naturally they do that in any line of business. I
know we have been entertained very well in their country, and if they
come up here, I would naturally expect to return the courtes}-.
MUNITIONS INDUSTRY 739
Mr. Hiss. Do you also have your friendships primarily with those
who are most influential in procuring orders ?
Mr. Webster. Not necessarily, but they are mostly my friends,
-engaged in airship work.
Mr. Hiss. Kather business than personal friends?
Mr. Webster. Yes; most of my friends in South America have
originated with business people.
Mr. Hiss. I offer as " Exhibit No. 314 " a letter dated April 16,
1934, addressed by " P. A. H." to Mr. Crosswell.
(The letter referred to was marked " Exhibit No. 314 ", and is
included in the appendix on p. 898.)
Mr. Hiss. This letter, " Exhibit No. 314 ", is written by " P. A. H.",
that is Mr. Hewlett?
Mr. Allard. That is correct.
Mr. Hiss. I read from this letter, " Exhibit No. 314 ", the follow-
ing paragraph :
I was very pleased to note that you had such an interesting discussion with
Olano at Pensacola and that he was so friendly to you, as I feel that Olano
will at a later date be a real asset to us in securing business from the Colombian
Government.
Mr. Olano was formerly Consul General of Colombia in New York?
Mr. Ajllard. That is my understanding.
Mr. Hiss. He was trained at Pensacola as a flyer?
Mr. Allard. I believe so.
Mr. Hiss. Your company was influential in getting him trained
there ?
Mr, Allard. I do not know whether we were asked to render any
assistance. If we had been asked to help get him trained there, we
would have done what we could.
Mr. Hiss. He is now director of aviation in Colombia?
Mr. Webster. I do not know whether he is or not, now.
Mr. Hiss. He was so appointed in August 1934.
Mr. Webster. Then he is.
Mr. Hiss. I offer " Exhibit No. 315 ", a letter dated May 29, 1934,
from Philip Shepley to Mr. William A. Reeks.
(The letter referred to was marked "Exhibit No. 315" and is
included in the appendix on p. 899.)
Mr. Hiss. Mr. William Reeks is in the employ of the Export Co. ?
Mr. Allard. No; Reeks is in the employ of the Wright Aero-
nautical.
Mr. Hiss. That is the engine company ?
Mr. Allard. That is right.
Mr. Hiss. I read from this letter as follows :
Referring to your letter of May 23rd, introducing young Lt. Rodriguez.
* * * I had quite a long talk with him last Friday, in the course of which
he told me that he had been up here about six months and had been through the
Curtiss Flying School Course at Valley Stream.
Did the Curtiss Co. maintain a flying course for training pilots?
Mr. Allard. We did at one time, but not at this date. He had
been there previously when that school was running.
Mr. Hiss. Reading further from the letter, it says :
His uncle at present holds an important position on the Colombian air force
staff and is a close friend of the man who is slated to be the next President
•of Colombia. If things work out as expected, his uncle will be the next
740 MUNITIONS INDUSTRY
Minister of War, and young Rodriguez as a result of his instruction and
knowledge of aviation secured during his present visit should hold a fairly
important position. I don't know, naturally, how true this all is, but I pass
it on to you for what it is worth and suggest that it would be worth while
to show this fellow some special consideration while he is at the Wright
factory.
Senator Pope. Do you know whether that was done?
Mr. Allard. I believe he visited the Wright factory and looked
at it. Special consideration in that connection, if I might say,
would be courtesy in seeing he was" properly taken around.
Mr. Hiss. I offer as," Exhibit No. 316 " a letter from Mr. Webster
to Capt. C. K. Travis, dated July 25, 1933.
(The letter referred to is marked " Exhibit No. 316 ", and is in-
cluded in the appendix on p. 899.)
Mr. Hiss. I read from this letter, " Exhibit No. 316 ", as follows :
I am sorry that Melgar did not take over the job of inspector general of
aviation of Peru, but, possibly, as military attache in Chile he can still be of
considerable service.
Mr. Melgar was an employee of the Peruvian Government?
Mr. Webster. Yes; Captain Melgar at this particular time, I
think, was an attache there in Bolivia or Chile, I am not sure. He
was formerly chief of the Peruvian army air corps, and he was one
of the few really efficient aircraft officers.
Mr. Hiss. I read further from this same letter as follows:
If the government intends to put in a foreigner, and possibly, an American,
in charge of aviation, who do they have in mind. I certainly hope that Grove
does not go back in Peru. Why not apply for the job yourself and see if we
cannot work out a situation whereby we could all profit by it.
What did you have in mind, Mr. Webster, by that sentence?
Mr. Webster. In an advisory way I thought an intelligent Ameri-
can could accomplish a great deal down there in giving them effi-
cient aircraft data. The Peruvian Government had in service about
16 or 18 different kinds of aircraft, and standardization of service
would help their upkeep and efficiency.
Mr. Hiss. And your compaii}^ would have profited by this?
Mr. Webster. We may have sold more equipment, and at the same
time Peru would have profited by having a standardized air corps.
Mr. Hiss. How would Captain Travis profit?
Mr. Webster. He had formerly been emplo3'ed as chief pilot for
the Peruvian Government.
Mr. Hiss. I say how could he have profited by this arrangement,
by becoming the Peruvian chief of aviation ?
Mr. Webster. His salary probably would have been more than we
could have paid him.
Mr. Hiss. That was your only interest in Mr. Travis taking that
particular job?
Mr. Webster. Yes; because at the time it looked as if we would
have to let Travis go, as business seemed to be rather poor.
Mr. Hiss. He is still one of the men on your staff ?
Mr. Webster. He is still employed by us ; yes.
Mr. Hiss. Now, reading further in this letter, you say, Mr.
Webster :
On second thought, however, perhaps this woi;ld not be such a good idea ;
but think it over and let me have your suggestionf^. The ideal situation, of
course, would be to start and steer such a selection in the right direction, and,
MUNITIONS INDUSTRY 741
with your connections and friemlships in Peru, you might suggest one or two
men when you return there.
Does your company attempt to select people for foreign positions
who will be favorably inclined toward your products ?
Mr. Webster. If we could get a combination of an efficient man
who would serve, for instance, the Peruvian Government in an effi-
cient way and at the same time select equipment, and providing our
equipment was up to specifications and better than the others, it
would make a good business combination.
Mr. Hiss. Your company is interested in seeing those officials
proj^erly serve the foreign government?
Mr. Webster. Yes; because it serves us also. If you purchase
intelligently, naturally you are going to be well satisfied with the
equipment you get.
Senator Pope. Mr. Hiss just read this sentence:
On second thouglit, liowever, perhaps this would not be such a good idea,
but think it over and let me have your suggestions.
What raised the question in your mind at that time?
Mr. Webster. I probably had some idea at that time, but I do
not recall it now. That was more than a year ago.
Senator Pope. However, he could be disclosed as your agent?
Mr. AVebster. Everybody knew Travis had been employed by
us, and had been previously employed by the Peruvian Government,
and he was well known. There would be no attempt in concealing
anything, he is too well known, and his opinions well known.
Senator Pope. The reaction to the fact he was your representative
might not reflect to your credit. Is that your thought?
Mr. Webster. No; I thought possibly he would not wish to stay
in Peru any longer. He had been there a good many j^ears and I
did not know what he might want to do. I do not know what idea
I had at that time.
Mr. Hiss. I offer as " Exhibit No. 317 " a letter dated January 19,
1934, signed " Jerry ", addressed to Mr. C. W. Webster.
(The letter referred to was marked " Exhibit No. 317 ", and is
included in the appendix on p. 901.)
Mr. Hiss. This letter, " Exhibit No. 317 ", signed by Jerry; that is
Mr. Van Wagner, in charge of your factory at Chile ?
Mr. Allard. Yes, sir.
Mr. Hiss. I read from this letter as follows :
Complying with your wishes to keep you in touch with things at this end,
I thought much colild be gained from Marcial Arredondo, so invited him and
his wife (nee Matilda, Merino's old secretary) out to the place for dinner last
evening.
Merino was formerly chief of the air corps in Chile ?
Mr. Webster. Yes, sir.
Mr. Hiss. Reading further from this letter, it says :
We had a long talk over everything in general, and especially on the possi-
bility and probability of the Government purchasing new equipment. Marcial
confirmed Alessandri's public statement that the Government intends raising'
funds in the near future for this object, but stated he could not tell when this
would be.
Is the Alessandri there referred to the President?
Mr. Webster. Yes, sir.
742 MUNITIONS INDUSTRY
Mr. Hiss. I read further from the letter as follows :
Marcial told me quite frankly that Araeena bas his eyes set first of all on
training planes, and he has it in his head to buy Avros.
What position did Araeena hold ?
Mr. Webster. Araeena at that time was, and is, chief of the air
corps. He replaced Merino,
Mr. Hiss. The letter further says :
With regard to the purchase of other equipment, Marcial said he will do
everything in his power to see we are taken into consideration. Marcial bas
a very big say in the matter so long as be is sitting next to the President and
is the right-hand man of Arcena. He promised to let us know in plenty of
time or sidetrack the prospective purchase of other planes.
Yesterday there was some testimony of the United Aircraft Co.
attempting to sidetrack the purchase of Curtiss planes, and it now
appears that your company might have been interested in side-
tracking the purchase of other planes.
Mr. Webster. No, sir; you did not finish that sentence, which
would explain that statement.
Mr. Hiss. Let me finish it. It says :
or sidetrack the prospective purchase of other planes, if possible, and if neces-
sary suggest an open competition, such as in 1929, before placing any orders.
Mr. Webster. In that connection, what he apparently had in mind
was to more or less postpone the purchase until we were able to get
down there and compete with the others in the event of a com-
petition.
Mr. Hiss. You will notice he just says —
If necessary suggest an open competition,
Mr. Webster. He knew I was familiar with the situation and did
not go into the details. As a matter of fact that has developed and
there is a demonstration plane being shipped down there now for
competition. In fact, a great many of those countries, including
Chile, purchase on performance, and in order to satisfy themselves
they ask the manufacturers to send a demonstration plane to those
countries to be demonstrated before they make a selection.
Mr. Hiss. Then, this letter continues as follows :
With Marcial watching out for us on the inside, I think it best not to rush
Araeena too much, as Marcial claims be is the go-between for Araeena and the
President and lie has to be consulted first so will be able to talk with Araeena
about our equipment and lead him right.
Has your company also done business in the Argentine ?
Mr. Webster. Have you finished with this one here ?
Mr. Hiss. Yes. Has your company also done business in the
Argentine ?
Mr. Webster. Yes, sir.
Mr. Hiss. Can you identify for the record Captain Zar, of the
Argentine ?
Mr. Webster. Yes; Captain Zar is chief of naval aviation of
Argentina.
Mr, Hiss. Can you identify Colonel Zuloaga ?
Mr. Webster. Yes; he is chief of army aviation of Argentina.
Mr. Hiss, Has your company's relations with those two officers
been very friendly ?
Mr. Webster. Yes, sir.
MUNITIONS INDUSTRY 743
Mr. Hiss. They are boosters of Curtiss products, would you Scay ?
Mr. Webster. Yes; Captain Zar was trained in the American
Navy and Colonel Zuloaga was military attache in Washington for
some time, and they are thoroughly familiar with American prod-
ucts, and in that way they possibly leaned toward American products,
with which they are familiar.
Senator Pope. How long, about, was he with the American Navy ?
Mr. Webster. He received his training at Pensacola, I think it
was, during the war, but I am not sure.
Senator Pope. Do you know whether he served in the Navy after
the war?
Mr. Webster. You mean the American Navy?
Senator Pope. Yes.
Mr. Webster. No; he simply went to Pensacola as a student and
received the regular course in aviation that the American officers
receive at Pensacola.
Mr. Hiss. I offer now as " Exhibit No. 318 " a letter of date March
21, 1932, from C. W. Webster to Mr. B. S. Wright.
(The letter referred to is marked " Exhibit No. 318 " and is in-
cluded in the appendix on p. 901.)
Mr. Hiss. Mr. Webster, I read from this letter as follows :
I still feel that Zar will not recommend that a mission be sent to the States,
although it is advisable to watch this possibility very closely. Zar is a very
intimate friend of ours and wishes to purchase only Curtiss-Wright equipment
and is playing his cards accordingly. He feels that if he sends a mission to
the States possibly complications might develop through the recommendations
of any officers he sends, and his desire is to control things himself as much as
possible.
Mr. Webster, you said a few minutes ago that the purchase of avia-
tion equipment was on the basis of performance?
Mr. Webster. Yes, sir.
Mr. Hiss. If so, why would Captain Zar be worried about the
recommendations of any mission sent to this country?
Mr. Webster. Possiblv he felt he was better qualified to judge of
equipment than other officers.
Mr. Hiss. Even though they were watching the performance in
this country and he was not?
Mr. Webster. It might be.
Mr. Hiss. I offer as " Exhibit No. 319 " a letter dated February 23,
1932. also from Mr. Webster to Mr. B. S. Wright.
(The letter referred to was marked " Exhibit No. 319 " and is
included in the appendix on p. 902.)
]\Ir. Hiss. I now read from this letter, " Exhibit No. 319 ", as
follows :
I now have a more complete and accurate picture of the proposed Argentine
Naval Mission and I am inclined to believe that the entire agitation was started
by Commander Jordan, U. S. Naval attache in Buenos Aires, in misinterpreting^
a conversation with Captain Zar, chief of Argentine Naval Aviation.
It seems that some time ago Captain Zar and Commander .Jordan met and
Zar mentioned that his budget for 1932 would permit him to buy a certain num-
ber of new ships and that they would be of U. S. make. Jordan asked which
make and, as Captain Zar didn't wish to tell him he was negotiating directly
with us and, on the other hand, didn't care to say he didn't know what he
wanted, he told Jordan he planned to ask the U. S. Navy to give him advice
when the propter time came. It seems Commander Jordan immediately com-
municated with the U. S. Navy in Washington informing them that the Argen-
tine Navy would send some of its men to the U. S. to solicit the advice of the
744 MUNITIONS INDUSTRY
U. S. Navy in the matter of purchases. Ciiptain Zar, in discussing tlie situation
with us, claims that he now realizes he made a mistake in mentioning the
matter to Jordan because if Washington gives the matter any publicity our
British competitors will possibly get busy and make it a little harder for us on
account of their lower prices. Captain Zar is one of our most intimate friends
and when the time comes to purchase equipment he will buy from Curtiss-
Wright insofar as he is able to do so. His budget this year allows him only
about $250,000 for new equipment which he figures is about enough for eight
Helldivers or similar ships, but the cash will not be available for 4 or o months.
We will receive an order for two engines and spares and possibly three
sets of smoke-screen apparatus, but the complete airplanes will not be ordered
for some little time.
I am giving you this picture of the situation for your confidential informa-
tion and I believe we should let the matter drop insofar as Washington is
concerned. Our contacts with Zar are of such an intimate nature that we
have nothing to fear from other competitors, unless something very radical
iiappens. It was Zar's intention to keep the entire matter quiet and get his
purchase through for us before any other manufacturer heard of it but unfor-
tunately he made a chance remark to Jordan which opened up the entire
subject.
Does that letter seem to you consistent with your statement that
aircraft is sold only on a performance basis?
Mr. Webster. Absolutely, sir. We have a demonstration of it
right in Argentina.
Mr. Hiss. Does this letter not say that Captain Zar Avas anxious
not to have a competitor know about the proposed purchases so that
they would be unable to demonstrate?
Mr. Webster. They have been demonstrated down there. The
manufacturers are demonstrating in Argentina, both European and
American manufacturers. There is no secret about that, and that
is the only wav vou can sell aircraft these days.
Mr. Hiss. "'Exhibit No. 320" is a letter dated July 18, 1933
The Chairman. Before you leave that, I would like to have my
own mind a little clearer than it is with respect to the exhibit which
was just offered. Referring to the matter of representatives of the
Argentine Navy being sent to the United States where they would
solicit the advice of the United States Navy in the matter of pur-
chase, is that a policy which is pretty generally pursued?
Mr. Webster. Yes, sir.
The Chairman. That South American naval authorities do have
access to the American Navy and their advice as respects purchase
of planes and other material?
Mr. Webster. That has been done, sir ; yes, sir.
The Chairman. There was nothing unusual, then, about that
particular proposal?
Mr. Webster. No, sir; none whatever.
The Chairman. All right.
Mr. Hiss. '' Exhibit No. 320 " is a letter dated July 18, 1933, from
Mr. Webster to Capt. C. K. Travis in Bolivia.
(The letter referred to was marked " Exhibit No. 320 " and is
included in the appendix on p. 903.)
Mr. Hiss. That letter reads in part as follows [reading] :
Immediately upon your arrival you should contact Colonel Zuloaga and
•Captain Zar.
That means his arrival in the Argentine?
Mr. Webster. Yes, sir.
MUNITIONS INDUSTRY 745
Mr. Hiss (continuing reading) :
Colonel Zuloaga is Director General of Aeronautics and Chief of the Army
Airport, and Captain Zar is Chief of Naval Aviation.
Mr. Webster. Pardon me, that is a typographical error ; Chief of
the Army Air Corps.
Mr. Hiss. Correct the exhibit, please.
(The exhibit was accordingly corrected.)
Mr. Hiss (continuing reading) :
Arrange if possible to dispatch the ship to El Palamar, the Army Air
Station.
The arrano-ement is in connection with the Argentine Falcon for
which your company is negotiating 5
Mr. Webster. Yes, sir.
Mr. Hiss (reading) :
Work through Zuloaga and Zar and follow their suggestions. In a recent
letter from Zar he suggested that we first get the plane to Palamar and pos-
sibly later transferring over to Puerto Indio, the Naval Landing Station.
Mr. Webster. Naval Land Station.
Mr. Hiss. You might correct that, too.
(Exhibit corrected.)
Mr. Hiss (reading) :
* * * Our object, naturally, is to sell the Falcon to the Argentine Gov-
ernment and, in due course, arrange a contract for them to purcliase the man-
ufacturing rights to construct this plane for the Government at Cordoba. All
of these arrangements will be handled by Leon —
Will you identify Mr. Leon ?
Mr. Webster. Mr. Leon is a former employee of the Export Co.
and a former employee of mine. He is no longer with us. He left
because of ill health. He represented us in Argentina for a great
many years as resident manager there.
Mr. Hiss. Was he discharged by your company?
Mr. Webster. No, sir.
Mr. Hiss. Left because of ill health?
Mr. Webster. Left because of ill health.
Mr. Hiss. He was in good standing at the time he left?
Mr. Webster. Oh, yes.
Mr. Hiss (continuing reading) :
when he arrived there, probably around the 15th of September. His relations
with Zuloaga and Zar are very intimate, so do not attempt to sell but merely
handle the plane for the time being and put on your show and the necessary
demonstration. When Leon arrives he will probably take you into his confi-
dence and give you a line on our set-up. so do nothing that will interfere with
the negotiations which Leon and myself have already started.
Did Mr. Leon ever take you into his confidence about the Argen-
tine negotiations?
Mr. Webster. Yes, sir.
Mr. Hiss. What did you have in mind when you stated that he
would take him " into his confidence ", referring to Leon ? What did
you expect him to try to do when he arrived with regard to your
relations with Zuloaga and Zar?
Mr. Webster. It was not entirely with relation to Zuloaga and
Zar, but the Army Air Corps in Argentina is a very large organiza-
tion. Many of its personnel have been trained in European coun-
746 MUNITIONS INDUSTRY
tries, and they are more or less pro-European in their ideas, and at
times a little prejudice will creep into it. So that I presume Leon:
wished to steer Mr. Travis and let him know who were pro-European,
and who were more or less open-minded on the subject.
Mr. Hiss. In this letter, Mr. Webster, you also said :
In selling this Falcon to Peru, please handle this, if possible, in the same
manner as the other Falcon and Hawk we sold. The payment to be made tO'
me personally and not to the company, as I have certain commissions that will
have to be paid.
Do you remember what commissions they were ?
Mr. Webster. I believe it was to Mr. Dan Tobin. In fact, it was-
Dan Tobin.
Mr. Hiss. Your negotiations in the Argentine were very compli-
cated, were they? It was a delicate matter?
Mr. Webster. No; I would not say they were delicate or compli-
cated. It was a hard selling job, but it was not complicated. There
was a lot of hard work to it.
Mr. Hiss. At the top of the third page of this letter you state
[reading] :
In asking you to lay off all sales negotiations, please do not feel that we do
not believe you capable of handling them, but Leon has spent so much time in
Argentina and knows his contacts so well and intimately, that I believe we
should not upset them in any way. I know that you will appreciate this-
situation.
Mr. Webster. Mr. Leon had been in Argentina as our resident
manager there for 14 or 15 years and was naturally very well ac-
quainted. Mr. Travis, I believe, had never been to the Argentine-
before. Mr. Leon was planning to return to Argentina in order to
pick up that work, but unfortunately his health would not permit
it and he did not go back, and for that reason I wished Travis to
wait for Leon to get back.
Mr. Hiss. I now introduce " Exhibits No. 321 and No. 322 ", the first
being a letter dated January 19, 1934, from Mr. Owen Shannon, of the-
Curtiss-Wright Export Corporation, to Mr. C. W. Webster, and it
encloses an unsigned memorandum dated January 17, 1934, which
Mr. Shannon says is a copy of a letter from Lawrence. That is Mr..
Leon?
Mr. Webster. Mr. Leon.
(The letter and memorandum referred to were marked " Exhibits-
No. 321 and No. 322 " and are included in the appendix on p. 905.)
Mr. Hiss. The enclosed memorandum states (reading) :
Your letter came a couple of hours after our telephone conversation. By all.
means do your best to get Mason to go down at once.
Mason was an employee of the company?
Mr. Webster. Mason was an employe of the Wright Aeronautical
Co. whom we were thinking of sending to South America as my own
representative.
Mr. Hiss (continuing reading) :
Hewlett may be a better man, but if this boy is a salesman and is loyal, his
knowledge of Spanish will take him farther. He will not have much to do for-
a few months, but that will give him a chance to get acquainted, and Zu —
That is Zuloaga ?
Mr. Webster. That is Zuloaga.
MUNITIONS INDUSTRY 747
Mr. Hiss (continuing reading) :
is liappier when somebody from the office is near at hand. Somebody has to
be there to be on the inside of things, or the business goes elsewhere. Tliose
fellows detest writing me, with good reasons * * *,
Why did they detest writing?
Mr. Webster. I do not know. I did not write this letter. I do
not know what Leon had in mind. I presume they did not wish to
go to the trouble of writing.
Mr. Hiss. You do not think it was because they did not wish to
put themselves down on record?
Mr. Webster. I do not know what the reason would be.
Mr. Hiss (continuing reading) :
and are getting tired of being told that I'll soon be back, with the result that I
am gradually getting out of touch with the real situation. Men in the various
departments are changed periodically and new friends must be constantly made.
I feel pretty bad about all this, but as explained in another letter I can not
leave the family in the shape it is, and to go for a few weeks now and come
back would be just a waste of money.
Trouble from W. was to be expected.
Can you identify Mr. W ?
Mr. Webster. Mr. Lee Wade.
Mr. Hiss. Whom did he represent at that time ?
Mr. Webster. Mr. Wade is more or less a free lance aeronautical
salesman. I believe he represents the Consolidated Co. in Buffalo
among others. I do not know. I believe he is selling second-hand
airplanes down there, more or less free lance.
Mr. Hiss (continuing reading) :
He is paying L's expenses and L does all he can for him.
Can you identify L. ?
Mr. Webster. That is an Argentine oiRcer up here, and I cannot
recall his name, but I think it begins with " L ", and I think that is
what he refers to^
Mr. Hiss. Can it be Captain Leporace?
Mr. Webster. Yes ; it could be. I think that is the name.
Mr. Hiss. Artemis Denaxas is with the Societe Financiere et Tech-
nique de Grece S.A., your agents in Greece. Is that correct, Mr
A^llard?
Mr. Allard. Yes, sir.
Mr. Hiss. He has no connection with the Government of Greece ?
Mr. Allard. None that I know of at all, sir. He is a commercial
man.
Mr. Hiss (continuing reading) :
Trouble from W. was to be expected.
" W " was a salesman on his own account for airplane equipment?
Mr. Webster. Yes ; and I think represented the Consolidated Air-
craft Co.
Mr. Hiss. Represented the Consolidated Aircraft Co.?
Mr. Webster. I think so.
Mr. Hiss (continuing reading) :
He is paying L.'s expenses.
which you think means Captain Leporace?
Mr. Webster. Yes, sir.
748 MUNITIONS INDUSTRY
Mr. Hiss (continuing reading) :
and L. does all he cau for him. L. has done a lot for Za
That refers to Captain Zar, does it not?
Mr. Webster. Yes, sir.
Mr. Hiss (continuing reading) :
on one occasion and Za arranged this spree for L. and is giving him free hand.
Then it continues:
Very likely this man will be in Za's place thre^ or four years from now
when both are due for promotion. He and his brother owe me a few favors of
more than ten years' standing and I am in position to make any arrangements
with him to counteract W's influence —
Wade's—
once we are all together. Just now he is not answering my letters, which, I
suspect, fell in W's hands.
That means Wade's.
With your letter also came the one I was expecting from Ta.
Can you identif y " Ta " ?
Mr. Webster. I think that is Taravella.
Mr. Hiss. Who is he?
Mr. Webster. Mr. Taravella is a civilian engineer, employed by the
Argentine Government in a Government factory at Cordoba, Argen-
tine.
Mr. Hiss. Has he been in this country also?
^h\ Webster. Yes, sir ; he was stationed at our factory for about
2 years.
Mr. Hiss. As an inspector?
Mr. Webster. As an inspector and engineer in the selection of cer-
tain factory equipment for the Government factory for the produc-
tion of Wright engines in Argentina.
Mr. Hiss (reading) :
I had asked him to write the real reason for changing their minds about
the Falcon and Hawk license. He says that while Travis' demonstration was
pretty good, it was not good enough to convince everybody. That is one rea-
son. The others are curtailment of appropriations and the necessity of the
engineering stafC to get busy and do something of their own or explain what
they were doing in Europe when they were sent there to study for five years.
He says that neither my presence nor Web's —
that is you, Mr. Webster?
Mr. Webster. Yes, sir.
Mr. Hiss (continuing reading) .
can for the moment rush orders, and tliat the only thing which could overcome
all these obstacles at once would be for the " Jingos " advocating preparedness
to get the upper hand or for me to resort to the " old maneuver."
Do you know what he means when he saj^s to resort to the " old
maneuver " ?
Mr. Webster. No, sir; I have been trying to think what it could
be, and the only thing I can think of is to go over the heads of some
people who had more say in the matter. That is the only interpre-
tation I could put on that.
Mr. Hiss (continuing reading) :
He meany the trick we turned in 1931 when we sold the engine license.
MUNITIONS INDUSTRY 74^
Do you remember the circumstances of the trick you turned in
1931 when you sold the engine license?
Mr. Webster. Yes, sir. At that time we even went to the Presi-
dent there in order to have our engine receive proper or sincere
attention. At that time they were manufacturing in Argentina, in
the government factory, the French engine, and that contract with
the French was canceled and a contract was made with us for the
manufacture of our engines in Argentina.
Mr. Hiss. Perhaps this will help, Mr. Webster; that is, the next
sentence of the memorandum, which states :
Unfortunately, tliis is not possible with the present set-up in the War Depart-
ment, the key man being one of the very few not amenable to anything of
that kind.
What does that mean in relation to going over somebody's head^
Mr. Webster ?
Mr. Webster. I would say that would bear it out. I should think
going over somebody's head would naturally cause some ill feeling
down there.
Mr. Hiss. You do not think it is a reference to the " commissions "
which you have referred to before ?
Mr. Webster. In this case, I do not think it is, sir.
Mr. Hiss (reading) :
But he is due for retirement this year. * * * Web already knows who the
men are, and should be the only one to handle commissions when the time
comes.
You were expecting that some commissions would be necessary?
Mr. Webster. Yes, sir; you see when Mr. Leon left down there,
it left us more or less without a representative, without a contact
there. We were later forced to make, a local contact with Gandara
& Co., and I made that contract last winter when I went down
there, and arranged to pay them a commission in order to handle our
local contracts.
Mr. Hiss (reading) :
Mason, if he goes down there, should not be entrusted with anything of
this kind until he has been there six months at least and has proven that
he can handle the business. It would be a mighty good idea if you went
through the files and took out all letters mentioning names and commissions.
The Chairman. Who was that letter from?
Mr. Hiss. From Mr. Lawrence Leon, at that time a representative
of the Export Co., which Mr. Shannon encloses in a letter to Mr.
Webster.
Mr. Allard. Pardon me, Mr. Hiss. He was not a representative
of the Export Co., but with Mr. Webster.
Mr. Hiss. On Mr. Webster's staff, selling?
Mr. Allard. Yes, sir.
Mr. Hiss. He had formerly been a representative of the Export Co. ?
Mr. Allard. Yes, sir.
Mr. Hiss. Mr. Shannon sent this to you, as he stated in his letter,
" Exhibit No. 322 ", thinking to be of help to you. What do you
think Leon meant by stating :
It would be a mighty good idea if you went through the files and took
out all letters mentioning names and commissions.
750 MUNITIONS INDUSTRY
Mr. Webster. At times the government wishes to deal directly
with manufacturers, and our particular predicament in the Argen-
tine at the time was that we had to have somebody down there,
and we did not have anybody down there, and the reason for
making a contact is that the Argentine Government has always pre-
ferred to deal direct with the factories. In fact, for a number of
years they maintained a permanent Argentine Naval Mission —
commission — here in the United States, quite a large staff, in order
to deal directly for purchases.
The Chairman. How much of the material relating to names and
commissions has been taken from the files?
Mr. Webster. To my knowledge there has been none taken out.
I did not exactly feel that it was necessary. It was his suggestion,
but I did not feel it was necessary.
Mr. Hiss. " Exhibit No. 323 " is a letter from Mr. Owen Shannon
to Mr. J. S. Allard under date of September 25, 1933, regarding the
Brazilian Mission.
(The letter referred to was marked " Exhibit No. 323 " and is in-
cluded in the appendix on p. 906.)
Mr. Hiss. The mission is where?
Mr. Allard. Brazil Mission.
Mr, Hiss. To where was it addressed?
Mr. Allard. Aeronautical Co.
Mr. Hiss. The engine company?
Mr. Allard. Yes, sir.
Mr. Hiss. That letter reads as follows:
You will be interested in the following quotation from a letter received from
our Brazil agents today :
" We are pleased to say that we have had occasion to talk at length with
Major Oliveira and Captain Mollo since their return from the United
States, * * * "
Were they members of a mission sent by Brazil to the United
States ?
Mr. Webster. Yes, sir.
Mr. Allard. They were,
Mr. Hiss (continuing reading) :
" and that they are highly gratified with all they saw and very much appreci-
ated all the courtesies lavished upon them by your company.
" We may confidentially advise you that the reports which have been sub-
mitted by the mission to the Minister of War are highly satisfactory to your
organization and likely therefore to yield good results."
Do you think, Mr. Allard, or Mr. Webster, that the " courtesies
lavished " upon foreign missions in this country have an3'thing to do
with the rejDorts which they later render being " highly satisfac-
tory " to your organization ?
Mr. Allard. I do not approve the word " lavished ", because we
have not lavished any attention. That is a Latin-American way of
making a statement. I think unquestionably that the attention thot
we paid to them, the things which we showed them, the demonstra-
tions of ships, certainly had been a contributing factor in their selec-
tion and recommendations which they made.
Senator Pope. And the entertainment?
Mr. Allard. Yes. It is quite a natural thing to be courteous to
visitors here.
Senator Pope. Yes, sir.
MUNITIONS INDUSTRY 751
Mr. Hiss. I am reading now from " Exhibit No. 294 ", put in evi-
dence yesterday, and which is a report by Melvin Hall, at that time a
representative of the Export Co., on conditions in Turkey, dated
February 27, 1933. [Keading:]
Hikmet Bey, a young engineer educated in America, has only moderate in-
fluence as yet, but is clever enough to assist us fully to build him up to talse
over Kayseri eventually, and is undoubtedly a strong asset in his present
capacity.
Does that refer to a factory in Turkey operated under a license
from your company?
Mr. Allabd. No, sir ; it was the Turkish national factory.
Mr. Hiss. Did the Wright Aeronautical Co. give them a license?
Mr. Allard. No, sir; our planes only.
Mr. Hiss. That is what I wanted to bring out.
" Exhibit No. 324 " is a memorandum to Mr. Cramer from Mr.
Allard. Is that correct, Mr. Allard ?
Mr. Allard. Yes, sir.
(The memorandum referred to was marked " Exhibit No. 324 " and
is included in the appendix on p. 906.)
Mr. Hiss. Is Mr. Pawley a director of the Export Co. ?
Mr. Allard. That is right.
Mr. Hiss. And is also president of the Intercontinent Aviation,
which is a selling agency in China?
Mr. Allard. That is right.
Mr. Hiss (reading) :
Mr. Pawley stated in a recent letter, or cable, that he had a fund of about
$2,000 to take care of the entertainment of General Wong and his party from
Canton.
They were touring this country in the last few months; that is, as
of May 10, 1934?
Mr. Allard. Yes, sir; just about that time.
Mr. Hiss. They were seeking to buy aviation equipment?
Mr. Allard. No; I do not think so; they were inspecting all avia-
tion, connnercial airlines, and factories.
Mr. Hiss (continuing reading) :
During their visit to this country they were entertained by the following:
Mr. Buchanan in San Francisco —
Do you know who Mr. Buchanan is?
Mr, Allard. Mr. Buchanan is the manager of the airport outside
San Francisco, the Alameda Airport,
Mr. Hiss (reading) :
Mr. Moseley in Los Angeles —
AVho is he?
Mr. Allard. Manager of our airport at L03 Angeles, Grand Cen-
tral.
Mr. Hiss. Does he manage that?
Mr. Allard. I think he, Mr. Buchanan, was a port accountant and
the airport was closed and he was more or less a watchman,
Mr. Hiss. But an employee of the Curtiss group?
Mr. Allard. Yes, sir ; at that time he was.
Mr. Hiss (reading) :
Ralph Damon in St. Louis * * *
83876— 34— PT 4 5
752 MUNITIONS INDUSTRY
Who is he?
Mr. Allard. President of the Curti^s-Wright Airplane Co., in
St. Louis.
Mr. Hiss (reading) :
Buffalo * * *
The plane company in Buffalo is the Curtis Airplane & Motor?
Mr. Allard. Yes, sir.
Mr. Hiss. Patterson is the Wright Aeronautical Engine Corpora-
tion?
Mr. Allard. Yes, sir.
Mr. Hiss (reading) :
and the New York office group, mainly Mr. Dooley.
Who is Mr. Dooley?
Mr. Allard. Mr. Dooley was an employee for this group, who
was later taken over by Export and is now in China, and happened
to be here at that time and had the job of entertaining thege people.
Mr. Hiss (reading) :
I wish you would get together the expense accounts from these various
organizations and submit them to Mr. Sanderson of Intercontinent so that we
can be reimbursed for these expenses.
Mr. Allard. Correct.
Mr. Hiss. The expenses of entertaining foreign visitors are some-
times rather large, are they?
Mr. Allard. It depends on what you mean by " large." I think
the total expenses of these five or six men were over $2,000. That
is for a couple of months' time here and paying air transportation
and railroad transportation.
Mr. Hiss, Mr. Webster, there are a considerable number of former
American officers who are now with foreign governments, are there
not? Is not that correct?
Mr. Webster. I do not know how many former officers are with
foreign governments, Mr. Hiss.
Mr. Hiss. Do you know a Commander Jordan in Bolivia?
Mr. AVebster. No. It is pronounced in English " Jordan."
Mr. Hiss. He is not a former American officer ?
Mr. Webster. No, gir; he is a Bolivian. It is an English name,
but there are a great many English and Irish down there, but it is
pronounced differently. He is a native Bolivian.
Mr. Hiss. Commander Strong is an American ?
Mr. Webster. I believe so.
Mr. Hiss. I think his name was mentioned previously in the
committee hearings.
Mr. Webster. Yes, sir ; he is an American.
Mr. Hiss. Commander Strong used to inspect, or used to be a
United States Navy inspector at the Keystone factory, did he not?
Mr. Allard. I have heard that, but I do not know it. It was
before my time.
Mr. Hiss. The Navy has regular inspectors at the factories in the
United States with which they do business ?
Mr. Allard. That is correct.
Mr. Hiss. From which it procures planes?
Mr. Allard. Yes. sir.
MUXITTOKS INDUSTRY 753
Mr. Hiss. Incidentally, your company's relations with Colonel
Jordan have always been very friendly, have they not ?
Mr. Webster. Yes, sir.
Mr. Hiss. I am reading a letter dated September 13, 1933, being a
letter from Mr. Travis to Mr. C. W. Webster, which reads, in part,
as follows :
Lopez told me in a confidential and friendly chat yesterday that if it hadn't
been for Jordan and two or three others that he named, that the last order
for planes would have been canceled and tbat our competitors would have been
given a chance.
Do you know what Colonel Jordan's present position is ?
Mr. Webster. He is chief of the air corps in Bolivia at the present
time. If you would like to have me explain that, for a great many
years aircraft or aviation in Bolivia had been more or less domi-
nated by the Germans and their air-line operations, and, naturally,
there are a lot of Germans still there, a number of German people
still there in connection with aviation, and there was a very strong
leaning toward German equipment ; because he had flown both types,
he preferred the American types, and for that reason he wished
American equipment.
Mr. Hiss. " Exhibit No. 325 " will be a letter dated April 21, 1934,
from J. Samper, on the letterhead of Urueta & Samper, who are the
Export Co.'s agents in Colombia?
Mr. Allard. They are.
Mr. Hiss. That is addressed to Mr. W. F. Goulding, vice president
Curtiss-Wright Export Corporation.
(The letter referred to was marked " Exhibit No. 325 " and is
included in the appendix on p. 907.)
Mr. Hiss. That letter reads, in part, as follows :
Through my good friendship with Gomm. Strong I will be able to meet not
only Mr. Trunk —
Who is Mr. Trunk, Mr. Webster?
Mr. Allard. May I answer that, because I am familiar with
Colombia ?
Mr. Hiss. Yes, sir.
Mr. Allard. Trunk headed up a group of pilots and mechanics
for Colombia some time this year from this country. I know Trunk
only by having seen him. He did it on his own. He is not identified
with our company.
Mr. Hiss. The letter states further:
I will be able to meet not only Mr. Trunk, but most of the important men
that may have come with him. I have enjoyed the confidence and friendship
of Conini. Strong, practically since his arrival, and in spite of his complete and
unbreakable reserve as far as military matters are concerned, I have been able
to ascertain that he is not in the least antagonistic to your products. He is
really an excellent man. To my understanding he will be placed by the
Ministry as actual head of the aviation activities in this country ♦ * *_
Has that come about?
Mr. Allard. I think it has; yes.
Mr. Hiss [reading] :
I am confident that once he knows all about the German competition and
antagonism to all foreign influence other than theirs, he will take measures to
stop their career.
754 MUNITIONS INDUSTRY
Quite naturally, an American officer would be more fara^iliar with
American equipment and w^ould be favorable to American equip-
ment ?
Mr. Allard, Certainly.
Mr. Hiss [reading] :
1 have just received from Irvin —
Does that mean the Irving Parachute or Airchute Co. ?
Mr. Allard. I believe so.
Mr. Hiss. J\Iy information is that Mr. J. C. Willson is a director
of the Curtiss-Wright parent company. Is that correct?
Mr. Allard. Yes, sir.
Mr. Hiss. He is also a director of the Irving Airchute Co.
Mr. Allard. I do not know it for a fact, but I have heard that.
Mr. Hiss. Does your company represent the Ir\T.ng Aircliute Co.
in a great many countries?
Mr. Allard. In a great many countries ; not all countries.
Mr. Hiss [reading] :
I have just received from Irvin —
which means Irving I am pretty sure —
some scarfs to distribute among the pilots here. I am afraid that the propa-
ganda was sent too late, because I was Informed definitely that the Govern-
ment had ordered the consul to place orders with our competitors (Switlik)
for tlie parachutes they are in need of. Since I had to pay something like 20
pesos duty on these scarfs, I will ask you to request from Irvin to deposit in
my account, as usual, the corresponding sum in dollars. I am sending them the
corresponding vouchers.
NEGOTIATIONS IN MEXICO
Mr. AVebster, are you familiar with your company's business in
Mexico ?
Mr. Webster. Yes, sir; in a way, but not entirely familiar with
it. I think I can answer your questions.
Mr. Hiss. Mr. Leon also handled some of the negotiations ?
Mr. Webster. Mr. Leon made one trip into Mexico while he
was out on the coast for his health. He was close by and we sug-
gested that he might combine a business trip and go into Mexico,
and also possibly find a place which was more healthful for him.
Mr. Hiss. Can you identify Colonel Aguilar? I will show you
a copy of an interoffice memorandum under date of December 5,
1930, from J. S. Allard to Mr. Burdette S. Wright, subject: Mexico.
Mr. Allard. I think I would know more about that.
(The memorandum referred to was marked " Exhibit No. 326 ",
and is included in the appendix on p. 908.)
Mr. Hiss. What is his position and what position did he hold
in 1930?
Mr. Allard. I believe he was the Mexican military attache here.
Mr. Hiss. In Washington ?
Mr. Allard. In Washington.
Mr. Hiss. Can you also identify General Azcarate?
Mr. Allard. General Azcarate was or may have been the chief of
a"\Tation, or at least the head of a division in it, and operated a
factory in Mexico City, airplane factory of his own.
MUNITIONS INDUSTRY 755
Mr. Hiss. Mr. Allard, do you think there was anything unusual
about your Mexican negotiations? Did they differ from your
ordinary negotiations in other countries?
Mr. Allaed. I should not say so; no.
Mr. Hiss. As I have said " Exhibit No. 326 " is a letter of December
5, 1930, from Mr. Allard to Burdette S. Wright, a vice president
of the Curtiss-Wright parent corporation. That reads in jjart as
follows [reading] :
I realize fully that Colonel A.!j;uilar is not doins all his sales promotion work
for us as a kinclly gesture, and I would welcome the opportunity of talking: with
him, inasmuch as we have no repi'eseutative in Mexico, on the subject of his
suggesting some representative througli whom he could get his compensation
for the work he is doing for us.
Were you proposing, Mr. Allard, to pay Colonel Aguilar, the
Mexican military attache, compensation from your company 4 years
ago?
Mr. Allard. I do not think it was to be done when he was still
military attache. He was leaving here and going back as a private
citizen to Mexico. I know that to be the fact.
Mr. Hiss [reading] :
And, incidentally, if he does suggest somebody, I would not hesitate in
telling him to plan on getting his compensation through that party rather than
direct from us, as I do not think it is good ball for us to show the payment
of any commission on any sales to anyone other than our authorized
distributors.
Mr. Allard. That is correct.
Mr. Hiss. Will you explain that?
Mr. Allard. Because we could not pay him; he was not sufficiently
set up as a business man to be our authorized distributor down there.
We later appointed, or at that time had Watson & Phillips, a busi-
ness house which had been in business there 75 years, I think.
Mr. Hiss. That was not because he was an official of the Mexican
Government ?
Mr. Allard. No.
Mr. Hiss. This is dated in 1930.
Mr. Allard. Yes, sir.
Mr. Hiss. Is he not still connected with the Mexican Government?
Mr. Allard. Insofar as I know, he is not.
Senator Pope. Do you know he is or not?
Mr. Allard. No ; I do not know whether he is or not at the present
time, but at that time in December 1930, he was quitting as military
attache, going back to Mexico and retiring' to private life.
Mr. Hiss. May I refresh your recollection by calling your attention
to a letter of November 29, 1933, addressed to you signed by Robert
L. Earle, who is in your Washington office here?
Mr. Allard. That is right.
Mr. Hiss. I will offer that letter as " Exhibit No. 327."
(The letter referred to was marked " Exhibit No. 327 " and
is included in the appendix on p. 908.)
Mr. Hiss. On page 3, Mr. Earle says — and this letter is a report
of a recent trip by Mr. Earle to Mexico and the date of it is Novem-
ber 29, 1933
Mr. Allard, That is correct.
756 MUNITIONS INDUSTRY
Mr. Hiss (reading letter) :
General Aguilar claims that he is to be the next Chief of Aviation, but since
he has made this claim during the four years that I have known him, it is
difficult to put a great deal of stock in his assertions. Add to this the fact
that he is now being punished by assignment to u relatively unimportant post
for the publishing of a pamphlet in Washington casting discredit on the Mexican
Minister of Finance, for which act he was recalled. * * *
Does it appear from that that General Aguilar had been in Wash-
ington, where Mr. Earle was, for several years after 1930?
Mr. Allard. I do not know.
Mr. Hiss. May I ask Mr. Earle, who is present?
Mr. Earle. General Aguilar I first knew about 4 years ago when
he was here as a colonel. He did return to Mexico. He resigned
from the Army. But by some stroke he got to be the general in the
Mexican Army and then he returned to Washington as military
attache. As my letter indicated, his recall to Mexico was brought
about because of this pamphlet that he wrote. Then shortly after
that he resigned again from the Mexican Army and is now a private
civilian.
Mr. Hiss. Do you know the date of his first resignation as some-
where around December 1930, Mr. Earle?
Mr. Eakle. No; I do not.
Mr. Hiss. But you think he did resign?
Mr. Earle. That is what I was told when I was in Mexico; yes,
sir. But he had gotten out of the Army and then he had gotten in
again.
Mr. Hiss. Who are your representatives in Mexico at the present
time ?
Mr. Allard. Watson & Phillips.
Mr. Hiss. Do you remember for what reason you gave them your
agency?
Mr. Webster. It was at the recommendation of Mr. Leon after Mr,
Leon had visited Mexico and had selected them. I believe he also
consulted the American commercial attache and various business
houses and selected Watson & Phillips.
Mr. Hiss. Did your company believe that they were influential in
swinging Government orders?
Mr. Webster. I would not say influential. They were a very good
business house and naturally it was necessary to have a good busi-
ness organization to look after your business.
Mr. Hiss. I will offer as " Exhibit No. 328 ;' a letter dated June 13,
1933, from Charles Cunningham, commercial attache of the De-
partment of Commerce stationed in Mexico, to the Curtiss-Wright
Export Corporation.
(Tlie letter referred to was marked " Exhibit No. 328 " and is
included in the appendix on p. 912.)
Mr. Hiss. The letter reads:
For some time we have been in touch with Watson Phillips & Co., Avenida
Uruguay 103, Mexico City, with respect to their representing you in the pos-
sible sale of military airplanes to the Mexican Government. As a matter of
fact, we contributed considerably towards interesting them in your planes as
their representative has come repeatedly to our office and talked over with us
the possible American representations available and for the purposes now under
consideration we strongly urged the possibilities of your Hawk type of machines.
MUNITIONS INDUSTRY 757
That is the pursuit type?
Mr. Allard. Single-seater pursuit.
Mr. Hiss (continuing reading letter) :
We are now confidentially advised that the Mexican Government, military
department, is contemplating the purchase of anywhere from three to ten
planes of the pursuit type, the requirements of which might be satisfactorily
met by the Hawk pursuit type.
The Watson Phillips representative called on us this morning and showed
your letter of June 9th. This firm feels that for the business that they have in
mind, your letter is not sufficiently clear on the matter of protecting them
in case they make a sale for you. You are undoubtedly aware of the manner
in which purchases of aeronautic equipment are sometimes made by foreign
governments, and it is a reasonable desire on their part to be protected in full
in the matter of commission to themselves sufficiently large to enable them to
meet all requirements.
What requirements in Mexico ayouIcI Watson, Phillips be faced
with?
Mr. Webster. I think more or less the same requirements as other
representatives in the way of technical advice and assistance. Wat-
son, Phillips undoubtedly do not know — I know that they are not
familiar with aircraft.
Mr. Hiss. Have the commercial attaches of the Department of
Commerce been helpful to you in the sale of military planes?
Mr. Webster. In a great many cases ; yes, sir. They have worked
with us and we have worked with them in all countries, as I believe
according to their instructions.
Mr. Hiss. The date of " Exhibit No. 328 " is June 13. On June 5,
just to refresh your memory. Brigadier General Azcarate, who was
head of the President's military staff at that time asked you for a
direct quotation on a Wright plane. On June 13, Mr. Cunningham
recommended to you Watson, Phillips in the letter which is " Exhibit
No. 328."
On June 21 you wrote to Watson, Phillips telling them that you had
been in direct communication with the aviation officials of the Mexi-
can Government and therefore you did not wish to have a
representative.
On June 29, 1933, Watson, Phillips replied to you and this letter
I offer in evidence as " Exhibit No. 329."
(The letter referred to was marked "Exhibit No. 329" and is
included in the appendix on p. 912.)
Mr. Hiss. This letter is as follows in part :
Naturally if you wish to work this matter directly we can only w'sh you
every success, but we venture to say that unless you have a representative here
familiar with the politics of the matter and with influential connections your
chances of obtaining orders are very slender, more especially as the Boeing is
being pushed very hard and in all probability will now obtain the order as
there is no other hard opposition. We may say also that a representative of
the Lockheed is now in this city from their factory in Burbank, Cal., but even
he will not get far unless he connects with someone who can put him in touch
with the right parties.
We regret your decision in this matter, more especially as we had already
taken up this matter in the highest quarters, but naturally you cannot expect
us to continue our labours unless we can be sure of some protection and also
be in a position to quote.
On June 30, the day after this letter from Watson, Phillips, Gen-
eral Azcarate notified you in regard to your quotation to him, which
letter I offer as " Exhibit No. 330."
(The letter referred to was marked " Exhibit No. 330.")
758 MUNITIONS INDUSTRY
Mr. Hiss. This letter, " Exhibit No. 330 ", reads :
Curtiss-Wbight Export Corp.,
27 West 57th St., New York, N.Y.
Gentlemen : I am pleased to refer to your letter dated the 26tli instant,
advising you that the Mexican Government cannot consider the purchase of any
planes right now, but we will be glad to receive the information that you
offer to send, for which reas(Ui I don't believe it necessary that your agent
come here. We will be glad to hold your offer for whenever the opportunity
presents itself.
With nothing further, I am, very truly yours,
Juan F. Azcarate,
Brl(/. General, Engineer.
Do you think there was any connection between your refusing to
accept Watson, Phillips' request that they be your agents and Gen-
eral Azcarate's notifying you shortly after that he had asked for a
quotation that they were not in the market for planes?
Mr. Allard. No; I do not. No sale was ever made down there.
Mr. Hiss. I offer as " Exhibit No. 331 " a letter from Mr. Earle to
Mr. Goulding dated July 21, 1933.
(The letter referred to Avas marked " Exhibit No. 331.")
Mr. Hiss. In this letter Mr. Earle states that :
General Aguilar advises that he has information to the effect that the Mexi-
can Government is definitely going to buy six Cyclone Hawks from us.
The interesting part of the situation is that he is now trying to claim some
credit for having influenced General Azcarate in this purchase from us, and I
know he is going to try to high-pressure vis into making some gre:^t concession
to him on a commercial airplane for himself. I have told him that I will go to
see him on Monday. This is going to be an interesting situation to handle, and
I plan to simply tell him that I will put the facts up to you for consideration.
That will give us a little breathing spell and time to think up a good answer
that will not entail any loss to ourselves and at the same time will appease
him.
I offer as " Exhibit No. 332 " a letter dated July 24, 1933. from Mr.
Shannon to Mr. Lawrence Leon which enclo-sed a copy of a letter
from Watson, Phillips, which letter has already been put in evidence
as " Exhibit No. 329."
(The letter referred to was marked " Exhibit No. 332 " and is
included in the appendix on p. 913.)
Mr. Hiss. This letter states in part as follows :
We have not replied to them further.
We understand from another source here that Azcarate always wants to be
taken care of, but is very careful aliout it and works through some third party.
Up to now we have not been able to find out who this party is.
We have not api)ointed any agents for military sales in Mexico, so we could
be free to deal witli whomever we found was Azcarate's man.
The prices we quoted could provide for a commission of 5 percent to Azcarate
or an agent.
Mr. Allard, was your company willing to pay to Azcarate, a Mexi-
can official, a 5-percent commission on the sale of military planes to
Mexico?
Mr. Allard. Mr. Webster would better answer that; while it was
his company, it was not ours.
Mr. Webster. Conditions in Mexico were a little different. Azca-
rate still was, I believe, employed by the Mexican Government, but
at the same time was operating a private airplane factory and selling
airplanes to the Mexican Government. There was no reason, if he
was operating a factory of his own and selling planes to the Govern-
MUNITIONS INDUSTRY " 759
ment while he was chief of the air corps, why we should not have
worked this way with him. There was nothing secretive about it.
Senator Pope. There is no reason why you should not pay him
that commission through a third party ?
Mr. Webster. I should think in that case there was no reason why
we should not, if he made a profit while still an officer in the Gov-
ernment, manufacturino; airplanes for the Mexican Government.
The Government paid him a commission, and there was no reason
why we should not do the same thing.
Mr. Hiss. Would you disclose that commission to the Govern-
ment ?
Mr. Webster. I do not see any reason why we should not.
Mr. Hiss. In your contracts with foreign governments, do you
customarily report to them the commissions that have been paid on
sales ?
Mr, Webster. If they request it.
Mr. Hiss. Is it frequently requested ?
Mr. Webster. At times ; yes.
Mr. Hiss. I offer as " Exhibit No. 333 " a letter dated August 5,
1933, from Mexico, written by Lawrence, who is Mr. Leon, to '* Dear
Web ", who is Mr. Webster.
(The letter referred to was marked "Exhibit No. 333" and is
included in the appendix on p. 913.)
Mr. Hiss. After receiving the letter of July 24, " Exhibit No. 332 ",
Mr. Leon had notified Watson, Phillips that they were authorized
to represent the Export Corporation in carrying on negotiations with
Mexico. Mr. Leon's letter is as follows. The letter is dated August
5, 1933.
Here is the situation : First of all, I found at Palacio Nacional that a request
was forwarded a mouth or so ago to Washington, thru the Mexican Embassy
for permission to send six flying officers to one of our pursuit fields to receive
some training in the event that Boeing or Curtiss shi^^s were purcliased (this
is how General Aguilar in Washington heard tliat his Government was about
to buy pursuit equipment and made advances to Bob Earl and probably also to
United). It seems that our Government turned down the request, and this
people feel very peeved about it, knowing that many foreign oflicers have been
trained at U.S. Army fields. Azcarate spoke very frankly to me, stating that a
contract with Boeing, which was all ready for signatures, was cancelled by
order of the President * * *."
You will remember that on Jime 30, just one month and a few
days before General Azcarate had notified you, just after you had
told Watson, Phillips that you did not want a deal with them, that
the Mexican Government cannot consider the purchase of any planes
right now, although this letter states that there was at that time, a
month prior to August 5, a contract all ready for signature with the
Boeing Co., which is a subsidiary of United Aircraft, one of your
competitors.
Mr. Webster. No contract was ever placed, by the way.
Mr. Hiss. Continuing with this letter, Azcarate stated that the
contract was canceled by order of the President —
* * * and it has been decided that this equipment shall be purchased any-
where but in the States. He also said that inquiries have been already dis-
patched to England and Italy for sending the men there as well as purchasing
the ships there.
I, naturally, told Azcarate that if he had spoken to us about it we would
Jiave solved the problem by either getting the necessary permission from our
760 MUNITIOlsrS INDUSTRY
War Department or by having the six men bruslied up on fast ships at some of
our own fields, but he insists that the men must go to a military school.
Did your company think it would have had no difficulty in secur-
ing War Department permission for Mexican officers to be trained in
the Army at Army fields?
Mr. Webster. I think possibly Mr. Leon was not in as close touch
with the situation as he thought he was. He did know that some of-
ficers have been trained at Army flying fields in America on many
occasions, and he possibly thought that it could be done again. But
I do not believe that he was in as close touch with the situation as
he thought he was at that time.
Mr. Hiss. Your own company had trained men in flying pursuit
ships in the past?
Mr. Webstee. No. We have never trained men in flying pursuit
ships. We have trained them in flying, but not in pursuit ships.
Mr. Hiss, Would the training that they receive enable them to
handle pursuit ships?
Mr. Webster, Yes ; I would say so, if they had the proper training
for that work.
Mr. Hiss. This goes on to say that —
Azcarate is out for Boeing, and he only inquired about our price in order
to show that they are higher than Boeing quotations. He told me the higher
performance is not necessary, as Mexico is not going to fight the United States.
He is not interested in the Osprey and wants to standardize on P. & W. engines
because they already have sixty of them on hand.
These difliculties can be surmounted. My problem was to contact and
interest another man with as much influence, and this I did through "Watson,
Phillips Co. Our man in the Presidencia now is Col. Rodriguez Familiar, a
very close friend of the President and his prot6g6. There will be a lot of
squabbling, but I believe the colonel will have his way in a few weeks' time.
I have never seen any country where graft is so freely taken for granted.
Watson, Phillips & Co. is the oldest British firm in Mexico having been in
business over a hundred years. They are very active and the financial rating
is high. I looked up two other firms, but was not as favorably impressed.
We need not fear their being partial toward British products; they have been
too long in this country, and will favor whoever gives them a better deal.
Referring to Watson, Phillips further he says :
It is mainly on account of their connection at the National Palace that I
wrote them the letter, copy of which is enclosed.
That is the letter of August 3, appointing them as agents.
It is an agreement that can easily be terminated by simply writing them
another letter, if we want to do so at any time.
Further on in the letter he says :
Besides the six Hawks, sixteen engines are needed, and the technical staff
at the shops are working on a report showing all the reasons why a change
from a P. & W. to
That is Pratt & Whitney?
Mr. Webster. Yes.
Mr. Hiss (continuing reading) :
to Wright should be made. I promised a Dodge sedan to the chief engineer
in charge of the shops if he is successful in switching this initial order to us.
Did the company or did you ever rebuke Mr. Leon for such a
promise ?
MUiSriTIONS INDUSTRY 761
Mr. Webster. I believe I did so, personally. Mr. Leon had no au-
thority to make such an offer, and no Dodge sedan was ever given.
I am quite sure that we would not have done so.
Mr. Hiss. You never got the order finally?
Mr. Webster. No order w^as every placed except for a few training
planes.
Mr. Hiss. He says further :
Naturally, all expenses connected with sales must be borne by them * * *
That is Watson, Phillips?
Mr. Webster. Yes.
Mr. Hiss (continuing) :
except this particular gift to the factory engineer, if the deal goes through, on
account of the fact that Watson, Phillips would not make any money on the six
Hawks, as 5 percent is barely enough to pay all rake offs and the price cannot
be increased, we have quoted $24,000 to Azcarate. There is a chance that
Azcarate will be kicked out soon, though, in which case things will change quite
a bit.
This country has been neglected and I wish I could remain here a few months.
The last part of this exhibit is :
According to my cable, this letter should be air-mailed from here, but I have
changed my mind ; too dangerous not only on account of its contents but also
because in order to avoid a lot of red tape and a deposit of $250 at point of
entry, I came as a tourist instead of as a business man. If I were caught, it
would be an expensive affair, so I thought a couple of days' delay are pref-
erable to taking the risk.
I will offer as " Exhibit No. 334 " a letter addressed to the Export
Corporation from Watson, Phillips in Mexico dated August 23, 1933.
(The letter referred to was marked " Exhibit No. 334 " and is in-
cluded in the appendix on p. 915.)
Mr. Hiss. This letter says :
The Aviation Department has made an official report to the Presidencia on
the various planes offered for the purpose — Boeing, Bristol, and Curtiss. This
report has been seen by our representative and is distinctly favorable to your
machines.
Do you think Mr. Leon's promise of a Dodge sedan had anything
to do with this report being f avorabkj Mr. Webster ?
Mr. Webster. No; this speaks of airplanes.
Mr. Hiss. You do not think he made any similar promise in re-
gard to a report on airplanes ?
]\Ir. Webster. I am quite sure he did not.
Mr. Hiss. Watson, Phillips also requested you:
Should you by any chance receive any further direct communications in re-
gard to prices we earnestly request you state that you have been obliged to
revise your original quotation, either on account of rise in price of material or
due to our intervention as agents, and support this figure. This has been done
for reasons which you will doubtless appreciate, and we can assure you that
same will in no way prejudice your chances of obtaining the order, on the
contrary.
We also have to inform you that Colonel Lezama, Assistant Chief of the Air
Department, expects to be in Tulsa, Okla., within approximately one week to
receive the Fleet planes * * ♦.
Those are made by the Consolidated Co.?
Mr. Webster. Yes ; training planes.
762 MUNITIONS INDUSTRY
Mr. Hiss (continuing reading) :
* * * recently purchased by the Flying School. This would be a good
opportunity for you to interview this gentleman and submit any additional
information that you may deem advisable, but we would impress upon you
that this should be done in a discreet manner, and without any advertising,
as Mr. Lezama does not wish it to appear that he is favoring any particular
make of plane.
I will offer as " Exhibit No. 335 " a letter from Mr. H. O. Claywell
to the Export Corporation, attention of Mr. Shannon.
(The letter referred to was marked "Exhibit No. 335 " and is in-
cluded in the appendix on p. 916.)
Mr. Hiss. Do you know who Mr. Claywell is, Mr. Allard?
Mr. Allard. I think he is a private individual who lives out in
the Middle "West some place. He has approached us several times
concerning commercial and military planes.
Mr. Hiss. This letter is from Mexico and reads in part as follows :
I congratulate you upon your representative wlio actually is not a conmier-
cial one at present, but one of the very highest Government authorities and
a very expert one, a splendid gentleman, and an excellent friend of mine.
Do you know to whom that reference is ?
Mr. Allard. I have not any idea who that is; no, sir.
Mr. Hiss. Do you think it could be the man to whom Mr. Leon
referred to in his letter as Col. Rodriguez Familiar?
Mr. Webster. I think he is referring to Watson, Phillips. He
says " our representative " there.
Mr. Hiss. They could not be described as a commercial one but one
of the very highest governmental authorities.
Mr. Allard. I do not know whom he refers to.
Mr. Hiss. I offer as "Exhibit No. 336" a letter from Watson,
Phillips to Robert L. Earle dated October 28, 1933.
(The letter referred to was marked " Exhibit No. 336 " and is in-
cluded in the appendix on p. 917.)
Mr. Hiss. They say in this letter :
The most important point at this moment is the " financial " end. According
to your company's letter of Sept. 7th the price of $24,000 still stands good and
for important deals in the future with the same department, and otlier reasons,
please ask your director to kindly cable us confirming that you maintain above-
mentioned price for tlus deal. For various reasons we have to ask you if you
could increase our commission on the aliove amount from .5 to 10 percent;
because in this case we could perhaps obtain the sales contract inunediately.
If possible our sales pi-ice to the Government of $26,000 should be maintained
as this is of utmost importance. Delivery should be as soon as possible and
the money for this deal is already set aside.
Please take great care that no news about this proposition should reach Mr.
Azcarate. If he should inquire alwut certain moves in Mexico, please keep
him in suspense as this matter must be kept secret until everything has been
definitely decided.
In dealing M'ith governments is it customary for your company
to keej) the negotiations secret from certain of the high officials?
Mr. Webster. No, sir.
The Chairman. Mr. Hiss, have you developed what the present
connection of this man Azcarate is?
Mr. Hiss. General Azcarate was at the time of these negotiations
Chief of the President's Military Commission, Military Staff in
Mexico. Is that correct?
MUNITION'S INDUSTRY 763
Mr. Allard. I do not know it to be a fact. I do not know what
his position was.
Senator Pope. That has been developed.
The Chairman. Yes; that is already developed. But what is his
occupation at the present time?
Mr. Hiss. "Exhibit No. 327" of November 29, 1933, says that
General Azcarate was chief of the President's staff and is now mili-
tary attache in Washington.
Mr. Webster. Is he here now ?
Mr. Hiss. Mr. Earle would probably know.
Mr. Earle. Yes.
Mr. Hiss. Mr. Earle says he is now military attache in Washing-
ton. That particular contract that you were then negotiating never
went through, is that correct?
Mr. Allard. That is correct.
Mr. Hiss. I will offer as " Exhibit No. 337 " a letter dated March 2,
1934, from Watson-Phillips to the Export Corporation.
(The letter referred to was marked "Exhibit No. 337 '" and is in-
cluded in the appendix on p. 917.)
Mr. Hiss. This letter reads :
A special commission which was very busy at the Aviation Department for
the last few weeks in making a close study of conditions and movements dur-
ing 1933, just finished tlieir study and a new program, together with new ideas
about this department, are under consideration.
We were informed confidentially of the exact position in this matter, and also
were asked confidentially to make out a certain report, which will be modified
after we have given same in according to the conditions and possibilities to the
department. An entirely new arrangement and system will be established.
The Talleres del Departamento de Aviacion will be taken over by a new man-
agement and transformed into a factory, similar to the one which Genl.
Azcarate <uice had in Mexico. The civil as well as military aviation construc-
tion program will be taken into consideration, but the Military Aviation De-
partment will furnish only the funds necessary for construction, repairs, up-
keep of planes for this department. We can tell you that Mr. Calles jun. him-
self is active in this work already and that his father might be the main
stockholder and perhaps director of the new company.
Mr. Hiss. In this letter I find this further statement :
In asking for further quotations on armament, state the factory prices, includ-
ing 10 percent commission, but do not mention the amount of commission in
future letters.
The governments frequently do not know the amount of commis-
sion your agents receive?
Mr. Webster. They do not know unless they request- the informa-
tion.
Mr. JHiss. Eef erring again now to " Exhibit No. 327 " letter dated
November 29, 1933, from Robert L. Earle to J. S. Allard, being a
report of a recent trip to Mexico City, I find this statement :
The situation now is approximately as follows : With the transfer of General
Azcarate to Washington, his influence over purchases by the Government is
apparently at an end and one of the most serious obstacles to Curtiss-Wright
progress removed. It will be remembered that he has an interest in the
factory that built Vought Corsairs under license, and since has done a great
deal to push the purchase of Boeing fighters. After he was forced to change
his attitude in favor of Curtiss Hawks recently he tried to give the impression
that he was out of patience with Boeing for having unexpectedly increased
764 MUNITIONS INDUSTRY
their prices, but he can hardly be counted on as a loyal Curtiss-Wright
supporter.
With General Rodriguez Familiar as the new chief of the presidential staff,
it appears that we may expect to receive very favorable consideration. During
a very satisfactory conference with him, he expressed admiration of our equip-
ment, and nyreed entirely with my statement to the effect that the Mexican
Government could not afford fighters having performance inferi(jr to the Hawk,
when so many governments have already adopted it as standard equipment.
From all indications, Watson Phillips have arrived at a satisfactory under-
standing with him regarding methods of handling the financial phases of the
contracts, although he, of course, has nothing to do with the actual drawing
«p of same. He is a relative of President Rodriguez, to whom Watson Pliillips
3ias access through a firm of lawyers.
General Ruiz, who is the Chief of Aviation, leaves matters of technical recom-
anendation and conferences with representatives of mnnufacturers almost
»eui irely up to Colonel Lezama, his subchief . In leaving us to Colonel Lezama
he said that he would back up whatever plan of action we arrived at.
Colonel Lezama, who was trained at Brooks and Kelly Field, is very favor-
able toward us. He said that with General Azcarate now out of the way
the course ahead would be comparatively clear, and that he would do all he
could to push the purchase of Curtiss-Wright equipment. He has direct access
to General Rodriguez, and it was he, in fact, who arranged for the conference
which Mr. Huebner and I had with general. Lezama and Rodriguez F. appear
to be in accord and in close touch with each other concerning all negotiations
for aircraft.
Colonel Gustavo Leon, who has been designated to make a nonstop flight
from Mexico City to Buenos Aires, has apparently full latitude in choosing his
airplane in which to make the flight, such purchase to be paid for, of course,
by the Government. He was at flrst interested in the Lockheed, but Watson
Phillips have swung him over to a preference for the Northrop, on the assump-
tion that we would be able to arrange for handling this type for the Northrop
Company. Leon seems so disposed to take the recommendation of Watson
Phillips concerning type of ship (probably due considerably to certain flnancial
arrangements) that I seriously doubt if the builder of a suitable type airplane
will be able to sell it there unless the deal is handled through this flrm.
General Aguilar claims that he is to be the next chief of aviation, but since
he has made this claim during the four years that I have known him, it is
difficult to put a great deal of stock in his assertions. Add to this the fact
that he is now being punished by assignment to a relatively unimportant post
for the publishing of a pamphlet in Washington casting discredit on the Mexicaji
Minister of Finance, for which act he was recalled, and his stor.y seems even
less plausible. He insists that the transfer of General Azcarate to Washing-
ton does not mean that any of his influence is lost, but I see no reason to
believe this. I purposely avoided calling on Aguilar until the last day, as I
wished to make it only a courtesy call. Watson Phillips may find it necessary
to play along with him to a limited extent for the reason that through his
presence in the Intendencia, which is the contracting division of the War De-
partment, even though his post is not of importance, he might be able to
seriously delay the signing of contracts, were he so disposed.
Mr. Ponce de Leon, an engineer in the Navy Department, has the task of
working up the design of gear necessary for the carrying and handling of a
seaplane on the deck of one of the six vessels being constructed for the Mexican
Navy by a shipyard in Spain. One or two seaplanes will be purchased for these
experiments, and the selection of type will be up to him to a considerable
extent, as its use will depend on the ability of space and gear on the vessel to
handle it. He and others in the Navy Department have pretty much crystal-
lized their thoughts on an airplane of not more than 250 h.p. I recommended
the Fledgling if they must stay in such a low horsepower class, but do not see
any particular advantage to this, if a plane more compact and not appreciably
heavier can be offered. They were considering the use of a catapult, only to
enable a plane to be launched when the water is too rough for take-off from
the suface. I recommended against trying to design a catapult, for much ex-
perimentation is necessary before a satisfactory one can be developed, and it
is not possible to obtain design information from the U.S. Navy as this is
confidential information. I pointed out that a sea too rough for taking off
MUNITIONS INDUSTKY 765
would be dangerous to land in anyway, and recommended that they confine
themselves to hoisting a seaplane over the side for water take-offs. I believe
this idea will be followed, and I have agreed to obtain information concerning
necessary clearances between wings and the ships' hull, and length of hoists
to allow for rolls. I hope that we can avoid having to design export ships for
catapulting for the time being at least. Our Osprey as a seaplane should be
a suitable plane if the catapulting idea is abandoned.
Possible business :
1. There are immediate plans for the development of a pursuit squadron,
starting with six airplanes. The money that was set aside for this purpose
several months ago was used for other purposes, to meet an emergency of
some sort in a different branch of the Army. They are now endeavoring to
dig up enough for a 25% deposit on six Hawks, with the idea of providing the
remainder from appropriations for the first half of 1934, which money when
and if ai^propriated would become available after January 1st of 1934.' They
seem convinced that the Hawk is the ship they want, and since proponents of
Boeings seems to be out of the way, it appears quite certain that ours is
first choice.
One thing which helped interest in the Hawk was the word given by Law-
rence Leon to the effect that we would give them a license to manufacture
Hawks without any charge for same. There are some who do not believe that
they can keep abreast of developments if they manufacture themselves, be-
cause of the time required to get new planes into production as the types
advance. Since the total number they would build would be comparatively
small, this view seems reasonable. With General Azcarate gone there will
probably be less pushing for manufacturing rights. I recommended that they
consider only completely manufactured planes for this year, all to be built in
Buffalo, and that a license, if desired, could be discussed after delivery of
these.
Since returning to this country I have heard that President Rodriguez was
financially interested in the factory venture which General Azcarate pro-
moted, in which the Corsairs were built, and that through it he lost quite a
bit of money. If this is true, he might favor a proposition for further manu-
facturing in that factory if it held promise of helping him get back some of his
losses. If the idea of manufacturing in Mexico were to be entertained, it
would, of course, be necessary for us to send someone to Mexico City to discuss
it and work out contractual arrangements.
Has your company carried on any negotiations as to licensing the
Mexican factory?
Mr. Allard. Yes ; we have had negotiations along that line, but it
has not developed into anything, to my knowledge.
Mr. Hiss. Reading further, the letter says :
It might be desirable for an executive of the Export Co. to make one or two
trips to Mexico City during the next six to eight months, at which time it
might be well to try to talk with the President himself, to be sure that he is
in sympathy with us and is satisfied with the way our affairs there are being
handled. He seems to be involved in all aircraft purchases.
The Chairman. Coming back to this man Zar, was he not in fact
an agent for your corporation?
Mr. Webster. No, sir; never.
The Chairman. One cannot follow through the vast amount of
correspondence we have been through here this morning without be-
ing impressed that he was something more than an official connected
with his own Government. You never paid him a commission?
Mr. Webster. Absolutely, not, sir.
The Chairman. You never paid him any return of any kind
for his good will and service to the corporation ?
Mr. Webster. No, sir; none whatever. Captain Zar is a very
fine type of gentleman. He spent a great many years in the United
766 MUNITIONS INDUSTRY
States, was trained in the United States Navy, and has a great
many friends in the United States Navy. As a matter of fact, his
wife is an American girl and he is very American in his thoughts.
The Chairman. Before recessing the Chair furnishes for the
record telegrams received during the morning from Ruth Nichols
and Amelia Earhart. These telegrams come as a result, I take it,
of testimony that was taken yesterday, in which Mr. Miranda
in a letter was undertaking to sell to some South American authority
the knowledge of very strong background in the United States and
other connections with important people in the flying industry. It
was clearly a propaganda letter, a salesman's letter selling his com-
pany to probable southern customers.
Miss Nichols' telegram is from Rye, N.Y., and is as follows:
Senator Nye,
Chairman U.S. Senate Anns Inccstiaatiun.s Coniiiiittee,
The Vauitol, Washington, D.C.
I am exceedingly sluckecl to learn from tonight's newspapers that in Senate
investigation of arms shipment to South America, there was revealed today a
letter written by Mr. A. J. Miranda, Jr., including my name along with others
in a state of highly dangerous and misleading import to the cause of peace to
which I am so extensively interested, both by belief and Quaker heritage.
Since at no time have I ever had dealings with Mr. Miranda, or any one
else in armament negotiations, and for the sake of peace to which I have
been actively working in plans for specific methods of preventing war, I hereby
urgently and respectfully request that the Nye committee demand an ex-
planation from Mr. Miranda as to the meaning of his statement that he found
me among other women fliers " useful in the pursuit of business ", and in ad-
dition requesting a clear, true declaration from him that I have never had
any connection with the armament matters being discussed by him in the
Senate investigation.
Ruth Nichols.
The telegram from Miss Earhart is from New York, and is as
follows :
Senator Geeald P. Nye,
Chairman Senate Munitions Investigating Com'mittee.
In reference to Miranda's letter introduced before your committee yester-
day and his statement he is " intimately acquainted " with me and that I
have been " most useful in the pursuit of business ", please know I do not
recall ever having met Miranda and in no way have I ever been wittingly
" useful " to him. I am emphatically opposed to all that has to do with war
and activities of munition makers and genuinely hope your committee may
curb their devious activities. My attorney investigating Miranda's totally un-
justified and damaging use of my name. Looking towards redress if possible.
AME3LIA Earhart.
Senator Bone. Mr. Chairman, as I recall, the only reference to
both of these ladies w^as to the effect they flew a certain type of plane,
that they regarded it as a very fine plane. I do not recall any
attempt to utilize them in connection with acquiring business or
utilizing their names.
The Chairman. I think I recall a letter in which Mr. Miranda did
declare that these people, along with other prominent fliers, had
been very useful to them.
With that the committee will be in recess until 2 o'clock.
(Thereupon the committee took a recess until 2 p.m.)
MUNITIONS INDUSTRY 767
AFTERNOON SESSION
(The hearing was resumed at 3 : 10 p.m. pursuant to the taking of
recess. )
TESTIMONY OF J. S. ALLARD AND CLARENCE W. WEBSTER—
Resumed
ACTIVITIES IN COUNTRIES ENGAGED IN WAR OR FEARFUL OF WAR
The Chairman. Mr. Hiss, proceed.
Mr. Hiss. Mr. Webster, in view of the fact that your company
sells primarily military planes, is it or is it not a fact that when
wars are going on or threatening, your company does more business
than in peace times?
Mr. Webster. Well, I would guess that possibly we did a little
more. I do not think we would do much more in times of war. For
instance, I am speaking now of Latin America. That is primarily
the territory I am personally interested in. If you strike an average,
I do not think it would be more, Mr. Hiss. I would have to check
the records, though; that is, over an extended period, to take an
average.
Mr. Hiss. The war involving the Chaco territory which is shown
on the map between Paraguay and Bolivia, the Chaco territory run-
ning down in through there [indicating on map] with Paraguay
there [indicating] and Bolivia there [indicating], has been going
on in actual force since 1932 and is still continuing; is not that
correct ?
Mr. Webster. Yes, sir.
Mr. Hiss. Your company's sales of planes as reported to the com-
mittee show that the country of Bolivia in 1932 and 1933 purchased
a total of 24 planes from your company.
Between the countries of Colombia and Peru there has been a dis-
pute involving the Leticia Territory, lying in through there [indi-
cating] with Colombia there and Peru there [indicating on map].
There has been intermittent fighting, or there was, during 1932
and 1933.
On May 24, 1934, a treaty was finally signed by both nations.
During 1932, 1933, and up to April of 1934, according to the infor-
mation your company has furnished the committee, a total of 50
airplanes was sold to Colombia. During that same period, 1932 and
1933, 4 planes, 1 of which was listed as a commercial plane, was
sold to Peru; 3 were sold in 1933, all 3 of those being military planes.
Mr. Allard, have any planes been sold to Peru in 1934?
Mr. Allard. Not to my knowledge ; I do not think so.
Mr. Webster. I do not recall. In 1934 ? I do not think so.
I would have to check on that.
Mr.. Hiss. In the year 1933 you sold to China, according to your
records a total of 54 planes.
In Argentina, in 1932, you sold 10 military planes and 2 com-
mercial planes.
83876 — 34— PT 4 6
768 MUNITIONS INDUSTEY
During 1932 and 1933 your competitors, the United Aircraft Cor-
poration, according to the information they have furnished the com-
mittee, sold 12 military planes to Argentina.
Mr. Webster. Argentina builds a good many of its own airplanes
at the Cordova Factory. They buy some engines and build the
planes in some cases and in others they build their own planes.
That is, if you are striking a comparison between one country that
is at peace and another that is at war.
Mr. Hiss. No. In fact, I understand that Argentina and Chile —
well, Chile has its own factory at Los Cerrillos.
Mr. Webster. That factory belongs to the Curtiss Co. in Chile.
Mr. Hiss. That does not appear as sales by the factory. Do they
appear as sales of the Curtiss Co. ?
Mr. Webster. It would; yes. But the factory in Chile is closed.
Senator Pope. How long has it been closed ?
Mr. Webster. I think more than a year.
Mr. Allard. About 2 years.
Mr. Webster. About 2 years; yes.
Mr. Hiss. Has your company any contracts now under way with
Bolivia for delivery of planes in 1934?
Mr. Webster. One contract was partially shipped; but owing to
the embargo the balance is held up.
Mr. Hiss. Do you know how many planes were shipped in 1934?
Mr. Webster. I could not tell you offhand.
Mr. Hiss. A memorandum in your files states that as of July 21,
1934, there were 2 pursuit planes, 3 observation planes, and 4 bombers
under contract and partly paid for. Do you know how many of
those have actually been released?
Mr. Webster. Five of them were released and shipped and four
are still held up.
Mr. Hiss. Under the embargo?
Mr. Webster. Under the embargo.
Mr. Hiss. In no other country than those mentioned has your com-
pany, so far as your records show, as submitted to the committee,
other than Turkey, where 19 planes were sold in 1932 — sold more
than 5 planes, I believe?
Mr. Allard. If the records show that, that is correct.
Mr. Webster. I would have to look up the records; I cannot tell
you offhand.
Mr. Hiss. I will offer as " Exhibit No. 338 " a letter of December
27, 1933, from Frank Sheridan Jonas to Mr. Shannon, of the Curtiss-
Wright Aviation Corporation.
(The letter referred to was marked " Exhibit No. 338 " and is in-
cluded in the appendix on p. 918.)
Mr. Hiss. Can you identify Mr. Jonas?
Mr. Webster. Mr. Jonas is employed by, and represents, the Rem-
ington Arms Co., and I think also the Winchester Co., in South
America.
Mr. Hiss. His brother represents Winchester, does he not?
Mr. Webster. That is possibly correct. I know he did represent
Winchester. I think now it is only Remington ; yes.
Mr. Hiss. Does not Mr. Jonas also represent the Federal Labora-
tories Co.?
MUNITIONS INDUSTRY 769
Mr. Webster. I know he did at one time. Whether he' does now
or not, I do not know.
Mr. Hiss. The second paragraph of this letter reads as follows :
The Paraguay and Bolivia fracas appears to be coming to a termination,
so business from that end is probably finished. We certainly are in one hell
of a business, where a fellow has to wish for troulile so as to make a living,
the only consolation being, liowever, that if we don't get the business someone
else will. It would be a terrible state of affairs if my conscience started to
bother me now.
The Chairman. Whose letter is that?
Mr. Hiss. That is a letter to Mr. Shannon of the Export Co.
from Mr. Jonas representing the Remington Arms Co. and the Fed-
eral Laboratories Co.
The Chairman. What is Mr. Shannon's connection with the
airways ?
Mr. Hiss. Mr. Shannon has been identified as a former employee
of the Aviation Corporation, now on Mr. Webster's staff, which is
the selling organization in South America.
Mr. Allard. If you will pardon me, it is not the Aviation Cor-
poration, but the Export Corporation.
The Chairman. Has Mr. Shannon any connection at all now, or
has he had with the Pan-American Airways?
Mr. Webster. No; he never has.
Mr. Allard. Never, to my knowledge.
Mr. Webster. There is another Shannon with the Pan-American-
Grace Airways.
Mr. Allard. They are not the same.
Mr. Webster. There was no relationship of any sort whatsoever.
The Chairman. Thank you. That is what we were trying to
determine.
I should like to ask the witness frankly, in the light of the expe-
rience that you have had for years, in the light of the experience
that is generally known now that all competitors have, it is " a hell
of a business ", is it not, to use Mr. Jonas' language ?
Mr. Webster. Well, in what way do you mean. Senator ?
The Chairman. I mean, in the foreign field, where you are so
directly in competition with other manufacturers?
Mr. Webster. I would not say that because we are in competition
makes it a hell of a business. I think it makes it rather interesting
to have competition.
The Chairman. But the kind of competition that has been shown ;
I cannot conceive that any American would relish that kind of com-
petition, the necessity of having to engage in the kind of practices
that are engaged in to get the business.
Do you really say that you delight in the kind of competition that
you have?
Mr. Webster. I would not say I delight in that kind of competi-
tion. Senator, but I would like competition in any line of business
that I was in. I should think it would be more interesting to have
competition.
The Chairman. Coming to Mr. Jonas' direct point, the fact
that trouble and bloodshed and warfare are necessary to the richest
profit of your business, are you quite ready to agree that that is, as
he expresses it, " a hell of a business " ?
770 MUNITIONS INDUSTRY
Mr. WtBSTER. Mr. Jonas is not in the same line of business we
are in.
The Chairman. I understand.
Mr. Webster. He is speaking of his own business, not of my
business.
The Chairman. You are all making things that enter into the
same general activity.
Mr. Webster. Well, we manufacture the same airplanes for the
United States Government.
The Chairman, Surely; but does he not manufacture and is he
not selling one and all alike?
Mr. Webster. Well, I do not know whom Mr. Jonas sells to for
Remington. I know that he is in South America. I do not believe
he sells to the United States Government. We sell the same ma-
terial— that is when it is released to foreign governments — we sell
the same material to foreign governments that we sell to the United
States Government and I do not think it is a hell of a business to
be in, dealing with the United States Government.
The Chairman. Very well.
Mr. Hiss. I offer as '' Exhibit No. 339 " a letter dated December 12,
1933, from Samper, the Export Co.'s representative in Bogota, Co-
lombia, to Mr. Goulding, vice president of the Export Corporation,
(The letter referred to was marked "Exhibit No. 339'' and is
included in the appendix on p. 919.)
Mr. Hiss, This letter reads in part:
Thank yoii, indeed, for the information contained in your letter No. 345 of
the 5tli inst., and for tlie enclosures received therewith. These we have read
with extreme interest and pleasure, for it is evident that efforts to convince
the Government of the need and advisahility of making immediate additions
to our air force have been effective. The likelihood of failure of the Rio
conference has aided us considerably in this endeavor.
Do you knoAv what the Rio conference was, Mr. Allard ?
Mr. Allard. No ; I do not.
Mr. Hiss. Just about this time, December 1933, a conference was
held in Rio de Janeiro among various of the South American coun-
tries looking to a cessation of the Chaco hostilities. Is it not true
that a failure of a peace conference at that time would have aided
your agents in persuading the governments that they should make
immediate additions to their air forces ?
Mr. All.\rd. I do not think that is what Mr. Samper refers to
here. I think he means the possibility of the failure of the confer-
ence would make the government continue with its national-defense
program,
Mr. Hiss. I offer as " Exhibit No. 340 " a letter dated May 20, 1934,
signed by William J, Crosswell and addressed to " Dear Parm."
(The letter referred to was marked " Exhibit No. 340 " and is in-
cluded in the appendix on p. 920.)
Mr. Hiss. William Crosswell was an agent for the Export Cor-
poration ?
Mr. AiJLARD. No. He is a pilot and lie was with the Curtiss Air-
plane & Motor Co.
Mr. Hiss. That is the Buffalo company ?
Mr. Allard. Correct.
MUNITIONS INDUSTEY 771
Air. Hiss. The letter is addressed to Dear Parm. which is Mr.
He^Ylett, of the Export Co.?
]\[r. Allard. That is right.
Mr. Hiss. This letter reads, in the third paragraph :
The minister had to rush back to Bogota because of the progress made at
the peace conference. Last night's Bogota paper stated that an agreement had
actually been signetl, and as nearly as I can gather from other sources, the
report "is authentic. It therefore looks as tho there is no call for the purchase
of more airplanes at this time.
Do vou not think from this statement of Mr. Crosswell's that it
was his opinion that peace between Paraguay and Bolivia would
mean the lessening of the purchases from your company, Mr. Allard ?
Mr. Allard. That is probably his thought in the matter, if it is in
there.
Mr. Hiss (reading) :
I have done quite a bit of talking about the value of the demonstrations over
Barranquilla and Cartagena from the viewpoints of satisfying the people as
to where their taxes have gone. I have also tried to paint a picture to the
;\Iinister's aid of the value of such a demonstration over Bogota. If these
people can become airminded enough they will be willing to appropriate enough
money to take care of the air force which will, of course, work out ultimately
to the mutual benefit of Curtiss and Colombia.
Mr. Hiss. I offer as " Exhibit No. 341 " a letter dated July 28, 1933,
to Captain Travis from Owen Shannon.
(The letter referred to was marked "Exhibit No. 341 ", and is in-
cluded in the appendix on p. 922.)
Mr. Hiss. Captain Travis at this time was on your staff, Mr. Web-
ster, was he not ?
Mr. Webster. Yes, sir.
Mr. Hiss. Beading from this letter, " Exhibit No. 341 " :
We noted that there are good prospects of another order for six to nine planes
and sure hope that this comes through soon. As a matter of fact, I was talking
with the consul general, Decker, today and he is firmly convinced that the scrap
down tiiere will be over within the next month, and in that event we dinibt
very much if they will purchase any more of the Hawks or Ospreys.
Mr. Hiss. I offer in evidence as " Exhibit No. 342 ", a letter dated
August 14, 1933, from C. W. Webster, to C. K. Travis.
(The letter referred to was marked " Exhibit No. 342 ", and is in-
cluded in the appendix on p. 923.)
Mr. Hiss. You say in this letter, Mr. Webster:
If Webster & Ashton are able to work fast enough they may be able to get
the additional 9 or 16 planes closed liefore the war ends.
Webster & Ashton referred to in this letter are your agent in
Bogota. Colombia?
Mr. Webster. No; in Bolivia.
Mr. Hiss. That is correct, Bolivia. You say further in this letter :
The consul general in New York seems to feel quite certain that the mess will
be cleaned up within a month. I certainly hope we will be able to get some
more business before this happens.
I offer as " Exhibit No. 343 ", a letter dated September 13, 1933,
from Cliff to Mr. Webster.
(The letter referred to was marked " Exhibit No. 343 ", and is in-
cluded in the appendix on p. 923.)
772 MUNITIONS INDUSTRY
Mr. Hiss. I note this letter, " Exhibit No. 343 ", is signed " Cliff " ;
that is Captain Travis?
Mr. Webster. That is correct.
Mr. Hiss. The letter proceeds as follows :
The war will probably last for months yet according to the looks of things.
It will all depend upon how long Paraguay can keep going. At any rate, the
Government is financing the war for another six months and making provisions
for a year. They have made arrangements for a loan of Bs. 30,000,000 which
they will receive in a very few days, and arrangements for an additional loan
of Bs. 25,000,000 if needed.
What is that ; "what do the}^ mean there ?
Mr. Webster. That is Bolivianas, v^diich is the national Liirrency.
Mr. Hiss. Then the letter reads further :
Just how much of that will be converted into foreign currency I have not
been able to find out, but I presume that the greater part will go for war
materials and planes. They can and will use their credit for internal purchases
and army pay roll.
Then, at the bottom of page 3, the letter continues :
We cannot neglect Bolivia : they are our best customers at the present time.
A small country but they have come across with nearly half a million dollars
in the past year and are good for quite a bit more if the war lasts.
The Chairman. Mr. Webster, on the face of these facts or asser-
tions, there was large advantage accruing to you and your people
through any prolonging of the conflict, was there not ?
Mr. Webster. It meant additional sales.
The Chairman. Sufficient to engender a desire, if you could do it,
to pull the strings to prolong it?
Mr. Webster. No, sir ; I Avould not say that.
The Chairman. I am glad to hear you say that.
Mr. Hiss. I offer as " Exhibit No. 344 " a letter bearing date Febru-
ary 15, 1933, from J. V. Van Wagner to Mr. C. W. AVebster.
(The letter referred to was marked " Exhibit No. 344 ", and is in-
cluded in the appendix on p. 926.)
Mr. Hiss. Mr. J. V. Van Wagner, who signed this letter, was the
manager of the Curtiss plant in Chile; is that correct?
Mr. Webster. That is correct.
Mr. Hiss. I read from this letter as follows :
As matters now stand it would seem very dlfiicult for us to get an offer for
the European Hawk.
That was a plane belonging to the Export Co, in Holland i
Mr. Allard. Yes ; that is correct.
Mr. Hiss. The letter reads further :
There is no hope whatever of the Chilean Government acquiring this machine,
and the only way I think you could dispose of it would be your dealing direct
with other countries at S. America at present engaged in warfare.
I offer next as " Exhibit No. 345 " a letter dated May 15, 1933, from
Mr. Webster, addressed to J. V. Van Wagner.
(The letter referred to was marked " Exhibit No. 345 " and is in-
cluded in the appendix on p. 927.)
Mr. Hiss. Mr. Webster, in this letter you instructed Mr. Van Wag-
ner as follows :
During this period of political unrest all over South Americn. circulate as
much as you can among oflScers and people in an effort to obtain information
MUXITIONS INDUSTRY 773
pertinent to our business situation wtiich may effect sales and shipments in all
of the Soutli American countries.
Mr. Webster. Yes.
Mr. Hiss. I offer as " Exhibit No. 346 " a letter dated April 7, 1934,
from Bruce G. Leighton to Mr. T. A. Morgan.
(The letter referred to was marked " Exhibit No. 346 " and is in-
cluded in the appendix on p. 928.)
Mr. Hiss. This letter, " Exhibit No. 346 ", is addressed to Mr. T. A.
Morgan, who is president of the parent corporation, Mr. Allard?
Mr. Allard. Yes ; that is right.
Mr. Hiss. The letter is from Mr. B. G. Leighton, who was the
European Export representative?
Mr. Allard. That is right.
Mr. Hiss. I read from this letter as follows :
Here are some important factors which must be kept in mind, as of great
possible influence on affairs out here.
That is, bearing on your general affairs ?
Mr. Allard. No; I think on our affairs out there, and not in
general.
Mr. Hiss. The letter then proceeds :
A few days ago Mussolini made a speech in Italy in which he talked very
frankly about his views regarding Italy's future lying in Asia and Africa. It
probably didn't create any stir at home — you may not even have noticed it.
But you can believe that it has caused a great stir out here. The Turkish
Ambassador has called on El Duce to ask him " What do you mean, Asia, etc.?"
El Duce, of course, replied that he didn't mean Turkey. And on the surface all
is quiet. But if you know anything at all of the background of Italy's aspira-
tions in Turkey — tangible evidence of which lies always at Turkey's front door
in the form of the Italian-mandated islands — you can well believe that these
last utterances of El Duce's have made a most profound impression, which
mere diplomatic assurances will not dispel.
And under the surface there is every evidence of a determination to see that
no stone is left unturned to see that Turkey's defenses are in shape. And avia-
tion defenses are receiving the most serious attention of the big shots in the
Government.
The machine-gun episode for Hawks is just one indication. When I cabled
you the other day that we have been asked to consider this one as a national
emergency, I can assure you that I wasn't kidding. They're in deadly earnest
about this.
In 1932 your company sold 19 planes to Turkey?
Mr. Allard. Yes, sir.
Mr. Hiss. When was the license of the Kayseri factory entered
into?
Mr. Allard. At that time.
Mr. Hiss. They are now manufacturing planes and engines?
Mr. Allard. No ; they are not doing either at the present.
Mr. Hiss. They have a license to manufacture them?
Mr. Allard. Of a sort; yes, sir.
Mr. Hiss. Have you not found, Mr. Webster, that in making pur-
chases for war purposes governments are better able to acquire funds
than at other times for other purchases?
Mr. Webster. You mean during a state of war?
Mr. Hiss. Yes ; or during a threatened state of war.
Mr. Webster. No ; I would not say so, Mr. Hiss.
Mr. Hiss. Let me phrase the question this way : When war is going
on or is threatened, haven't you found that countries are able to
774 MUNITIONS INDUSTRY
secure fiiiicLs for the purchase of niateriiil necessary to carry on the
war more easily than they have been able to acquire funds at other
times for ])eaceful ]5urposes?
Mr. Webster. I would not say so, Mr. Hiss; no. It has been our
experience with other countries that are not in a state of war that
they purchase and secure the funds, because they pay in cash. We
do not extend credit.
Mr. Hiss. Will you refer to this letter which I now show you, being
a letter of January 31, 1933, which will be '' Exhibit No. 347 "?
(The letter referred to was marked " Exhibit No. 347 " and is in-
cluded in the aj^pendix on p. 929.)
Mr. Hiss. " Exhibit No. 347 " is a letter which you wrote to Mr.
Travis, and at that time j^ou said :
The situiition at Cliaco is liable to blow vip any time, and if it does, the
natural move for the Bolivian Government to make, and in view of their past
performance, would l)e to default on any payments that are due. Therefore,
let's hold tlieni to their contracted payments. If the show does not end this
cominii' summer, they naturally will have to have additional equipment. I
realize that the Government is about broke at the present time, but they gen-
erally And the funds for munitions v,'hen necessary.
Mr. Webster. I was speaking; of Bolivia in that present case.
Mr. Hiss. You do believe the Bolivian Government is better able
to secure funds for munitions than it is for other purposes?
Mr. Webster. No; I would not say that. Naturally, in case of
emergency, if they require certain equipment, they have to find the
funds in order to purchase it, and if they have to have the equip-
ment they will find the funds.
Mr. Hiss. And is war a technical case of emergency?
Mr. AVebster. Yes.
Mr. Hiss. Then, on the outbreak of war, is it not true that the
country can find funds for war purchases more easily than it can
for other purposes?
Mr. Wp:bster. It would not be necessary perhaps to have that
much equipment in peace time, and in this case that is true. We have
a great many contracts with other countries that are not at war,
and they always pay for their equipment.
INIr. Hiss. I 'offer' as '' Exhibit No. 348 '^ a letter dated February 8,
1933, from Mr. Webster to Captain Travis.
(The letter referred to is marked " Exhibit No. 348 " and is in-
cluded in the appendix on p. 930.)
Mr. Hiss. In this letter I quote the following:
I am firmly convinced tlirough personal conservation, while in Buenos Aires,
that moral and tinancial suitport is coming and will continue from Argentine
on behalf of Paraguay, and Bolivia will be required to find similar support
either tlirough the Standard Oil Co. or through wealthy nationals, such as
Patino,
Who is Mr. Patino ?
Mr. Webster. Mr. Patino is at the head of the Patino Co., which
is a tin company and a very large company.
Mr. Hiss. They own tin mines?
Mr. Webster. Yes, sir.
Mr. Hiss. I continue reading from this letter :
whose business and financial interests are at stake. I am still of the opinion
that before these two "comic opera wars" are finished in the north and south
MUXITIUXS INDUSTRY 775
that practically all of South America will be iiivolvod — so watch your step and
play your cards accordingly.
Mr. Webstek. Mr. Hiss, my comments in connection with, for in-
stance, the Standard Oil Co., are merely my own comments, my own
impressions. I have nothing except my observation to base that
statement on.
Mr. Hiss. It wag your opinion at that time that Standard Oil
would assist Bolivia?
Mr. Webster I thought possibly they might assist them. That is
the impression.
Tlie Chairman, You have nothing to base that statement on?
Mr. Webster. No ; I have nothing to ba.se the statement on.
Mr. Hiss. They have interests in Bolivia?
Mr. Webster. They have very large interests in Bolivia.
Senator Pope. Did you read the excerpt from the first paragraph
of that letter Mr. Hiss?
Mr. Hiss. No ; I did not read it. But I will read it as follows :
Although you say tliere is an apparent scarcity of Government funds, I
still believe that Bolivia will be required to i)urchase additional aircraft equip-
ment, and the dollars will he found somewhere when required. In my opinion,
the real activity is just hegiiming, not only in the Chaco, but around Leticia
as well. National pride and stul)l)orness will not permit these countries to
quit until they blow up through absolute bankruptcy, and while the show is
going on, it is our job as distributors of munitions to get our share. If we
don't someone else will.
Senator Bone. Mr. Webster, what is the extent of the Standard
Oil Co. operations in Bolivia ?
Mr. Webster. Senator, I could not tell you to what extent they
do operate. I know they are down there quite extensively.
Senator Bone. Do they operate under their own namef
Mr. Webster. I do not believe that branch of the Standard Oil ig
called the Standard Oil. It may l)e West India Oil.
Senator Bone. It is a Standard Oil affiliate?
Mr, Webster. Yes; it is a Standard Oil affiliate, nevertheless.
Senator Bone, Are any of their properties located in the Chaco
reffion
Mr, Webster. I believe it is just outside of Chaco, not in Chaco,
but north of Chaco,
Senator Bone. Do you know to what extent the oil company may
have interested itself in the political disturbance down there?
Mr. Webster. No, sir.
Senator Bone, You evidently had in your mind gome definite
thought that these wars would cause the ultimate collapse of those
countries if the fighting was prolonged.
Mr, Webster. It will cause the collapse of any country to carry on
a war very long.
Senator Bone. I understand that. It would be inevitable, if
they kept on bu^dng extensive munitions of war, that would cause
the collapse, if they went into the operations sufficientl3^
Mr. Webster, Yes ; if they bought enough.
Senator Pope, Do you know which Standard Oil this was?
Mr, Webster, I do not know, sir.
Senator Pope, You do not know whether it would be the Stand-
ard Oil of Indiana?
776 MUNITIONS INDUSTRY
Mr. Webster. I don't know whether the West India goes down
that far or not, but it is one of the subsidiaries of tlie Standard Oil.
Senator Bone. There is one other question, do they hold conces-
sions from the Bolivian Government, or did they have oil resources?
Mr. Webster. I believe the Standard Oil had some concessions
in Chaco, but to what extent I do not know.
Senator Pope. To what extent are they developed, have they oil
wells down there?
Mr. Webster. Yes ; they have drilled wells down there.
Mr. Hiss. I offer as " Exhibit No. 349 " a letter dated October 26,
1933, from Mr. Webster, addressed to " Owen."
(The letter referred to is marked " Exhibit No. 349 ", and is in-
cluded in the appendix on p. 931.)
Mr. Hiss. That letter is addressed to Mr. Shannon, when it says
Dear Owen.
Mr. Webster. Yes, sir.
Mr. Hiss. I read from the last paragraph as follows:
Hope we can come to some kind of agreement as there is plenty of business
here. Lopez told me tonight frankly and confidentially that Bolivia had no
intention of making peace until they got what they were after and, if neces-
sary, the entire Patino company could back their stand. Will be waiting
for J.A.B.'s opinion.
Senator Pope. What companj^ is that?
Mr. Hiss. That has been identified by Mr. Webster as being a tin
company owning large tin mines in Bolivia.
Is that a Bolivian company, Mr. Webster, or does it have its
control outside?
Mr. Webster, I believe it is a Bolivian company.
Mr. Hiss. Mr. Webster, did you ever have reason to believe that
Patino was supplying funds to the Bolivian Government in order
to carry on the war?
Mr. Webster. I heard Mr. Patino had personally loaned the
Bolivian Government funds.
Mr. Hiss. I offer as " Exhibit No. 350 " a letter signed Pierrot, ad-
dressed to " Dear Leon ", and dated April 20, 1933.
(The letter referred to is marked " Exhibit No. 350 ", and is in-
cluded in the appendix on p. 932.)
Mr. Hiss. Pierrot who signs this letter is A. Ogden Pierrot,
who is now on your staff?
Mr. Webster. Yes, sir.
Mr. Hiss. On April 20, 1933, when this letter was written to Mr.
Leon, do you know what his position was, or was he then on your
staff?
Mr. Webster. If I can glance over this letter, I probably can
tell you. Mr. Pierrot was then United States Trade Commissioner
in Rio.
Mr. Hiss. In this letter, " Exhibit No. 350 ", the statement is made :
The Government is, for some reason that I have not figured out, in a great
hurry to acquire that number of amphibians, and I know that they are
giving preference to Loening. They are also thinking of Douglas.
That refers to the Douglas Co. ?
Mr. Webster. Yes, sir.
MUlSTITIOlSrS INDUSTRY 777
Mr. Hiss. I read further from the same letter, as follows :
That latter comiiany has a representative here who is about as effective as
yours. I am definitely informed that Loenings are wanted, and in all prob-
al)ility you will be hearing of this through Castro Lopez.
I realize that Web is not losing sight of the financial end of things. To my
mind, that is one of the most important, and I can say that I feel certain
that if exchange is given to anyone in Brazil it will be given to suppliers of
the Government, and of all classes of suppliers, those handing war materials
-come first in the present set-up. If dollar credits are not available in advance,
then suffi'ient milreis to enable you to buy your exchange in the bootleg mar-
ket will be given. That's where it would be well for you or some other
representative to be on the job.
They were your agents at that time ?
Mr. Webster. At that time they represented us in Brazil.
Mr. Hiss. I read further from this letter, as follows :
So far as I know he had not even gotten wise to the business yet. The
•clique that makes the purchases does not feel that it can do itself justice by
dealing with them.
Mr. Webster. Mr. Hiss, that particular reference to the finan-
'Cial end of things means the conversion of milreis, or obtaining
dollars in exchange. Dollar exchange was very difficult to obtain in
Brazil at that time on the things purchased down there, and the
agent would be compelled to find these dollars, because the Govern-
ment was only paying milreis.
Mr. Hiss. I was really interested in the statement that, " those
handling war materials come first in the present set-up."
Mr. Webster. Yes, sir.
Mr. Hiss. On March 18, 1933, Mr. W. H. Smyth wrote from Bel-
grade to Mr. Melvin Hall who was then the representative of the
Export Co., and I offer this letter as " Exhibit No. 851."'
(The letter referred to was marked " Exhibit No. 351 " and is in-
cluded in the appendix on p. 933.)
Mr. Hiss. Mr. Melvin Hall was then the representative of the
Export Co. ?
Mr. Allard. Yes; that is right.
Mr. Hiss. A reference is made in this letter, " Exhil)it No. 351 ",
to possible sales in Yugoslavia, and the letter says :
Even if the French should secure the general order for motors and planes,
I believe we should be able to sell at least a few motors to the Air Force on
the basis tliat if and when a war breaks, the Curtiss-Wright Co. will be one
of the first in the position to give them quick delivery on date, and it will be
well for them to have some practice on these motors so as to know what to
expect from these planes.
I understand that Mr. Gould of the Pratt & Whitney Co., has been here for
the past week working hard on the air force.
Now, Mr. Allard, do you remember any correspondence your com-
pany had with a Dr. Warnshuis?
Mr. Allard. No ; I do not.
Mr. Hiss. I offer as " Exhibit No. 352 " a letter from the Curtiss-
Wright Export Corporation to Dr. A. L. Warnshuis, dated February
"20 1932.
(The letter referred to was marked " Exhibit No. 352.")
Mr. Hiss. Perhaps, Mr. Allard, this letter, "Exhibit No. 352",
which is addressed to Dr. A. L. Warnshuis of the International
Missionary Council, being written by W. F. Goulding, vice president
778 MUNITIONS INDUSTRY
of the Ciirtiss-Wright Export Corporation, will help refresh your
recollection.
In the letter, " Exhibit No. 352 ", Mr. Gouldino; says :
Your name has been suggested to us as the man most conversant with
existing conditions in China. We have heard of various movements initiated
by Chinese residents in this country, and have observed published announce-
ments that they are organizing groups for the purchase of aircraft to be sent
to Cliina for use there.
As we are one of tlie largest suppliers of aircraft in this country, we are
naturally anxious to get in touch with, the leaders of such movements and to
ascertain whether or not it is a fact that steps are being taken by Chinese
residents in this country to furnish aircraft for use in China.
We should appreciate very much any information or assistance you can give
us along these lines, and the writer will telephone you on Tuesday, February
23d, and ascertain if you are agreeable to discussing this matter with him.
Do you know whether information was received from Dr. Warn-
shuis as to the persons interested in the purchase of aircraft in
China ?
Mr. Allard. No ; I do not. This is the first time I ever heard of
him.
Mr. Hiss. On February 24, 1932, 4 days after that, your company
received a communication from one Harry S. Jue, of Worcester,
Mass., of the Chinese Patriotic Association of Schenectady, N.Y.
And on February 25, 1932, Mr. Goulding wrote to a Dr. Tehyi
Hsieh, Chinese Trade Bureau of Boston, Mass.
On February 25, 1932, Mr. Webster wrote to Mr. Leon in Buenos
Aires referring to the possibility of Chinese patriotic associations
raising money to buy planes to be sent to China.
Mr. Webster in his letter says :
Thought the Chinese colony in Buenos Aires might be doing the same thing
and it might be worth while looking into the situation and seeing if by any
chance we could sell a few airplanes for that purpose.
On February 26, Mr. Martin wrote to Mr. Goulding and said :
As I understand it, these ships are to be bought and paid for in this country
by a corporation that is as yet to be formed. This corporation is to be made
up of wealthy Chinese and American citizens. Dr. Hsieh mentioned a Chester
I. Campbell as possibly one of the members. This Che.ster I. Camiibell is head
of one of the leading advertising firms and also puts on expositions of different
kinds in the Mechanics Building in Boston. Dr. Hsieh also mentioned that the
Atlantic National Bank of Boston would have some interest in this.
On March 11, 1932, there was a telegram from Bartlett in Cali-
fornia to Curtiss-Wright Export Co., New York. Can you identify
Bartlett ?
Mr. Allard. He was an employee of a flying field or Airport
Service Co. at an airport in California, but I do not know which.
Mr. Hiss. The telegram reads as follows :
Large fund contributed by San Francisco Chinese controlled by various fac-
tions and tongs. We working very closely and confidentially with them and
recent arrivals from China reputedly representing the nationalists.
Senator Pope. Who was it wrote that letter?
Mr. Hiss. The last was a telegram from Bartlett in California to
the Export Co,
Senator Pope. Did you say he was employed by your company?
Mr. Allard. No; he was an employee of one of the subsidiaries
that ran an airport out there.
MUNITIONS INDUSTRY 779
Mr. Hiss. In 1933 you sold China 54 airplanes, of which 50 were
pursuit and 4 training planes and they were all military planes.
Mr. Allard. That is right.
Mr. Hiss. Did you, or anyone in your company think there was
anything incongruous about writing a missionary for the names of
people interested in buying military planes in China ?
Mr. Allard. Probably not. May I explain, we have had a great
many letters along the same lines'^from Chinese organizations, and
no sales have ever been made under these conditions. A great many
Chinese born in America or living in America have gotten together
a great many times and discussed the possibility of their buying an
airplane and sending it back to China as a patriotic gift from them.
That is the background of this whole business.
Mr, Hiss. Has your company ever sold planes to one country
engaged in a war, and notified the other side of the sale ?
Mr. Allard. Not to my knowledge ; no, sir.
Mr. Hiss. Have you ever said to one country that another country
has been acquiring planes from you?
Mr. Allard. That would have to be answered by the man who
was doing the selling. I never have personally.
Mr. Hiss. Would your company be opposed to that as a matter of
policy ?
Mr. Allard. Notifying one countiy what another country was
buying ?
Mr. Hiss. Yes.
Mr. Allard. I think conditions would control that a great deal.
It would depend upon the relations with the country.
Mr. Hiss. I offer in evidence as " Exhibit No. 353 '' a letter dated
February 17, 1932, from the Curtiss-Wright Export Corporation,
signed by Melvin Hall, to A. B. Mercantile, Helsingfors, Finland.
(The letter referred to is marked " Exhibit No. 353 " and is in-
cluded in the appendix on p. 933.)
Mr. Hiss. That letter, " Exhibit No. 353 ", was addressed to your
representative at Helsingfors, Finland?
Mr. Allard. Yes.
Mr. Hiss. This letter, " Exhibit No. 353 ", reads as follows :
We are pleased to advise you for your information that the Lithuanian
Ministry of Defense has ordered from us five (.5) Cliallenger engines for in-
stallation in their training planes. We believe that you will desire to communi-
cate this information to the Finnish Ministry of Defense.
We would also advise you confidentially that the Turkish Government has
pas.sed an order to us for twenty-four (24) Curtiss-Hawk single-seater pursuit
planes with Cyclone engines, six (6) Fledgling training planes with Whirlwind
engines, together with a quantity of spare engines. This information is not
for publication and is to be communicated by you only in a confidential manner,
should you deem it desirable to inform the Ministry to this elfect.
What is your opinion as to the effect of such information con-
veyed to one country as to the purchases by other coimtries, nearby
or neighboring?
Mr. Allard. Take Lithuania. We are engaged in Finland in the
sale of Challenger engines, engines I believe in the training planes,
which was not a military plane but really a training plane. I
imagine, although I cannot verify it, but I think the records will
780 MUNITIONS INDUSTRY
show that was public information in the case of Lithuania at the time.
In the case of the sale of the Turkish Hawks, that was public infor-
mation and published in all the newspapers in the world. I do not
know why Hall used the wording he did in his letter except prob-
ably to show or to indicate to the agent up there he was giving him
something very secret, but it was out and did not do any harm or
could not do any harm.
Mr. Hiss. What, in your opinion, would be the harm in notifying
one government of the planes of another government ?
Mr. Allard. In this instance it was done to secure an order to be
placed for the engine — that is, the Finnish Government.
Mr. Hiss. There is natural competition between governments as
to their military planes?
Mr. Allard. No; I do not think so in this case. This was en-
fcirel}^ too far removed from Turkey to be of any such connection.
Mr. Hiss. Finland and Lithuania are not so far removed.
Mr. Allard. That is perfectly right, but that was a training plane,
with public information.
Mr. Hiss. Training planes are used to train pilots for war planes,
are they not?
Mr. Allard. As well as commercial planes.
Mr. Hiss. Do the Finnish Government and the Ministry of De-
fense train pilots for commercial planes?
Mr. Allard. I do not know that now. A great many governments
train their own pilots.
Mr. Hiss. In " Exhibit No. 348 ", already introduced, the letter
from Mr. Webster to Mr. Travis, the following statement is made :
While in Peru, and as soon as convenient, give me a frank picture of the
Peruvian situation, and do what you can to assist Faucett in closing addi-
tional business there. For your confidential information, their friends to the
extreme north are still purchasing heavily.
Who would " their friends to the extreme north " be ?
Mr. Webster. That would be Colombia.
Mr. Hiss (continuing reading) :
You might use this in your official conversations but in a very careful and
diplomatic manner.
In 1933 your company sold 29 planes to Colombia. In 1933 Co-
lombia and Peru were engaged in a dispute about the Leticia terri-
tory^, during which clashes broke out at various times. On Febru-
ary 14, 1933, there was a clash between the two forces, and this letter
was written on February 10 of the same year, 1933. Do you think
that by notifying Peru of the purchases made from you by Colombia,
you would tend to get Peru to increase the purchase of military
planes from your company, Mr. Webster?
Mr. Webster. Not necessarily. There was no secret up and down
the west coast of South America as to what the other countries had.
They are all very familiar with the conditions, and they are all sent
on the same steamships, and all came through the Canal, and it is
public ])roperty as to what they were purchasing. There was no
secret about it.
Senator Pope. Why should the language be used in a letter " for
your confidential information "?
MUNITIONS INDUSTRY 781
Mr. Webster. For his own information. Telling our representa-
tive, our employee there, telling him what business relations we are
having.
Senator Pope. If it was public property and published generally,
why should it be so confidential ?
Mr. Webster. It should not have been in confidence at all. All
those planes were shipped out of New York City, and there was no
reason why any person should not go down and find out what ship-
ments were being made.
Senator Pope. Then you go further and state :
You might use this in your oflScial conversations, but in a very careful and
diplomatic manner.
Mr. Webster. Yes ; I do not think he referred there to any pub-
licity in newspapers. But there is no secret at all about what the
countries down there were buying.
Mr. Hiss. Again, in " Exhibit No. 355 ", which is a letter dated
February 9, 1933, from Mr. Webster to Mr. Faucett, you say to him,
Mr. Webster, the following [reading] :
Please remember that no spare engines have yet been purchased for the
Hawks, so please bring a little pressure to bear on the air corps officials and
on Mr. Pardo * * *.
Mr. Pardo was chairman of a voluntary committee?
Mr. Webster. A civilian committee ; yes, sir.
Mr. Hiss. Getting aircraft and donating them to the Peruvian
Government ?
Mr. Webster. Yes, sir.
Mr. Hiss (continuing reading) :
and see if this business cannot be concluded in the near future. For your
confidential information you might diplomatically inform interested parties
that your neighbor to the extreme north is still purchasing in large quantities.
Do not overlook such items as bombs, ammunition, machine guns equipment,
etc.
(The letter referred to was marked " Exhibit No. 355 " and is
included in the appendix on p. 934.)^
Mr. Hiss. " Exhibit No. 356 " is a letter of November 1, 1933, from
Mr. Goulding to Samper, the Curtiss-Wright representative in
Bogota, Colombia. Is that right?
Mr. Webster. Yes, sir.
(The letter referred to was marked " Exhibit No. 356 " and is
included in the appendix on p. 935.)
Mr. Hiss. That letter reads in part as follows [reading] :
Meanwhile I think you should concentrate your efforts in endeavoring to
get further orders for Hawks and Falcons, as we feel that the Colombia Gov-
ernment, now that they have made such a splendid advance in building up
an air force, should not permit these efforts to lag. There is no telling when
they will need a very strong air force.
Then the letter further states :
According to Lieutenant Gonzales, the current opinion in Colombia is that
the negotiations with Peru will come to naught, in which case Colombia will
again be forced with the necessity of a, strong air force. We know, as a mat-
ter of fact, that Peru has not been idle in adding to their equipment, and
unless Colombia maintains and increases their air force which they have now
started, they will lose the advantage which they now have.
1 There was no exhibit marked " No. 354."
782 MUNITIONS INDUSTRY
In other words, in this case you had ah^eady notified Peru of
Colombian purchases, and now you were notifying Colombia of
Peruvian purchases ?
Mr. Allard. We notified the agent in Peru ; that is correct.
Mr. Hiss. " Exhibit No. 357 " is a letter of December 16, 1933, from
Mr. Tobin, who was then associated with Faucett as a representa-
tive in Lima, Peru ?
Mr. Webster. Yes, sir.
Mr. Hiss. And is addressed to Mr. Owen Shannon.
(The letter referred to was marked "Exhibit No, 357" and is
included in the appendix on p. 936.)
Mr. Hiss. That letter reads in part as follows [reading] :
The Peruvians apparently have just received a good burning on the Fairey
Fox. This ship at sea level cannot catch up with our old Stinsons, with the
Stinson cruising at 1,750 r.p.m., and the Faii'ey running wide open. I'm thinking
the Colombians will liave a few good chuckles witli their new Falcons at all
altitudes under 15,000 feet and in all probability at the high altitudes as well.
These things are being pointed out to all the officers not concerned with the
purchase of the English and French equipment.
Was it a policy of your company to point out to the various gov-
ernments that the planes which you had sold to their opponents were
superior in performance to some of the planes they were buying
from other countries, and that, therefore, they should buy from
you to get planes of at least equally good performance ?
Mr. Allard. This is a statement of a representative or agent
down there.
Mr. Hiss. Did your company ever disavow this statement?
Mr. Allard. Not to my knowledge. I think that is common,
ordinary sales practice ?
Mr. Hiss. You do?
Mr. Allard. Yes, sir.
Mr. Hiss. " Exhibit No. 358 " is a telegram of March 15, 1934, from
Mr. Webster to Mr. Tobin in Lima, Peru.
(The telegram referred to was marked " Exhibit No. 358 " and is
included in the appendix on p. 937.)
Mr. Hiss. That telegram reads in part as follows [reading] :
Confidentially, your competitors have just placed order 23 additional Falcons,
15 Hawks, but no deposit yet. Strongly recommend Peru make deposit imme-
diately additional Hawks Falcons for delivery priority. Your present schedule
ends May 28, but starting May 14 can deliver two additional airplanes each
week until June 1, then four each week until July i * * *.
Mr. Webster, by this you were recommending to your agent in
Peru that there was an order which had been placed by the country
with which they were still having a dispute, and Peru could, by
making an immediate deposit, secure priority on delivery?
Mr. Webster. They could continue the contract they already had
in effect and go on with that contract on products in order to get
quick delivery.
Mr. Hiss. During this period of 1932 and 1933 you were profiting
by the dispute between Peru and Colombia, in that you were selling
both sides, when both sides were attempting to increase their mili-
tary aviation equipment?
MUNITIONS INDUSTKY 783
Mr. Webster. We sold to both Peru and Colombia; j^es, sir.^ In
that connection, Mr. Hiss, we have never taken sides and have striven
to be neutral, and have never lined up or taken sides with any par-
ticular country.
Mr. Hiss. " Exhibit No. 359 " is a letter of May 3, 1933, from Mr.
Shannon to Mr. Travis.
(The letter referred to was marked " Exhibit No. 359 " and is
included in the appendix on p. 938.)
Mr. Hiss. That letter reads in part as follows [reading] :
During the past few days the New York papers have carried stories of the
Bolivian planes bombing some of the Paraguanian rail centers with considerable
success. We are glad to see they are at last making some real use of their
planes and hope their success will convince them of the advantages they would
gain by getting more of the Hawks and Ospreys.
" Exhibit No. 360 " is a letter of February 10, 1933, from Mr.
Webster to Mr. Leon, who was then in Buenos Aires, Argentina.
(The letter referred to was marked " Exhibit No. 360 " and is in-
cluded in the appendix on p. 939.)
Mr. Hiss. That letter reads in part as follows [reading] :
Newspapers the last few days have been carrying stories about the pending
and probably political and revolutionary upheaval in Uruguay.
I believe it would do no harm to slide over to Montevideo as soon as con-
venient and contact the proper officials in an effort to promote the sale of air-
craft or any class of munitions.
That is, Montevideo is the capital of Uruguay ?
Mr. Webster. Yes, sir.
Mr. Hiss (continuing reading) :
Also, in this connection, do you think it advisable to make a personal contact
with Paraguayan Government officials in Asuncion?
I know that this is a rotten trip to make up the river, but it seems to me
that the Bolivia-Paraguay trouble has not yet reached its peak and the con-
ditions instead of becoming better are gradually getting worse. If such is the
case, it will be absolutely necessary for Paraguay to find the money for the
purchase of aircraft and other munitions. If we are able to sell them anything,
we will have to work very carefully and quietly, and possibly work through
you, as an individual, as the Bolivian Government would naturally raise " merry
hell " if they believed that we were dealing with their enemies.
Mr. Webster, I thought you said that the sales of the various gov-
ernments were common property in South America.
Mr. Webster. No; I did not make that statement, Mr. Hiss. I
made that statement as to Peru and Colombia.
Mr. Hiss. As to Bolivia and Paraguay it was not common knowl-
edge?
Mr. Webster. No, sir ; not that I know of.
Mr. Hiss. " Exhibit No. 361 " is a letter of May 17, 1933, signed
•'Cliff." That is Mr. Travis?
Mr. Webster. Yes, sir.
^At the time of the above testimony neither Mr. Webster nor Mr. AUard knew
whether the March 1934 Peruvian negotiations had resulted in the sale of any planes.
In response to a request of the committee, Mr. Allard notified the committee on Novem-
ber 3, 1934, that from January 1 to September 30, 1934, the Export Co. shipped the
following materials to Peru : In May, 1 Rambler — no armament ; in June, 3 Hawks —
2 guns each and bomb racks ; in June and July, 9 Falcons — 2 gtms each and bomb
racks ; in August, 4 Travelairs — no armament ; in August, plane spares. Motor spares
and miscellaneous parts were shipped throughout this period. These shipments totaled
$553,752.80.
83876— 34— PT 4 7
784 MUNITIONS INDUSTRY
Mr. Hiss. Addressed to Mr. Shannon.
(The letter referred to was marked " Exhibit No, 361 " and is in-
cluded in the appendix on p. 939.)
Mr. Hiss. That reads in part as folloAvs [reading] :
You are quite right in assuming that the Bolivians are making good use of
our planes in bombing. They have created a real menace to the Paraguayans,
as well as a deep fear. The Chief of Operations in the Chaco (Air Corps)
has been urging the Government for several weeks to buy six more Ospreys
and three additional Hawks and the decision now, after having passed all the
minor departments and the general staff, rests with General Kundt, commander
in chief of field operations. As I wrote Web, I expect a definite answer from
the Government late this week or early next week. Slowness and red tape is
still the order of the day here. There also might be a chance to sell some
Travelair bombers.
Travelair bombers are commercial planes, are they not?
Mr. Allard. Yes, sir; they are.
Mr. Hiss. Which are not usually sold for military purposes?
Mr. Allard. Not to my knowledge.
Mr. Hiss (continuing reading) :
Some of the " Brass Hats " who are in positions of power here, although they
know nothing whatever of aviation, seem to think that the answer to the whole
situation is a flock of 4,000-pound bombers. Tlie remark was made that the
Ospreys and Hawks were toys because they only carried some 460 pounds of
bombs. That, of course, is the natural reaction of these people after all of
these bombing expeditions with really good results. They have gone bomb-
miiaded.
As regards bombs and cartridges, Europe has that pretty well sewed up as
they can offer them at much lower prices than we possibly could on account
of the exchange and cheaper labor.
" Exhibit No. 362 " is a letter of February 14, 1933, from James H.
Spencer to Mr. Webster.
(The letter referred to was marked " Exhibit No. 362 " and is
included in the appendix on p. 940.)
Mr. Hiss. Mr. Webster, what was the connection between the Cur-
tiss-Wright Export Corporation and Mr. Spencer?
Mr. Webster. None whatever.
Mr. Hiss. The letter reads in part as follows :
Paraguay, with whom I have been dealing thro' tb.e Minister here in Santiago,
and also thro' an ofiicial of the same Government in Buenos Aires, have
shown an interest in at least the " Hawk " that is here. They made a counter
offer for this machine equipped with armament and bomb racks, but the
offer was so ridiculously low that Jerry told me that it was no use even to
consult you. * * *
On the other hand, Bolivia, with whom I was negotiating, showed an inter-
est, and the Bolivian Minister here did quite a lot of cabling over the subject.
Then Echenique started negotiations at a lower figure — with the result that
my early work was lost. As I now understand the situation, Bolivia will buy
if Chile will concede the permit to fly these two machines to La Paz.
The difficulty of more than one person dealing on this kind of business is
obvious, and Governments will not go very far with any intermediary unless
he can show proper credentials. In the present case, it was one of lower price
and a desire to buy two planes so that they should not go to the enemy,
Mr. Spencer was authorized to gell for your account if he was
able to sell this particular plane ?
Mr. AVebster. No, sir. There should be another letter, Mr. Hiss,
to go with this, a letter from me to Mr. Spencer, dealing with Mr.
Spencer, that he had no authority whatever to negotiate sales there.
MUNITIONS INDUSTRY 785
Mr. Hiss. I know, but I have not seen that. Did Mr. Echenique
have any authority to negotiate at that time ?
Mr. Webster. No, sir.
Senator Pope. Was the purpose of that letter really to ,sell planes
for you?
Mr. Webster. It was an etiort on the part of Mr. Spencer to ap-
parently start selling and make some negotiations. He had no au-
thority whatever to represent us and did not represent us, and was
so notified, but apparently the second letter that goes with this is
not in your records.
Senator Pope. Who was Mr. Spencer? What is his business?
Mr. Webster. He is a member of the firm of Spencer & Waters
of Santiago, Chile. At one time, a number of years ago, Mr. Spen-
cer did represent the Curtiss Co., but we made other arrangements
later on. This letter should have no bearing whatsoever on our
situation, as he has no connection whatever, and had no authority
to write such a letter and negotiate for us.
Mr. Hiss. " Exhibit No. 344 ", already in the record, is a letter to
Mr. Webster, dated February 15, 1933, from Van Wagner, who was
the manager of the factory in Chile. Is that correct?
Mr. Webster. Yes, sir.
Mr. Hiss (reading) :
Senor M. Cruchaga, the Foreign Minister — and who, at the same time, lias
been acting minister of national defense — presided recently at an antiwar meet-
ing held in Mendoza with the Argentine authorities, the object being to try and
induce Bolivia and Paraguay to cease hostilities and go to arbitration. It was
also agreed that neither Chile or the Argentine would lend any assistance to
either country with arms or munitions. So, iu a nutshell, we can see why it
has been so difficult to dispose of the Falcon and Hawk to Bolivia or Paraguay.
At that time those were two planes which the Export Co. owned in
South America, which they were trying to sell?
Mr. Webster. Yes, sir; they were used planes.
Mr. Hiss (reading) :
I do not know from whom Pancho
That is Echenique?
Mr. Webster. Yes, sir.
Mr. Hiss (continuing reading) :
obtained permission, and only yesterday we received notice passed down from
the Foreign Minister that on no account must the Falcon and Hawk leave the
factory.
That is the Chilean factory?
JNTr. Webster. Yes, sir.
Mr. Hiss (continuing reading) :
The only way to get these ships out is for an agreement to be made between
the Bolivian and Chilean Ministers, and I am anxious to know what news
Pancho will give us tomorrow.
At the same time Jim Spencer is still working on selling the machines to
Paraguay, but apparently he is meeting with more difficulties than Pancho.
Do you remember the date of the letter in which you notified Spen-
cer that he was to discontinue?
Mr. Webster. No, sir ; but it should have been on or shortly after
the letter arrived in New York.
Mr. Hiss. Did you also notify Mr. Van Wagner to that effect?
786 MUNITIONS INDUSTRY
Mr. Webster. I am not sure that I did or not, but it seems quite
likely that I did.
Mr. Hiss (continuing reading) :
We cannot do any more than we have already done to dispose of the Falcon
and Hawk, and you must not lose sight of the fact that Chile represents herself
as a peace-making nation and has promised not to provide or assist in provid-
ing war material to any of the belligerent S. American countries.
* * * As matters now stand it would seem very diflBcult for us to get an
order for the European Hawk.
That is the one in Holland, already mentioned ?
Mr. Webster. Yes, sir.
Mr. Hiss (continuing reading) :
There is no hope whatever of the Chilean Government acquiring this ma-
chine, and the only way I think you could dispose of it would be your dealing
direct with other countries at S. America at present engaged in warfare.
Then there is another reference to Mr. Spencer, as follows:
Jim Spencer has been trying to get an offer from the other side, but noth-
ing has come of it.
I note what you write about Jim Spencer and quite appreciate your atti-
tude before dealing direct with him. In conversation the other day, he told
me he had received your letter, so I did not make any comment on what you
vprote me.
Do you remember what you had written him ?
Mr. Webster. Apparently it was along the lines of m}^ letter to
Mr. Spencer.
Mr. Hiss. Did you tell Mr. Spencer if he arranged a sale, you
would not sell the machine?
Mr. Webster. I told him that he had no authority whatever to
deal and to stop negotiating.
Mr. Hiss. If he had come to you with a particular offer, would
your company have turned him down?
Mr. Webster. I do not know, sir. We would have to wait until
the time came and see what conditions were then.
Mr. Hiss (continuing reading) :
The whole trouble in trying to make deals of this nature is that there is
excessive graft to contend with. The Bolivian and Paraguayan Ministers know
of our offer and yet they prefer dealing through agents. They both know
our figure and the agent's figure, so you can imagine who has to take a share
between tlie sale and purchase prices. Jim —
that is Spencer —
has been working the deal for Bolivia and Paraguay through the Argentine.
His figures are the same as Pancho's —
that is Echenique?
Mr. Webster. Yes, sir.
Mr. Hiss (continuing reading) :
and he knows perfectly well that his commission is included in anything he
can get over $15,000. If he could make $1,000 on each plane for himself,
I think he would be lucky. The other $2,000 would be paid to the other
intermediaries.
Mr. Webster. I might add there, Mr. Hiss, that many times in-
dividuals of this type as they see an opportunity of selling some-
thing and making something out of it, they are very quick to take
advantage of it. Neither Mr. Echenique nor Mr. Spencer had
MUNITIONS INDUSTRY 787
authority to sell airplanes for us at that time. In other words,
they were free-lancing.
Mr. Hiss. May I call your attention to " Exhibit No. 363 "
Senator Pope. Who was your representative at that time?
Mr. Webster. In what place, Senator?
Senator Pope. In Santiago.
Mr. Webster. Santiago, Chile?
Senator Pope. Yes, sir.
Mr. Webster. What was the date of that letter, Senator?
Senator Pope. February 15, 1933.
Mr. Webster. I believe the only man we had there at the time
was Mr. Van Wagner.
Senator Pope. Did he have any authority to employ other agents
or assistants?
Mr. Webster. No, sir.
Senator Pope. So that his reference to " intermediaries " did not
have any particular reference to any agents recognized by you ?
Mr. Webster. No, sir. We had instructed him to try to dispose
of the two planes which we had on our hands there, and that appar-
ently is what he was doing.
Mr. Hiss. As " Exhibit No. 363 " I offer a letter dated March 15,
1933, from Van Wagner to you, Mr. Webster, from which I wish
to read.
(The letter referred to was marked " Exhibit No. 363 " and is
included in the appendix on p. 941.)
Mr. Hiss. That letter reads in part as follows :
We cabled you on the 13th that the Peruvian Ambassador demanded imme-
diate action with regard to delivery of the Hawk and Falcon, and the following
day received your cable: "O.K. delivery."
Were those two planes finally sold to Peru ?
Mr. Webster. There was a Hawk and Falcon sold to Peru.
Mr. Hiss (continuing reading) :
From this message we understood that the $36.000 — held by the Chase Na-
tional Bank — had been placed to your credit without restrictions.
Now, the whole trouble is in getting permission to fly the ships out of the
country. * * * wilh the present action taken by the Chilean Foreign Min-
ister to foment peace in S. America, he cannot possibly give his consent to
allow war material to leave Chile, especially to a country engaged in warfare.
Did your company regard his actions for peace as " fomenting
peace ", Mr. Webster ?
Mr. Webster. I do not believe so. That is an expression Mr. Van
Wagner used. I do not believe I would have used that expression.
Mr. Hiss. Were the Hawk and Falcon ever released so that they
were able to go to Peru ?
Mr. Webster. Yes, sir.
Mr. Hiss. In spite of the " fomenting of peace " ?
Mr. Webster. Yes, sir.
Senator Bone. Do you think that munition firms generally would
regard that as a sort of antisocial activity ?
Mr. Webster. I would not doubt it a bit, sir.
Mr. Hiss. " Exhibit No. 364 " is a letter of March 30, 1933, from
Mr. Webster to Mr. Van Wagner.
(The letter referred to was marked " Exhibit No. 364 " and is
included in the appendix on p. 942.)
788 MUNITIONS INDUSTRY
Mr. Hiss. That letter reads in part as follows:
Was glad to bear that the Hawk and Falcon got away safely and with
oflScial permission.
Again please remember to refrain in all of your letters sent to this office
from mentioning the name of Orsini. You can always refer to him as " Jones."
Who was Orsini, Mr. Webster?
Mr. Webster. Orsini was an officer in the Brazilian Government,
Brazilian Army Air Corps, who had been going under the name of
" Jones " in South America at the time I met him.
Mr. Hiss. Was he an official engaged in purchasing planes on be-
half of the Brazilian Government?
Mr. Webster. Yes, sir.
Mr. Hiss. Did your company make any sales through Mr. Orsini?
Mr. Webster. Yes, sir; but not at the time that we knew Mr.
Orsini's name was Orsini. We sold him under the name of " Mr.
Jones." That is the reason I put it in quotations.
Mr. Hiss. Why did you at this time want to refer to him as
" Jones " and not " Orsini " in letters sent to the New York office ?
Mr. Webster. There had been quite a bit of discussion about a
certain transaction which we had in South America. Some planes
which I had sold Mr. Orsini, whom I knew as Mr. " Jones " in
Buenos Aires and in Santiago, Chile, it later turned out that Mr.
Jones was Lieutenant Orsini, who had gone over to the rebels during
the Sao Paulo Brazilian revolution, and referred to himself as a
Paraguayan, when he purchased this equipment in Argentina and
Chile. There was so much fuss about the matter that I did not
want to stir it up again, and I told Mr. Van Wagner to refrain from
mentioning Mr. Orsini because we did not want to hear any more
about it.
Mr. Hiss. Did you not say that any correspondence about Orsini
could be sent to your home and not to the office ?
Mr. Webster. I believe I did mention that. From time to time
I had correspondence sent to my home because I found it necessary
to remain at home over a long period of time at that period.
Mr. Hiss. You said awhile ago that Mr. Echenique did not have
any authority to act on behalf of your company, did you not?
Mr. Webster. No, sir; he did not.
Mr. Hiss. In this letter, " Exhibit No. 364 ", you say :
Also do not converse with anyone regarding sales of machines or equipment
going to other countries or any transaction concerning them. As mentioned in
my previous letter, conditions are becoming very acute and I do not wish
our files to contain anything with a bearing on this business. You can always
send any necessary letters to my home and thereby keep them out of our
files.
Mr. Webster. I believe I referred to Mr. Orsini there.
Mr. Hiss (continuing reading) :
It is perfectly all right for Pancho —
That is Echenique?
Mr. Webster. Yes, sir.
Mr. Hiss (continuing) :
to mess around with things providing his activities and statements do not
conflict with our present arrangements in other countries.
MUNITIONS INDUSTRY 789
Does not this mean that Echeniqiie could bring in business on a
commission basis to you, but he could not represent you officially?
Mr. Webster. He could not represent us in countries where we had
regularly established agents.
Mr. Hiss. In this same letter, on the last page, you say as follows
[reading] :
Do not forget that we still have available Conqueror Hav^-k in Holland.
That meant a Hawk with a Conqueror engine ?
Mr. Webster. Yes, sir.
Mr. Hiss (continuing reading) :
You might mention that to your friend, the Ambassador —
Is that the Peruvian Ambassador that was referred to previously ?
Mr. Webster. I think that is the Peruvian Ambassador; yes, sir.
Mr. Hiss (continuing reading) :
but iu all correspondence regarding this particular individual and subsequent
sales, I believe It advisable to carry on your correspondence with me per-
sonally instead of running it through the office in case of possible future per-
cussions. If you were able to secure the release of the Hawk and Falcon going
to Peru, it is assumed that additional permission could be obtained for other
operations. Get onto this job immediately and let me have all the information
obtainable and what we could possibly ex-pect in the way of Chilean Govern-
ment cooperation or in the way of cooperation from individuals.
That means in getting the planes for Peru?
Mr. Webster. Getting permission to fly from Chile to Peru.
Mr. Hiss (continuing reading) :
In one of your last cables you state that the Hawk and Falcon were deliv-
ered without armament. What happened to the material in the tail of the
Falcon ?
Was armament stored in the tail of the Falcon?
Mr. Webster. It was placed there for safe-keeping at the time we
stored it. It was there, being stored, and we put it in the tail of the
ship so that it would not be stolen.
Mr. Hiss. Did Colombia protest about your sale of equipment to
Peru?
Mr. Webster. Not to my knowledge, sir.
Mr. Hiss. " Exhibit No. 365 " is a letter to Mr. Goulding from
Mr. Samper.
Mr. Allard. Yes, sir.
(The letter referred to was marked " Exhibit No. 365 " and is
included in the appendix on p. 944.)
Mr. Hiss. Mr. Samper was in the field, representing your com-
pany in Bogota, Colombia?
Mr. Allard. Yes, sir.
Mr. Hiss. In that letter the writer states in part as follows :
Whereas I can appreciate your viewpoint regarding your policy of not
restricting sales to any one country in a certain geographical division, you can
likewise understand that the position taken by the directors of your firm to sell
to Colombia's potential enemy has greatly jeopardized future sales possibilities
to this country. I have, of course, expended every effort to counteract the
unfavorable impression created at the ministry when they received the infor-
mation, but what the result will be over an extended i)eriod of time only time
can tell.
790 MUNITIONS INDUSTRY
Did your company at the same time sell another plane to Peru
which was in the possession of a Captain Wooten, United States
military attache in Chile?
Mr. Webster. No, sir ; that plane was given to Peru. It had been
used considerably and was in rather poor shape, and the Peruvian
Government requested that we make them a gift of it, which we did.
The Chairman. Was not that a rather unusual request for a gov-
ernment to make ?
Mr. Webster. No, sir.
Mr. Allard. It was an old, worn-out plane.
Mr. Webster. They would probably use it more or less for prac-
tice work, instructions, and so forth.
Mr. Hiss. I offer as " Exhibit No. 366 " a letter dated May 6, 1933,
to Mr. Webster from J. V. Van Wagner, Santiago, Chile.
(The letter referred to was marked " Exhibit No. 366 " and is in-
cluded in the appendix on p. 945.)
Mr. Hiss. This letter states :
In my letter of 29th April I wrote about a visit we had from Mr. Bofil, who
was interested in buying six planes, with armaments, for Peru. We have had
another visit from Mr. Bofil, and he showed us a letter he had received from
the Peruvian commercial agent in Valparaiso, which proves that the Peruvian
Government is actually interested in acquiring six airplanes as soon as possible.
According to Mr. Bofil, the commercial agent has more power in these ques-
tions than the Ambassador, as he is responsible for the purchase of material
and produce for the Peruvian Army. We advised Mr. Bofil that we could
not do anything in the matter and it would be necessary to make some arrange-
ment with the Chilean Government if Peru wanted six planes urgently.
Was that because planes made at the Chilean factory were under
contract to Chile ?
Mr. Webster. No, sir ; not at that time.
Mr. Hiss. Why would an arrangement have to be made with the
Chilean Government?
Mr. Webster. This particular situation, Mr. Hiss, I never did un-
derstand. Mr. Bofil I never heard of. Mr. Bofil had no author-
ity— I checked on that in Peru — to do any purchasing for the Peru-
vian Government. Nothing ever materialized from this, and I am
inclined to believe that Mr. Bofil was misrepresenting facts to our
representative in Chile.
Mr. Hiss. Later on in that paragraph the statement is made :
It seems that Mr. Bofil is well known in the Government and has been at
work trying to get the Air Corps to dispose of the three last machines repaired
in the factory and three others undei-going repair. The Director of Material
was sent out yesterday by Aracena to talk the matter * * *^
He was the Director of Aviation in Chile ?
Mr. Webster. Yes, sir,
Mr. Hiss (continuing reading) :
* * * to talk the matter over with us, and the idea is for us to take over
the six planes — in a figurative way — and for us to sell them to Peru. The Air
Corps will fix the price, and the money will be placed to your credit in New
York. This money will then be utilized in buying modern equipment for Chile.
Everything looks pretty hopeful and the Air Corps are anxious that the
business results.
So that apparently Chile was willing to go through with a deal if
Mr. Bonfil had had proper authority from Peru?
Mr. Webster. I do not think so. I do not think that this had
the sanction of the Government. I think whoever Mr. Bofil talked
MUNITIONS INDUSTKY 791
to in the Chilean Government had no authority whatever to speak
for the Government. Nothing whatever materialized. We had no
advice from either the Chilean Government or the Peruvian Govern-
ment to bear out the statement^ of Mr. Bofil.
Mr. Hiss. How were you able to secure a release of Captain
Wooten's plane so that you were able to make a gift of it to Peru,
Mr. Webster?
Mr. Webster. We asked official permission from the Chilean Gov-
ernment to fly that plane to Peru.
Mr. Hiss. Was that plane the property of the United States Gov-
ernment ?
Mr, Webster. No, sir ; it was our property. We purchased it from
the United States Government.
Mr. Hiss. It was the property of the United States Government
while Captain Wooten had it; is that correct?
Mr. Webster. Yes, sir.
Mr. Hiss. Who had furnished it to Captain Wooten?
Mr. Webster. It was ordered by the United States Army Air
Corps to Chile for the private U3e of Captain Wooten, who was
military attache.
Mr. Hiss. You then purchased that from the United States Gov-
ernment and made a present of it to Peru ?
Mr. Webster. Yes, sir. At the time we purchased it, we had no
idea of making a gift of it to the Peruvian Government. It was
left on the United States' hands in Chile and they did not want to
go to the expense of shipping it back to the States ; it was more or
less of an obsolete airplane anyway.
Senator Pope. Do you remember how much you paid the Govern-
ment for that plane?
Mr. Webster. I think it was about $5,500 or $6,000, somewhere
along that line. I could not tell you exactly.
Senator Pope. And you made a gift of that to the Government?
Mr. Webster. We had flown it ourselves considerably before it
was turned over to the Peruvian Government, We used it more for
a taxi ship there, to go up and down the coast, to get around quickly
for our own business operations.
Mr. Hiss, I offer as " Exhibit No. 367 " a letter dated the 29th of
April 1933 from Santiago, Chile, to Mr. Webster.
(The letter was marked " Exhibit No. 367 ", and is included in
the appendix on p. 946.)
Mr. Hiss. This letter is from Mr. Van Wagner to Mr. Webster
and it says :
We cabled you this morning that Captain Wooten is still without news from
Washington about the ship being taken over by us, and we hope instructions
will be cabled him in this respect at any moment, so that we can proceed to
take out the U.S. Army signs and paint on the new registration number.
The United States Army signs were painted out and this ship was
then given by you to the Peruvian Government ?
Mr, Webster. Not until some time later, Mr, Hiss, I believe that
plane was on our hands almost a year. We had been using it our-
selves. We purchased the ship to use ourselves as a taxi plane to
get around South America.
792 MUNITIONS INDUSTRY
Mr. Hiss. But at the time you were getting the Army to turn
it over to you, were you not attempting then to sell it to Peru a,s this
correspondence indicates ?
Mr. Webster. I do not recall whether we offered it for sale or not.
The record will speak for itself.
Mr. Hiss. This letter, " Exhibit No. 367 ", says :
Outside Aracena and the Paraguayan Minister, no one else other than the
Peruvian Ambassador should have known that Captain Wooten's plane was
for sale.
You were attempting at that time to sell it then ?
Mr. Webster. Apparently we were attempting to sell it, but we
did not and had it on our hands for about a year and used it our-
selves and then later on presented it to the Peruvian Government
for instruction work.
Mr. Hiss. In that same connection I offer as " Exhibit No. 368 " a
letter dated March 28, 1933, to Mr. Van Wagner from Mr. Webster.
(The letter referred to was marked " Exhibit No. 368 " and is in-
cluded in the appendix on p. 947.)
Mr. Hiss. In this letter you say :
If you have not already done so, please advise immediately by cable to my
personal address any developments in connection with Wooten's Falcon. I
prefer to bury this transaction as much as possible as far as the office goes in
order to prevent any possible adverse publicity.
The situation involving Peru is becoming very acute and is liable to be more
so in the very near future. It looks to me like an embargo.
The Chairman. Mr. Webster, in the matter that I want to examine
you briefly upon, it is first necessary to lay a little foundation in
history. If it has not already been made a part of the record it will
be that the sales of the Export Corporation to the Federal Govern-
ment of Brazil in 1932 amounted to $35,900. That consisted of
miscellaneous material and did not include any planes. Is that
precisely the case, as you recollect it now?
Mr. Webster. I believe it is. Senator. I would have to check it to
be certain about it.
The Chairman. In September of that year, 1932, is it true that
the United States Navy had with the United Aircraft Corporation
an order for 29 or 30 planes ?
Mr. Webster. The IJnited Aircraft?
The Chairman. Yes.
Mr. Webster. I could not tell you.
The Chairman. You could not testify as to that?
Mr. Webster. No, sir.
The Chairman. It will then be made a matter of record later on
that such an order had been placed by the United States Navy; and
that the Navy gave the United Aircraft Corporation permission to
lay aside the work they were doing for the Na\^ in order that they
could fulfill contracts that were very pressing with the Government
of Brazil; that Brazil was demanding unusually quick deliveries
and they could not be fulfilled if the United States Government
insisted upon the fulfillment of its contract.
On May 25 of 1932, rioting began in Sao Paulo in Brazil.
On June 11 of that year a genuine revolt broke out there at Sao
Paulo, with the army, so it has been charged, aiding the revo-
lutionists.
MUNITIONS INDUSTRY 793
There appears to have been quite continuous fighting throughout
the months of July and September and the revolution continued on
up into sometime in November.
On November 4, the Brazilian Government after the revolution,
seized certain planes from the revolutionists.
On November 4, 1932, Castro Lopez, who was the Export Corpo-
ration's agent in Rio, wrote you a letter which is offered as " Exhibit
No. 369."
(The letter referred to was marked " Exhibit No. 369 " and is in-
cluded in the appendix on p. 947.)
The Chairman. This letter is to the effect that among the planes
seized from the Sao Paulo government after the revolution were seven
Falcons believed to have been smuggled by way of Argentine. The
ministry of war, according to this letter, iDelieved that during your
stay in Buenos Aires you were instrumental in getting the Falcons to
Sao Paulo.
What can you tell us of that, what knowledge do you have of
any such transaction?
Mr. Webster. In the late summer or fall of that year I was in
Buenos Aires and this Mr. Orsini, or Lieutenant Orsini, whom I
mentioned a short time ago, was presented to me by several people
there, and in company with another man who was introduced to
me as Mr. Jones and the other man as a Mr. Jackson or Johnson —
I have forgotten which — and as representatives of the Paraguayan
Government.
They inquired if we had any airplanes for delivery — any air-
planes in South America for quick delivery. I told them that
we had no complete planes, but some that were partially fabricated
in our Chilean factory that had been ordered by the Chilean Gov-
ernment, but the Government was unable to pay for them and the
plant had been closed.
A price was established, fixed, on those planes, and they were
sold to them.
Subsequently stories appeared in the Asuncion Paraguayan's
newspaper to the effect that the Paraguayan Government had pur-
chased 10 airplanes from the Curtiss factory in Santiago, Chile.
Those airplanes were delivered to Mr. Johnson and to Mr. Jackson,
who later turned them over to Orsini and his friends. They were
delivered at our factory in Santiago. They took delivery of them
at the factor}^, and their own pilots flew them out of Chile.
So far as we know they were flown to Paraguay until later on
it developed that they were flown into South Brazil, into Sao
Paulo.
At the time the sale was made we believed we had been selling
to a representative of the Paraguayan Government.
The Chairman. In this letter of November 4 to you by Lopez
the opening paragraph makes reference to your departure for the
south — " Since your departure for the south." Where did this letter
finally reach j^ou?
Mr. Webster. I believe it reached me in New York. It is dated
November 4, and I believe I had returned to New York by that time.
The Chairman. In keeping in part with what you have been tell-
ing us, I offer as " Exhibit No. 370 " a letter dated January 21, 1933,
addressed to Mr. S. Sampaio by Mr. Webster.
794 MUNITIONS INDUSTRY
(The letter referred was marked " Exhibit No. 370 " and is in-
cluded in the appendix on p. 948.)
The Chairman. In this letter, Mr. Webster, you wrote that —
by the way, who is Sampaio?
Mr. Webster. Sampaio is now our agent in Brazil. At that
time, in 1933, he was not our agent. He has since been made our
agent in Brazil.
The Chairman. At that time he was consul general of Brazil in
New York, was he not?
Mr. Webster. That is probably a different Sampaio, I am sorry.
We have an agent by the name of Sampaio in Brazil. Apparently
this is the Sampaio who is the consul general in New York ; yes, sir.
The Chairman, You wrote in this letter of January 21, relative to
planes sold to the Santiago factory and later found in Brazil
that the entire transaction had been closed.
Mr. Webster. Yes, sir.
The Chairman. The language was — —
* * * I wish to advise you that this entire transaction lias been definitely
closed, no material is left undelivered, and all funds paid to us have been
entirely used.
Mr. Webster. Yes, sir.
The Chairman. I offer as " Exhibit No. 371 " a letter dated Janu-
ary 23, 1933, by Sampaio to Mr. Webster, which is an acknowledg-
ment of your letter of the 21st.
(The letter referred to was marked " Exhibit No. 371 ", and is
included in the appendix on p. 948.)
Tlie Chairman. This letter requests confirmation of your oral
statement that the planes numbering 11 were delivered and funds
paid about the end of September 1932 or just before the end of the
Sao Paulo revolution. Is that correct?
Mr. Webster. I believe so. I know they w^ere all paid for before
they were delivered.
The Chairman. That settlement came positively before the end of
the revolution?
Mr. Webster. Oh, absolutely; yes, sir. In fact, no material was
delivered until it was paid for. In fact, it was paid for in advance.
The Chairman. I should like to offer as " Exhibit No. 372 " a letter
dated January 28, 1933, from Mr. Webster to Mr. Sampaio.
(The letter referred to was marked " Exhibit No. 372 ", and is
included in the appendix on p. 949.)
The Chairman. This letter was sent to the consul general of Brazil
in New York and relates to a conversation regarding airplanes that
were sold in Buenos Aires and delivered at your factory in Santiago,
which it was stated eventually found their way into Brazil. The
machines, according to this letter, had been delivered and payments
made by the end of September 1932 which was before the end of the
revolution. Is that the purport of the letter, Mr. Webster?
Mr. Webster. Yes, sir. I might exj)lain this, perhaps it will make
it a little more clear to you. Senator. The Brazilian consul general,
Mr. Sampaio, in New York, called at our office following my return
to New York to inquire into that transaction, and I explained the
entire situation to him. He asked me if all the material had been
delivered that had been paid for, or whether we still had funds in
our possession which he claimed would naturally revert to the Fed-
MUNITIONS INDUSTRY 795
eral Government. But all the material had been delivered and we
had no funds left. In fact, we were paid at the time the material
was delivered. That was the reason for that letter. He simply
wished me to go on record so that he could send that to his govern-
ment.
The Chairman. I understand. Was the Chilean Government
aware of the destination of these nine Falcons?
Mr. Webster. I do not believe so. I had nothing whatever to do
with the delivery of the planes.
The Chairman. To get these Falcons from Chile over to Sao
Paulo, over what territory would they have to go ?
Mr. Webster. They would have to fly across Chile, over the Andes,
across the Argentine, across Paraguay, and into Brazil.
The Chairman. To whom was the plane given to which yom
referred a while ago as having been given to a government ? What
government was that?
Mr. Webster. That was the Peruvian Government.
The Chairman. Is it not a fact that Paraguay was given one
plane for the privilege of permitting a landing of these planes in
Paraguay ?
Mr. Webster. Not to my knowledge. I know that one plane —
I afterwards heard that one plane had had a forced landing. This
came out sometime later, that one of those planes was forced down
in Paraguay and was more or less taken over by the Paraguayan
Government. That is merely hearsay, I think. That is gossip.
The Chairman. You have not any authentic information on that?
Mr. Webster. No, sir. I know that there was a Falcon, one of
this same type of planes, in Paraguay, because they purchased, or
rather asked for prices — I do not know that they did purchase — on
spare parts for that type of airplane, and I know that we had never
sold Paraguay that type.
The Chairman. Chile accomplished a release from its contract
with you about that time, did it not ?
Mr. Webster. Yes, sir. In order to sell those airplanes, it was
necessary to receive a release from the Chilean Government. These
airplanes had been contracted for by the Chilean Government to be
fabricated in Chile. But a little later they ran into financial diffi-
culties ; they were not able to carry out the contract, and the factory
was closed. We still had certain funds in our possession which had
been paid as a deposit on those airplanes. So that it was necessary
for us to arrange with the Chilean Government to sell those airplanes
to another customer and in return refund to Chile the sums that had
been paid against them as a deposit.
The Chairman. Did you pay Chile any consideration for this
release ?
Mr. Webster. I believe they received the money, the advance pay-
ment which they had made to us, and I believe also that they
received somewhere in the neighborhood of — I think it was a sliding
scale of from $3,000 down per airplane.
The Chairman. Per plane?
Mr. Webster. Yes.
The Chairman. So that a figure of about $32,000 might cover the
entire transaction?
796 MUNITIONS INDUSTRY
Mr. Webster. I am not sure as to the exact amount. I am not
in the accounting division.
The Chairman. Coming back to this thought that the Paraguayan
Goverimient had been given a plane for permitting a landing of
these ] lanes in Paraguay —
Mr. Webster (interposing). I doubt that that is so, Senator,
because I remember reading later on clippings that were sent to me
in a Buenos Aires newspaper saying that the plane had been forced
down and taken over by the Paraguayan Government; and that the
pilot had been imprisoned for a few days. That is merely hearsay.
So I doubt very much whether that plane was actually given to the
Paraguayan Government.
The Chairman. The committee has in its possession a report on
this particular plane that it believes to be very authentic. It will
want this report to be known as " Exhibit No. 373 ', but it will not be
offered for the record, at least at this time.
(The report referred to was marked for identification " Exhibit
No. 373.")
The Cpiairman. Mr. Webster, I offer now as " Exhibit No. 374" a
letter dated May 13, 1933, to Mr. Van Wagner from Mr. Webster.
(The letter referred to was marked " Exhibit No. 374 ", and is
included in the appendix on p. 949.)
The Chairman. In this letter — again will you say who Mr. Van
Wagner is or was ?
Mr. Webster. Mr. Van Wagner is or was the factory manager of
our plant in Santiago, Chile. He is still in Santiago, but the plant is
inoperative at the present time.
The Chairman. You are making inquiry of him in this letter
concerning a reputed inquiry for used planes. That is the general
reference of the letter, is it not, Mr. Webster ?
Mr. Webster. Yes. sir.
The Chairman. You say in this letter that the price mentioned is
too high for any sale to be possible, and you say further that the
Chilean officials must be thinking of the deal last summer and fall
" when we cleaned out the Los Cerrillos factory."
What was that deal ?
Mr. Webster. That was the 10 ships that we sold out of the
Santiago factory and which the Chilean Government made on that
sliding scale from $3,000 per plane down.
The Chairman. Mr. Webster, would a continuous flight from
Chile to Sao Paulo be possible?
Mr. Webster. No, sir ; not with that type of plane.
The Chairman. They would have to land somewhere between those
two points?
Mr. Webster. Yes, sir.
The Chairman. You understand that the fleet did land in
Paraguay ?
Mr. Webster. No ; I do not, sir.
The Chairman. You have not understood that to be the case?
Mr. Webster. No, sir. I have heard that one plane had a forced
landing in Paraguay.
The Chairman. There is another story to the effect that they were
all landed there and all but one took off and went on to Sao Paulo.
MUNITIONS INDUSTRY 797
Mr. Webster. I doubt it very much, sir. I am not sure, but I doubt
it very much from what I know of conditions in the country there.
The Chairman. On February 28, 1933, you, Mr. Webster, wrote
to Salvador Sanfuentes. This letter deals quite at length with the
commission paid him for the sale of 10 Falcons. In the letter it is
stated that the original contract was for 40 planes, and 20 of them
were to be Falcons; that only 10 Falcons were ever delivered and
paid for ; that later an opportunity was had for selling 5 Falcons to
another customer, and subsequently the remaining 5 to the same
customer; that the arrangement for disposing of these 10 Falcons
involved the cancellation of the remaining 10 on order for the Chilean
Government and also the cancellation of the 20 additional machines
specified in the original contract. The letter then says it was neces-
sary to pay the Chilean Government a commission of $3,000 on each
of the 10 Falcons. In a summary of this letter you say Curtiss-
Wright lost $32,000 on the contract, and you say also that one-third
of the payment on that contract was returned to the Chilean Gov-
ernment at the time the contract was canceled.
The letter also refers to the purchase of armaments by Chile and
the resale to another customer at exactly cost price.
Was this all part of the same transaction?
Mr. Webster. Yes; that was all a part of the same transaction.
He speaks of the 40 planes, and that was a part of the planes con-
tracted for by the Chilean Government as an inducement for us to
construct the factory there in Chile. There was one contract for 20
planes and another additional contract for 20, which we had placed
before the first planes were fabricated. The second planes were not
delivered, and the contract was canceled, so we closed the factory
and it has been closed ever since. These 10 planes which were sold
to Mr. Orsini were the 10 left on our hands partially fabricated.
The Chairman. You say it was your understanding that only one
of those planes had landed in Paraguay ?
Mr. Webster. That is my understanding, and that was a forced
landing. I may be wrong, but that is the rumor and the stories I
had picked up as I passed through there.
The Chairman. Where did you understand they did land?
Mr. Webster. I do not know; it would be very difficult indeed
to get those planes over there.
The Chairman. It would be quite impossible to get them over
there in one hop ?
Mr. Webster. It is impossible.
The Chairman. It could not be done ?
Mr. Webster. No ; it could not be done.
The Chairman. So they had to stop somewhere ?
Mr. Webster. They had to stop at least twice. Their gasoline
and fuel supply would not be sufficient, and they would have to stop
twice, I should say.
The Chairman. It would be a fairer assumption, if there were two
landings, one was in Paraguay and the other had to be in Argentine ?
Mr. Webster. That is right.
The Chairman. Mr. Webster, who was that other customer to
whom the five Falcons were sold?
Mr. Webster. That same one, sir.
798 MUNITIONS INDUSTRY
The Chairman. The same one?
Mr. Webster. Yes; there were 5 sold at first, then an additional
arrangement made for the remaining 5, so that I believe it was 10 in
all sold.
The Chairman. In this letter of February 28, " Exhibit No. 375 ",I
find this language at the top of the page numbered 2, in the first
paragraph :
The other matter of 20 percent commission on armament sold to us by Chile
is entirely out of order as our customer refused to pay us a higher price than
that quoted by the Chilean Government, and this armament was delivered by
us to our customer at exactly cost price. This money was retained by Curtiss
and applied against the Chilean debt to Curtiss-Wright. This arrangement
assisted us in delivering the spares which were on order, and on which you are
entitled to your 5 percent commission.
You have no comment to offer on that?
Mr. Webster. No ; I was waiting for you to ask the question. This
refers to that same customer.
Mr. Hiss. That refers to the equipment for those planes?
Mr. Webster. Yes.
Mr. Hiss. You sold all the munitions?
Mr. Webster. We had shipped down for the Chilean Government
machine guns to go on their own planes, and we were shy a few
machine guns, and in order to assist us the Chilean Government
sold us a few guns and we turned them over and credited the Chilean
Government with the amount covering that.
(The letter referred to was marked " Exhibit No. 375 " and is in-
cluded in the appendix on p. 951.)
The Chairman. The committee will now recess until 10 o'clock
tomorrow morning.
(The committee thereupon took a recess until tomorrow, Wednes-
day, Sept. 12, 1934, at 10 a.m.)
INVESTIGATION OF MUNITIONS INDUSTRY
WEDNESDAY, SEPTEMBER 12, 1934
United States Senate,
Special Committee to Investigate the Munitions Industry,
Washington, D.G.
The hearing was resumed at 10 a.m., pursuant to the taking of
recess, Senator Gerald P. Nye (chairman) presiding.
Present: Senators Nye (chairman), George, Clark, Bone, Pope,
and Vandenberg.
Also present: Stephen Kaushenbush, secretary, and Alger Hiss,
investigator.
The Chairman. The committee will be in order. Mr. Hiss, you
may proceed.
FURTHER TESTIMONY OF J. S. ALLARD AND CLARENCE W.
WEBSTER
Mr. Hiss. Mr. AUard, in the course of selling to countries that
were either actually engaged in war or on the eve of hostilities, has
your company ever furnished pilots to train army pilots for the
countries at war, or have you furnished mechanics to countries at
war or to repair planes purchased from you and actually used in
war?
Mr. Allard. We have furnished mechanics to repair airplanes in
use. To my knowledge we have never furnished any pilots to train.
Mr. Hiss. Do you know whether it is customary for South Amer-
ican countries to request aid and cooperation of airplane companies
when they — that is, the countries — are engaged in war? Have you
ever heard of any cases of that sort ?
Mr. Allard. Requested manufacturers for cooperation?
Mr. Hiss. Manufacturers or flying companies, operating com-
panies ?
Mr. Allard. No ; I do not know of any cases of that kind.
Mr. Hiss. I would like to ask this next question of you, Mr.
Webster. I offer as " Exhibit No. 376 " a letter of May 19, 1933
signed " Slim." That is Mr. Faucett in Peru, Mr. Webster ?
Mr. Webster. Yes, sir.
(The letter referred to was marked " Exhibit No. 376 " and is
included in the appendix on p. 952.)
Mr. Hiss. The fourth paragraph says —
I suppose you know that all our planes * * *
That refers to the Faucett Airline, does it not ?
Mr. Webster. Yes, sir.
83876— 34— PT 4 8 799
800 MUNITIONS INDUSTRY
Mr. Hiss (continues reading) :
are on the other side of the " hill '\ * * *
Does that mean the Andes?
Mr. Webster. Yes, sir.
Mr. Hiss (continuing) :
* * * Dan and Red, also * * *.
That refers to two of his pilots ?
Mr. Webster. Yes, sir.
Mr. Hiss (continuing) :
The Government stopped our coast service on the 21st of April, and Dan,
Red, and Pinillos went over on Sunday, 23rd April, in Nos. 4, 2, and 6 * * *.
That refers to phines in the company's operation ?
Mr. Webster. Yes, sir.
Mr. Hiss (continuing) :
* * * and I took No. 8 over on 4th May. We are just now finishing
No. 5, and it will have to go, too, unless the war should be called ofC soon.
Dan and Red are with the Government now.
Did you not understand from that letter that Mr. Faucett felt it
advisable, or at any event did send some of his planes to help out in
Peruvian military maneuvers?
Mr. Webster. I would like to explain that. Mr. Faucett's company
is a Peruvian corporation. It is not an American corporation.
Mr. Hiss. Do you know whether the capital investment is Ameri-
can or Peruvian?
Mr. Webster. I am not certain. I know there is some American
capital. I know it was originally a Peruvian corporation, financed
entirely by Peruvian capital. I believe there is some American
capital in it now, but to what extent I am not sure. Also, I have
been told that the Peruvian Government took over and pressed into
service certain of Faucett's ships. That is what I am told. We have
no connection with the Faucett company.
Mr. Hiss. I realize that. I was not trying to indicate otherwise.
Does not this language indicate to you also that Faucett's pilots were
pressed into service?
Mr. Webster. Pressed into service to fly Faucett's ships, as I would
gather from this letter.
Mr. Hiss. To fly Faucett's ships to the other side of the Andes, or
in Government service?
Mr. Webster. I do not know whether they were in Government
service.
Mr. Hiss. The last sentence of that paragraph says —
Dan and Red are with the Government now.
That rather sounds as though they are actually in the Government
service.
Mr. Webster. That I do not know, sir. It sounds to me that those
pilots were used to ferry those ships over the hill.
Mr. Hiss. Do you know who Mr. Donnelly was? He was one of
the employees in the factory in Los Cerrillos. Was he a mechanic?
Mr. Webster. A former mechanic no longer in our employ.
MUNITIONS INDUSTRY 801
Mr. Hiss. On August 22, 1933, Mr. Van Wagner wrote to you that
Donnelly was in the Chaco. I offer this letter as " Exhibit No. 377."
(The 'letter referred to was marked "Exhibit No. 377", and is
included in the appendix on p. 953.)
Mr. Hiss. This says in the second paragraph :
Donnelly is in the Chaco and I have not had any news from him since he
left. I still have his checks so cannot get a signed receipt for them until he
comes back.
Do you know what Donnelly was doing in the Chaco area?
Mr. Webster. I believe he was employed by the Bolivian Govern-
ment to repair a gas tank. Donnelly was not in our employ at the
time the Bolivian Government asked him to come up there.
Mr. Hiss. But apparently your company still owed him checks for
past services?
Mr. Webster. I am not sure whether they are checks from us or
checks from some other source. I have no idea what Mr. Van
Wagner referred to — what checks he referred to.
Mr. Hiss. He is reporting to you; this letter is to you from Mr.
Van Wagner, dated August 22, 1933.
Mr. Webster. I assume that they were the balance of any salarj', or
back salary that he might have coming to him. There is a rule in
the Chilean Government that employers must hold a certain percent
of their employees' salaries and those to a certain percentage must
be paid into the Government, and when that employee leaves that
company, he obtains that back salary. It is in the nature of an
employees' insurance.
Mr.'Hiss. Who was Mr. Berger?
Mr. Webster. Mr. Berger is our mechanic — our field service man.
Mr. Hiss. " Exhibit No. 301 ", already in evidence, a letter of
September 21, 1933, from Travis in Bolivia to Mr. Webster says —
Shorty—
That means Berger?
Mr. Webster. Yes, sir.
Mr. Hiss (reading) :
* * * is going to the Chaco next Friday to look things over and give some
much needed instructions to the mechanics. This was requested by the pilots,
and I left it up to Shorty as to whether he would go or not. He can be of
great help there for a couple of weeks, both to us and to the pilots and
mechanics.
On September 21, 1933, the Bolivian-Paraguayan hostilities,
known as the " Chaco War ", were going on, and they are still con-
tinuing ?
Mr. Webster. Yes. I would like to explain again, Mr. Hiss, as
I believe I told you yesterday, that the instructions referred to there
are simply as to how to operate those engines.
Mr. Hiss. "Exhibit No. 349 ", already a part of the record, which
is a letter from Mr. Webster to Mr. Shannon — the letter having been
written from Bolivia on October 26, 1933 — says :
Am writing this letter at midnight. Just came in from dinner after a late
session with Lopez and the Minister of War. Our plans have somewhat
changed. Cliff, * * *_
802 MUNITIONS INDUSTRY
That is Mr. Travis?
Mr. Webster. Yes, sir.
Mr. Hiss. Who was a pilot?
Mr. Webster. Yes, sir.
Mr. Hiss. A former Army pilot, was he not ?
Mr. Webster. I believe he was trained in the American Army a
number of years ago.
Mr. Hiss (reading) :
* * * instead of going along with us tomorrow is leaving for the
Chaco on Saturday with the Minister of War and the Chief of StafE for a con-
ference with General Kundt and aviation officials at the front. Lopez and the
Minister suggested that Cliff fly down there with thera, and the job is so im-
portant that we decided that if necessary we would have to delay the Argen-
tine business.
That letter indicates, does it not, that your company was doing
business on the actual scene of warfare ?
Mr. Webster. No, sir. They were having some trouble with the
planes there and Travis went down there to see what the trouble was.
Mr. Hiss. Was not this with reference to a possible acquisition of
planes ? The fourth sentence of this paragraph says :
The Government wishes to acquire ten large bombing planes, and it is a
choice between Junkers and ourselves. Lopez and the Minister suggested that
Cliff fly down there with them, and the job is so important that we decided
that if necessary we would have to delay the Argentine business.
Mr. Webster. Apparently that letter does infer that. It was my
present impression that it was to go down on trouble shooting.
Mr. Hiss. Who was Mr. Brewton?
Mr. Webster. He is also a service engineer, a service man, from
the Wright Aeronautical Co.
Mr. Hiss. I offer as " Exhibit No. 3?8 " a letter dated November 8,
1933, to Mr. J. A. B. Smith, from Mr. Shannon.
(The letter referred to was marked " Exhibit No. 378 ■', and is in-
cluded in the appendix on p. 954.)
Mr. Hiss. J. A. B. Smith is an official of the Export Corporation ?
Mr. Allard. No. Mr. Smith is the treasurer of the parent
company.
Mr. Hiss. With a copy to Mr. Allard. On page 3, referring to
the first complete paragraph, the letter says :
Harvey Brewton Is here and have spent much time with him. He expects
to leave on Sunday's plane to Bolivia and will also probably go down into
the Chaco. Shorty Berger is also down there and additional spares, including
engines, will undoubtedly be purchased.
Mr. Webster. Mr. Hiss, if you will permit me to say so, that does
not necessarily mean that they were down there selling. Mr.
Brewton has nothing whatever to do with sales. He is a mechanic.
He was down there trouble-shooting, as we did before.
Mr. Hiss. Earlier I asked Mr. Allard if you had not given in-
structions on the actual scene of hostilities to foreign mechanics, or
if you had not made repairs; and Mr. Allard, as I remember his
answer, said that he thought you had only made repairs of ships
you had already sold. This was an indication that the men were
on the scene and that, taken in connection with some of the previous
letters introduced this morning, they were giving instructions to^
mechanics as well as actually repairing machines.
MUNITIONS INDUSTRY 803
Mr. Allard. Mr. Hiss, those are entirely instructions in the opera-
tion which would come under the category of service, repairs. If
a man is ruining an engine by improper knowledge of how to operate
it, it would save the expense of having to service it, if we told him
how to operate it properly ; that is all.
Mr. Hiss. Then you do agree that your company gives service
directions as well as makes trouble-shooting repairs.
Mr. Allard. Absolutely.
Mr. Webster, Yes, indeed.
Mr. Hiss. At the actual scene of warfare?
Mr. Allard. If necessary ; yes, sir.
Mr. Webster. This was not at the actual scene of warfare, Mr.
Hiss.
Mr. Hiss. In the Chaco ?
Mr. Webster. It was in the Chaco, but not at the actual scene of
warfare. This was back at some supply base.
Mr. Hiss. Do you think it was the air base for the Chaco region?
Mr. Webster. No; I believe probably it was the overhaul base,
repair base.
Mr. Hiss. It was the major repair base for the Bolivian Air
Corps, was it not ?
Mr. Webster. I do not know whether it was the major base. It
was some base. It was not at the actual scene.
Mr. Hiss. The base used for the Chaco dispute ?
Mr. Webster. Probably.
Mr. Hiss. I offer as " Exhibit No. 379 " a letter dated December 15,
1933, signed "Tony." That is Mr. Ashton, of Webster & Ashton?
Mr. Webster. Yes, sir.
Mr. Hiss. Your agents in Bolivia ?
Mr. Webster. Yes, sir. ,
Mr. Hiss. This letter is to Mr. Webster.
(The letter referred to was marked " Exhibit No. 379 " and is
included in the appendix on p. 956.)
Mr, Hiss. Eeferring to the last paragraph in the letter :
Travis's presence in the Chaco is most important, as the pilots are very
friendly indeed toward him and he is very discreet in his ways. Brewton
(that is the mechanic), with his knowledge, of course, is also very valuable,
so between the two some excellent work must have been done,
Mr, Webster. That is in overcoming the difficulties they were hav-
mg at the time in the operation of the engines,
Mr, Hiss, Have you ever supplied flight instructions to officers
who you expected would use those instructions in warfare — officers
of foreign governments ?
Mr, Webster, Just how do you mean? Do you mean we might
give instructions today and 5 years from now those officers would
be used in warfare?
Mr. Hiss. Do 3^011 give gunnery instructions, for example?
Mr. Webster. No, sir.
Mr. Hiss, Mr, Allard, may I call 3'^our attention to a telegram
from vou to Mr. Burdette S. Wright dated November 24, 1931,
which I will offer as " Exhibit No. 380,"
(The telegram referred to was marked " Exhibit No. 380.")
804 MUNITIONS INDUSTRY
Mr. Hiss. This Exhibit " No. 380 " says :
Would there be any governmental objection our giving flight training, includ-
ing some gunnery, to American-born Cliinese.
J. S. AliARD.
Mr. Allard. That is correct. At that time we were giving flight
training in the flying service, wliich was discontinued some 2 years
ago or a year and a half ago at least.
Mr. Hiss. And that included gunnery training?
Mr. Allard. No. It did not. We were asking if we could include
gunnery training at that time.
Mr. Hiss. You did not include gunnery training?
Mr. Allard. No, sir.
Mr. Hiss. Have you ever supplied personnel as recruiting officials
for a foreign government? Have you ever had requests from foreign
governments that your company recommend pilots or mechanics ?
Mr. Allard. AVe may have had requests. I think the files would
disclose that. We probably have had requests.
Mr. Webster. Yes.
Mr. Hiss. Has your company ever complied with any of those
requests ?
Mr. Allard. We have possibly recommended mechanical personnel.
Mr. Hiss. Have you ever had an agreement with a foreign country
whereby you were under obligation to furnish expert instructions in
the handling of planes either from the mechanical end or the flying
end during any period of time after the purchase of planes from
your company?
Mr. Allard. Never on the flying end that I know of. We have
had — we have supplied or recommended to the governments not
on our pay roll, personnel to work in factories.
Mr. Hiss. I offer as " Exhibit No. 381 " af letter from Mr. Goulding,
vice president of the Export Corporation to Mr. Roberto Escobar,
acting Consul General in New York for Colombia.
(The letter referred to was marked " Exhibit No. 381 '' and is
included in the appendix on p. 958.)
Mr. Hiss. The first paragraph of the letter, Mr. Allard, says :
You know from copy of agreement which I handed you that we had agreed
to furnish and recommend certain personnel to go to Culombia. The agree-
ment I have reference to is one dated January 31. 1934, under whicli we
were to furnish an expert in the flying of Condor planes, to accompany the
planes to Colombia and remain there for a period not to exceed three months
to give instruction at the school fields in the handling of the Condor planes.
On page two, the last paragraph, is —
One of our St. Louis mechanics seems especially interested in making this
trip. His name is George Clark, who formerly made trips for us to Latin
American countries. He is a very expert mechanic and has a very pleasing
personality, speaks Spanish, and in addition to his aircraft mechanical knowl-
edge, is an expert on armament.
An aviator or a mechanic who is an expert on armament is more
valuable to your company for such services than one without that
knowledge ?
Mr. Allard. Not to our company ; possibly to the customer.
Mr. Hiss. " Exhibit No. 378 ", which has already been made a part
of the record, November 8, 1933, from Mr. Shannon to Mr, Smith,
MUNITIONS INDUSTBY 805
page 2, in the middle of the first complete paragraph, the fourth
sentence, reads :
I was also asked to secure about eisht good Army bombing pilots who might
be available and out of jobs aud looking for a little excitement and money to
come down with the ships and go to work in the Chaco for the Government.
I offer as " Exhibit No. 382 " a letter dated March 30, 1934, from
Mr. Webster to Mr. Anthony Ashton, of Webster & Ashton, Bolivia.
(The letter referred to was marked " Exhibit No. 382 " and is
inchided in the appendix on p. 959.)
Mr. Hiss. Reading from page 2, under the heading " Pilots ", in
" Exhibit No. 382 " :
While in La Paz I offered my own services gratis, and as a friendly gesture,
to handle the delivery of the Condors. I also agreed, at the request of the Gov-
ernment, to secure some pilots who would remain in Bolivia and handle them
in service.
Those Condors were sold for what purpose, Mr. Webster ?
Mr. Webster. They were transport planes and bombing planes.
Mr. Hiss. They could be used as large bombing planes, and were
so sold by your company ?
Mr. Webster. Yes, sir.
Mr. Allard. But they were never delivered.
Mr. Webster. No; they were never delivered. I might add, Mr.
Hiss, that when it was called to my attention it was entirely out of
order to supply pilots or assist in engaging pilots for Bolivia, we
immediately notified the Bolivian Government it was impossible to
do that, and the entire matter was called off.
Mr. Hiss. Did you ever employ pilots for Colombia ?
Mr. Webster. No, sir.
Mr. Hiss. " Exhibit No. 383 ", which I offer in evidence, is a letter
from Mr. Crosswell to " Dear Parin."
(The letter referred to was marked " Exhibit No. 383 " and is
included in the appendix on p. 961.)
Mr. Hiss. The letter, " Exhibit No. 383 ", is dated April 25, 1934,
and is addressed to " Dear Farm." That is Mr. Hewlett?
Mr. Allard. Yes.
Mr. Hiss. Beginning with the second paragraph of this letter, I
read as follows :
I spent last week end in Cartegena with Comm. Strong and the American
pilots and mechanics who have recently arrived, 24 pilots and approximately
the same number of mechanics. Comm. Strong is in a little hot water, and it
is mostly in his interest that I am writing this letter.
Commander Strong referred to was a former American naval
officer who was at that time adviser to the Government of Colombia ?
Mr. Allard. So I understand.
Mr. Hiss. Reading further from this letter, it says :
It seems that Comm. Strong left the States with the understanding that
pilots were to be recruited who are willi»g to tight, if necessary, and instruct
Colombian students otlierwise. Contracts were drawn up accordingly, and
everyone was very happy until the press got wind of the movement. The State
Department then had to take official cognizance to which they were forced to
react negatively in order to maintain a strict neutrality in South America.
The pilots were told that passports would not be issued with the figbting clause
in their contract, and that should they engage in actual military combat after
arriving here, the consuls would be instructed to take up their passports and
806 MUNITIONS INDUSTRY
they would automatically lose their citizenship. A new contract was therefore
drawn up, with the permission of Bogota, which eliminated tlie fighting clause.
It seems that Comm. Strong was not consulted regarding this new contract,
and it was his understanding and intention all along that these pilots imme-
diately organize as a fighting squadron and begin training as such at Cartagena.
When Comm. Strong met the pilots and was informed of the above happen-
ings he asked for an immediate decision as to which of the two contracts they
intended to keep, letting them know that he would not compromise. If they
intend to instruct only, they will fly only training planes, and vice versa, if they
intend to fight. They unanimously decided to stick by the second contract —
in other words, instruct only.
Comm. Strong is quite incensed as a result of their decision, and I presume
that he is sincere in giving the impression that he didn't know of the second
contract. At any rate, he wants to take immeditae steps to get other pilots
down here who are willing to fight. He indicated to me that he will be in hot
water with the war minister, who also thought this group would function as a
fighting unit (as to who gave the permission for the second contract in Bogota,
Quien sabe?) I therefore told him that I would give you all the dope in order
that you may help recruit new pilots if you so desire. He thought that Ralph
Damon could interest the Naval Reserve unit at St. Louis, as some of these
fellows had previously indicated a willingness to go in for flying of this sort.
Please understand, however, that there is no obligation whatever for any
action on the part of the Curtiss Co. He wanted you all to know just as
another agent, so to speak, for contacting the type of pilot who is desirable.
The Ralph Damon referred to was then the president of the Air-
plane Co. in St. Louis?
Mr. Allard. That is correct.
Mr. Hiss. Reading further, the letter says :
He wants men with military flight training (or naval) who have been trained
in dive bombing and airplane gunnery. A high type of individual is necessary
in order that Colombia may have the best impression possible of Americans,
which impression will be reflected by their use of American goods and equip-
ment.
Did your company ever recommend any pilots for Commander
Strong 'i
Mr. Allakd. Absolutely not.
Mr. Hiss. Has your company ever recommended any pilots to be
sent to China as instructors to the Chinese ?
Mr. Allard. Not to my knowledge, Mr. Hiss.
Mr. Hess. I offer " Exhibit No. 384 ", being a letter to Mr. Robert
L. Earle from the Intercontinent Aviation, Inc., dated February 6,
1934.
(The letter referred to was marked " Exhibit No. 384 ", and is
included in the apendix on p. 952.)
Mr. Hiss. Mr. Robert Earle was a representative of the Curtiss-
"Wright Corporation in Washington, D.C.?
Mr. Allard. Yes.
Mr. Hiss. The Intercontinent Aviation, Inc., was the Curtiss
group selling agency in China?
Mr. Allard. Yes.
Mr. Hiss. Reading from this letter, " Exhibit No. 384 ", it says :
Jack Allard has asked me to write and see if you could obtain from the
Army a list of about 25 recent graduates of Kelley Field, together with their
service records, from which we could pick a number of them for ferrying air-
planes to a foreign country with the possibility that they might obtain employ-
ment with that foreign government.
We understand that a number of Kelley graduates have been discharged
recently and these are the men to whom we refer.
There exists an opening for a man in China to act as machine-gun instructor,
who may also be selected from this list.
MUNITIONS INDUSTRY 807
Mr. Hiss. I offer " Exhibit No. 385 ", which is a letter from the
Intercontinent Aviation, Inc., to Mr. Kobert L. Earle, Washington,
D.C., dated February 13, 1934.
(The letter referred to was marked " Exhibit No. 385 " and is
included in the appendix on p. 963.)
Mr. Hiss. I read from this letter, as follows :
I talked with Mr. Allard regarding the specifications for pilots and he
advised that he does not wish to disclose any information regarding what
countries the pilots are to go to. He wishes you to obtain the names of
pursuit, bombardment, attack, and observation pilots who are interested in
going to a foreign country and a specification from them as to what country
they would like to go.
From time to time we have occasion to send men out and we would like to
have in our files information concerning a number of such pilots.
We also suggest that you approach the Navy on this subject and obtain a list
of Navy-traine^d pilots who may be available for such work as we at times have
occasion to send out airplanes on floats.
I would suggest that you have Lt. HoUidge write us fully giving complete in-
formation as to himself with references whom we may contact and that you
supply us with as much information as you can concerning him in connection
with the position of machine-gun instructor in China.
"We are not sure that this position is still open, but it will pay about 800 Hong-
kong dollars a month and should afford an opportunity for an Army-trained
man to continue his work along military lines.
Who was Lieutenant Hollidge?
Mr. Allard. I haven't any information whatever.
CURTISS-WRIGHT COMPANY'S ATTITUDE TOWARD EMBARGOES
Mr. Hiss. Mr. Allard or Mr. Webster, has your company opposed
embargoes on shipments of military equipment?
Mr. Allard. Opposed them, in what way?
Mr. Hiss. When they have been suggested or proposed or con-
sidered in Congress or by other countries with which your company
deals, has your company opposed them?
Mr. Allard. Not to my knowledge ; no.
Mr. Hiss. Does your company believe in the policy of embargoes
on military equipment?
Mr. Allard. I think that is rather a difficult question for me to
answer at this time. We believe in the policy, dictates, and laws of
this Government or any other government under whose jurisdiction
we might be operating.
Mr. Hiss. In your sales to various South American countries have
there been occasions when you understood that one country with
whom you dealt did not wish you to sell to another country, and in
order to avoid that you have transshipped your material so that it
was invoiced to one country and actually transshipped to another ?
Mr. Allard. Not to my knowledge ; no.
Mr. Hiss. " Exhibit No. 378 ", already a part of the record, from
Mr. Shannon to Mr. Smith, with a copy to Allard, in the last part of
the last paragraph, reads :
As I told you before, Peru expects to mix things again with Colombia. In
this connection, if there is trouble on the part of Colombia objecting to us
selling Peru, we can make a deal whereby the material would be intended for
the Bolivian Government and shipped along with their orders to Mollendo.
MoUendo is in Peru?
Mr. Webster. Yes, sir.
808 MUNITIONS INDUSTRY
Mr, Hiss. Reading further it says :
Bolivia and Peru are working very closely together. Cliile has now lifted
the ban on shipments to Arica for Bolivia and is asking for the business
through her ports, but Lopez told me that he did not wish to hurt Peru's
feelings and although it was more difficult to ship through Mollendo, he
intended to play ball with Peru.
Wasn't that a case of a plan to make transshipments in case one
country disapproved of your selling to another country ?
Mr. Allard. I think it is merely a statement. It is not any plan,
and was never considered as such.
Mr. Hiss. I offer " Exhibit No. 386 ", which is a letter from Mr.
Webster to Mr. Van Wagner, dated April 27, 1933.
(The letter referred to was marked " Exhibit No. 386 " and is
included in the appendix on p. 963.)
Mr. Hiss. I read from this letter, " Exhibit No. 386 ", as follows :
The Grace Company, owing to considerable pressure from the Colombian Gov-
ernment,^ has refused to accept shipments consigned to the Peruvian Government
or to Faucett, which makes it necessary to ship to the Canal for reshipment on
British or Italian vessels.
Faucett was your agent in Peru ?
Mr. Webster. Yes, sir.
Mr. Hiss. Eeading further, the letter says :
The thought occurred to us that we might circumvent the difficulty by ship-
ping to Arica and reshipping from there to Callao.
Callao is a port in Peru?
Mr. Webster. Yes-
Mr. Hiss. Reading again from this paragraph, the letter says:
Inasmuch as the Chilean Government has closed the port of Arica to Bolivia,
it is possible that they will take similar action with Peru. I would suggest
that you take this matter up with Dias Lira and see if permission can be
obtained to go into Arica and then come back up north to Callao.
Dias Lira was a lawyer in Chile ?
Mr. Webster. Yes. That action on the part of the Grace Co. was
purely their own action, inasmuch as they had large interests in Co-
lombia, and the Colombian Government simply requested them not
to carry shipments to those ports.
Mr. Hiss. Your company, Mr. Allard, owns how many plants
abroad which can produce planes or engines ?
Mr. Allard. The Export Co. does not own any. The Curtiss-
Wright Corporation has one in Chile and a part interest in one in
China. Those are the only two plants.
Mr. Hiss. Have you any interest in the Argentine or Brazilian
factories ?
Mr. Allard. None whatsoever.
Mr. Hiss. In the event of an embargo such as the embargo now in
effect, Avould you feel free to manufacture military planes in the
Ohilean factory or in the Chinese factory, although the Government
had forbidden the sale within the United States ?
Mr. Allard. I do not know, Mr. Hiss. That is a policy that would
«ome up at the time such a problem presented itself. It never has
come up and we have never given it any consideration.
1 Mr. Allard later informed the committee tliat the Curtiss-Wriglvt Export Corporation
•does own the plant in Chile.
MUNITIONS INDUSTRY 809
Mr. Hiss. There is at present an embargo in Paraguay and
Bolivia?
Mr. Allard. Yes.
Mr. Hiss. Would your company observe any embargo in Chile,
where your factory is located?
Mr. Allard. Yes ; we could not do anything else.
Mr. Hiss. "Exhibit No. 364" is a letter dated March 30, 1933,
from Mr. Webster to Mr. Van Wagner, and I read from that letter as
follows :
Another matter which I wish you would take up immediately and possibly
through Diaz Lira is the question involving the possible manufacture in the
Santiago plant of airplanes intended for other South American countries.
This is in view of a possible embargo on the part of the League of Nations
and the United States Government. In other words, would we be permitted
to ship material into Chile for assembly and fabrication for such countries as
Colombia, Ecuador, Peru, Bolivia, etc.?
I offer as " Exhibit No. 387 " a letter dated April 20, 1933, from
Javier Diaz Lira to Mr. Van Wagner.
(The letter referred to was marked "Exhibit No. 387", and is
included in the appendix on p. 964.)
Mr. Hiss. From this letter, " Exhibit No. 387 ", I read the fol-
lowing :
After a number of conversations that I have had with several officials, I
want to confirm to you what I mentioned in my letter of the 10th inst., to
the effect that there is not any difficulty, as respects the Government of Chile,
in the Curtiss Company extending its activities of building planes ftn- sale
and exportation to other countries. There is no regulation, neither in the
law nor in the contract, which resulted in the setting up of the factory in
Chile that might prevent that activity of the company which you represent.
On the Government's part, the initiative of the factory is considered not only
with acceptance but even with evident pleasure, I have today discussed this
matter fully with Mr. Diego Aracena, Chief of the Air Force, who told me
that he accepted with enthusiasm the notice that the factory would intensify
its work and production of airplanes for sale in Chile or in foreign markets.
Mr. Webster. Would you mind reading the rest of that paragraph,
Mr. Hiss?
Mr. Hiss. Following the words "or in foreign markets?"
Mr. Webster. Yes.
Mr. Hiss. Certainly. It reads as follows :
and, knowing the importance and benefit that this would mean to the country
and to the advantages that would also accrue to the National Air Force, he
would support all protection with reference thereto before the Government.
Mr. Webster. It was the desire of the Chilean Government to
create a national airplane or aviation industry in Chile the same as
in many other countries.
Mr. Hiss. Has your company in any way attempted to evade em-
bargoes or restrictions on military planes by labeling the packing
cases by other names than the actual names of the planes?
Mr. Allard. I do not think any packing cases have the names of
planes on them.
Mr. Hiss. What discloses the nature of the shipment, the shipping
documents ?
Mr. Allard. Yes ; the shipping documents.
810 MUNITIOITS INDUSTRY
Mr. Hiss. I offer " Exhibit No. 388 ", which is a letter dated April
15, 1933, from the Curtiss-Wright Corporation by S. J. Abelow to
Faucett in Lima, Pern.
(The letter referred to was marked " Exhibit No. 388 ". and is
included in the appendix on p. 964.)
Mr, Hiss. Who is S. J. Abelow by whom this letter is signed ?
Mr. Allard. He is a clerk.
Mr. Hiss. In the employ of the Export Co. ?
Mr. Allard. Yes.
Mr. Hiss. I read from this letter, " Exhibit No. 388 ", as follows :
We ju8t received advice by teleplione from the Barr Shipping Corp., our
forwarding agents, tliat the Grace Line notified them tliey would be unable to
accept any shipments consigned to you that moved on their steamers via a
Colombian port. Evidently the Grace Line is taking a strong hand due to the
fact tliat they have been subject to considerable pressure on the part of
Colombian Government authorities in carrying material of a military nature.
Our information is that the Colombian Government knows you are buying
material for the Government of Peru, and consequently is making every effort
to prevent such material from reaching Peru.
And then in the last paragraph the letter reads :
We could declare the material by other terms on the bill of lading so as
to throw the steamship company off the track; e.g., we could declare engine
parts as " internal combustion parts " ; " spark plugs " ; other aeroplane parts
could likewise be changed ; e.g., " steel tubing " in place of aeroplane parts ;
" lacquer " instead of " dope ", etc, etc.
Dope, what is that ; is that lacquer ?
Mr. Allard. It is lacquer; yes.
Mr. Hiss (reading) :
We suggest you act on this immediately and give us the name of your
forwarders by cable, referring specifically to this letter number for our
guidance.
Mr. Webster, I have never seen that letter before, and I do not
think anything of that nature was ever done, Mr. Hiss,
Mr. Hiss. I offer " Exhibit No. 389 ", which is a letter dated March
12, 1934, from Walter J. Decker, Consul General of Bolivia, to Mr.
Webster.
(The letter referred to was marked " Exhibit No. 389.")
Mr. Hiss. I read from this letter, " Exhibit No. 389 ", as follows :
I beg to inform you that as per instructions which I have received from
La Paz, it is my Government's desire to avoid showing completely, in the
cases and the documents covering them, the real content of all shipments of
war material.
To this effect I take the liberty of requesting your kind cooperation iii
issuing strict instinactions to all concerned to the following effect :
(1st) That in all shipments made by your firm for the Government of Bolivia
the cases must have only the words " handle with care ", outside of the ordinary
shipping marks, without having any trade names or any other marks or words
that may in any way reveal the real contents of the shipment involved.
(2nd) That both the bill of lading and the consular invoice must each show
the following as the content of each shipment :
MATEEIAL FOR THE GO\"ERNMENT OF BOLIVIA
While the commercial invoice and packing list must be made up in the usual
manner, giving full particulars regarding the contents, prices, etc. This will, in
no way at all interfere with the respective classification necessary for freight-
rate purposes, which is to be filed separately to the steamship line.
MUNITIONS INDUSTRY 811
Hoping that you will follow these instructions closely and awaiting your
I'eply to the effect that you are in complete accord with the contents of this
communication, I beg to remain.
Yours very truly,
(Sgd.) Walter J. Decker,
Consul General of Bolivia.
Mr. Webster. There is nothing unusual or out of order in so
marking packing cases. As a matter of fact, we usually only mark
them by numbers and by letter.
The Chairman. Is it not a violation of law to deceive in these
foreign shipments?
Mr. Webster. You are not deceiving. Your invoices show the
exact material, and it is just the marking on the outside of the cases.
The Chairman. What can our very efficient Commerce Depart-
ment do in its effort to ascertain correctly and closely what our
exports are, if that is not required?
Mr. Allard. I do not know what the Department does.
The Chairman. They cannot do that.
Mr. Allard. Oh, yes; they can. There must be ways of their
checking up, because they have been doing it for years.
Mr. Webster. All of your papers must show exactly what the
shipment is.
The Chairman. The records of the Commerce Department reveal
the contents of shipments abroad, and they must be all inclusive ?
Mr. Webster. Yes.
The Chairman. They do not know there are ways of getting
around it.
Mr. Allard. Speaking from our business alone, with which I am
only acquainted, there is absolutely a check.
The Chapman. They are without a check?
Mr, Allard. No; they have an absolute check, they have a very
definite check.
Mr. Hiss. Mr. Allard, has your company ever used any of the
methods described in these letters, such as transshipments, or mis-
labeling of materials or any of the other things we have just been
through in the last three or four letters, in an attempt to evade an
embargo of the United States Government ?
Mr. Allard. No, sir.
Mr. Hiss. Did your company enter into a contract with the Gov-
ernment of China in anticipation of an embargo on shipments of
military planes to China ?
Mr. Allard. No, sir.
Mr. Hiss, I offer " Exhibit No, 390 ", which is a telegraphic mes-
sage from the China Co., Shanghai, China, to the Export Co.
(The telegraphic message referred to was marked " Exhibit No.
390 ", and is included in the appendix on p. 965.)
Mr, Hiss. The China Co. is your representative?
Mr, Allard. Yes,
Mr. Hiss. Reading from this message I find the following:
About 1 to 2 months ago I suggested Minister of Finance enter (s) (into)
contract (s) acquiring large number (s) (of) military airplane (s) as protec-
tion against possible American embargo (upon) stop.
Minister of Finance have signed contract (with) Intercontinent Aviation,
Inc.. March 29th,
812 MUNITIONS INDUSTRY
You sold through the Intercontinent Co. in China ?
Mr. Allard. That is right,
Mr. Hiss. I read further from the message, as follows :
For 96 military airplane (s) subject to cancellation 15 clays' notice either
party (ies) (to).
Is that not rather an unusual provision in any contract?
Mr. Allard. No ; depending oi> the contract.
Mr. Hiss. No description of planes. Is that unusual?
Mr. Allard. No.
Mr. Hiss. No prices; is that not unusual?
Mr. Allard. No.
Mr. Hiss. No delivery date mentioned; is that not unusual?
Mr. Allard. No; not ■when you are negotiating the contract.
Mr. Hiss. I read further from the message :
Please notify Department of State of tliis conti'act stating that Chinese
Government aviation expert (s) to decide about on tyiDe (s) at a later date.
No publicity of any kind must not be given this matter as Minister of Finance
exceedingly anxious (to) transaction not to be known anyone except Depart-
ment of State official (s).
It must be understood that this is not purchase (s) agreement (s) and is a
contract (s) (for) for the purpose (s) (of) protecting government against
embargo (upon) this contract give us moral advantage (s) over competitor (s).
You do not consider that arrangement was an attempt to evade
a possible embargo by the United States Government on shipments of
military planes?
Mr. Allard. It very definitely states there this is not a purchase
agreement, but the contract was never accepted by us or considered
in any way. That is a statement made by an agent telling about a
contract they entered into. The record will definitely show we
referred the matter right back to them, telling them we were not
interested.
Mr. Hiss. This letter says the contract was signed by the Inter-
continent Aviation.
Mr. Allard. Yes.
Mr. Hiss. Their only connection with your companjr is the}- are
a selling agency?
Mr. Allard. That is right.
Mr. Hiss. They are also controlled by the Sperry Corporation, are
they not ?
Mr. Allard. That is right.
relations with officials and departments of united states
government
Mr. Hiss. Earlier in your testimony you referred to the severity
of competition in perfecting sales of military planes abroad. In the
course of that competition, have you found that foreign aviation
companies have received the support of their respective governments
in perfecting sales?
Mr. Allard. Very definitely ; very completely.
Mr. Hiss. I offer " Exhibit No. '391 ", which is a letter to Mr.
Allard of date July 8, 1930, signed Avith the initials " R. P. F."
(The letter referred to was marked " Exhibit No. 391 ". and is.
included in the appendix on p. 966.)
MUNITIONS INDUSTRY 813
Mr. Hiss. The initials " R. P. F.", is that Mr. Farnsworth?
Mr. Allaed. Yes.
Mr. Hiss. He was at that time an employee of the Export Co. ?
Mr. Allard. That is right.
Mr. Hiss. I read from this " Exhibit No. 391 ", as follows :
The following is a more or less complete outline of the conversation Mr.
Farnsworth had with Fowler Barker this afternoon. Undoubtedly you are
cognizant of all these facts, hut it will do no harm certainly to jot them
down.
Fowler Barker was with the Department of Commerce at that
time ?
Mr. Allard. Yes.
Mr. Hiss. Reading further, the letter states :
It seems that Mr. Young recently received rather lengthy reports from the
commercial attache at Buenos Aires and Montevideo expressing their apprehen-
sion over strong European aeronautical competition. There is to be a British
aircraft carrier in a River Plate around December 21st, carrying about 20
assorted airplanes of English manufacture. Italy has stationed De Pinedo as
air attache in Buenos Aires and is evidently making a strong bid for business.
The French position was greatly strengthened by the recent trans-Atlantic
flight carrying mail to South America.
There evidently was a consultation between Captain Fleming, our military
attache for Argentina and Uruguay, and the two commercial attaches in these
countries, and Leigh Wade, who as you know, is down there representing the
Consolidated people.
That is the Consolidated Aircraft Corporation ?
Mr. Allard. From Buffalo; yes.
Mr. Hiss. Then the letter reads further :
This conference resulted in the determination to attempt to arrange some
sort of a demonstration from the United States to counteract the European
activities. The Department of Commerce will possibly interview the leaders
of the aircraft industry here and see what their attitude would be toward send-
ing a group of planes to South America, possibly some of those participating in
the National Air Tour this year. It is thought possible that if the manufac-
turers so desire, a delegation of them will interview Secretary Ingalls and gain
his consent for the use of one of our carriers to transport the planes to South
America, citing the action of the British as a precedent. Undoubtedly this
demonstration if ever made tangible would visit the international aeronautical
exhibition to be held at Montevideo during the first half of February 1931.
That is Secretaiy Ingalls, who was Assistant Secretary of Air, he
is referring to ?
Mr. Allard. For the Navy; yes.
Mr. Hiss. Assistant Secretary of the Navy for Air ?
Mr. Allard. Yes.
Mr. Hiss, When he refers to one of the carriers, he means one of
the plane transports?
Mr. Allard. Yes.
Mr. Hiss. The letter then reads further:
I am quite sure that this idea has not been broached to any of our com-
petitors and nothing may ever come of it, but in the event that something does
materialize we Avill at least have had a little bit of warning.
Do you know whether Mr. Inefalls was ever aiDDroached on that
matter ?
Mr. Allard. I believe he was, but I do not remember definitely
whether he was.
Mr. Hiss. Do you remember whether he was sympathetic to it ?
Mr. Allard. No.
814 MUNITIONS INDUSTRY
Mr. Hiss. I offer " Exhibit No. 392 ", which is a letter dated
September 29, 1930, from Mr. Wright to Mr. Allard.
(The letter was marked " Exhibit No. 392 ", and is included in the
appendix on p. 96G.)
Mr. Hiss. In this letter there is the following [reading] :
I was in Mr. Ingalls' office this morning and his office urged that we push in
every way possible the completion of the arranging for the carrier to go to
South America. Comdr. Moulton believes that we must take the matter up
with the White House by possibly a head of the Aeronautical Chamber of Com-
merce. I know that you are handling the matter as representative of theirs,
together with the help of the Department of Commerce. It looks as though I
may be out of town Wednesday of this week at Dayton, but I am hoping that
I may be able to delay the trip until Thursday in order to be here when you
are here on Wednesday.
I offer as " Exhibit No. 393 " a letter dated October 7, 1930, from
Mr. Allard to Mr. B. S. Wright.
(The letter referred to was marked " Exhibit No. 393 ", and is
included in the appendix on p. 967.)
Mr. Hiss. This letter, " Exhibit No. 393 ", is on the subject of naval
carrier to South America, and says [reading] :
Thanks for yours of October 3rd on this subject, and as a result, Leigh
Rogers and I are today drafting the letter for Fred Rentschler to present to
Mr. Hoover.
Mr, Leighton Rogers was then Director of the Bureau of Foreign
and Domestic Commerce in charge of the Aeronautics Division?
Mr. Allard. Yes.
Mr. Hiss. Mr. Fred Rentschler referred to was an ojfficial of United
Aircraft ?
Mr. Allard. Yes; I think the reference to him there is as presi-
dent of the Aeronautical Chamber.
Mr. Hiss. He was then president of the Aeronautical Chamber,
of which Mr. T. A. Morgan is now president ?
Mr. Allard. That is right.
Mr. Hiss. Will you identify Mr. Merino? I think he has been
identified before, however.
Mr. Allard. Mr. Webster will have to do that.
Mr. Webster. What date was that?
Mr. Hiss. 1931.
Mr. AVebster. I believe at that time Arturo Merino was chief of
aircraft of Chile.
Mr. Hiss. " Exhibit No. 394 " is a letter from Mr. Webster to Mr.
Burdette S. Wright, dated March 11, 1931.
(The letter referred to was marked "Exhibit No. 394", and is
included in the appendix on p. 967.)
Mr. Hiss. That letter reads in part as follows :
In line with my telephone conversation this morning, Comandante Arturo
Merino B., subsecretario of the interior for aviation, is the chief of all Chilean
aviation — aimy, navy, and civilian. He is the biggest foreign customer we
have, and is entirely responsible for all our business in Chile.
During the recent visit of the Prince of Wales to Chile, the Prince per-
sonally invited Merino to visit him this spring, which invitation was accepted.
His original plan was to proceed to England first, and then visit the United
States, but we have persuaded him to visit the United States first in order to
witness the Air Corps manoeuvres during May. He has agreed to this pro-
gram providing an ofiicial invitation is extended to him by the U.S. Government
through the War Department as a foreign obsers'er.
MUNITIONS INDUSTRY 815
Tliis means a great deal to us, as Merino has never been out of his own
country and lias always been partial to European rcfetliods and materials
until we began to supply him with equipment a few years ago. It is up to us
to lean over backward in selling Merino American ideas, methods, and equip-
ment, and upon his arrival here we are arranging an elaborate and extensive
program calling for visits to various airports in this country. If possible,
we would like to have you arrange for permission to visit various Army and
Navy stations and have him meet the Army and Navy Secretaries, and,
if possible. President Hoover. This seems advisable and necessary in order
to off-set the efforts of the Prince of Wales.
* * * In order to further emphasize the importance of making these
arrangements for Comandante Merino I should mention that we have at
present orders amounting to $1,-00,000 for the Chilean Government with an-
other million or million and a half ready to be closed within the next month
or so.
Has your company ever borrowed from the United States Army
pilots to help in demonstrating your planes abroad ?
Mr. Allard. Yes, sir.
Mr. Hiss. Have you found that they have been helpful in making
sales ?
Mr. Allard. Certainly — in making sales ?
Mr. Hiss. In your making sales ?
Mr. Allard. Yes; as demonstrators, surely.
Mr. Hiss. Were they in active service at the time or had they
retired from the Army ?
Mr. Allard. In most cases that I am familiar with they were in
active service on leave, approved by the Secretary of War and
Chief of the Air Corps.
Mr. Hiss. And you arranged for the leave, requested their leave?
Mr. Allard. We assisted them in requesting the leave.
Mr. Hiss. " Exhibit No. 395 " is a letter of August 12, 1930, from
Burdette S. Wright to Mr. Allard.
(The letter referred to was marked " Exhibit No. 395 ", and is
included in the appendix on p. 968.)
Mr. Hiss. That letter reads in part as follows :
Colonel Foy of the Military Intelligence Division called Farnsworth to his
office this morning and showed him some correspondence received from Major
Emer Yeager, military attache at the American Embassy, Warsaw, Poland.
Major Yeager, among other things, said that the performance of our pilots,
planes, and motors made a profound impression in Bucharaest and Rumania.
He happened to be standing by the side of the chief of Rumanian aviation in
Bucharest while Doolittle was doing his stuff. The chief apparently ex-
pected the wings to drop off the Hawk at any moment during a power dive
and had never seen anything at all like Doolittle's performance.
In Warsaw, Captain Cannon —
That was an American officer?
Ml. Allard. That is right; on this tour.
Mr. Hiss (continuing reading) :
seems to have carried off the honors with his superb handling of the Fledgling.
He apparently put it through completely its paces, leaving a firmly seated
conviction of the stability, steadiness, and remarkable performance of the
plane. As one Pole expressed it, he made it do everything but dance. All in
all, the officials, including French and British attaches, wei-e deeply impressed
with the power of the motors and the strength of the ships.
Another dis^iatch deals with the jealousy of the French and English aroused
by this flight. Shortly after oiu- demonstration was finished. France made an
official flight with high ranking officers to Warsaw and Baltic countries.
This trip was made very secretly and with a minimum of publicity. Major
Y^eager tells of a flight of British airplanes to twelve Balkan and Scandinavian
83876— .34— PT 4 9
816 MUNITIONS INDUSTRY
countries to be made in September. Tliis is supposed to be merely an ofl5cial
flight of the Royal Air Force, but Major Yeager learned from reliable source
that it was definitely planned to offset any good impressions of American
aviation made by our Curtiss-Wright tour.
In addition to borrowing pilots from the Army for demonstration
purposes, has your company found that other governmental depart-
ments or institutions have been helpful in promoting the sale of
aircraft abroad?
Mr. Allard. Very definitely.
Mr. Hiss. " Exhibit No. 396 " is a letter from Helsingfors, Fin-
land, dated February 18, 1931, signed by Melvin Hall, vice president
of the Export Corporation, to the American Charge cl'Affaires at the
American Legation at Helsingfors.
(The letter referred to was marked " Exhibit No. 396 ", and is
included in the appendix on p. 968.)
Mr. Hiss. That letter reads in the third paragraph as follows
[reading] :
I have warning, however, that the decision may be influenced by political
considerations, and I have good reason to believe that the Gnome et Rhone
Company (French) are bringing considerable pressure to bear in an effort to
secure this business for their "Jupiter " or " Mercury " engine which they build
under license from the Bristol Aeroplane Co. (British). This pressaire is of a
nature which reflects little credit on the business ethics of the Gnome et Rhone
Co. The Finnish Air Force possesses a certain quantity of Gnome et Rhone
" Jupiters " and I believe that some fourteen of these engines are now in the
Gnome et Rhone factory near Paris for overhaul. The company apparently
agreed to carry out this ovei'haul free of cost, but once having received the
motors they appear now to be using them as a lever, coupled with threats of
making difficulties in future with respect to spare parts for the other
"Jupiters " in Finnish hands, to force the Finns to divert their projected order
for new motors to Gnome et Rhone.
Then the letter continues [reading] :
Our European competitors are undoubtedly using both economic and political
arguments against American manufacturers, and liave succeeded in convincing
certain of the Finnish officials in high authority that America is out of the
question, or at least not dependable, for geographical and political reasons, as
a suitable source of supply for military equipment. I believe their arguments
fundamentally unsound and have attempted to combat them in my communica-
tion to the Minister of Defence.
It has been suggested to me, and quite strongly, that it would be very helpful
if the American Legation should use its good offices in this instance to combat
this propaganda of our European competitors and accredited representatives of
their respective governments. Confidentially, I may mention that Col. Vuori,
Chief of the Finnish Air Force, who has stated frankly that he favors the
" Cyclone " advised me last night that it would do a vast amount of good if the
Charge d'Affaires could talk personally with the Foreign Minister, the Finance
Minister, the Defence Minister, and possibly the Minister of Commerce, on the
politico-economic situation as it may affect the subject of this memorandum,
stressing especially the fact that the United States would be a dependable and
rapid source of supply for Finland under all conditions that might conceivably
arise. It may be that certain of the grounds for such a contention that I have
advanced in my communication to the Minister of Defence will meet with your
concurrence.
It is possible that trade arguments will also be advanced against us, which
would seem answei'able in view of America's friendly relations with Finland,
the recent decision of our Treasury Department respecting "dumping" and the
vast amounts of money loaned to Finland by the United States and potentially
available for future loans.
" Exhibit No. 397 " is a memorandum to Mr. Thomas A. Morgan,
dated June 19, 1934. That was after this committee had begun its
investigations, was it not?
MUNITIONS INDUSTRY 817
Mr. Allard. What was the date ?
Mr. Hiss. This bears the date of the 19th of June 1934, and we
began the 1st of June.
Mr. Allard. It must have been ; yes, sir.
Mr. Hiss. Mr. Morgan is president of the Curtiss-Wright, parent
corporation, and president of the Aeronautical Chamber of Com-
merce ?
Mr. Allard. Right.
Mr. Hiss. Do you know whether this memorandum was ever pre-
sented to anybody in the Government ?
Mr. Allard. Not to my knowledge.
Mr. Hiss. Do you know, Mr. Webster?
Mr. Webster. No. I do not know what the memorandum is.
Mr. Hiss. It is headed •' Importance of the export market to the
aviation industry."
(The memorandum referred to was marked "' Exhibit No. 397 "
and is included in the appendix on p. 969.)
Mr. Hiss. One of our investigators was informed that Mr. Morgan
left a copy of the memorandum with the President and discussed
the matter with him.
Mr. Allard. If Mr. Morgan made that statement, it is probably
correct. I have no personal knowledge of it.
Mr. Hiss. With further reference to Major Doolittle, who was
referred to as one of the flyers, the Army flyers, do you remember
whether Major Doolittle was on the recent board that Newton D.
Baker headed up, which recommended an increase in the procure-
ment of Army airplanes ?
Mr. Allard. Yes, sir ; he was.
Mr. Hiss, And he is very definitely interested in increasing the
number of planes that the United States Government possesses ?
Mr. Allard. I do not know what the report states.
Mr. Hiss. The report recommended an increase.
Mr. Allard. If it does, he was an endorser of that.
Mr. Hiss. On page 3 of this memorandum, paragraph numbered 8,
the committee has been informed that that paragraph was discussed
by Mr. Morgan with the President, and it, I assume, represents your
company's views of the importance of export business for the aircraft
industry ?
Mr. Allard. I think it does.
Ar. Hiss. Paragraph numbered 8, the second sentence, reads as
follows [reading] :
In 1933 over one-third of the entire production of aeronautical products was
shipped to foreign countries. Aeronautical exports were larger in 1933 than,
any other year in aviation history. The important part played by exports ia
relation to our total production is due not only to the sales-promotion efforts
and the high quality of our products but is also due to the cooperation the
industry has received from the commercial attaches and other United States
Government representatives located in foreign countries. Those figures are of
even greater importance when it is realized that American aircraft available
for export is in the obsolescent stage and that it must compete with foreign
products which are released for export in manv cases after oassing the
experimental stage.
What do you think Mr. Morgan meant by that ?
Mr. Allard. Mr. Lodwick ?
818 MUNITIONS INDUSTRY
Mr. Hiss. Yes; Mr. Lodwick. What do you think Mr. Lodwick
meant by that in his memorandum to Mr. Morgan?
Mr. Allard. Simply that the aircraft, engines, and accessories
which are released by the Army and Navy for sale to foreign coun-
tries are more or less in an obsolescent stage, so far as the United
States Government products are concerned.
Mr. Hiss. But you find that they are sufficiently recent models so
far as foreign competition is concerned to enable your company to
compete successfully abroad?
Mr. Allard. Not all instances. It is getting more and more diffi-
cult and foreign governments are releasing later models than our
Government releases.
Mr. Hiss (continuing reading) :
Foreign countries have likewise assisted their commercial companies in de-
veloping business by sending their naval aviation units to foreign countries to
demonstrate their latest types of flying equipment. An example of this was
the visit i>f the British Navy to Turkey in 1929, and the flight of 35 Savoia
Marchetti torpedo and bombing planes from Italy to Athens, Constantinople,
Varna, and Odessa, in June 1929.
The relations of your company with the Department of Commerce
have always been very friendly. Is that not correct, Mr, Allard ?
Mr. Allard. I hope so.
Mr. Hiss. " Exhibit No. 398 " is a letter of December 10, 1929,
written by Mr. Burdette S. Wright, a vice president of the parent
company and a director of the Export Co. to Mr. Leighton W.
Rogers, Chief of the Aeronautics Trade Division
Mr. Allard. He is not a director of the Export Co.
Mr. Hiss. Is he an officer of the Export Co. ?
Mr. Allard, No, sir.
Mr. Hiss. To Mr. Leighton W. Rogers, Chief of the Aeronautics
Trade Division, Bureau of Foreign and Domestic Commerce, Wash-
ington, D.C,
(The letter referred to was marked " Exhibit No. 398 " and is in-
cluded in the appendix on p. 973.)
Mr. Hiss. That letter states [reading] :
Dear Mr. Rogers: The Cui-tiss Aeroplane Export Corporation has recently
consummated contracts for the sale of military pursuit airplanes to the Dutch
East Indies and to the Siamese Government. These ccmtracts have finally
been obtained after several months of work through the combined efforts of
our representatives and those of the Bureau of Foreign and Domestic Commerce.
We wish you to know how much we appreciate the splendid cooperation of
your Division and of the Bureau and of the assistance given by your men in
the field and your office in Washington. It is very probable that the contracts
might not have been obtained had it not been for the service which your organi-
zation was able to extend, as, of course, there are certain angles of situations
and information which can be obtained by an official representative of the
United States Government, which wcmld be impossible for a private individual
to gain.
I certainly hope that the relations between this company and your Division
may always remain as happy as they have been in the past and that you will
continue to allow us the privilege of calling upon you for assistance in the
furtherance of our foreign business, not only in the countries where you have
already assisted us but, I hope, also in more extensive fields included in our
future program of expansion. I can see where the assistance you might be
able to give us in newer fields which we have not yet reached, could be of even
greater service to us than in those where we have already carried on negotia-
tions, as, of course, making the initial step in new territory is the most diffi-
cult part, unless contacts have already been established r.head of us and we
are able to use them for guidance.
MUNITIONS INDUSTRY 819
Would it be fair to say that the Department of Commerce has
supplied you with additional foreign agents abroad in the sale of
aircraft, Mr. Allard?
Mr. AxLARD. Not at all.
Mr. Hill. "Exhibit No. 399 " is a letter of December 30, 1929,
bearing the initials " R. L. E." That is Mr. Earle?
Mr. Allard. Yes,
Mr. Hiss. Addressed to Mr. J. S. Allard.
(The letter referred to was marked '' Exhibit No. 399 ■•.)
Mr. Hiss. That letter reads as follows :
Durin,^ my visit to New Yorli several weel^s ago we were discussing tlie best
method of sending out export catalogs to the American foreign offices. I dis-
cussed this with Leigh Rogers the otlier day and he says that the Bureau of
Foreign and Domestic Commerce will be very glad to send these through in
their official pouches to the Commerce Department offices abroad. Where there
are no Commerce offices, but consular or other offices of the State Department
are located, that he will have them transmitted to the State Department to be
placed in their official pouches.
Leigh feels that this will be much safer than sending them direct, as in some
countries catalogs in going in are held for payment of duties which would
either hold them up for some period of time or obviate any chance of them being
delivered at all. All of these may be sent directly to his office if you wish
but addressed to the various offices for which they are intended and he will
see that they get into the proper channels.
" Exhibit No. 400 " is a letter of January 31, 1930, from Burdette S.
Wright, an officer of the parent corporation, to Mr. Leighton W.
Rogers.
(The letter referred to w'as marked *' Exhibit No. 400 *" and is
included in the appendix on p. 973.)
Mr. Hiss. The third paragraph of that letter reads as follows :
i\Iy company has expressed its appreciation in no uncertain terms of the
assistance which it has received from the Department of Commerce and in
sales problems, especially exports, from the Aeronautics Trade Division. As
an example, your aeronautics specialist in South America was instrumental
last year in paving the way for, and in the consummation of, a sale for six
of our airplanes in Brazil — a market from which we have not received any
business for years. Such contributions to marketing constitute aid of original
and outstanding value.
Because of the strong competition offered by European aircraft manufac-
turers in the Far East, the embargo against United States aircraft in Australia
(which it has been impossible to have lifted through diplomatic channels and
by correspondence) and the missionary work which .should be done at this
time in the Far East in general —
That is missionary work in the sale of munitions?
Mr. Allard. For aircraft, I suppose.
Mr. Hiss (continuing reading) :
we are naturally very much interested in having an impartial observer for
the aeronautics industry cover those territories in the same manner in which
South America has been covered by your Bureau. The time is particularly
opportune to have a qualified aeronautics man visit Australia, New Zealand,
and, if possible, South Africa. The Chinese market needs attention, particu-
larly because of the price competition offered by European makers.
We have known for some time that the Department was asking Congress
for funds to enable it to carry on and extend this foreign field work for the
aeronautics industry, and this letter is being written to ask you about the
status of that request for appropriations. Frankly, the company wants the
assistance which these appropriations will bring into being.
Your company is in favor of increasing the appropriations for
maintaining commercial attaches abroad, Mr. Allard?
820 MUNiTioisrs industry
Mr. Allied. We were at that time.
jNIr. Hiss. Has your policy changed since that time ?
Mr. Allard. I do not think so; no.
Mr. Hiss. " Exhibit No. 401 " is a letter from Mr. Leighton W.
Rogers, on the letterhead of the Department of Commerce, dated
May 12, 1933, to Mr. Webster, marked " Confidential."
(The letter referred to was marked " Exhibit No. 401 " and is
included in the appendix on p. 974.)
Mr. Hiss. That letter, in part, reads as follows :
Kindly refer to my letter of April 14, about the visit of the Brazilian Army
air-service officers who arrived yesterday on the " Southern Cross." It would
l)e impolitic, I believe, to mention the proposition mentioned below to the
JBrazilian group now here.
In connection with their visit, I note from correspondence from our Rio de
Janeiro office that Captain Henrique Dyott Fontenelle was not included in the
mission and, according to our office, was the principal advocate of Brazil's
purchase and virtual standardization upon American aeronautics equipment.
The Rio de Janeiro office suggested that some American manufacturers or
group of them might desire to pay Fontenelle's way to this country, taking
advantage of the present low steamship rates. (First-class round-trip passages
from liio de Janeiro to Chicago and return now available for about $250.00, such
round-trip passages being good for a period of six months in connection with
the Century of Progress Exposition at Chicago.)
It is understood that Captain Fontenelle can arrange to make the trip, insofar
as leave from his duties is concerned. This man has been placed in charge of
the organization of the observation group of the army.
I quote from a report dated April 13 from Mr. Pierrot, and am pleased to
attach the statement referred to therein —
He was the commercial attache in Rio?
Mr. Webster. Yes, sir.
Mr. Hiss (continuing reading) :
I have just secured a copy of the recommendations made by Fontenelle
during the first two weeks of the revolution, when the War Dept. was in a
quandary as to what type of equipment to purchase, and when a tremendous
amount of pressure was being brought upon War Dept. officials by French
and British manufacturers to buy their equipment. This translation of Fonte-
nelle's report is of particular interest in substantiating the statements I made
in my letter to the effect that he, more than any other single flying officer, had
been responsible for the purchases of the large number of American planes
acquired by the army during the latter months of the revolution.
I am passing this suggestion on to you without any recommendation on my
part, as well as to other United States manufacturers likely to be interested
and who have been active in the Brazilian market.
The Chairman. Mr. Hiss, what was the date of the suggested
request for a squadron of planes or an airplane carrier going south?
Mr. Hiss. That was in September 1930. " Exhibit No. 402 " is a
letter of February 18, 1931, from Mr. Osborn S. Watson, commercial
attache, to Mr. Dickson, charge d'affaires.
(The memorandum referred to was marked " Exhibit No. 402 "
and is included in the appendix on p. 975.)
Mr. Hiss. " Exhibit No. 403 " is a letter of March 24, 1931, from
Mr. Leighton W. Rogers to Mr. Allard. The memorandum that has
been marked " Exhibit No. 402 ", as will be noted, was enclosed in
the letter, " Exhibit No. 403."
(The letter referred to was marked " Exhibit No. 403 " and is
included in the appendix on p. 976.)
Mr. Hiss. The first paragraph of Mr. Watson's report to Mr.
Dickson, the charge d'affaires, reads as follows :
MUNITIOlSrS IISTDUSTRY 821
Referring to previous conversations on the subject of the pending purchase
■of aeronautical equipment by the Finnisli Air Corps, for which they have
appropriations totalling approximately FMKs 60,000,000 (residue from 1930
to 1931 new allowances), the immediate purchase of 10 airplane engines,
possibly 18, at around $6,500 each, which has been debated for a number of
months is, according to my latest information, to be decided on within a week
or ten days. * * *
This present engine order is of considerable importance to American aero-
nautical manufacturers ; it represents the first order of any importance for
engines for military use to be made available to American manufacturers
in as advantageous a prospect, it is definitely the first order for airplane
engines which American manufacturers have had as good a chance to get
in Finland ; if this order goes to America, it opens up very good prospects for
future business in Finland, and would very much strengthen the chance for
doing business in surrounding countries in the Baltic States and Scandinavia.
One of the American companies, the Curtiss-Wright Export Corporation, has
devoted considerable time and money in following up this opportunity, which
I uncovered in October 1929 ; in June of last year they sent a demonstrating
mission of three airplanes to Finland at large expense and since then have
had three highly paid men visit Finland for varying lengths of time. The
United Aircraft Export Corporation have also sent one man to Finland in
connection with this matter, having shown an active interest in it some months
after Curtiss-Wright had earnestly taken it up.
In view of the apparent political sentiment in the Government here against
the purchase of American engines, even though the technical board in the
general staff prefer the American engines, I believe that it would be of con-
siderable assistance if certain Government officials who might have a say in
the final decision could be informed of the facts in the matter, as to Amer-
ican deliveries, etc.
" Exhibit No. 404 " is an excerpt from a report to the Director of
the Bureau of Foreign and Domestic Commerce, attention Mr. Leigh-
ton W. Rogers, which was enclosed in a letter of April 7, 1933, from
Leighton W. Rogers, Chief Aeronautics Trade Division, to Mr. Wil-
liam Goulding, vice president Curtiss-Wright Export Corporation.
(The report referred to was marked " Exhibit No. 404 ", and is
included in the appendix on p. 976.)
Mr. Hiss. The letter of April 7, 1933, from Mr. Rogers to Mr.
Goulding will be " Exhibit No. 405."
(The letter referred to was marked " Exhibit No. 405.")
Mr. Hiss. " Exhibit No. 405 " reads as follows :
You may find of interest and value the attached copy of a letter dated
Febnaary 23 from Conunercial Attach^ "Watson, at Helsingfors.
Needless to say the attached is strictly confidential.
The report from Mr. Watson, " Exhibit No. 404 ", reads in part as
follows :
In connection with this Czechoslovak purchase, even though it was a propo-
sition of a kind of barter, the very fact that the Finns bought from the Czechs
instead of from the English makes me believe to a certain extent that all of
this official pressure by the English is not as effective as it might be. I have
heard the sentiment voiced recently that perhaps this oflacial pressure propo-
sition has gone a little too far up here. I sincerely trust that this is the case.
A few days ago at a dinner the secretary of the legation was talking to Mr.
Ryti, the governor of the Bank of Finland, about Finnish Government pur-
chases, and Mr. Ryti categorically stated that it was a Finnish Government
policy to buy the best things they could at the cheapest price, regardless of
political considerations. This sounds rather funny to me in the face of some
recent Finnish Government purchases from England, but I am taking a spark
of hope from this Czechoslovak order. I expect our two big companies at
home, who really have spent a considerable amount of money up here in
Finland, are more or less inclined at this time to let this particular small
territory ride for the time being. They have not had anybody up here at all
822 MUNITIONS INDUSTRY
since I came back. Both of them have very good agents, but I do not think
that pressure from headquarters from time to time is a very salutary thing.
I suppose he means '' I do think."'
Mr. Allard. I think so ; yes, sir.
Mr. Hiss (continuing reading) :
I certainly hope that it may be possible within the not too distant future for
some sort of cooperation to be brought about between the American aircraft
firms who do a good deal of export, as referred to in Mr. Warner's article about
which I wrote you a few days ago, so that we may then be able to take off
our coats and dive right into the middle of these Government orders.
Do you still think that the commercial attaches did not act as
agents for your own company, when they took off their coats and
dove into orders?
Mr. Allard. No, sir; I think they were doing their duties at that
time.
The Chairman. The Exhibit would indicate that they not only
dove in but dove into the middle of it.
Mr. Allard. Right.
Mr. Hiss. It was good diving. " Exhibit No. 406 " is a letter from
Leighton W. Rogers, Chief Aeronautics Trade Division, Department
of Commerce, to Mr. C. W. Webster, marked " Confidential ", dated
March 12, 1932.
(The letter referred to was marked " Exhibit No. 406 " and is in-
cluded in the appendix on p. 977.)
Mr. Hiss (reading) :
As you may have already heard, there is an aviation mission on the west
coast from Canton which arrived in Seattle on March 8. It consists of Briga-
dier General Woo G. Garr, commander of the iSecond Squadron of the Canton
Aviation Bureau, and Colonel S. K. Yee, director of the Cantonese Intelligence
Bureau. These officers are representing General Chang Wei Jung, commander
of the Canton Aviation Bureau, whom you will recall as former chief of tlie
Nationalist Air Force at Nanking. According to Trade Connnissioner Edward
P. Howard * * *
He was stationed in Shanghai, was he not?
Mr. Allard. He was.
Mr. Hiss. And he is now representing the Douglas Aircraft
Company ?
Mr. Allard. That is correct.
Mr. Hiss (continuing reading) :
* * * they came to inspect aircraft factories and advise the San Fran-
cisco Chinese regarding airplane purchases for presentation to China.
I could not advise you of their presence in the United States before, since I
was requested not to from China. For obvious reasons I urge your keeping the
information contained in this letter in strict confidence. Under no circum-
stances should any publicity be given out about the mission.
I understand that the two officers arrived from Seattle at San Francisco
yesterday, where they will stay for approximately 2 weeks. They will then
proceed to Los Angeles, Chicago, Detroit, Washington, New York, and Boston.
I shall endeavor to arrange it so that they will visit Buffalo.
That is where your plane-manufacturing company is located?
Mr. Allard. Yes, sir.
Mr. Hiss. Turning to the last paragraph.
You can get in touch with the mission through our Mr. Wesley Ash, district
manager, United States Bureau of Foreign and Domestic Commerce, at 310
Customhouse, San Francisco. In doing so please make no mention of the fact
that I suggested this action.
MUNITIONS INDUSTRY 823
Mr. Rogers is now executive vice president of the Aeronautical
Chamber of Commerce, is he not?
Mr. Allard. He is.
Mr. Hiss. I will offer as " Exhibit No. 407 " a letter dated Decem-
ber 3, 1931, from Mr. Goulding to Mr. Hewlett regarding Finland.
(The letter referred to was marked " Exhibit No. 407 ".)
Mr. Hiss. The letter reads:
Mr. Osborn Watson, American commercial attache, Helsingfors, Finland, is
now in this country on a brief leave. He plans to be in Buffalo on December
9th for the purpose of visiting j'our plant. I have asked him to telephone you
upon his arrival and that you will see that he is taken care of.
Mr. Watson is a very fine chap personally, and has been of great service to
us endeavoring to sell aeronautical equipment in Finland. We finally succeeded
in placing a number of Cyclone engines in operation there. We have hopes of
developing this further to include aircraft. Mr. Watson is especially interested
in aeronautics.
Anything you can do for Mr. Watson will be greatly appreciated.
I will now offer as " Exhibit No. 408 " a letter dated February 21,
1933, from Mr. Goulding to Mr. MacGowan, acting commercial
attache, Bogota, Colombia.
(The letter referred to was marked " Exhibit No. 408 " and is
included in the appendix on p. 978.)
Mr. Hiss. Mr. MacGowan is now in the export business in New
York, connected with a former official of the Colombian Govern-
ment, is he not ?
Mr. Allard. Is he ? I do not know.
Mr. Hiss. The letter reads :
Deab Mb. MacGowan : I want to acknowledge receipt of your letter of
February 1st and extend our appreciation of the great assistance we can always
get from your office.
The Department in Washington advised us that they had a cable from you
asking us to submit information on the planes that we are able to offer. As
we have already passed this information, by cable, to Joaquin Samper * * *,
He was your representative in Bogota ?
Mr. Allard. And is still ; yes.
Mr. Hiss (reading) :
* * * and knowing his close contact with you, I have simply cabled you in
reply that he has all the necessary information.
I will now offer as " Exhibit No. 409 " a letter dated May 23, 1932,
from Melvin Hall in Paris to Julian E. Gillespie, American com-
mercial attache, Istanbul, Turkey.
(The letter referred to was marked " Exhibit No. 409 " and is
included in the appendix on p. 978.)
Mr. Hiss. The letter reads :
Dear Jtjliein : The attached copy of a letter to the Secretary of Commerce,
which I am enclosing for your information, is self-explanatory,
I am indeed appreciative of the cooperation which we have received from the
Department of Commerce and particularly from yourself. Your assistance
and wise counsel have been invaluable ; and when I say that we are counting
greatly upon your good advice and collaboration in our future dealings with
the Turkish Government, you know what I mean.
I will now offer as " Exhibit No. 410 " a letter dated May 11, 1933,
to Mr. Gillespie from Mr. Allard.
(The letter referred to was marked " Exhibit No. 410 " and is in-
cluded in the appendix on p. 979.)
824 MUNITIONS INDUSTRY
Mr. Hiss. I am referring to the second paragraph on the first page,
the last sentence thereof [reading] :
Your courtesy in letting nie use your office as you did * * *.
You were in Istanbul for a while ?
Mr. Allard. I was there 3 months ; yes.
Mr. Hiss [reading] :
* * * will always be remembered and your good nature and sound judgment
and assistance to me in our discussions of my many problems were priceless.
Yesterday I x'eceived your cable about the Kayseri situation * * *.
That was the Turkish manufacturing plant?
Mr. Allard. That is right.
Mr. Hiss. To which you gave a license for the manufacturf; of
planes ?
Mr. Allard. Yes.
Mr. Hiss (reading) :
* * * and I am grateful for your thoughtfulness in sending it to me.
When you send such cables or incur any expense on Curtiss business, will you
please collect the costs from Bob Farnsworth. There is no reason in the world
why your office should stand these expenses, and I want your definite promise
that you will collect them from Bob.
I have the complete approval of the board of directors to replace Capt. Coon
at the factory and to send out the necessary personnel to step up production to
completely satisfy the Turkish Government. Today I am interviewing Bob
Simon, who has liad a vast amount of experience in factory management with
Fairchild, Berliner-Joyce, and ourselves. He has been highly recommended by
Ted Wright, of our Buffalo plant, and if my interview with him satisfies me, he
will probably be the man we will send out, and you may rest assured that we
are working just as fast as it is humanly possible, and will get him out there
on the earliest boat. Substantially, my plan is to do as I told you when we
discussed this problem in your office.
You discussed your sales operations in Turkey thoroughly with
Mr. Gillespie?
Mr. Allard. Yes. This particular thing refers to the operation of
the American personnel who were on the pay roll of the Turkish
Government.
Mr. Hiss. I am referring to the last 2 or 3 sentences now of
the last paragraph, which read :
The best dope I can get on the situation in the future for Department of
Commerce is that even though the Department's activities in foreign fields are
curtailed, the good men, such as yourself, will be retained on the job under
either the State Department or the Consular Service, or in some manner, and
I am sure that nobody will replace you in the matter of value to the Govern-
ment. Don't worry. We all hope for the best, and you may rest assured that
you have some great boosters working for you here.
The Chairman. Who was Mr. Farnsworth?
Mr. Hiss. Mr. Farnsworth was a representative of the Curtiss Co.
This letter was written to Mr. Gillespie, the American commercial
attache.
The Chairman. Farnsworth was their representative where?
Mr. Hiss. At one time in Washington and later in Turkey ; is that
correct ?
Mr. Allard. That is correct; yes, sir.
Senator Pope. Did he comply with your request here and collect
the costs from Farnsworth,?
Mr. Allard. Yes ; he did.
MUNITIONS INDUSTRY 825
Senator Pope. About what would that amount, or what did that
amount to?
Mr. Allard. It might have been 10 Turkish pounds for a cable-
gram, which woukl be, roughly, $4 or $5, American. They are all
small amounts.
Senator Pope. Did he observe that strictly with reference to all
expenses that he incurred in assisting you in your business?
Mr. Allaed. I could not say, Senator, as to that. I do not know
how many expenses he incurred. But he did submit from time ta
time some items or I paid him personally when I was there, if a
cablegram was sent; or if I used his stenographer, I would pa}' her^
They were small amounts.
Mr. Hiss. But none the less, as indicated in a previous exhibit,,
your company was interested in further appropriations for the work
of the commercial attaches.
Mr. Allard. Certainly.
The Chairman. Mr. Webster. I w^ant to go back to " Exhibit No.
392 ", which was your letter to Mr. Allard, you writing from Wash-
ington to him in New York, saying:
I was in Mr. Ingalls' oflBce this morning and his oflBce urged that we push
in every way possible the completion of the arranging for the carrier to go to
South America.
Mr. Webster. That is not my letter, Mr. Chairman.
Mr. Hiss. Is it Burdette S. Wright ?
The Chairman. That is what it is; yes. Then. Mr. Allard. I will
ask you, perhaps you can answer this question. Was this arrange-
ment made to send a carrier to South America ?
Mr. Allard. No, sir.
The Chairman. It was not sent?
Mr. Allard. Never sent; no, sir.
The Chairman. You are, of course, aware of the fact that a car-
rier is in South America now ?
Mr. Allard. I have heard there is one that went down there on a
shakedown cruise.
The Chairman. And is now in Rio ?
Mr, Allard. Yes.
The Chairman. Have you had any hand in bringing about the
designation of that carrier for that trip ?
Mr. Allard. Absolutely not. I just learned it in the last week.
The Chairman. I should like for a moment to refer to " Exhibit
No. 394 " which was Mr. Webster's letter to Mr. Wright concerning
the contemplated business of Commander Merino of Chile. In this
case, Mr, Webster, you were appealing for an effort to be extended
to accomplish a worthwhile reception for Commander Merino when
he came, were you not?
Mr. Webster. Yes, sir.
The Chairman. You were suggesting that an arrangement be made
for permission to be extended to him to visit A'arious army and navy
stations ?
Mr. Webster. Yes, sir.
The Chairman. And you wanted arrangements made for him to
meet the Army and Navy Secretaries and, if possible. President
Hoover, himself ?
Mr. Webster, Yes, sir.
826 MUNITIONS INDUSTRY
The Chairman. Was this arrangement made? Did he come?
Mr. Webster. He did visit Washington. I do not think — I am
quite sure that he did not get to see President Hoover, but he met a
great many officials in the Army and Navy Air Services.
The Chairman. Did he visit the Army and Navy stations?
Mr. Webster. He visited a number of them. I do not know that
he visited all of them.
The Chairman. This you thought at the time was advisable and
necessary in order to offset the efforts of the Prince of Wales?
Mr. Webster. Partially so, yes, sir; and also to repay the many
courtesies that Commandante Merino and the Chilean Government
officials had extended to American Army and Navy officials in Chile.
The Chairman. Does not this all tend very strongly to make it
appear that in the business of selling to South American countries
arms and war supplies, it has become a battle between the heads of
governments primarily ?
Mr. Webster. By heads of governments, do you mean a battle
among the heads of one particular government?
The Chairman. No: a battle between the heads of different gov-
ernments.
Mr. Webster. I would not say so, sir; I do not believe so.
The Chairman. Here was the Prince of Wales on a goodwill tour
in South America. He had gone to Chile and had made a very
strong impression. Inviting Commandante Merino to come to Brit-
ain and be his guest there naturally would have a tendency to dis-
tract Merino from the North American market?
Mr. Webster. It might be so construed, Senator. But the Prince
of Wales was very nicely entertained and courteously entertained in
Chile and this was simply the return of an invitation to come and
visit England.
The Chairman. But there was a danger that all of this was going
to have an effect upon trade.
Mr. Webster. Possibly so; yes, sir.
The Chairman. And the English makers of planes might get into
a market that you had come to get a pretty large percentage of?
Mr. Webster. Possibly so.
The Chairman. So that there was every advantage to be looked
forward to in having American officials here when Merino came here
and be as nice to him as the Prince of Wales might have been when
he vrent to Britain, as he planned to do.
Mr. Webster. Possibly so; yes, sir.
The Chairman. So to that extent we do find agencies of the gov-
ernment fighting for these orders for munitions, do we not?
Mr. Webster. We find agencies of the government — yes — trying
to sell the products of their respective countries.
The Chairman. That is right.
Mr. Hiss. Mr. AUard, as a practical matter, do you not frequently
find that men who have served as commercial attaches or trade com-
missioners abroad have established such valuable contacts with for-
eign governments and with foreign purchasers in general that you
frequently are glad to have them become employees of your com-
pany ?
Mr. Allard. I would not say it was a common practice, by a long
shot.
MUNITIONS INDUSTRY 827
Mr. Hiss. How about the other aircraft companies in general?
Mr. Allard. I do not know. I know of one.
Mr. Hiss. Mr. Howard who was formerly in Shanghai is now
representing the Douglas Aircraft Co. out there.
Mr. Allard. That is correct. That is the only one I know of.
Mr. Hiss. Mr. Carleton Jackson, formerl}^ at Rio. is now a repre-
sentative of the Sperry Corporation?
Mr. Allard. I do not think he is a representative. He is doing
some work for a lot of different manufacturers in this country.
Mr. Hiss. According to the files you say he is a representative.
Mr. Allard. Is that so ?
Mr. Webster. He is really not a representative.
Mr. Hiss. Mr. Pierrot, A. Ogden Pierrot, who was formerly com-
mercial attache in Rio is now on your payroll. Mr. Webster, is he not?
Mr. Webster. Yes, sir.
Mr. Hiss. " Exhibit No. 350 " already in evidence is a letter of
April 20, 1933, from Pierrot to Leon.
Mr. Webster. That is correct.
Mr. Hiss. This reads :
Thanks for your cable. Sorry things turned out as they did, but possibly
I can be of use to you even though I am not on the payroll.
Mr. Pierrot was of aid to you even though he was not on the
Curtiss-Wright pay roll at that time ?
Mr. Webster. Yes, sir ; he was trade commissioner.
Mr. Hiss (reading) :
The thing I'm most interested in now is the matter of representation. Your
cable gives me the impression that you are not interested in improving the
quality and efficiency of your representation here. If that is the case, I'm
afraid you are making a great mistake, for there is a fine order in the air
and I should like to see you get it — and if I were with you I'd hope to share
to a small degree in the profit.
Mr. Hiss. I offer as " Exhibit No. 411 " a letter of April 20. 1933,
addressed to Mr. Webster from Pierrot.
(The letter referred to was marked " Exhibit Xo. 411 " and is in-
cluded in the appendix on p. 980.)
Mr. Hiss. Mr. Pierrot was not at that time an employee of yours?
Mr. Webster. No, sir.
Mr. Hiss (reading) :
Had Leon's cable this morning, and want to tell you that I appreciate Leon
having thought of me, and that I realize that conditions are not such now
as to justify you in adding to the expense of your organization.
I have intended writing to you for some time, that is, for the past two
weeks, in connection with your representation here. You've got to get
a good outfit with the best possible government connections. Don't lay off
this market now in the hope that there will be another mixup which will
put the ins out. Even if that occurs, it is no reason why you should sit by
and see chances for business go by the boards. There is considerable talk
right now, and some degree of certainty, that there is gtnug to be some more
buying by the Government.
In connection with the use of Army flyers' help in a demonstra-
tion of your planes, in addition to Captain Cannon, who was men-
tioned as part of the European tour, Lt. James E. Parker was also
on that tour, was he not?
]SIr. Allard. That is right.
828 MUNITIONS INDUSTRY
Mr. Hiss. And Lieutenant Doolittle, who is now, I believe, Major
Doolittle, has been on other tours for your company?
Mr. Allard. Yes, sir.
Mr. Hiss. He toured in South America, did he not?
Mr. Allard. That is correct.
Mr. Hiss. And also in China?
Mr. Allard. Yes, sir. But not as an officer of the Air Corps. He
is with the Shell Co.
Mr. Hiss. He has now resigned?
Mr. Allard. Yes, sir.
Mr. Hiss. But at the time he made the trip to Europe he was a
member of the United States Army, was he not?
Mr. Allard. I think he was.
Mr. Webster. He was not in the Army when he went to Europe.
Mr. Allard. He was with the Shell Co.
Mr. Hiss. How about when he made the trip to South America?
Mr. Webster. He was in the Army at that time, when he went to
South America. He was not in the Army when he went to Europe.
Mr. Hiss. Lieutenant Doolittle or Major Doolittle has been help-
ful in the sale of aviation equipment since he left the Army, as well
as Avhile he made these good-will tours; is not that correct?
Mr. Allard. That is correct.
The Chairman. This is the same Major Doolittle who has served
on the so-called " Baker Board " ?
Mr. Allard, That is correct.
Mr. Hiss. I offer as " Exhibit No. 412 " a memorandum dated July
1, 1929, from B. S. W.— that is Burdette S. Wright— to Mr. Kussell.
(The memorandum referred to was marked "Exhibit No. 412",)
Mr. Hiss. Who is Mr. Russell?
Mr. Allard, Mr. Russell at that time was vice president of the
Curtiss Airplane & Motor Co. ; that is, in 1929.
Mr. Hiss. That is the engine factory?
Mr. Allard. No. That is the airplane factory in Garden City at
that time.
Mr. Hiss (reading " Exhibit No. 412 ") :
I saw Steve Early, Washinnton representative of the Paramount News Reel
people, and he is working on the procuring of a Curtiss Hawk from the Army
for Doolittle to make some acrobatic pictures over New York City.
Early has obtained authority for the Army to send a plane from Boiling
Field to New York to be turned over to Doolittle there. In view of the fact
that we may be able to get the caption " Curtiss Hawk " it would be well to
have some one get in touch with Jimmie in this matter.
The Chairman. What is the date of that?
Mr. Hiss. July 1, 1929. Of course, any news-reel picture of a
Curtiss Hawk with Major Doolittle stunting it would be very good
for publicity.
Mr. Allard. It certainly would.
WAR and navy departments AID IN FOREIGN SALES OF AIRCRAFT
Mr. Hiss. Is it not the official policy of the War and Naval De-
partments to encourage the American aircraft industry in the devel-
opment of foreign business?
Mr. Allard. I believe it is so stated.
MUNITIONS INDUSTRY 829
Mr. Hiss. I offer as " Exhibit No. 413 " an official memorandum of
the Navy Department, Bureau of Aeronautics, dated August 5, 1933.
(The memorandum referred to was marked " Exhibit No. 413 " and
is inchided in the appendix on p. 981.)
Mr. Hiss. In paragraph numbered 3, under the heading " Policy ",
there is this language :
The War and Navy Departments will encourage the American aeronautical
industry in developing foreign business and assist in such development so far
as consistent vpith national policy and the needs of the national defense.
Have you found that the American Navy or Army officials, when
traveling in Europe, have spoken favorabl}' of American military
equipment ?
Mr. Allard. I have no way of knowing what they have done,
unless we have been so advised in correspondence.
Mr. Hiss. I will offer as " Exhibit No. 414 " a letter of October 12,
1932, to Mr. F. C. Nichols from Mr. Goulding, vice president of the
Export Corporation.
(The letter referred to was marked " Exhibit No. 414 " and is in-
cluded in the appendix on p. 983.)
Mr. Hiss. Mr. Nichols is with the Colt's Patent Fire Arms Manu-
facturing Co. The last paragraph of this letter reads :
In another letter which I have just received from Mr. Farnsworth, * * *
Mr. Farnsworth was a representative of your company ?
Mr. Allard. Yes, sir.
Mr. Hiss (reading) :
* * * he refers particularly to the recent visit of General MacArthur to
Turkey, and the fact that General MacArthur was received with great pomp
and enthusiasm by the Turkish dignitaries. Naturally, the general was made
familiar with the business which we are carrying on with the Turkish authori-
ties, and, apparently, he talked up American military equipment to the skies
in discussions which he had with the Turkish general staff. Bob Farnsworth
says that for safety sake, he is not putting down in black and white what was
said, but I rather gather that your equipment and ours did not suffer from
lack of praise.^
The equipment to which he refers is Colt's equipment, which
would be machine guns and rapid-fire guns in general ?
Mr. Allard. Yes, sir.
Mr, Hiss. Revolvers and automatic rifles ?
Mr. Allard. I do not know the list of products that they make.
Mr. Hiss. He finishes the letter with —
This, of course, is for your confidential information.
Mr. Webster, can you explain the background of your sales efforts
in Guatemala, Central America?
Mr. Webster. I did not personally handle Guatemala.
Mr. Hiss. I offer as " Exhibit No. 415 " a letter of May 28, 1934,
from Owen Shannon to Mr. Hewlett.
(The letter referred to was marked " Exhibit No. 415 " and is in-
cluded in the appendix on p. 983.)
1 On Sept. 13, 1934, Gen. Douglas MacArthur wrote a letter to the committee, denying
the above allegations of Mr. Goulding. This letter was read into the record of the
morning of Sept. 13, 1934, and appears in part V.
830 MUNITIONS INDUSTRY
Mr. Hiss. This states in the second paragraph :
We have no agent in Guatemala but make all of our contacts through
General John A. Considine, who is a major in the United States Army, loaned
to the Guatemala Government.
Major Considine suggests that it would be more satisfactory for us to deal
directly with the Government through him rather than attempt to deal through
any local agent, as his recommendations are followed by the President in the
purchase of all types of military equipment.
Mr. Webster. Mr. Hiss, I do not believe Major Considine is now
in the United States Army, although I am not sure. I think he is a
retired Army officer employed by the Guatemalan Government. I
am not certain about that. That is my impression,
Mr. Hiss. So far as you know, he is very favorable to American
equipment ?
Mr. Webster. Yes.
The Chairman. Mr. Hiss, this letter of October 12, by Goulding
to Mr. Nichols, concerning General MacArthur's visit to Turkey
makes reference to this :
In another letter which I have just received from Mr. Farnsworth * * *,
Is that other letter in evidence ?
Mr. Hiss. We have found no copy of that letter; no, sir.
The Chairman. Mr. Webster, how generally is it true that Army
and Navy officers are playing the part that General MacArthur
seems to have plaj^ed there in Turkey, the part pretty nearlj^ of a
salesman, which is what is very closely what it looks like?
Mr. Webster. I have had very little experience in that particular
line. Senator. That is not my particular territory and I am not
familiar with it.
The Chairman. It makes one begin to wonder whether the Army
and Navy are just organizations of salesmen for private industry,
paid by the American Government.
Mr, Hiss. I am referring now to a document which I will offer
in evidence as " Exhibit No. 416 ", which is a letter of February 3,
1932, to Mr. Lawrence Leon from Mr. Webster.
(The letter referred to was marked " Exhibit No, 416 " and is in-
cluded in the appendix on p. 984.)
Mr. Hiss. This letter reads :
For your information, I enclose hei'ewith a letter which I wrote Burdette
Wright, who is in charge of our Washington office, in regard to the assignment
of a U.S. naval officer to accompany the two Argentine naval officers who, we
understand, will shortly arrive here for the purpose of selecting and purchasing
aircraft equipment.
We are proceeding very cautiously in Washington and believe that when the
request is made to our naval intelligence, if it is not already made, we can
more or less guide their choice and see that an officer is selected who would
most properly fit the job.
I noAv offer as " Exhibit No. 417 " a letter, referring to the same
subject, being dated January 29, 1932, from Mr, Webster to Mr.
Burdette S. Wright.
(The letter referred to ^vas marked " Exhibit No. 417".)
Mr, Hiss. This letter reads :
I learned today through a confidential source from a friend who is attached
to the Diplomatic Service in Buenos Aires that Captain Zar, head of tlie
Argentine naval aviation, has requested our Navy Department, through naval
intelligence, for permission to send two Argentine naval offif-ei's fi-oni the Air
MUNITIONS INDUSTRY 831
Corps to the United States and have assigned to tliem on their arrival an
officer of the American Naval Air Service for the purpose of advice and assist-
ance in selecting new airplane equipment for the Argentine Navy. This in-
formation is supposed to be very confidential. Our Argentine office also knows
of this request and in a very short time will have the names of the two officers
who will visit the United States.
Inasmuch as our information came to us confidentially from naval intelli-
gence, it may be rather embarrassing to approach them unless we say we
received the information from Buenos Aires. The reason for the secrecy on
the part of the Argentine Navy is the fact that they wish to sidestep, if pos-
sible, receiving quotations from British manufacturers. Their desire is to
purchase American equipment, but inasmuch as British prices would be at
least one-third below ours due to the difference in exchange, if these quotations
are received from England, it would be difficult for the Argentine naval officers
to approve American prices.
It occurred to me that you could in some way start preliminary work leading
toward the proper selection of the American naval officer to be assigned to the
job. I am passing along this information to you for your suggestions.
Regardless of what make of airplanes is selected, our engines will undoubt-
edly be used owing to our recent engine license contract with the Argentine
Government, but we naturally should like to secure the airplane business as well.
Captain Zar is a very intimate friend of ours and would prefer Curtiss-Wright
airplanes to any others, but he must proceed cautiously so as not to encounter
criticism after the selection is made. Please let me have your suggestions at
your early convenience.
I offer as " Exhibit No. 418 " a letter of June 12, 1933, from Mr.
Shannon to Mr. Earle.
(The letter referred to was marked " Exhibit No. 418 " and is in-
cluded in the appendix on p. 985.)
Mr. Hiss. It reads :
We are informed that a Major A. R. Harris has been acting as U.S. military
attache to the legations in all five Central American Republics and Panama.
If this is so, it would probably be very much worth while for you to see him
and load him up with Curtiss-Wright dope, catalogs, and so forth. If he is to
be in New York before his return south, we would like to have an opportunity
to see him.
Of these six countries, we believe we have fairly good agents in Panama and
Salvador, both of whicli have bought Curtiss-Wright equipment. By the way,
we just received an order from Salvador last week for three Ospreys, which,
we understand, is the first military equipment purchased by them.
We understand Guatemala, Honduras, and Nicaragua are contemplating
purchasing planes as soon as they have funds, and as you already know,
Honduras is planning to buy two or three ships now.
It is, therefore, important that we use every possible channel to put Curtiss-
Wright planes across to all of these countries and Major Harris might prove
helpful.
Have the military attaches of the United States proved helpful in
putting Curtiss-Wright planes across ?
Mr. Webster. Yes, sir; in putting all types of American planes
across.
Mr. Hiss. I offer as " Exhibit No. 419 " a letter dated May 23,
193'3, from Burdette S. Wright to Mr. Webster.
(The letter referred to was marked " Exhibit No. 419 ".)
Mr. Hiss. This letter reads :
Have just returned from having lunch with Major John Weeks of the Cavalry,
who is going down to Chile as military attache. He is a bachelor and I know
that you can give him some real good dope on Chile.
He is leaving Washington the night of May 30, arriving in New York the
next morning, and sailing on June 2. This should give him two nights in New
York. I have told him that you would like to entertain him one night. He
said that he might have to go out with friends one night, but would probably
8:!S76— 34— PT 4 10
832 MUNITIONS INDUSTRY
stay at the Pennsylvania Hotel. We can arrange the details of your meeting
him in New York a little later just before he leaves Washington. If he cannot
get together with you at night, he will want to see you some time during the
day on May 31 or June 1. I hope that this time will be convenient to you. If
you are going to be away those days, you might want to come to Washington
and see him, but I think it would be pretty good ball to entertain him in New
York if convenient.
He seems to be a live, wide-awake chap and is extremely interested in the
background in regard to Chilean aviation and our work there and what our
plans are for the future.
Senator Pope. Did you entertain him?
Mr. Webstee. No; I did not meet him here at all. I met him at
Santiago, Chile, sometime later.
Mr. Hiss. Has your company been able to secure for your foreign
customers the service of American military officers in inspecting
planes sold to foreign governments by you?
Mr. Allard. The company itself has not been able to. We have
assisted the legations of the specific foreign governments by supple-
menting their requests and acknowledging their willingness to have
such inspections made.
Mr. Hiss. Have you ever had any difficulty in aiding the legation
in securing such requests?
Mr. Allard. I think at one time we did.
Mr. Hiss. Do you find that difficult at the present time?
Mr. Allard. As a matter of fact, we refrain from it at the present
time and leave it entirely up to the embassies or legations.
Mr. Hiss. I offer as " Exhibit No. 420 " a letter dated May 23,
1934, to the Curtiss-Wright Export Corporation from William A.
Reeks.
(The letter referred to was marked " Exhibit No. 420 " and is
included in the appendix on p. 985.) '
Mr. Hiss. The last page, paragraph marked 7 reads :
If the Argentines desire U.S. Army inspection of their Cyclones when being
built at our plant, this can be arranged by getting in touch with us, and we
will contact the Army inspector now stationed here at our plant, who will
arrange the matter. The Army inspector has been contacted and we have been
given assurance that he will be able to arrange this.
This letter is from Mr. William A. Reeks, of the engine company,
in Paterson to the Export Corporation with copies to Mr. Chapline,
Mr. Lucas, Mr. Kennedy, Mr. Colvin, and Mr. Shepley.
They are all officers of one or the other of the Curtiss companies.
Mr. Allard. They are all with the Wright Aeronautical except
Shepley. Shepley is with the Export Corporation. I might say
there, Mr. Hiss, if I may, that I do not know what the policy is with
the individual manufacturing units. I was referring merely to the
Export Co.
Mr. Hiss (reading) :
The inspection he will give the Argentine engines will be identical with the
inspection he customarily makes for the U.S. Army and will include full inspec-
tion right through manufacturing, through testing, and to shipping. The
Argentines will be required to pay the Army inspector the following for the
inspection : Cyclone geared, $125.00 per engine ; Whirlwind 250 direct, $100.00
per engine.
The following will apply to generators and starters: Per generator, $5.00;
per starter, $5.00.
Will you please also inform us on this point as to whether or not the Argen-
tines are interested. In most respects such an arrangement as outlined above
MUNITIONS INDUSTRY 833
will be to the best advantage of the Argentines if they require other inspection
than ours. It would undoubtedly cost them much less than if they had their
own inspector on the job and they will have the assurance of the U.S. Army
inspector, who is stationed at our plant and who is entirely familiar with
our engines.
Mr. Hiss. Paragraph 8 reads :
If the Argentines so desire, arrangements can be made so that the U.S.
Army inspector certifies the shipping documents to the effect that the engines
being shipped are the same as those which A.T.C. has been granted for the
type in question.
Mr. Hiss. I read further:
It is not definite whether the U.S. Army or U.S. Navy would issue any
written statement to the effect that they are or had bought certain materials.
However, we believe we can supply you with copies of statements issued by
the Aeronautical Chamber of Commerce, giving the Army and Navy contract
awards and showing contract numbers of same.
Have yon been able to secure letters of recommendation from the
Army or the Navy, Mr. Webster?
Mr. Webster. No recommendations particularly, but referring to
their use of certain of the products.
Mr. Hiss. Do the Army and the Navy help the engine and plane
companies bear the cost of development of new planes or new engines.
Mr. Allard?
Mr. Allard. I am not at all familiar with the contracting with
the Army and Navy on domestic purchases.
Mr. Hiss. Do they furnish technical assistance in connection with
the development of planes and engines?
Mr. Allard. Do the Army and Navy furnish technical assistance ?
Mr. Hiss. Yes.
Mr. Allard. That is clearly in the same category.
Mr. Hiss. I am referring to a letter dated in October 1932, in your
files and not a part of the record, in reference to an attack plane
which Mr. Webster states was developed by the Curtiss-Wright Co.
in conjunction with the United States Navy and Army Air Corps
which was used for ground attack on troops, trenches, etc. ; and in the
same letter Mr. Webster refers to a special gun mount developed by
the Curtiss-Wright Co. in cooperation with and for the Army Air
Corps.
And I further read from " Exhibit No. 271 ", which has heretofore
been put in the record, being a letter to Consul General Escobar
from Mr. Hewlett referring to certain complications appearing in
the report by Mr. Trimbach who has heretofore been identified as an
armament engineer, he says:
And further, since we have a very limited knowledge of sight installation
previously made it is recommended that we should discourage applying this
gun to our airplanes until after our own Government has proven them worth
while.
That would indicate that the use and experiments by the Govern-
ment of experimental planes and engines does help you bear part
of the cost of development, and that they also furnish technical aid,
as indicated by Mr. Webster's letter from which I read, and that they
also furnish assistance in trying them out in actual service ?
Mr. Webster. I think it is a part of the normal function of the
plane that has been developed to have somebody try it out in actual
834 MUNITIONS INDUSTRY
service. It is not saving us any expense, because we would not build
a. plane for one particular item.
Mr. Hiss. But the tryer in your case is either the United States
Army or the United States Navy?
Mr. Webster. Naturally, because any product we sell on export
has to be approved by them before we can sell it.
Mr. Hiss. Is it not also a fact that the business which the Curtiss
Co. does with the United States Army and Navy is really essential
for the existence of the company?
Mr. Webster. Certainly.
Mr. Hiss. That constitutes a major portion of your business, I
believe. In the hearings before the Subcommittee on Aeronautics of
the House Military Affairs Committee which were held last spring,
at pages 799 and 800, it appears that the total sales of the Aero-
nautical Co., that is the engine company, from 1922 to 1933, inclusive
were $18,000,000 to the Army and $25,000,000 to the Navy, and
all others $22,000,000, so that the Army and Navy constituted ap-
proximately two-thirds of your total business?
Mr. Allard. Yes.
Mr. Hiss. Is it not also true that in the last ie^y years the majority
of your non-United States military sales have been in the foreign
market?
Mr. Allard. Yes.
Mr. Hiss. At this same place in the hearings referred to it appeal's
your total sales in 1931, other than sales to the United States Gov-
ernment, were listed as $2,500,000, foreign sales, $1,500,000 ; for 1932.
total sales, $1,600,000, foreign sales, $1,000,000; in 1933, the total
was $1,800,000, and the foreign was $1,100,000.
In the report of these same hearings at page 1040 is shown a list
of the major aircraft activities and that the Navy engines were pur-
chased during the years 1927 to 1933 from one or two companies,
the Wright Aeronautical and the Pratt-Whitney.
Do you know whether the United States Government buys any
substantial quantities from any other engine company ?
Mr. Allard. I do not know. The records would show that.
Mr. Hiss. Do you know whether the prices of the Wright Engine
Co. on its sales to the Army or the Navy are higher than on its sales
to other customers?
Mr. Allard. I do not know. The Army and Navy audits, I think
should show that.
Mr. Hiss. Statements filed at this same hearing I have referred
to at pages 799 and 800 show during the years 1920 to 1933 the profit
on the Army sales was 9.27 percent, the profit on the Navy sales was
14.83 percent, and the profit on all other sales was only 5.81 percent.
In 1925 the engine sales to the Navy netted a profit of 31.88 per-
cent, according to the record submitted by the company; the sales
to the Army netted a profit of 93 percent. In 1926 the Navy profits
were 21 percent; in 1927 the Navy profits were 29 percent; in 1928
the Navy profits were 44 percent, and the Army 31 percent; in 1929
the Navy profit was 30 percent; and in 1933 the Army profit was
18 percent.
Similarly, with the Curtiss Airplane & Motor Co., in the same
hearing at page 1104 it is shown that the total sales for 1928 to 1933,
inclusive, were $4,900,000 to tlie Navy and $9,900,000 to the ±^ rmy,
MUNITIONS INDUSTRY 835
and only $5,800,000 to all others. In other words, more than two-
thirds of the Curtiss Airplane & Motor Co. business was sold to the
United States Government.
In that connection do you knoAV whether your company has ever
sold planes or engines to foreign governments at any cheaper price
than the same planes or engines were being sold to the United States
Government ?
Mr. Allard. No; not to my knowledge.
Mr. Hiss. Will you supply the committee with an analysis of the
sales to the Army and Navy currently and of the different types of
sales to foreign countries of the same types as the sales to the United
States Government and at the same time, and also what prices were
paid by your company to its sources of supply, both in the case of
engines and in the case of planes, from both companies ?
Mr. Allard. We will.
Mr. Hiss. It is the announced policy of the Army and Navy to
limit the export of new designs in the field of aviation to those
designs which are a year old or something of that sort ?
Mr. Allard. I do not know the age of the designs, but they have
to be released by the Army and the Navy.
Mr. Hiss. You have to have permission and release in any event?
Mr. Allard. That is right.
Mr. Hiss. Have you found any difficulty in getting releases when
you needed them ? Have you had difficulty in getting releases when
A^ou had an order ?
Mr. x\llard. Not when we had an order, but we have when we
wanted to negotiate to meet competition.
Mr. Hiss. Assuming a foreign country comes to you and says,
^' We would like to buy a substantial number of planes ", which at
that time are on the restricted list of the Army or the Navy, have
you experienced any difficulty in securing releases where the order is
substantial ?
Mr. Allard. Yes ; I think we have.
Mr. Hiss. Would that not be in conflict with the policy of the
Army and the Navy to encourage exports?
Mr. Allard. No; it would not, because it might be of the very
latest product that had not been produced in quantity.
Mr. Hiss. Haven't you experienced some difficulty in disposing of
what Mr. Morgan describes as obsolescent equipment, and therefore
you must attempt to secure releases as promptly as possible ?
IVTt* Attard jlGs
Mr. Hiss. I offer as "Exhibit No. 421 " a letter dated April 23,
1934, addressed to Inspector General of Aviation of Peru.
(The letter referred to was marked " Exhibit No. 421 " and is in-
cluded in the appendix on p. 988.)
Mr. Hiss. This letter, " Exhibit No. 421 ", does not bear any sig-
nature, and I wonder if you can identify that, Mr. Allard?
Mr. Allard. I cannot.
Mr. Hiss. This letter states :
We also wish to submit herewith a proposal for the latest type of Curtiss
attack plane, known as the " U.S. Army model A-12." Complete specifications
and photographs are attached.
This plane is the most modern fighting unit of its type ever developed and
Jias been furnished only to the U.S. Army Air Corps. Providing we have a con-
836 MUNITIONS INDUSTRY
tract for at least 10 planes, we will be able to secure permissiou from the
U.S. Government to build it for Peru. The selling price for 10 planes GIF
Callao, equipt with 5 niachine guns and bomb racks, is $48,950 each and $6,500
eacli additional for the pontoon equipment.
We believe we can secure prompt permission from the U.S. Government to
accept a contract from Peru and depending upon this we could probably deliver
the first machine in Buffalo within 90 days and continue at the rate of one
plane each 10 days thereafter.
Is it not a fact that the Army and the Navy policy has been that
in order to encourage export abroad, that if you get an order for a
sufficiently large quantity, they look with great favor upon releas-
ing it ?
Mr. Allard. I would not say so, Mr. Hiss; no. In this particular
instance I do not know who wrote this letter, but I don't think he
knew Avhat he was talking about, whoever he was, in saying we could
secure permission. We would try to secure permission.
Mr. Hiss. I offer as " Exhibit No. 422 " a letter from Mr. Burdette
S. Wright to Mr. Allard, dated February 4, 1931.
(The letter referred to was marked " Exhibit No. 422.")
Mr. Hiss. The Bob Farnsworth referred to in this letter, " Ex-
hibit No. 422 ", was then in Washington as an employee of the
Export Co. ?
Mr. Allard. Yes.
Mr. Hiss. This letter, " Exhibit No. 422 ", reads as follows :
Bob Farnsworth was assured informally this morning, by the Office of the
Chief of Air Corps, that hereafter, as a general rule, the Army Air Corps would
look with favor upon requests for the exporting of military aircraft imme-
diately after production is started upon such aircraft. For various reasons at
present they do not desire to change the wording of the policy and will let the
matter rest as it is and decide each case upon its own mex'its.
I think this came directly from General Foulois, head of the Plane Division,
and in the future we will not be handicapped by the one year in service stipula-
tion except in very rare instances. At all events, I think we are entirely justi-
fied in having Melvin Hall and other members of the Export Corporation start
preliminary negotiations upon any and all types of aircraft that we are produc-
ing or about to go into production on. However, I think that permission will
undoubtedly be withheld to export new-type production planes to France. Italy,
England, and possibly Japan.
Mr. Hiss. I offer as " Exhibit No. 423 ", a letter dated October 16,
1931, from Mr. Burdette S. Wright to Mr. W. F. Goulding.
(The letter referred to was marked " Exhibit No. 423 ", and is
included in the appendix on p. 988.)
Mr. Hiss. I read from this letter as follows :
I understand there are about five or six undelivered 02C-l's coming through
at Buffalo for the Navy.
Is that the Osprey?
Mr. Allard. No; I think that is the Navy type observation plane
from Buffalo.
Mr. Hiss. The letter further reads :
As I wired you, Comdr. Dillon is very much against our taking these ships
but I have talked to him and know that we will not lose his friendship should
we go over his head.
Doesn't this indicate, in addition to the other, the cooperation you
have received from the Army and Navy, that if you are actually in
production on a Navy contract you can at times secure a release from
the Navy contract and divert the planes or engines in production to
MUNITIONS INDUSTRY 837
a foreign contract, through the cooperation of the Navy or the
Army ?
Mr. Allard. It has never been clone to my knowledge, but we have
asked if it could be done in several instances.
Mr. Hiss. You remember yesterday Senator Nye referred to the
diversion of 29 planes then under contract with the Boeing Co. and
another subsidiary the United Aircraft, which were sold to the Bra-
zilian Government on release of the United States Navy?
Mr. Allard. Yes, sir.
Mr. Hiss. That has never occurred in your case?
Mr. Allard. No, sir ; it has not.
Mr. Hiss. Eeading further from this letter, " Exhibit No. 423 ", it
says:
Capt. Cook, the Assistant Chief of tlie Bureau of Aeronautics of tlie Navy
Department, told me that if it was urgent lie would certainly look with favor
on helping us out.
Referring back to the policy of the Navy with respect to export
restrictions, I now offer as " Exhibit No. 424 ", a letter dated Feb-
ruary 19, 1933, directed to Capt. Hamdi Bey by Melvin Hall.
(The letter referred to was marked " Exhibit No. 424 " and is
included in the appendix on p. 989.)
Mr. Hiss. Capt. Hamdi Bey, to whom this letter is directed, was
connected with the technical section. Ministry of National Defense
of Turkey, and Melvin Hall was an emploj^^ee of the Export Co.?
Mr. Allard. Yes.
Mr. Hiss. I read from this letter, " Exhibit No. 424 ", as follows :
I enclose a photograph herewith for your information of the Martin bomber
which is known as the B-907.
That is made by Glenn Martin Co. of Baltimore ?
Mr. Allard. Yes.
Mr. Hiss. The letter continues :
This plane is still on the secret list of the United States Army and conse-
quently we have not available any detailed performance figures. Should the
Government of Turkey be seriously interested in this or any other of the
latest types of American bombing planes, we believe that it will be possible
to secure release by the United States Army on special application.
Mr. Allard. May I make a statement there ?
Mr. Hiss. Yes, sir.
Mr. Allard. Melvin Hall is a salesman and he has often made
statements in an endeavor to sell, and they are not always accurate
statements.
Mr. Hiss. Is Mr. Goulding a salesman, or is he an operating officer?
Mr. Allard. No ; he is a salesman and vice president.
Mr. Hiss. Would you say all of the officials of the Export Cor-
poration are salesmen?
Mr. Allard. I should.
Mr. Hiss. Including yourself ?
Mr. Allard. I might be flattered in that.
Mr. Hiss. I offer as " Exhibit No. 425 " a letter dated February 23,
1932, addressed to Ralph S. Damon from W. F. Goulding.
(The letter referred to was marked " Exhibit No. 425 ", and is
included in the appendix on p. 990.)
838 MUNITIONS INDUSTRY
Mr. Hiss. On the subject of Keystone bombers, this letter says
[reading] :
With respect to deliveries, we uuderstand that you can furnish the first
plane within sixty (60) days, two planes per week for the ensuing four weeks,
and three each week thereafter. Furthermore, if release of any of the planes
which you are now completing for the Army is accomplished, that you would
be in a position to give us the first one of these planes in forty (40) days.
Mr. Allard. That is correct. It never was done, though.
The Chairman. It was not done ?
Mr. Allard. No, sir.
Mr. Hiss. In connection with the release of the Boeing planes, your
company received some criticism as to why j^ou could not furnish
quick delivery. I think you Mr. Webster were then president of
the company?
Mr. Webster. I don't recall it.
Mr. Hiss. I offer as " Exhibit No. 426 " a letter dated October 3,
1932, from W. F. Goulding to Mr. Burdette S. Wright.
(The letter referred to was marked " Exhibit No. 426 ", and is
included in the appendix on p. 990.)
Mr. Hiss. I quote from this letter as follows :
Of course, it is embarrassing to answer questions as to why United secured
this Bi-azilian business. I think probably the best answer is as you have
given it, to tho effect that United was able to get release on U.S. Government
contracts to give the best deliveries.
Another matter is the question of financing. Apparently United was able
to work this out to their satisfaction, but how it was done I am not entirely
aware. As a matter of fact, I think it was worked out in connection with the
Farm Board's coffee, but you don't need to tell people this if they don't know it.
Do 3^ou know, Mr. Webster, how that financing was worked out?
Mr. Webster. No; I do not, sir.
Mr. Hiss. I offer as " Exhibit No. 427 " a letter from Mr. Goulding
to Mr. Guy Vaughan of date October 3, 1932.
(The letter referred to was markecl "Exhibit No. 427", and is
included in the appendix on p. 991.)
Mr. Hiss. This letter is on the same subject, and I quote from it
as follows :
You, no doubt, realize that United had under construction for the Govern-
ment a number of Corsairs and Boeings which the Navy released to permit
them to offer excellent deliveries to Brazil. Unfortunately, Curtiss-Wright
had no Government contracts which could be diverted for such prompt de-
liveries. The fact remains, however, that United, having taken this Brazil
business, is not in as good a position to give deliveries on other orders for
other countries as we are.
Would there be any reason for Mr. Goulding to be using salesman's
language there?
Mr. Allard. No.
Mr. Hiss. Does that indicate that it was difficult to secure releases
from the Government on these contracts?
Mr. Allard. I do not know that it indicates it was difficult or
not, but we could try.
Mr. Hiss. The sentence I call your attention to is [reading] :
Curtiss-Wright had no Government contracts which could be diverted for
such prompt deliveries.
Mr. Allard. I know that is his language, but we had no ships
under contract for the Army that we could endeavor to get diverted.
MUNITIONS INDUSTRY 839
Mr. Hiss. Have you or 3^our corporation actually borrowed from
the Army or the 'Nsl\j property to help you fill foreign orders for
military planes or equipment?
Mr. Allard. Yes ; not aircraft as such.
Mr. Hiss. Do 3'ou remember in January 1933, whether your com-
pany borrowed any fljang suits for Cuban pilots, from the Army
or the Navy ?
Mr. Allard. I do not know whether we borrowed them, or whether
the Cubans did themselves. The}' were out at Mitchel Field in the
winter and needed the flying suits, and they borrowed them for
the trip to Cuba and return, I think that is right.
Mr. Hiss. I offer as " Exhibit No. 428 " a letter dated January 7.
1933, from Mr. Carrington to Mr. Hewlett.
(The letter referred to was marked " Exhibit No. 428 ''. and is
included in the appendix on p. 991.)
Mr. Hiss. In this letter it states that four pilots will be here
Monday and will probably go to Buffalo Tuesday to fly ships away;
and then it quotes a telegram, in which the statement is made
[reading] :
I ask you to do the necessary with Aimy or Navy for four winter flying
suits which will be returned to them iinni'ediately.
Then Mr. Carrington saj^s to Mr. Hewlett :
You will know what to do about the flying suits.
Did your company not actually borrow the flying suits?
Mr. Allard. No; I think we called up the flying field and asked
them if they could lend these suits to the pilots, that they were
Cuban pilots, and it is the courteous thing to do that.
Mr. Hiss. I offer as " Exhibit No. 429 " a letter dated February 7,
1934. from Kobert L. Earle to Lt. H. E. Regan.
(The letter referred to was marked " Exhibit No. 429 ", and is
included in the appendix on p. 992.)
Mr. Hiss. I quote from this letter as follows :
When talking with you yesterday concerning the need for propellers to meet
deliveries on a certain foreign contract, I thought that three 2-bladed propellers
would take care of the situation. However, I have since found that our export
Falcons do not use the same propeller as the export Hawks and therefore we
really need a total of six instead of three.
Then there appears a description of the specific propellers and the
letter continues [reading] :
The need for these propellers is occasioned by our having negotiations with
a certain foreign government for a number of airplanes which must be delivered
within a short period of time. The delivery of the first three Hawks and the
first three Falcons, both of which are powered by direct-drive Cyclone engines,
must be earlier than we are able to obtain deliveries on propellers. We have
contacted all propeller manufacturers and find tliat Hamilton-Standard can
give us the best deliveries, but even these will not be early enough to meet our
needs for the first three Hawks and the first three Falcons referred to above.
Inasmuch as the entire contract is contingent upon our meeting the delivery
requirements of the customer, we are exceedingly anxious to somehow make
arrangements to obtain these propellers within the required time.
It would therefore be greatly appreciated if the Bureau of Aeronautics could
arrange to loan us three each of the two types of propellers described above,
upon our guarantee to replace them in the very near future. We would desire
to take delivery on the two-bladed propellers within the next two weeks and
will guarantee replacement of them by not later than the first week in April.
840 MUNITIONS INDUSTRY
The threp-bliided propellers will be needed before the middle of March, aud we
would guarantee replacement of them by the middle of April.
It is presumed that arrangements could be made to have the replacement
propellers inspected by the Navy inspector at the Hamilton-Standard Co. as
they are built.
The Bureau's kind consideration in arranging for the loan to us of the above
six propellers will be sincerely appreciated.
Do you know whether that loan was ever consummated?
Mr. Allard. I think it was. I do not know whether we got all of
the propellers, but I think we got some.
Mr. Hiss. And the Hawks and Falcons to which they were to be
attached are military planes?
Mr. Allard. That is correct.
Mr. Hiss. Have you ever purchased surplus munitions from the
United States War De]:»artment or United States Navy Department?
Mr. Allard. I do not know of any, but the record will show if we
have.
Mr. Hiss. Have you ever attempted to, or been interested in doing
that?
Mr. Allard. If we had had a request from a customer for material
known as surplus material, we probably have asked for quotations
on it.
Mr. Hiss. I offer as " Exhibit No. 430 " a letter dated September
10, 1929, addressed to Hon. F. Trubee Davison, Assistant Secretary
of War for Aeronautics, Washington, D.C.
(The letter referred to was marked " Exhibit No. 430 ". and is
included in the appendix on p. 992.)
Mr. Hiss. It does not appear who wrote this letter, " Exhibit No.
430 ", but it was found in the Washington file of your company. This
letter requests that authority be granted by the War Department
for the sale of the following material to the Curtiss- Aeroplane
Export Corporation, it being understood the same is on hand in the
Ordnance Department, to wit : 24 Lewis flexible machine guns, model
1918, 72 ammunition pans or magazines, 12 carriers for 6 magazines,
24 deflectors for shells for Lewis guns, 24 extension-charging han-
dles, 2 fillers for magazines, 2 handles for magazine loading.
And similarly requested authority for the sale of the following
equipment, which it is understood is available in the Air Corps, at
Wilbur Wright Field, to wit: 12 Duplex Lewis mount type G--2,
12 double trigger control type H, 12 double gun brace type OA-259,
12 scarf ring mounts, 12 ring sights for flexible Lewis, 12 wind vane
sights for flexible Lewis.
Mr. Allard. You will notice those Lewis guns were model 1918,
and I imagine that is war surplus.
Mr. Hiss. I offer as " Exhibit No. 431 " a letter dated January 21,
1930, addressed to Mr. Burdette S. Wright, and signed F. Trubee
Davison, Assistant Secretary of War.
(The letter referred to was marked " Exhibit No. 431 ", and is
included in the appendix on p. 993.)
Mr. Hiss. This letter shows that the previous letter, " Exhibit No.
430 ", was apparently written by Mr. Burdette S. Wright, and I now
read from " Exhibit No. 431 " as follows :
With reference to your letter of September 10, 1929, relative to the sale
of certain Air Corps aud ordnance material to the Curtiss Aeroplane Export
MUNITIONS INDUSTRY 841
Corporation, it has been finally determined that the items listed are in excess
of prospective War Department needs in the quantities enumerated.
Before the transaction is consummated, however, it will be necessary for
you to obtain the approval of the State Department as to the exportation of
the property in question for the purpose mentioned.
Do you know whether that approval was ever secured?
Mr. Allard, If the purchase was made, the approval was secured
from the State Department, but I do not think it was ever sold.
Mr. Hiss. I offer as " Exhibit No. 432 " a letter dated October 30,
1930, from J. S. Allard to Burdette S. Wright.
(The letter referred to was marked " Exhibit No. 432 ", and is in-
cluded in the appendix on p. 993.)
Mr. Hiss. I read from " Exhibit No. 432 ", as follows :
Thanks for yours of the 29th on the above subject and also on the subject
of how certain munitions of war can be declared surplus, and whether or not
commercial firms can buy such equipment and resell it to foreign countries
at a profit.
It would certainly be nice if it develops that we can buy bombs from the
"War Department and sell them again at a profit to an approved foreign
government.
Do you know whether at present you can buy surplus material
from the United States War Department?
Mr. Allard. I do not know.
Mr. Hiss. Do you know, Mr. Webster?
Mr. Webster. No, sir ; I do not know.
Mr. Hiss. Do you know whether you have bought any in recent
months ?
Mr. Allard. No.
Mr. Hiss. Did you receive any official notice as to whether that was
stopped ?
Mr. Allard. I do not know that, but the record will show, I sup-
pose.
Mr. Hiss. I oiEfer in evidence as " Exhibit No. 433 " a letter dated
April 11, 1933, from Burdette S. Wright, to Mr. C. W. Webster.
(The letter referred to was marked " Exhibit No. 433 ".)
Mr. Hiss. I read the letter, " Exhibit No. 433 ", as follows :
Due to the establishments of military training for the unemployed, the Secre-
tary of War has suspended all sales of surplus material by the War Depart-
ment, as they are now short of equipment for this purpose.
It is not known just when this ban will be lifted, but we have been advised
that possibly Silverman Brothers, 594 Broadway, New York City, might have
some former surplus material on hand which they might sell to your friends.
Mr. Hiss. Mr. Allard, I asked you a few minutes back whether
you had been able to secure endorsements from Army or Navy
officials of your products. I do not exactly remember what 3^our
reply was to that question. May I repeat it ?
Mr. Allard. I think I said that I did not consider them endorse-
ments. We receive statements from certain Army and Navy offi-
cials with reference either to the number or type of ship and engine
in question, which have been purchased as to what their experience
with them is.
Mr. Hiss. There is no doubt that the prestige of the United States
Army or Navy does carry weight, particularly in South American
countries ?
Mr. Allard. All over the world.
842 MUNITIONS INDUSTRY
Mr. Hiss. Therefore a letter of recommendation from the ArmT
or Navy Avould be very helpful in making sales ?
Mr. Allard. Any statement of fact.
Mr. Hiss. Mr. Webster, in referring to anj^ letter from the Army
or Navy as to the value or quality of your products, you objected
to reference to them as being recommendations, did you not?
Mr. Webster. Yes, sir ; I believe it is contrary to the policy of the
Army or Navy to recommend. They simply state, " We are using
this in service." They never recommend.
Mr. Hiss. " Exhibit No. 434 ", Mr. Webster, is a letter which you
wrote to Mr. Burdette S. Wright, on March 31, 1933.
(The letter referred to was marked " Exhibit No. 434 " and is
included in the appendix on p. 994.)
Mr. Hiss. That letter in the last two paragraphs reads as follows :
We are also negotiation^
I guess that means negotiating —
for eight or ten Cyclone Falcons for the Argentine Navy to replace Vouglit
" Corsairs " now in service.
The " Corsairs " are made by the United Aircraft group ?
Mr. Webster. Yes, sir.
Mr. Hiss (continuing reading) :
We are up against a serious obstacle in that the Falcon has never been in.
U.S. naval service, except the Marine Corps and the Argentine Navy will not
accept equipment not having been used or specified by the U.S. Navy.
It is the desire of Capttiin Zar, Chief of Naval Aviation, to use the Falcon
or any other suitable and capable Curtiss Wright plane in preference to United
Aircraft equipment but we must provide him with all possible data and con-
versation in support of his ultimate selection of our material. Will you,
therefore, kindly supply me as quickly as possible as much information as
you can in support of this idea. For instance : How many Falcons were used
by the Marine Corps ofBcials to supplement our sales arguments?
Using your own language, Mr. Webster.
Mr. Webster. Yes, sir.
Mr. Hiss (continuing reading) :
Also how many Falcons used by the Army and their written reaction as to-
their service and efficiency.
On April 6, 1933, a letter was sent by Mr. Burdette S. Wright ad-
dressed to the Secretary of the Navy, apparently in accordance
with your letter of March 31, Mr. Webster, "Exhibit No. 434."'
That will be " Exhibit No. 435."
(The letter referred to was marked " Exhibit No. 435 " and is
included in the appendix on p. 995.)
Mr. Hiss. That letter reads in part as follows :
In connection with possible sale of aircraft to South American countries, we
have received a request that we obtain from the Navy Department and from
the War Department a statement of the experience these two departments
have had with the Curtiss Falcon type of airplane in service. The question*
involved include:
(«) The number of planes of this general type purchased to date.
(&) The type of missions they have been engaged on such as observation,
attack, and light bombing.
(c) The experience with this type of construction from maintenance and-
overhaul standpoint.
(d) Statements that the plane has been adopted as a service type and has
rendered good service.
MUNITIONS INDUSTRY 843
We would more than appreciate a short statement along the above lines
which we could forward to our agents for them to use in connection with
the possibility of obtaining contracts on this type of airplane.
Any assistance that the Navy Department can give us in this regard will
be of great advantage.
" Exhibit No. 436 " is a letter from Capt. A. B. Cook, Acting Chief
of Bureau of Aeronautics of the Nav}', to Mr, Wright, Mr. Burdette
S. Wright.
(The letter referred to was marked '* Exhibit No. 436 " and is
included in the appendix on p. 995.)
Mr. Hiss. The letter reads in part as follows [reading] :
The Secretary of the Navy has referred to this office your letter of April 6,
and accordingly the following information is furnished —
And then follows a rather detailed statement on the use of Curtiss
planes [reading] :
(a) Four OG-l's and 21 OG-2's were delivered between .January and May
1928 : there are at present seven of these operating with aircraft Squadrons
WCEF, San Diego, Calif.
(&) Seven of these planes were used in Nicaragua from February 1928 to
June 1931 on observation, ground attack, and light bombing missions ; nine
were used in China on ol»servation missions; this type has been used in the
United States for observation and attack training ; individual planes of this
type have been used for aerial photography.
(0) The following notes apply to the type of construction, maintenance, and
overhaul :
(1) Trouble was experienced with the fuselage cross brace at the forward
landing-gear fitting. This brace has to be reenforced with steel.
(2) The webs from the tail skid assembly all pulled out and had to be
replaced with steel.
(3) The wing fittings in the center section had to be reenforced.
(4) After the above changes were made overhaul and maintenance condi-
tions were excellent ; many of these planes were flown 700 hours between over-
hauls; engines and parts needing attention were easily accessible.
(5) The following observations may be of interest:
(fl) One plane which had been submerged in salt water for 36 hours was
corroded so badly that it had to be surveyed.
(6) Longerons struck by bullets were shattered by the impact, there being
considerable tearing around the bullet hole.
(c) These planes were originally designed to be powered by the D-^-2
water-cooled engine ; when the P. & W. Wasp was installed a great deal
of trouble was encountered with fixed gun fittings.
((i) This plane was used for several years as a Marine Corps observation
plane and as such rendered excellent service. The long cruising range was a
particularly advantageous characteristic.
Mr. Hiss. " Exhibit No. 437 " is a letter which Mr. Webster wrote
to Mr. Burdette S. Wright, referred to the letter just read. " Exhibit
:N'o. 436." The date of that letter is May 5, 1933.
(The letter referred to was marked " Exhibit No. 437 " and is
included in the appendix on p. 996.)
Mr. Hiss. Mr. Webster in that letter says in part as follows :
With further reference to the letter from the Navy Department (Capt.
Cook) would it be possible to go back at the Bureau with the explanation
that the letter requested was for the purpose of assisting us in competing
against foreign aircraft manufacturers, especially the British, who are making
a very definite effort to crash into the Argentine territory.
We have the inside track on this business and Captain Zar, chief of naval
aviation, who was trained at Pensacola and who is anxious to see the Falcon
installed in the Argentine Navy, is requesting us to supply him with some-
thing to back up his action should he be able to place this business with us.
844 MUNITIONS INDUSTRY
This partiC'Ular information regarding Zar, ot course, is confidential and is
intended for you, and should not be passed along to the Navy, but if the
Bureau could reword their letter eliminating the objectional features, it
would serve our purpose.
Objectionable features, is meant, I guess.
Using their present letter as a basis, the following suggestion taken from
Capt. Cook's own letter would help us a great deal. Please bear in mind and
impress upon the Bureau that it has been the policy of the Argentine Navy
to use only such ships as are standard or have been used by the navies of
the countries from which they purchase.
You then quote a proposed letter for the Bureau to write as
follows :
The Secretary of the Navy has referred to this oflBce your letter of April 6,
and accordingly the following information is furnished :
Curtiss Falcons have been used since 1928 in Nicaragua and China observa-
tion, ground attack, and light bombing missions and in the United States for
ground attack and observation training and aerial photography. After a few
changes made in the early types, overhaul and maintenance conditions were
excellent, many of the planes having flown 700 hours between overhauls.
Mr. Webster, I call your attention to the fact that " Exhibit No.
436 ", Captain Cook's letter to Burdette S. Wright, on which you
say you based this proposed reply lists " observation, ground attack,
and light bombing missions " in Nicaragua but not China, where
it refers only to observation missions. In the proposed letter which
you sent to Mr. Wright you have changed that so that you suggest
that the Navy say that the —
Curtiss Falcons have been used since 1928 in Nicaragua and China on obser-
vation, ground attack, and light bombing missions * * *.
Mr. Webster. I think that is probably a typographical error, but
it does not make any difference.
Mr. Hiss. I do not believe there has been any attack work in
China.
Mr. Webster. It is just an error.
Mr. Hiss. You will note also that you say, "After a few changes
made in the early types ", and the wording of the Navy was, "After
the above changes were made " ; and there is no reference to early
types.
Mr. Webster. Yes, sir.
Mr. Hiss. You further state in the letter to Mr. Wright [reading] :
It is highly important that we get such a letter and it seems to us that the
Navy would be perfectly justified in writing such a letter to assist us in over-
coming foreign competition and establishing American aircraft in Argentine
naval service.
" Exhibit No. 438 " is a letter from E. J. King, rear admiral,
United States Navy, and Chief of the Bureau of Aeronautics, ad-
dressed to Mr. Burdette S. Wright, under date of June 28, 1933,
which is after your letter, " Exhibit No. 437."
(The letter referred to was marked " Exhibit 438 ".)
Mr. Hiss. That letter states [reading] :
My Dkar Mr. Wright : The Secretary of the Navy has referred to this oflSce
your letter of April 6th, and accordingly the following information is furnished :
Curtiss Falcons have been used since 1928 in Nicaragua and China on
observation, ground attack, and light bombing missions,
The Navy made the same typographical error you made, Mr.
Webster.
MUNITIONS INDUSTRY 845
Mr. Webster. Yes, sir; I probably went off on that.
Mr. Hiss (continuing reading) :
and in the United States for ground attack and observation training and
aerial photograpliy. After a few changes in the early types —
the Navy was adoj)ting your language instead of saying "After the
above changes — "
[Reading] :
overhaul and maintenance conditions were excellent, many of the planes having
flown 700 hours between overhauls.
That is signed " E. J. King."
That is identical with the language which you proposed?
Mr. Webster. Yes, sir.
Mr. Hiss. ^' Exhibit No. 439 " is a letter from Burdette S. Wright
to Mr. Webster, under date of June 29, 1933.
(The letter referred to was marked " Exhibit No. 439 ".)
Mr. Hiss. That letter reads as follows:
I am very sorry that it took us so long to get a new letter for you from the
Navy on the services of Curtiss Falcons.
Attached hereto is a new letter which states the Navy's success with these
airplanes in the manner which you desire.
Would you not say, Mr. Webster, that that did constitute a letter
of reconmiendation actually written by your company for the Navy
simply to adopt?
Mr. Webster. Yes; it might possibly be considered as a letter of
recommendation.
Mr. Hiss. " Exhibit No. 440 " is a letter of February 5, 1932, from
Mr. Burdette S. Wright to Mr. Allard.
(The letter referred to was marked "Exhibit No. 440" and is
included in the appendix on p. 997.)
Mr. Hiss. That letter reads in part as follows :
I am attaching hereto a letter signed by Admiral Moffett replying to my
letter in which I requested information on the 02C-1 airplanes in connection
with our interest in selling to the Dominican Republic.
This is not a very elaborate statement, but represents what was linally
decided upon after they had ■writteti two or three different samples. This
can be used as an official letter in connection with the Export Co.'s efforts
to sell to the Dominican Republic.
Admiral Moffett's letter, " Exhibit No. 441 " does not bear date,
being on the letterhead of the Navy Department, Bureau of Aero-
nautics, and being addressed to the Curtiss Aeroplane & Motor Co.
That is the aeroplane company in Buffalo?
Mr. Allard. Right.
(The letter referred to was marked " Exhibit No. 441 ".)
Mr. Hiss. " Exhibit No. 441 " reads as follows :
In reply to your letter of recent date you are advised that about eighty of
your model 02C-1 airplanes are being used as observation planes in the Marine
Corps and in the training of aviators in the Naval Reserve Force.
I am pleased to be able to inform you that favorable reports have been re-
ceived from the foregoing activities concerning the service utility of this model.
In regard to the policy of restriction, can you remember any time
when not only have you been successful in securing release of restric-
tion to the extent indicated by the evidence, but when you have
actually asked the Navy to impose a restriction because it was con-
346 MUNITIONS INDUSTRY
venient to 3^our business interest, and so have used the restriction to
your aid rather than to your hindrance?
Mr. Allard. I do not recall off-hand.
Mr. Hiss. May I call your attention to a letter of July 19, 1933,
which will be " Exhibit No. 442 ", which is a letter to Mr. Earle from
Mr. Hewlett, with a copy to Mr. Goulding?
(The letter referred to was marked '' Exhibit No. 442 " and is
included in the appendix on p. 997.)
Mr. Hiss. That letter reads in part as follows :
At the present time there is stationed at Consolidated Aircraft, inspecting
some trainers which are being built for Mexico, a Capt. David Chagoya Rodri-
guy of the Mexican Air Corps, who has requested permission to visit our plant
at the earliest possible opportunity. Captain Chagoya is not particularly
interested in anything outside of training activities, however, in view of the
fact that the Mexican Government at this time has under consideration the
purchase of a number of Pursuit airplanes, on which the Export Company has
been negotiating and the further fact that he is interested in our Hawks I
believe a special effort should be made to secure permission for this visit.
In tiie above connection, you will recall that we were turned down by the
Naval Intelligence Division and the U.S. Air Corps some time ago due to a
letter which we had written —
That is the company —
reflecting upon the fact that we had on our production floor, certain Army
and Navy experimental jobs, which we did not consider it desirable for for-
eigners to view. However, since that time these experimental jobs have all
been removed within the experimental department, with the exception of the
A-12 production job and this has not proceeded to the point that, within the
next 15 days, there should be any objection by the Air Corps for anyone to see
same, as practically all the parts built up are in detail and are located in
our feeder shops and in reality no one could see anything worth while or of
such interest to allow them to copy. At the time we wrote this letter, you
recall, —
That must be the letter on which the Navy and the Air Corps
based their refusal
Mr. Allard. Yes, sir.
Mr. Hiss, (continuing reading) :
that same was considered desirable inasmuch as certain Japanese oflieers de-
sired to visit the plant and we were building numerous planes for the Chinese.
Then the next to the last paragraph reads as follows :
However, recently we have secured permission from our Government allow-
ing General Chang Hung Wan of the Chinese Army to visit our plant which
permission was signed by Lt. Col. Nelsen and we therefore feel that by regu-
lated contact you can, without doubt, secure permission for this Mexican.
In view of the condition that he is interesited in making an immediate trip
to the plant it would be appreciated if you will advise me by wire as to the
results of your contact with the Intelligence bureau.
In other cases you have been able to secure permission for foreign
buyers to inspect planes in production at your plant, with a fair de-
gree of regularity, have you not, when you so desired it, Mr. Allard ?
Mr. Allard. I think when it met with the policies of the Govern-
ment we have always been able to get that done. A great many of
them have been turned down.
Mr. Hiss. " Exhibit No. 443 " is a letter from Mr. J. A. B. Smith to
Mr. B. S. Wright, dated January 29, 1932.
(The letter referred to was marked '' Exhibit No. 443 " and is
included in the appendix on p. 998.)
MUNITIONS INDUSTRY 847
Mr. Hiss. That letter reads in full as follows :
I understand from Mr. Webster that two Argentine Navy ofBcers are being
sent to this country to look over aviation materials and that we were named
by the Navy Intelligence to have a Navy officer designated to accompany
them to this country.
If you will look into this and let me know the name of some Navy flyer
who is friendly to our equipment and who would be acceptable to the Bureau
of Aeronautics, I think I can get Captain Ellis, who is head of the Navy
Intelligence, to ask for the particular officer whom you might pick out.
In the memorandum to Mr. Morgan, which is " Exhibit No. 397 ",
already introduced in evidence, the memorandum being dated June
19, 1934, written after the present investigation of this committee
began, there is a statement which reads as follows :
The greater the number of countries purchasing our airplanes and engines,
the greater our knowledge of the potentiality of their air force. Our pilots,
mechanics, and salesmen procure very valuable knowledge of flying conditions,
terrain, available landing flelds in foreign countries, which would be of great
military value in case of an emergency.
Is it not true, Mr. Allard, that it is very important for j-our com-
pany to maintain, and that your company does have, as a seller of
military equipment, a confidential relationship with your foreign
customers ?
Mr. Allard. Just how do you mean, Mr. Hiss ?
Mr. Hiss. Do you not consider that military strength and military
secrets are of a confidential nature, and if your companj^ should
learn of any of them in the course of its business, it would want to
retain and not disclose the information, on the ground that it was
confidential. Is not that correct?
Mr. Allard. Yes; certainly.
Mr. Hiss. Therefore, this statement in the memorandum to Mr.
Morgan, which we understood Mr. Morgan discussed with President
Roosevelt —
The greater the number of countries purchasing our airplanes and engines,
the greater our knowledge of the potentiality of their air force. Our pilots,
mechanics, and salesmen procure very valuable knowledge of flying conditions,
terrain, available landing fields in foreign countries, which would be of great
military value in case of an emergency —
is rather an exaggerated statement? You would regard such in-
formation as confidential and would not turn it over to the United
States Government ?
Mr. Allard. Certainly not. That states that the pilots, mechan-
ics, and salesmen gather this information for themselves, and I
certainly would not hesitate to turn over to my Government here
any information that it wanted, that I thought would be of any
value to them. That is why I joined the Army.
The Chairman. Would you volunteer the information?
]\Ir. Allard. To the Army ?
The Chairman. Yes, sir.
Mr. Allard. Yes, six ; confidentially, certainly. I think it is a
duty, a patriotic duty.
]Mr. Hiss. Now I call your attention, in this connection, to " Ex-
hibit No. 444", being a "letter under date of May 24, 1934, that is
8387G— 34— pt4 11
84S MUNITIONS INDUSTRY
this past May, from Mr. Robert L. Earle to you, Mr. Allard, witli a
copy to Mr. Hewlett.
(The letter referred to was marked " Exhibit No. 4^4 " and is
included in the appendix on p. 999.)
Mr. Hiss. That letter reads as follows :
When talking to Capt. Kenney, the working Air Corps representative on the
Joint Aeronautical Board, today, he said that, while we do not have to do it,
he thought as a matter of courtesy we should sulimit copies of all contracts and
agreements with foreign governments to the .Joint Aeronautical Board in
order that they might know that the interests of the United States Govern-
ment were being safeguarded, insofar as concerned military secrets. He said
that this would help a lot when they were considering whether or not they
should permit foreigners to visit our plants, in that if they knew we had a
contract or agreement with the government represented it would expedite and
possibly insure favorable action.
We told Capt- Kenney we knew nothing about our practice in matters of
this kind but would be glad to forward his suggestions to you. The matter
was called to Capt. Kenney's mind when talking about a couple of Rumanian
inspectors and he would also like to know if we have a contract or an agi'ee-
ment with that country.
" Exhibit No. 445 " is a letter of June 25, 1934, last June, from you,
Mr. Allard, to Mr. Robert L. Earle.
(The letter referred to was marked " Exhibit No, 445 " and is
included in the appendix on ]). 999,)
Mr. Hiss, That letter reads in part as follows [reading] :
I have delayed answering your letter of May 24th on the subject above men-
tioned— OC-712 — as I wanted to check into the matter very carefully. It is
my opinion that our business does not permit of our furnishing copies of
contracts and agreements with foreign governments. As a matter of fact,
many times our business is done witliout any written contract or agreement.
However, as you know, the interests of the U.S. Government are very well safe-
guarded as we do not sell at export any equipment not released by the U.S.
Government services.
But you have had very little difficulty in securing release of Gov-
ernment planes. Do you agree to that?
Mr. Allard. How?
Mr. Hiss. I say, you have not had much difficulty in getting Gov-
ernment models released for export, have you ?
Mr. Allard. When one was ready to be released.
Mr. Hiss. The letter states further as follows [reading] :
I shall be very happy to show the .Joint Aeronautical Board, at any time,
just wliat business we have done in the past, wliich will bear this out, but it
must be borne in mind that our business with foreign governments is strictly
confidential as it is obvious that one government is not interested in having
other governments know all of the details of the business.
Mr, Allard. That is true.
]Mr. Hiss. Is it not also true, Mr. Allard, that in order to meet
foreign competition your company is continually urging the Navy
and the Air Corps to release their latest developments?
Mr. Allard. Certainly.
Mr. Hiss. So that you can sell them abroad?
Mr. Allard. Certainly.
Mr. Hiss. But j^ou have been careful when you may have re-
leased information that the Anu}^ and Navy had specifically au-
thorized its release?
]Mr. Allard. Information?
Mr. Hiss. With respect to development of planes or engines.
MUNITIONS INDUSTRY 849
Mr. Allard. Yes, sir.
Mr. Hiss. May I call your attention to a letter of March l-t, 1931,
" Exhibit No. 446 ", from Mr. Robert P. Farnsworth to Mr. C. W.
Webster.
(The letter referred to was marked " Exhibit No. 446 " and is in-
cluded in the appendix on p. 1000.)
Mr. Hiss. That letter reads [reading] :
Del\r Web : I have been able to secure for you " G-1 ". " G-2 ", " G-3 ",
and " G-4 " plans for the Air Corps exercises of 1931. This information is
definitely not for publication, was secured by me in the face of a definite
order prohibiting its issuance, and I beg you to be very careful in the manner
in which you give this information to Merino.
He was then a Chilean aviation official?
Mr. Webster. Yes, sir.
Mr. Hiss. Mr. Farnsworth in this letter continues [reading] :
There are no particular military secrets contained therein and I know that
if there were the War Department would not object to Chile's knowing them,
but the point is they would prefer to give this to Chile themselves rather
than through another agency such as us. Please keep tight hold on these four
pamphlets and bring them back with you when you return.
IMr. Webster. They were given to them by the United States
Government.
Mr. Hiss. For this use?
Mr. Webster. Yes, sir; during the public maneuvers here,
Mr. Hiss. These were given to Mr. Farnsworth by the United
States Government?
Ml". Webster. No; given to Chile.
Mr. Hiss. At the time Mr. Farnsworth had given you these,
which you had apparently requested, the United States Government
had not given them to Chile?
Mr. Allard. No; but they were definitely not released for press
publication. It was the itinerary.
Mr. WEBsTEii. That means press publication and not turning over
to Chile.
Mr. Hiss. He says:
This information is definitely not for publication, was secured by me in the
face of a definite order prohibiting its issuance, * * *,
]Mr. Allard. I think he means its press issuance.
Mr. Hiss. You do not think that means its issuance to him ?
Mr. Allard. No, sir ; not to Farnsworth.
Mr, Webster. That is newspaper publication.
INIr. Hiss. I think the letter speaks for itself.
On August 24, 1933, " Exhibit No. 447 ", Mr. Allard, you wrote a
letter to Mr. Leighton in Europe.
(The letter referred to was marked "Exhibit No. 447" and is
included in the appendix on p. 1000.)
Mr. Hiss. This is a long letter and over on page 5, at the top of
the page, you state :
On my way back from the west coast, I stopped at Buffalo and spent about
3 hours with Burdette Wright. Ted was out.
That is Ted Wright?
Mr. Allard. Yes.
850 MUNITIONS INDUSTRY
Mr. Hiss (continuing reading) :
"We discussed hoAV to get the information to you in view of the American
Government's present very rigid attitude on the release of information on
new and experimental aircraft. There is a new espionage act in the United
States which has caused the Army and Navy to become all the more definite
and determined in preventing information from getting out on these planes.
We can't give out any information on the YO-40, the A-12, the FllC-3, or
the Fll-C-1. I know how important it is to you that you have information
on the results of tests on these ships so that you can quote on a Turkish plane
of high performance. Our position with both the Army and Navy is such that
we are not justitled in pushing them any further. It is downright dangerous ;
and I don't think it would do any good, and it might do some harm, for you
to go direct to Admiral King or anybody else.
As I said in a previous letter to you, I believe you can read through ambigu-
ous remarks, so here goes. Janes All the Worlds Aircraft has published some
data on the YO-40.
That is other than the ones as referred to by you ?
Mr. Allaed. Correct.
Mr. Hiss (continuing reading) :
Information already published on the A-S is pretty good, and you know
what a different motor installation might do. I have already told you how
much retractible undercarriage adds to rdrplane performance. A 14-cyIiuder
motor for small planes of around 200 ni.p.b. can be expected to improve per-
formance from 3 to 6 miles per hour, as compared with equivalent horse-
power from a Cyclone. When you get back from this trip you will have a
better idea of what you will require in the future under similar circum-
stances, and I think we can load up your mind and ov;r inside vest pocket
with enough dope so that the situations can be handled. They are doing
everything possible in Buffalo to complete flight tests on the demonstrator
Hawk with 4-barrel carburetor —
At that time the 4-barrel carburetor could not be released for
export ?
Mr, Allard. Yes, sir ; it could. It was on commercial planes. It
is on all the Douglas planes.^
Mr. Hiss (continuing reading) :
but there was a hitch in the program due to the Navy's borrowing the only
4-barrel we had, and we are just receiving from Wright a replacement. On
the Douglas transport the use of the 4-barrel carburetor as compared to the
2-barrel added about 30 horsepower per motor. Every new single-motored
or bi-motored transport I have seen recently has retractible landing gear and
controllable pitch propellers, which I am told add from 3 to 10 miles per
hour to the top speed.
Mr. Hiss. This retractible landing gear was a new development?
Mr. Allard. No; not particularly new. It was a recent develop-
ment.
Mr. Hiss. And the controllable pitch propellers were new?
Mr. Allard, Yes, sir; but released for export.
Mr. Hiss. Then you state [reading] :
Do you get it? It's almost like a code.
In the original letter that appears in capitals.
Mr. Allard, That is correct.
]Mr. Hiss. What did you mean by that, Mr. Allard?
Mr. Allard. I will explain the whole two paragraphs, if I may.
It was definitely our policy not to release any information, and I
i(" Exhibit Nos. 449 A to E, inclusive", in reference to above were introduced in
hearinss of Sept. 17 (see part VI), and are included in the appendix of this volume on
pp. 1010, 1011, and 1012.)
MUNITIONS INDUSTRY 851
refused to do it, to Mr. Leighton, on the ships which are specified
in my letter. I had just returned from Turkey myself and Leighton
had replaced me over there, and I knew what Leighton was up
against, and he was asking for the information on these airplanes,
if such information had been released by the Army and Navy, so
that he could take as an engineer and aeronautical man and compute
what performance he could give the Turkish Government on the
then existing type of aircraft they had in service over what we had
sold them some 2 years previously.
I knew that he did not need the information which he was asking
for. I knew what information he needed and proceeded to give it
to him. That information, for example, was on the Hawk air-
plane, of which Turkey had 24. He wanted to add a retractible
landing gear, which anybody could do. That was published, and
those retractible landing gears were used on all airplanes. Practi-
cally all commercial airplanes have them.
He wanted to know what the performance was on the FllC-3
airplane, because among other features it had a retractible landing
gear.
I gave him the information that a retractible undercarriage would
add 3 to 10 miles per hour to the performance of the airplane, which
would have stei^pecl up the performance of the Turkish Hawks by 3
to 10 miles per hour. I did not give him any information on the
construction or type, details of general performance characteristics
on the FllC-3 or the FllC-1, which he was asking for.
On this YO-40, that was published, which I stated here in the
letter, in Janes All the World Aircraft, the information released
by the Air Corps, which was public, and the same thing with the
A-8, a liquid-cooled engine. He wanted to know the difference in
performance between an airplane equipped with a liquid-cooled en-
gine, which was the Falcon, which at that time we were trying to
sell Turkey, but they wanted an air-cooled engine in the airplane,
because there were air-cooled engines throughout in the Hawks
which they purchased from us.
So that I gave the information I stated, and he already knew
what an air-cooled different engine installation would do to an air-
plane, and in dictating this, as one officer to another officer in a
company, in a jocular way, I said, " It's almost like a code " and
" Do you get it? " It was a perfectly innocent remark or a normal
statement in talking to Leighton. There was absolutely no infor-
mation given in this in any way, shape, or manner. No engineer,
no pilot — I have been flying for 17 years myself and it is impossible
to get the performance on any of the airplanes on which information
was not already released by the Air Corps from that paragraph of
my letter.
Mr. Kaushenbush. Mr. AUard, why did you not simply tell him
how many miles per hour the plane could do with all those changes?
Mr. Allard. Because I did not know what other characteristics
he was going to have to combat in Turkey. That is, whether they
wanted changes in gas tanks or other items. I was telling him that
with a retractible landing gear, which could be put on the airplane,
that he would add 3 to 10 miles per hour.
Mr. Hiss. One other line of inquiry, Mr. Allard, which I would
like to take up in this connection : Has the art of dive bombing been
852 MUNITIONS INDUSTRY
a fairly recent development on the part of the United States Army
and the United States Navy?
Mr. Allard. I do not think so. I think that is referred to in
those letters of Admiral King and Admiral Moffett.
Mr. Hiss. I do not think so.
Mr. Allard. Dive bombing?
Mr. Hiss. We will look back.
Mr. Allard. I do not know. It goes back to the Hell Diver air-
plane, around which the moving picture was made several years
ago.
Mr. Hiss. Here is Admiral Moffett's letter, " Exhibit No. 441 "
[handing paper to witness].
Mr. Allard. I think it was Admiral King's letter.
Mr. Hiss. You mean the one which was written after Mr. Web-
ster's ?
Mr. Allard. The one which was written before or after.
Mr. Hiss. There is Cook's letter and there is King's letter [hand-
ing papers to witness]. Not dive bombing.
Mr. Allard. Not dive bombing.
Mr. Hiss. Has the Navy permitted dive-bombing tactics to be
sent abroad by American aviation companies who happened to be
familiar with those tactics?
Mr. Allard. I do not know.
Mr. Hiss. " Exhibit No. 448 " i^ a letter dated October 8, 1932,
from Mr. Robert L. Earle to Mr. A. B. Carrington, of the Export Co.
(The letter referred to was marked " Exhibit No. 448 ", and is
included in the appendix on p. 1004.)
jMr. Hiss. That letter reads in part as follows [reading] :
It will not be possible to offer any dissertation in detail on the metlidd
employed by the Navy in dive bombing for, as we have advised the Export
Ccnipany before, the Navy considers this information as confidential and will
not permit it to be passed out. The following statement, however, may serve
your purposes :
" Single-seater and two-seater airplanes in use by the U.S. Army and Navy
are not constructed to enable bomb sights to be used for the dropping of
bombs while in horizontal flight. It is impossible to locate such a siglit where
a pilot or his gunner could effectively employ this instrument with the needed
degree of accuracy. For this reason, such sights are used only in large, sIo\yer
airplanes especially constructed for this type of bombing.
" Both branches of the American service have found that greater accuracy
can be obtained in the placing of bombs of comparatively small size such as
used with single-seater and two-seater airplanes by the releasing of these
bombs while in a dive. In the dropping of bombs in this method the pilot
uses tlie same sight which he employs in connection with fixed guns. He
simply aims the airplane itself at the target, drops his bomb or bombs while
the airplane is in a dive, then pulls out and resumes normal flying. It is for
this reason that airplanes constructed for the U.S. Army and Navy are built
to withstand considerable diving but do not make provision for the installa-
tion of bomb sights of the type used in horizontal bombing."
Mr. Earle further says :
The above is simply my own statement of the bombing methods employed
but I hope it will suit your purposes.
That was in 1932.
Mr. Allard. Yes, sir.
Mr. Hiss. Were the officials of the Export Co. in Europe advised
at that time that the details of dive bombing should not be made
public ?
MUNITIONS INDUSTEY 853
Mr. Allard. I do not think they were advised that, unless the
question came up for some specific purpose.
Mr. Hiss. On January 18, 1934, Mr. Allard, you wrote a letter to
Mr. Leighton, which will be marked " Exhibit No. 449."
(The letter referred to was marked " Exhibit No. 449 " and is
included in the appendix on p. 100").)
Mr. Hiss. On page 2 of that letter, the third paragraph, you state
as follows [reading] :
On the subject of dive bombing, —
This was written January 1934, whereas Mr. Earle's letter was
1932.
Mr. Allard. Yes, sir.
Mr. Hiss (reading) :
On the subject of dive bombing which j'ou refer to in your letter of Decem-
ber 12th, and which is apparent in copies of your proposals to the Government
on new business, this is a matter that is most delicate by nature. You refer
specifically in your protocol to the Ministry of Defense on the Kiiyseri factory
project, under the heading "Test Flights of the Planes," page 6, as follows:
" Diving bomb tests will be included this time In the oflBcial tests." We have
been nosing around in the Bureau in Washington, discreetly, and find that
they hold as most strictly confidential their dive-bombing tactics and procedure,
and they frown upon our even mentioning dive bombing in connection with
the Hawks or any other airplane to any foreign powers. It is absolutely
unwise and unethical at this time, and probably for some time to come, for
us to indicate in any way that we know anything about the technique and
tactics of dive bombing and to include such tests in ofiicial tests, or to have
any pilot demonstrate or instruct in dive bombing, would be just about the
w(»rst thing that could be done at this time. I can see no objection to your
referring to dive bombing in conversation, but you should plead absolute
ignorance as to the technique employed or why or how we can use dive bomb-
ing in our services here. If any Navy officials, or any of the Navy officers now
located in Turkey, or who might visit there, or replace the present officers,
should get hold of any proposal from us in which we refer to dive bombing,
it would snap right back to Washington and I am afraid it would seriously
react against our Navy relations which are too good now here to upset in any
way. I know you can appreciate this and I also know that you will take the
necessary steps to remove from present negotiations any reference to dive
bombing, and keep the mention of them out of any formal contracts or even
proposals. / cannot stress the importance of this too much.
I realize that you are fighting against European competition that seems
to have airplanes that are a little faster than ours. However, I know that
you also know of all the sales arguments against the extra speed and, par-
ticularly, how they obtain it in foreign equipment. It is done at a definite
sacrifice on the life of the engine and, probably, the airplane ; it is done at
a sacrifice of maneuverability and military load ; and if those features in the
Hawk do not offset a few kilometers difference in speed, plus the fact that the
ship will withstand power dives of high velocity and stand a punishing to
which this type has been subject for years in our services at home, I do not
know how you can compete.
It may be all right for Bob — •
That is Farnsworth?
Mr. Allard. Yes.
Mr. Hiss (continuing reading) :
To put on a dive bombing show to show the strength of the airplanes, but to
refer in contract to dive bombing, or endeavor to teach dive bombing, is what
I am cautioning against doing.
Senator Bone. Mr. Allard, can you tell us what percentage of your
Curtiss-Wright business, in dollars and cents, is done with the United
States Government, in both military planes and those used in other
services ?
854 MUNITIONS INDUSTRY
Mr. Allabd. I cannot off-hand. The records have been furnished
the committee, and have been gone into this morning.
Senator Bone. Do the studies wliich were put in the record indi-
cate what percentage of the business, in dollars and cents, has been
done with other governments?
Mr. Allard. Exports? Yes, sir.
The Chairman. Off-hand, what percentage of your total business
is with the United States Government?
Mr. Allard. I think it was about 66% percent.
Mr. Hiss. About two thirds.
Mr. Allard. Yes, sir.
Mr. Hiss. And of the other business, the majority in recent 5^ears
has been foreign sales, of which the majority has been with foreign
governments. Is not that correct?
Mr. Allard. Yes, sir ; by far.
The Chairman. Mr. Allard, do you know Major Doolittle very
well?
Mr. Allard. Yes, sir ; I served with him during the war.
The Chairman. What position does he occupy? Do you know?
Mr. Allard. Yes, sir; he is manager of the aviation department
of the Shell Oil Co., headquartering in St. Louis.
The Chairman. Is he in any way connected with the procurement
division of the Army at Chicago ?
Mr. Allard. Not to my knowledge. I do not know, sir.
Mr. Hiss. Mr. Allard, do you know how many officials of your
company are former Army or Navy officers, or have been in the
Army Reserve Corps or the Naval Reserve?
Mr. Allard. I do not know how many, but it could easily be
found out. We can get that.
Mr. Hiss. You yourself served as a pilot?
Mr. Allard. Correct, during the war.
Mr. Hiss. And Captain Travis was a former Army pilot, was he
not?
Mr. Allard. So I understand.
Mr. Hiss. And Major Doolittle was helpful in demonstrating.
Major Melvin Hall, formerly with your company, was an Army
aviator during the war, was he not?
Mr. Allard. I understand he was aide to General Mitchell during
the war.
Mr. Hiss. Captain S. C. Coon, who was at the Turkish factory at
one time, was a former Army or Navy man ?
Mr. Allard. I know he was an Army man during the war.
Mr. Hiss, Mr. Theodore Wright was a former Army man or
Navy man, was he ?
Mr. Allard. I do not know, but I can find out easily.
Mr. Hiss. Mr. Leighton was a former lieutenant commander, was
he not?
Mr. Allard. Of the Navy.
Mr. Hiss. Mr. Chapline of Wright Aeronautical was a former
Army officer?
Mr. Allard. No, Navy officer.
Mr. Hiss. In the hearings before the Subcommittee on Aero-
nautics of the Committee on Naval Affairs of the House of Repre-
MUNITIONS INDUSTRY 855
sentatives, at page 600, there is a list of men who are now employed
by aviation companies who were formerly in the United States Navy.
Keferring to the Eclipse Co., which is a part of the General Mo-
tors group, we find Lt. Comdr. C. H. Havil ; and Lt. Jens Soucek.
General Aviation had Lt. C. H. Schildhauer.
Could you furnish the committee with a list of all the officers,
former Navy or Army officers, including Reserve Corps, of both
the Army and Navy, that is, in any capacity in the Army or Navy,
who are now with the company and what their duties are ? ^
Mr. Allard. Take the officer and employee list of the company
at the present time?
Mr, Hiss. Yes, sir.
Senator Bone. Do you consider that your company is an enter-
prising one?
Mr. Allard. I hope so, yes, sir.
Senator Bone. And that it is applying to aviation the very latest
features of aerial navigation?
Mr. Allard. I should say so, yes, sir.
Senator Bone. Is there any doubt in your mind as to that?
Mr. Allard. Not as a pilot.
Senator Bone. From the mechanical side, do you think your com-
pany and other aviation concerns in this country are applying the
very latest principles?
Mr. Allard. I certainly do.
Senator Bone. I take it your company and other companies have
research work going on all the time?
Mr. Allard. Yes, sir.
Senator Bone. So that you are attempting to keep abreast of all
the changes made?
Mr. Allard. We are attempting to keep abreast of all the changes
made.
Senator Bone. And that information is made available to the
Government ?
Mr. Allard. Yes, sir.
Senator Bone. Would you say that the United States Govern-
ment, then, has the very latest word in efficiency of planes that,
it is building and will build?
Mr. Allard. At the present time and under present conditions of
appropriation and so forth, yes, sir.
Mr. Hiss. Mr. Allard, in the memorandum previously referred
to and marked " Exhibit No. 3'97 ", the memorandum of June 19,
1934, from Mr. Albert I. Lodwick, who was an employee of the
parent corporation
Mr. Allard. Yes, sir.
Mr. Hiss (continuing). To Mr. Thomas A. Morgan, the president
of the Curtiss-Wright parent company, who was also the president
of the Aeronautical Chamber of Commerce
Mr. Allard. Yes, sir.
Mr. Hiss. And who, according to the records of the Army Ord-
nance Association is or has been a member of the executive commit-
tee of the St. Louis post of that association^on the last page of
^ The above-requested list was furnished to the committee by Mr. Allard and is included
in the appendix on p. 1013.
856 MUNITIONS INDUSTRY
this memorandum, which one of our investigators is informed was
discussed by Mr. Morgan with President Roosevelt in June, after
this committee was formed, the following appears :
Congressional investigations, embargoes, pacifistic talk, and propaganda will
doubtless cause some of our present customers to buy abroad due to the
uncertainty of delivery and tbe uncertainty of obtaining spare parts in tne
future. The greater the volume of aviation business in this country, the
better our national defense.
Your company does not look upon embargoes or peace talk or
congressional investigations with favor?
Mr. Allard. Yes, certainly. If all the powers in the world will
join in them ; but there is no good for us to put on an embargo or
talk peace and let this business go to foreign competitors and give
them the business.
Senator Bone. How do you suppose that the world could arrive at
a state of mind where it can begin to discuss peace, unless peace
is talked?
Mr. Allard. It has been talked for centuries, has it not. Senator?
Senator Bone. Would your company suppress all discussions on
the desirability of peace?
Mr. Allard. No; I do not think that I am in a position to say
what my company would think of a subject as great as that now.
Senator Bone. There was some reference during the course of
the hearing to " fomenting peace ", and I believe you made some
observations upon that.
Mr. Allard. Yes, sir.
Senator Bone. How would you, Mr. Allard, find a way to bring
about a different attitude of mind among the nations of the earth
except by talking peace ? Could you suggest any other way ?
Mr. Allard. No ; I do not think so.
Senator Bone, It is part of our duty to inquire into the whole
picture, and I am wondering if you can suggest any way by which
the world can finally get rid of some of the things which confront
us except by discussing the desirability of peace,
Mr, Allard, That has gone on for centuries, has it not, for a
great many years?
Senator Bone. I understand, and murder has gone on for cen-
turies, but we still have laws with respect to it, and larceny has gone
on for centuries, but we still have laws with respect to it. We do not
find ourselves confronted with a sense of frustration in dealing with
these things, but still continue the laws on the statute books,
Mr, Allard. Certainly,
Senator Bone. Would you suggest that we abandon all efforts to
have peace?
Mr. Allard. Oh, no; obviously not.
Senator Bone, To what extent would you suppress that sort of
thing? I do not mean that in an odious sense, but I mean to turn
it down,
Mr. Allard. I think, Senator, that it is entirely too great a sub-
ject for me. It is beyond my comprehension to give any solution
to it. The great world powers have been trying for years to get a
solution to this problem, and I certainly am not equipped to give
any judgment on it now, I wish I could.
MUNITIONS INDUSTRY 857
The Chairman. How seriously do you feel that the great world
powers have undertaken this task?
Mr. Allard. I only hope that they have, Mr. Chairman. I would
not have any way of knowing how seriously they do it. I am not
close enough to the powers to know.
Senator Bone. I take it that you, as a private citizen and as a
business man, would not want to see the world engaged in another
such thing as occurred between 1914 and 1918?
Mr. Allard. I certainly would not.
Senator Bone. What do you think might happen to western
civilization in the event another conflict of that kind ensued, con-
sidering the financial and economic conditiong we have in the world
today ?
Mr. Allard. I would not care to see that happen. Senator.
Senator Bone. We are not asking you to deliver a lecture or any-
thing of the kind.
Mr. Allard. I hope not.
Senator Bone. But what do you think might happen to western
civilization in the event that the world got embroiled in another
conflict of that kind?
Mr. Allard. Frankly, I do not know. I do not think any one
could forecast what happened to us prior to the war. I certainly
know I did not have any idea what would happen. I would not
attempt to guess.
Senator Bone. Were you astounded by what did happen?
Mr. Allard. Probably I was a little too young to be astounded
by it at the time, sir.
The Chairman. Do you think the world could stand another con-
flict of that land ?
Mr. Allard. I do not know.
The Chairman. There is a doubt in your mind, is there not, and
you are wondering, as others of us are, whether the world could
withstand another conflict like that of 15 years ago ?
Mr. Allard. Yes, sir ; that is correct.
Senator Bone. You would be fearful of the economic and political
changes that would be brought about by a war of that kind ?
Mr. Allard. Yes; probably.
Senator Bone. Why do you not say it would be? You say it
would probably be.
Mr. Allard. I do not know that that is the only thing I would
be fearful of. There are a lot of other things besides political and
economic things to consider in a world conflict. I do not know
what would happen. I do not know what this world would look
like.
Senator Pope. Do you think the activities of the munitions makers,
such as disclosed here, with the assistance of Government officials in
Europe, and even in America, are promoting peace or a peaceful
attitude among the nations ?
Mr. Allard. I do not think it is hurting peace, Senator, until
all the world powers get together and establish some definite basis
of world peace. They have been talking of it for years, but the
mere sale of munitions or aircraft by us or anybody else is not
detracting from the possibility of peace.
858 MUNITIONS INDUSTRY
Senator Pope. Do you think that all the facts which have been
brought out at this hearing, as to the intrigue indulged in, par-
ticularly by the European countries, in South America and in
Europe, is having no effect at all, so far as promoting a peaceful
attitude in the world is concerned ?
Mr. Allard. Not unless all the powers of the world get together
and stop it. One stopping it is not going to answer the problem.
The Chairman. Mr. Allard, if I am not mistaken, it was Lord
Cecil, who has been in pretty constant attendance upon these dis-
armament conferences and peace conclaves, who declared that a
very ominous factor entering into all the negotiations had been
the influence of the munitions makers the world over. Now, that
being the case, are you not ready to concede that the munition makers
perhaps are taking a larger hand in opposition to understandings
than we might wish to have ?
Mr. Allard. I do not think I can answer that, Senator.
The Chairman. Perhaps I should not expect you to.
Mr. Allard. I would have to think it over.
The Chairman. But the attitude, such as I attributed to Lord
Cecil, is an attitude not at all unlike that our own American emis-
saries bring back as being things standing in the way of under-
standings.
Gentlemen, you will understand yourselves to be excused, and
the committee will reconvene at 2 : 15 o'clock.
(Witnesses excused.)
(Thereupon, at 1 : 20 p.m., the committee took a recess until
2 : 15 p.m.)
This concludes the record of the Curtiss-Wright Export Corpora-
tion. The committee at this point took up the case of the E. I.
du Pont de Nemours & Co., which is printed in part V.
DU PONT - GENERAL MOTORS
AIRCRAFT MANUFACTURING INTERESTS
ALLISON ENGINEERINC
DIVISION
U1A 0WNSA93tTS
(fWWACTURES AVIATION
CNSINES, BEARINGS, SUPER-
aoRSCWS.CTC IWIANAPOIIS)
DU PONT CO.
2a05'/< 0FG.M.C0t1-
MCN STOCK HELD BY
WHOLLY OWNCPSUBSIOARY
GENERAL
MOTORS
CORPORATION
BDffilX 4/IATION
CORP.
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G.M.C. OWNS 15%
BENDIX
PRODUCTS
CORPORATION
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OF CANADA. LTa
MANUFACTURE &5*LE
ECLIPSE
AVWTION CORP
[ASTOIMNCE.N J.
MANUrACTURES
ENGINES.STARTERS.
AND CENERATORS
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BENDIX-STROfaDK
CAMUKETORCa
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; (PLANES) NORTH
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'•ISf. (89,062 SHARES)
ECLip«e
HACHINE ca
fLMiRA, N r
(STARTER DRI.'E.
BRAKES)
100 V.
CCNERALAMATION
CORR (HOLDING)
AFFILIATED WITH i.HC
S.N.C OWNS A»M%, CiJia
NORTH AHCRICAN
MMTiOH. INC
GCNl AVIATI0N0WN9 *i2tV
G.MC OWtiS 67<X
JULIAN p.
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PIONEER
MSTRUMENT CA
(BENDIX AVIATION CORP
OVHS lOOX COMMON
STOCK -WRIOUS I35urs
PREF. STOCK STILL
OUTSTANDING APRIL
|9M)*/IATI0N INSTRU-
MENTS, ETC BROOKLYN
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BENDIX AVIATION (a»P
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ELECTRIC 4 IGNITION
APPARATUS
BENDtX-
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BENDIX AVIATION SIU \
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CORP.
I JOINT CONTDOL WITH
(STANDARD OIL COiail
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VACUUM POWER eRA)(ES
AND AUrOMATIC
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(PIONEER INSTRUMENT
CO CWNS 100 X)
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BROOKLYN
CENERAL AMATKW
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100%
CQWCRCIALA MILITARY
PLANES. BALTIMORE:
AIRCRAFT CORP.
100 j;
MILITARY AIRCRAFT
BALTIMORE
CONDOR CORR
100 X
(investment
corporation;
SPERRT CORP.
I/ILL STOCIf DISTRIBUTCO
VOTING TRUST CERTiriCATES
TO NORTH AMERCAN STOCK-
HOtJIERS OF RECORD ALJ&. r7.33
noODY'SISM
ri DUPONT n NEMOURS
ANNUAL REPORT FX)? S33
STRRTfiYROSCaPECO.
EROOIfLYN N Y lOOV.
1=IRO-COI1PASS, GYRO-
STABILIZER , GUN-FIRE
CONTROL tTC.
8PERRY GYROSCOPE
ca LTD.
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SPERffY GYROSCOPE
CO OWNS 100%
FOROMSTRMCMTCa
LONG ISLAND CITY
l(X>S; RAN6E-KfEPER5
ANTlAlfiCRAFE flBE-CON-
TROL MECHANISMS ETC
WTERCONTMMr
ilMT)ON.INC
SHARES ouremDw-ngm
sPDwrcofiPovrtis- i7*isia
vazx . pieuc - sBfloo
COnRAMA cc
AMAOON FAUCETr.<A
UWUI MKIirCORR
SFtWlfCDW.OKKIBfli
CUSSA(I,I47,<»I OUT-
STANDUGJCIlSSlCOftlON
itTlOfil? (WTSryWDING)
MmONEXPlXWrnOMBK
miOOX "DEWLOPS AMTON
IKPUSTRY.COnftRaAL
REPRESENTATIVE FDflEISN
CO(«TRIES. SEVERAL CORR
rt#T;TS.,A»W>I.A«ES . ETC."
■i. (Face p. 859.)
APPENDIX
EXHIBITS
("Exhibit No. 268" appears on facing page)
" Exhibit No. 26S-A" is a list of stockholders in Cnrtiss-Wright and is on file
with the committee. (See p. 693.)
Exhibit No. 269
[Copy]
Watson, Phillips & Cia. Sues., S. En. C,
AvBNiDA Uruguay No. 103 Apartado Postal 67,
Mexico, D.F., March 23rd, 193'f.
agency agreement
Cltitiss Wright Corporation,
R.C.A. Building, 30 Rockefeller Plaza, iNeio York City.
Dear Sirs: We duly received your letter of the 15th of January, with whicli
you enclosed copy of your sales agent agreement, and regret having left this
matter pending for so long, but we expected to discuss the points which we wish
to bring up now, with one of your representatives upon his visit to the country,
which at that time we believed would take place in the near future.
We believe the agreement appears to be quite suitable, and the only points
which we shall draw your attention to, are the following :
We note that we are allowed the agency solely for military airplanes and
engines, and that no mention is made of civil machines. Although it is scarcely
likely tl.;u we uiay cbtain an order fur e'vil tiirplaiio ■■. Vv-e presume you will
have no objection to our soliciting same, should opportunity offer.
We note that we are merely named in the agreement as " Soliciting sales
agents ", and that we may not act in any more official capacity than is outlined
in the agreement, which we believe might rather restrict us in our representa-
tions liefore Government departments in case of necessity, as if we are considered
b.v them your official representatives, they will properly expect us to be in a
posiiion to make definite offers and close contracts on your behalf, for indeed,
as you know these matters are indefinitely delayed whilst negotiations are in
course, but it is always the case when the Government officials make a decision,
they wish everything to be done with extreme rapidity, and having to refer
mat ers back to you, might be prejudicial to your interests and ours.
Glause 3. We note the conditions with regard to the payment of commissions,
and believe that this clause should be amplified to provide for some form of
commission to be payable to us on orders for machines to be delivered in
Mexico, which may be placed direct with you in the United States. The possi-
bility of such orders may be remote, but we feel that due to our friendship with
the officials of the aviation lines here in Mexico, and the propaganda which we
have made on .vour behalf, this may ultimately result in planes "being bought in
the United States by these airways, and we believe that in that case, we should
be entitled to some remuneration.
Our comments with regard to our position as repi'esentatives of yours as
above, specially refers to our ability to collect on your behalf down payments
which may be made by the Government, as unless we are in a position to do
this, you will readily appreciate that any other form of payment may be prej-
udicial to your interests, as we are always particularly careful to see that
859
860 MUNITIONS INDUSTRY
before we acc( pt any Govornnieiit orders, we have received part payment in
casti before submitting the order. We would be glad to have your advices in
this connection in due course.
As we are informing you under a separate letter, the Government holidays
commence today and last to the end of this month, consequently all negotiations
must remain i)ending until that time. This is jtarticularly unfortunate, as it
only means further delay, but we really believe that in the near future some-
thing definite will be forthcoming as the Government simply must have new
motors and jilanes, and it is certain that these will be ordered l)efore this term
of office has passed ; consequently matters may come to a head in time in the
month of April.
We are assured that our connection with the various departments are satis-
factory, and that if anything is to be ordered it will be from your firm, it is
only that the delay is very depressing.
Awaiting your advices in connection with this matter with much interest, we
remain
(Signed) Watson, Phillips & Cia.
CHEP/tvz.
Exhibit No. 270
[Copy]
Ankara, Fcbruanj 20th, WS.'f.
Mr. J. S. Allaed,
Curtlss-W right E.rport Corp., RCA BuiMitig,
30 Rockefeller Plaza, Neio Yo7'k.
Dear .Tack : This letter is in follow-up of exchange of cablegrams regarding
Caldwell — yours of 16 February asking if I felt situation justified additional
help in Europe, and my reply of Feb. 17, saying, " Think it advisable have
additional permanent European representation for some time in view of
developments." I suggest you hold Caldwell in Europe until receipt of
letter.
This letter is a sort of review of lengthy correspondent we have had in the
past on the general subject. Before writing this letter I have reread much of
that correspondence. I don't ask you to take the time to do the same thing,
because it is long, but I do particularly ask you to read again the latter part
of my long general letter addressed to Tom Morgan on October 2Gth, and my
recent general letter of February 14th — mailed two days before receipt of your
Febr. 16th cable.
I have been out here for nearly eight mrnths. Although I've spent most of
my time in Turkey I haven't for a moment forgotten that Turkey is after all
only a part of the larger general European job. I believe that my contacts with
otlier parts of Europe plus the flow of information correspondence that has
been forwarded me regarding affairs elsewhere in Europe, has kept my per-
spective fairly straight. Bill Kennedy's recent trip here has given me side
lights which serve to fill in the blank spaces in the picture — particularly the
K. L. M. story. I have had plenty of opportunity to talk with i)eople who have
intimate dealings in other countries in Europe.
Everything I have seen, read, and heard, seems to justify a conclusion that
our experience in Turkey isn't just a special isolated case, but that it may be
looked upon as a problem typical of airplane sales in Europe. With certain
variations in detail to meet special local conditions, our experiences in Turkey
may be taken as a point of departure on which to build our European sales
policy (excepting such countries as England, France, Italy, and Germany,
which a»'e industrialized producing countries and where licensing is our only
possibiliiy).
If that hypothesis is even half correct it means that we've got to be prepared
to make more permanent contacts, and to spend more time in those countries
where we're looking for business. And that means more people on the job on
a permanent assignment basis.
Right here I would like to set down briefly a number of conclusions that have
been forming in my mind while I've been sweating over this job — and con-
stantly champing at the bit because of my complete inability to break loose
from Turkey to run down the numerous interesting possibilities for business
that are continually being reported all over Europe.
MUNITIONS INDUSTRY 861
I. When you sell airplanes in Europe you deal with governments. You
are dealing in military equipment, which is invariably and popularly looked
upon as vital to the personal safety of every individual. (Remember that in
Europe civil air transports are usually looked upon as military planes in dis-
guise.) The basic problem in Europe isn't so different from the problem of
dealing with our own Government at home as one would at first suppose.
There are differences in details but tlie underlying basic requirements and
general strategy are remarkably similar when you get down to final cases. In
Europe you're dealing with twenty-odd governments, each one of which is as
fussy as the one Government we deal with at home.
II. Occasional visits to the big shots at the top side stir up a measure of
passing interest, but in the final analysis they don't do a whole lot of good
unless they are backed up by everlasting hammering at the rank and file,
through personal contacts with subordinate section chiefs, and on down through
the pilots and mechanics in the operating units. If the operating personnel
don't like your stuff, the big shots on the top side rarely, if ever, have the nerve
to buy it.
III. Palm persuasion is a far less potent factor than it is reputed to be. In
certain cases in some countries it helps somewhat in getting a favorable hear-
ing, but it is far less general than one would suppose. Competition is too
keen, and gossip too searching, for the art of palmistry to thrive. There have
been a lot of political heads chopped off because of it, and it is becoming
constantly less popular.
IV. Personal acquaintances and friendships — and the confidence and good
will growing out of them, are as potent a factor in Europe as they are at home.
The only difference is that it takes longer to establish them in Europe than in
America, first because of differences in language, and second because the
average European is less given to accepting strangers on faith than is the
American.
V. The competition is at least as keen, and it is more varied, in Europe than
in America. Political conditions are far less stable, changes in assignments of
personnel to important positions of responsibility and authority are far more
frequent and sudden. That means that you must always be prepared to see
the work of months badly battered and suddenly in need of major overhaul.
The wider and more varied is your acquaintanceship the less you are likely
to be disturbed by such changes. (I have, for example, just received word from
Greece that their whole aviation program has been at a standstill as result
of a sudden change in the Minister of Aviation and sweeping changes in the
entire headquarters staff.)
VI. Due to the very nature of the product, and the general conditions under
which it operates, the airplane sales job is largely a " sales engineering " jot),
which requires an intimate knowledge of the technical features of our product,
at least a fair acquaintance with the technical features of the competitors
products, and a fair acquaintanceship with general strategic and tactical prob-
lems. Further, because there usually enters the problem of local manufacture
(see my letter of October 26th) you've got to have at least a general acquaint-
ance with manufacturing principles. If there are any agents available who
have the required technical qualifications I have yet to hear of them. De-
naxas and Admiral Gerondas in Athens are the nearest approach I've foiuid
yet, but they fall far short of full qualification. Your agent can act as your
general contact, he can keep you acquainted with the general situation, see
that you meet the people worth seeing, do your translating and interpreting,
help with banking connections, etc., but he can't sell your goods nor negotiate
your contracts. When it comes to primari/ selling (I except miscellaneous
spare parts and accessories which follow inevitably in the wake of primary
sales) you've got to have a direct representative of the home organization on
the ground. And that direct representative has goit to know his stuff, because
he's hivariably up against the best selling organizations in Europe who have
their home organization near at hand, and demonstrators available. In this
connection it is well to remember that the best agents (that is those who have
the best connections) are those who carry a number of lines. No agent who
is worth his salt can afford to handle your line as a specialty— at least until
you've become firmly enough established to assure a continuing flow of profit-
able business. Therefore your agents need constant punching by personal visits
to keep them on their toes.
VII. It follows inevitably from the foregoing that to hook orders, in Europe
you've got to have pretty complete direct representation on the ground — at
862 MUNITIONS INDUSTRY
least until you've become firmly established. Without such representation
you'll get lots of nibbles and occasional hot inquiries, and spend a lot of money
sending cables and mailing literature, but you'll book lew orders for profitable
business. You can't sell aircraft in Europe by correspondence or through de-
tached agents.
VIII. Due to the very rapid pace of technical and tactical development in
aviation, it follows from VI that your representatives in the field must have
frequent personal contacts with progress at home, through personal visits to
the factory organizations where they can see what is going on, and learn what
our own people are thinking about. Of equal importance is that the factory
organizations must have first hand personal reports from the field regarding
what is going on. Correspondence is a very unsatisfactory medium for such
interchange of ideas. No representatives should be left out in the field for
more than a year. He gets too far behind, and when he gets too far behind he
just can't hold up his end when it comes to the knock-down drag-out fight, into
which all sales in Europe apparently develop before you walk out with a signed
contract. (In that respect the situation in Europe doesn't seem to be any
different from that at home. I gather that the Douglas episode wasn't any
bed of roses. When I get too discouraged at delays and difficulties involved
in this Turkish battle I console myself with the recollection that the Douglas
battle started nearly a year before I left for Turkey.)
IX. One man can't begin to cover all of Europe effectively, no half of it.
Europe isn't very large in point of distances, but it is a whale of a big territory
in term of time and convenience of communication. It has some twenty-seven
governments in it, in the majority of which are potential markets that we are
trying to reach. Each government considers itself just as important, and each
is just as fussy and at least as red-tape ridden, as is our own Government. A
representative just can't " drop in " on Ankara from Paris. It's a fovir-day
journey, each way. It takes just about as long, costs about as much, and is a
lot less convenient to " drop in " on Oslo from Ankara as it is to " drop in " on
Oslo from New York. " Sizing up " a situation comes closer to being a two-
months' job than two days.
X. And, finally, successful selling requires demonstration. Our European
competitors use demonstrators. I don't know of any airplane sales in Europe
that haven't been preceded by demonstrations, either by taking the product to
the customer, or bringing the customer to the product. (Let's not forget that
in our Turkish sales we did both.)
I'm convinced that If we're going to do a job in Europe we've got to do a
good job. If we don't do a good job, we're going to keep on answering cables,
mailing reams of literature, spending a lot for rail fare and hotel bills and
sundries, getting all hot and bothered about new prospects that are cimtinu-
ously cropping up (more often than not at widely separate points), but in the
end booking few I'eal orders.
I don't know that there is paying business to be had in Europe, but I believe
there is. I believe that the prospects are at least good enough to warrant
absorbing the expense of putting some additional help in the field for sufficient
time and under the required conditions to make a really thorough investigation
of the whole territory, so that we can lay out a coordinated plan based on
knowledge of cold facts rather than on rumors or enthusiastic agents' reports
(v>hich are likely to be half baked and biased, for obvious reasons).
Tuere's no news in that for you, of course. Realizing it, you started out a
year ago to make a personal investigation ; and spent about four months in
Turkey. I started out last summer with a nicely planned itinerary and with
the same objective, but I haven't got much further than you did — in nearly
eight months. You sent Morrie Caldwell out for a short visit. He's had to
stick three months, but so far as I have lea-ned the Norway and Persia deal>>
have got only so far as to the drawing of preliminary proposals. That's rio
fault of Morrie's I am sure. It's just another instance of the same old story.
I'm morally certain that no worth-while business can be concluded in Europe
in less than three months, or if the man on the job relaxes his presence for
an instiint before the signatures are on the dotted line, and advance payments
are in hand. If we're not ready to see .these various things through to the very
end regardless of advance itineraries, I'm convinced that we'll be better off
in the long run not to start on them in the fi-.st place. That's why I've stuck
close to Ankara in spite of holidays, Greece, Beograd, Bucaresti, and all the
rest, and its why I believe I ought to continue to stick until the job is exactly
1007o finished. Once that's done, I'll be only too happy to light out for other
MUNITIONS INDUSTRY 863
parts. If we do less than a finished job, about all our promotional work ac-
complishes is to build up a market for some European competitor to snatch
away from us at the last minute.
While I'm on this subject of what constitutes a finished job, I'd like to jot
down a brief summary of tlie position in Turkey, which will, I believe, be well
consolidated if we can get this new Kayseri project definitely closed up.
We have Curtiss-Wright products in the two leading air bases in Turkey,
which means continuing avenues of contact. We have one pilot in each of those
air bases acting in the capacity of instructor in advanced formation flying, blind
flying, etc., and from all reports they are doing excellent work and building
prestige for Curtiss-Wright among all the operating pers(5nuel and making
lasting friendship and contacts. These pilots, incidentally, are on the Turkish
pay roll and are costing us nothing. Joe Gody is looked up to and cordially
respected and liked by the entire maintenance force at Eskisehir, and we have
now sent him down to Izmir to dig in there. Hunter and his crew at Kayseri
have gained the complete respect and admiration of the entire manufacturing
and engineering personnel of the Turkish Air Force and have established a
wide circle of acquaintances and friends that is of inestimable and lasting value.
Bob Farnsworth has formed a circle of personal acquaintances and firm friend-
ships all along the line that is equally invaluable. I have been fortunate
enough to be able to establish personal relations on a plane of evident mutual
confidence and trust with the highest authorities in the Government. There
are four specially selected Tiu-kish leading mechanics now in America in the
hands of Curtiss-Wright. (They've cost us a lot of headaches, to be sure, and
it was a bull that they got there, but there they are ; and their presence can.
be, and should be, seized upon to impress the mechanics with the merits of
Curtiss-Wright and of American methods; the training and iniloctrination we
give them during their year in our organization at home can be made an inval-
uable asset in future activities here.) There are four selected Turkish pilots
in America now for a year's tactical training in the U. S. Army, another point of
contact open to us for firmly establishing the Curtiss-Wriirht idea in the minds
of men who will doubtless be very infiuential in Turkish air activities in future
years.
We have established the complete groundwork for establishing Curtiss-
Wright in a position of high prestige throughout the whole structure of the
Turkish Air Forces, and of the Government — a position which is not duplicated
by any competitor and which cannot be duplicated short of at least two years of
careful and costly effort. Basically our potential position in Turkey today is
excellent. It remains only to close this present pending contract to definitely
perpetuate (and strengthen) that position for at least a year to come.
With this contract lor keeping Kaiseri occupied the rest of this year closed,
our preferential position in Turkey will carry on and improve steadily on a
self-supporting basis from sheer inertia. This contract is like the final coat of
paint on a carefully built and expensive house. With it the house will last ;
without it we'll have to face continuing bills for repairs so long as we elect to
stay in it.
I repeat that if we are to do this job in Europe at all it must be a good job,
and that means more personal contact and more permanently assigned personnel
on the European territory.
We've already tacitly admitted that, without fully realizing it, in sending out
various " temporary " assignments — Caldwell on the Persian and Norway job ;
Kennedy to KLM (a special job, but this trip was extended to additional neces-
sary contracts) ; my special trip of two years ago; Arthur Nutt's special trip;
your special trip ; Guy Vaughn's special trip. Each one of these special trips
results in reports of this or that lead, this or that prospect encountered that
" ought to be followed up, I couldn't do it because I hadn't time." Either these
unanimous reports are cock-eyed or else we don't do as much and as continuous
contacting as we should. Somebody ought to have followed up the old matter
of Wasp-Cyclone replacements in KLM. Somebcdy ought to follow up the
Hensley lead in Rumania. Somebody ought to be following the Athens situa-
tion right this minute ; somebody ought to be following the situation in Beograd
and LOT in Warsaw, etc., etc. But just who? And how?
I haven't dared leave Turkey for reasons with which you are fully familiar.
Bob couldn't leave, with all the mess at Eskisehir and Kayseri to clean up.
His presence here has been indispensable during the preparation of detailed
specifications and contract provis.ons for the new project. His experience and
detailed knowledge of tl:e local situation have been invaluable.
83876—34 — PT 4 12
864 MUNITIONS INDUSTRY
Bob has ideal attributes for handling general European contract work. He
has brains, personality, sound business sense, guts — everything you could pos-
sibly ask for, but he is (through no fault of his own) greatly lacking in the
essential element of complete familiarity with the internal workings of the
producing organization. Paterson, Buffalo, and St. Louis are qu^te unfamiliar
to h;m, as are all their products of the past couple of years. Bob's place now
is back home for an intensive tie-in with the working organization. Give him
three to six months there and you can put him up against anything in Europe
on hio own. Without that background he is under a heavy handicap. He
has been away from hcmie now more than 2 years. It is neither fair to him,
nor in the interest of Curtiss-Wright that we should delay his return longer.
I don't need to tell you that he needs a trip home, or that C.W. needs to have
him take a trip i < me. You'll be glad to receive news that he is about to get
it. As I have said before, up until now I couldn't have got along without
him here. But with the last of the IS Hawks accepted, Bruce Buckley or
Sam Irwin available to fill in the gap on Fledgeing and Kayseri Hawk tests,
the new specifications, contract drawn, I've given him instructions to pull
up stakes and start home within the next 10 days. He'll be on his way before
this letter reaches you.
It is not alone for the purpose of rounding out Bob's experience that I
feel it necessary to have him go home now. Bob will learn a heap from Pater-
son, and Buffalo, and St. Louis, but I venture the assertion that P.B. and
St.L. have also a good bit to learn from the boy who has been through the
mill en this end. You'll be tempted to hold him in the New York oflice.
Please don't. Get him out to the factories, regardless.
With Bob going back there is certainly more than enough to keep both
Morrie and me busy in Europe. Please don't forget that I've been out eight
months now, that I'm beginning to lose my familiarity with what's going
on at home. Sometime before very long I've got to be getting back there for at
least a br:ef visit, for there are all sorts of things that I've got to catch up on
that can't be handled otherwise than through personal contact. Retractable
gear Hawk. Shrike. Airline dope for the projected Turkish project. Cargo
slaips for Greece. (What are the sales arguments to keep Condors in the
picture in the face of certain Douglas competition and existing United com-
petition), both of which have materially higher specifications to offer and hence
appeal to the military elements strongly (don't forget that European trans-
port planes are in reality considered merely as bombers in disguise). I should
get up to Italy, France, and England to see all this new military stuff thnt
we've been hearing so much about. (Mecid Bey told me today of reports they
have received of a 430-km Hanriot single seater in France for example).
What's going on in Russia, Gei'many, and Poland? I'ou may know all about
these things back home, but that doesn't help me to answer embarrassing
questions out here. And if I go on up into western Europe for any length
of time now who's going to co\er the various interesting loads that are crying
to be covered in the Balkans? And if this airline project goes through in
Turkey (and it seems as likely to as any other interesting prospect that I
know of in Europe) who is going to run that show?
I'll not continue longer on this line. I hope I've said enough to make it
quite plain that if all these various reports and inquiries that we've been
receiving from all over Europe are worth any attention at all, they are worth
serious investigation. And if we are to investigate them seriously I repeat
my conviction that we've got to have more people permanently assigned to
Europe than we now have.
I'm not recommending a big organization. I'm not even recommending a
European office, though I recognize the merits of Morrie's arguments in this
regard. I'm frank to say I don't know enough aliout it yet. But I am
recommending that you definitely and permanently assign Morrie to th s
European job, and direct him to rei)ort to me for instructions. My first move
will be to meet him somewhere and compare observations, experience, and
opinions, lay out a tentative definite plan of action, and send It along to yoii
for check and revision.
I believe there's business to be had in Europe, profitable business, but it is
going to require a lot of careful work, hard scratching, and patience, to
get it.
AVe can't get it by "temporary" flying trips to Europe. We've got to keep
everlastingly at it, with permanently assigned personnel. We need Morrie in
Europe for an indefinite period, and we need Bob Farnsworth back as soon
as he's caught up with goings on at home.
MUNITIONS INDUSTRY 865
For reasons which I have explained at length in my letter of February 14,
I l)elieve now is a favorable opportunity to dig into the European market, and
I believe the extra help and a couple of demonstrators will justify their
expense.
Sincerely,
(Signed) Bruce,
Bruce Leighton.
P.S. — I have been over all these matters with Bob repeatedly and at length.
We are in full agreement. I'm mailing a copy of this and my letter of Febru-
ary 14 direct to Morrie, for his study and comment.
Exhibit No. 271
May 29th, 1934.
Mr. Roberto Escobar,
New Weston Hotel, ^9th Street & 3Iadison Avenue,
New York City.
Dear Mr. Escobar: In accordance with your request for a statement as to
the installation of the Driggs 37 mm gun in Hawk and Falcon airplanes, re-
sultant from. Mr. Driggs' trip to Buffalo, I have had this matter up with our
armament enghieer, Mr. Trimbacb, who has submitted a report as covering
his contacts with Mr. Driggs, extracts from which follow :
" Mr. L. L. Driggs, of the Driggs Ordnance Engineering Co., 19 West 47th
St., New York, visited our plant on May 10th to discuss the possibilities of In-
stalling subject gun in the Hawk and Falcon airplanes for Colombia.
" Characteristics of the gun as obtained verbally from Mr. Driggs are as
follows :
Inches
Over-all length M. 8
Length of receiver 33
Length of barrel 31. 8
Over-all height 7%
Center of barrel from bottom of gun 2. 5
Width of receiver from center line to R.H. side for 30 rd. magazine. 4
Width of receiver from center line to L.H. side for 30 rd. magazine 8
C.G. location from aft end of gun 22%
Clearance required below receiver for operation of action 6
Clearance required below receiver for magazine, 10 rds. deep 18
Location of front wall of magazine from front end of receiver 6
Fore and aft length of magazine clearances symmetrical about
center line of gun 4
Weight of gun lbs 94
Weight of loaded magazine (30 rds.) do 50
Weight of loaded magazine (10 rds.) do 16
Recoil aft load do___ 1.200
Speed of gun shots per miu 100
Control (remote), Bowdenite cable and casing.
Recoil movement of barrel and action 8
" From the above characteristics a brief investigation revealed the fol-
lowing :
"Fixed Gun, Hawk Winri. — The only logical installation for the Hawk
would lie one of these guns in the upper wing center section clearing the
propeller disc.
" In order to accomplish this installation it is necessary to increase the
beam spacing, add considerable reinforcements, and possibly restrict the air-
plane's performance due to the increase in gross weight.
The niiigazine for a wing gun being of 30-round capacity would extend
below the wing 18" pcross an area of 8" which would result in a large blind
sppce for the pilot's vision. The gun could be mounted above the panel which
still gives an objectionable blind space.
The installing, loading, and general servicing of a gun of this size in an
upper panel will be quite difficult and may result in damaging the panel due
to the personnel's normal awkwardness.
866 MUNITIONS INDUSTRY
FIXBID GUN FALCON WING
The logical installation for the Falcon would be the same as that recom-
mentled for the Hawk except that two guns would be used.
The accomplishment would necessitate : Adding considerable reinforcement
and restrict the airplanes' performance due to the increase in gross weight.
It, likewise, being assumed that the .30 cal. wing guns in the lower panels
would be eliminated and only the synchronized .30 cal. be retained. Unless
the upper and lower wing guns are carried as alternate loads.
The magazine arrangement would result in the same objections as that
described above under the Hawk due to the wing section being of the same
depth.
The installing, servicing, etc., falls in the same category as the Hawk.
Mr. Driggs informed us of the omission of the provisions for ground gun
adjustment stating that the gun could be mounted fixed parallel to the center
line of the airplane, which means that the line of sight would be set at nn angle
with respect to the line of flight in order to have the lines of sight and fire
converge at the desired range. This will require the pilot to yaw the ship
to 'the right or left as the case may be. If two guns are used the sight should
also be " parallel " with the guns which means that with the guns spread out.
as in wing installation accurate firing will be almost impossible.
FLEXIBLE GUN
The installation of this gun for flexible use on the Falcon results in prac-
tically the same conditions as those described in previous correspondence on
37 mm flexible guns.
In view of the above complications which must be dealt with to arrive at
satisfactory installations of these guns and further since we have very limited
knowledge on satisfactory installations previously made, it is recommended
that from a development cost standpoint we should discourage applying this
gun to our airplanes until after oiir own government has proven them worth-
while.
Trusting that the above information meets with your requirements and.
requesting that you hold this report as strictly confidential, we are
Vei-y truly yours,
CuRTiss- Wright Export Corporation.
P. A. Hewlett.
PAH*B
Exhibit No. 272
Hotel Columbus, Miami, Fla., March SI, 193Jt.
Dear Farm : My discussion with Lieut. Comnr. Hugh Sease this morning
brought out that some time ago a number of United States naval aviation
officers tried to interest the Bureau Ordnance in an Italian machine gun which
they thought more suitable to fighters or pursuit planes. The gun is about
.45 cal., weighs only 9 lbs., has a considerably reduced range from the Brown-
ing but was accurate within approx. 300 yards, the ammunition weighs con-
5:iderably less than the Browning ammunitions and occupies a considerably
smaller space. He thinks quite a weight saving possible by use of this gun
and recommended that m'anufacturers investigate the gun with the view to
possibly inducing the Bureau Ordnance to adopt it for fighters.
While be was talking it occurred to me that perhaps it would be good to have
the dope on this gun in case we should ever wish to build a flying arsemil
for export sale with say six guns forward which we could do more readily with
a smaller gun.
He didn't know the name of the manufacturer but thought it the standard
Italian Air Force gun for fighters. I am just passing this dope along in case
you might wish to ask some European exp;irt company representative to get the
iowdiiwn or even handle it yourself by correspondence.
Best regards and please don't fill up the Buffalo plant with Colombians be-
cause I will be good and ready to see Americans when I return.
Sincerely,
(Sgd.) William J. Crosswexl.
MUNITIONS INDUSTRY 867
Exhibit No. 273
February 25, 1932.
Dr. Tehyi Hsibh,
Cliiiiesc Trade Bureau, 75 Federal Street, Boston, Mass.
Dear Mr. Hsieh : We have your letter of February 24th and are very pleased
indeed to enclose herewith certain descriptive matter and photographs of
certain of the planes which we manufacture and which we believe will be of
particular interest to you for the purpose which you have in mind.
We would point out that we build planes of all types and categories Imt
believe that the ones described in the attached data will be the most suitable
for your consideration. We should be very pleased indeed to have you sub-
mit these to the Nationalist League headquarters of the U.S.A., or would be
very glad to communicate directly with them if you will inform us where they
may be reached.
The data which we are enclosing consists of the following: Characteristic
sheet EX-C-4B and photograph of the Curtiss Hawk powered with G50 horse-
power Cyclone engine. This plane is a high performance, single-seater fightpr
as constructed for the United States Army and Navy. We reconmiend this plane
with the Wright Cyclone engine, because the Chinese Nationalist Government
already has in operation a considerable number of these Cyclone engines and
it is, therefore, desirable that any further equipment destined to China should
use engines of this type in oider to facilitate maintenance problems. This
Hawk plane can be had with other power plants, notably the Curtiss Conqueror
engine, which installation is the type which we have recently furnished the
United States Army. We have just completed a contract of forty-six of these
Hawks and are now delivering them to the United States Army, so that you
may be sure that this Curtiss Hawk is the very last word in the single-seater
pursuit plane category.
Enclosed herewith is general description of our speeding observation air-
plane. This description, together with the characteristics and performance
of this plane, will give you a good general idea of this plane which
we can offer at a most attractive price. The photograph attached shows two
of these planes which we recently built up and delivered to the Government
of the Republic of Panama. This plane is especially suitable for observation
work and light bombardment and, I believe, should be of particular interest
lor shipment to China.
We are also enclosing characteristic sheet and photograph of our Keystone
bomber. This plane, powered with a Cyclone engine, is used extensively by the
United States Army Air Corps, and we are just completing at our factory at
Bristol, Pa., a large contract of these planes for the United States Army. This
plane can carry over 2,000 pounds of bombs, and is, therefore, a formidable
offensive weapon.
Naturally, a plane of this size is somewhat expensive, but its cost is incom-
parable with the damage it can do with its heavy load of bombs.
We are also enclosing characteristic sheet EX-D- covering the Curtiss Hell-
diver with G50 horsepower Cyclone engine. This is the plane which is used
largely by the United States Navy and Marine Corps for observation and light
bombardment. The attached 3-view drawing of this plane will give you an idea
of the general appearance of this plane, which is a 2-seater with two forward
firing guns usually controlled by the pilot from the front cockpit, and a flexible
gun installed in the rear cockpit and operated by the observer in the rear cock-
pit. Bombs may be carried suspended under the lower wing.
We are also enclosing photograph and characteristic sheet covering the Curtiss
Fledgling, powered with a Wright Whirlwind engine. This is the training
plane which is used extensively by the United States Navy and which our
Flying Service is using in large quantities in their flying schools throughout this
country. We have a considerable quantity of these Fledglings now in operation
at our schools, and it occurs to us that you might be interested in considering
the purchase of a number of these used planes for immediate delivery at a very
low price. This would be entirely suitable for the training of pilots and
observers.
The four planes submitted cover the four main categories of flight training,
pursuit, 2-seater observation, and flghter and the large type of bombardment.
Planes in each of these categories are necessary for a full, rounded air force,
but for the situation as it now exists in China we would recommend special
consideration to the single-seater pursuit plane, whose chief use is defensive in
868 MUNITIONS INDUSTRY
the destruction of enemy aircraft. Witlacut planes of this type in considerable
quantities no successful air operation can be conducted.
We also recommend for special consideration the Speedwing light observation
plane, whose outstanding performance and high degi'ee of maneuverability
make it especially desirable for observation and bombardment missions and
use against troops ou the ground.
Please let us know if you desire any further information and whether or
not we can get in touch directly with the Nationalist League headquarters.
We are advised by our flying-service base in East Boston that their Mr.
Martin has been in touch with you, and we have asked him to talk with you to
find out if you would like to arrange an appointment to see the writer and
discuss in more detail the possible purchase of this military equipment.
We trust to have your early advices in connection with this matter.
Very truly yours,
CuRTiss Weight Export Corporation,
F. W. GouLDiNG, Vice President.
WFG/f.
End.
Exhibit No. 274
March 4, 1933.
#193
Via air mail.
Mr. E. J. Faucett,
Conipania de Aviaoion Faucett, S.A., Apartado 1^29,
Lima, Peru.
Dear Mr. Faucett : Referring to our cable of today, confirmation copy of which
is enclosed.
We can arrange for a special steamer to sail from New York on or about six
weeks' notice, at a cost of from $10,000 to $12,000 for the trip to Callaco. They
require six weeks' notice in order to get additional cargo.
The 200 each 50- and 80-kilo bombs would gross about 39 tons and the steam-
ship company would be willing to take 10 to 15 tons more bombs or other mate-
rials for the same cost of 10,000 to 12,000 dollars for the special trip.
If only the 400 bombs were shipped it would seem the c.i.f. cost would be
$25.00 to $30.00 each, but if the quantity was increased, it would materially
reduce the cost per bomb, or if other materials were shipped at the same time
It would absorb some of the cost.
We will send you by next air mail complete prices, etc., on all sizes of loaded
and unloaded bombs and cartridges, etc., and perhaps you could get the Peru
Government to place a substantial order for such equipment to be sent on such a
special sailing.
Please let us know by return air mail what the prospects are of getting early
orders for bombs and ammunition, etc.
Yours very truly,
Curtiss-Wright Export Corporation,
Owen Shannon.
Exhibit No. 275
Remington Arms Company, Inc.,
Bridgeport, Conn., January 6, 1933.
Mr. W. D. Pawley,
CUrtiss-W right Export Corporation, 27 West 57th Street,
Neio Yark City.
Dear Mr. Pawley : We confirm our conversation with you today in respect to
the ideas you discussed on behalf of your company to represent us in the sale of
our military rifles and ammunition to the Chinese Government.
It is understood that for the present this is only a tentative arrangement
to enable you to determine the possibilities of business with the Chinese Govern-
ment, and in the event progress satisfactory to you and ourselves is accom-
plished, we are to conclude exclusive arrangements with your company for a
period of say one or two years.
MUNITIONS INDUSrUY 869
While you are iu Cliiua representiug your company we ^Yill refer to you auy
inquiries we may receive for military supplies, and we understand you will
consider our rifles aud ammunition exclusively in any negotiations you conduct
for sucli material.
It is understood for the present we will not be responsible for auy salary to
you or expenses on your part. The occasion may arise where expenses by you
on our behalf would be justified, in which event you would obtain our agree-
ment beforehand.
We agree to quote you the lowest prices we would accord anyone for Chinese
military business, and these prices are to be net to us without any deduction for
commission, etc. We understand it is your intention to add to these prices
such profit for your company as you deem" advisable.
It is understood that no orders are to be binding on us until they are accepted
by us. As we explained to you the prices we intend applying to any inquiries
you have will be so low as to preclude any credit risk. Consequently, the
minimum terms we would require would be 50 percent cash with order and 50
percent irrevocable credit in New York payable against shipping documents.
As you are aware, Messrs. S. J. David & Co., Shanghai, operate for us in
China on sporting-goods business and sales to police forces, which is not to be
construed as military business. Our arrangements with S. J. David & Co. for
such busines are to continue uninterrupted. Undoubtedly Mr. E. A. Sykes,
manager of that company, will be glad to extend you every cooperation.
Yours very truly,
Remington Arms Company, Inc.,
f. j. monaghan.
Exhibit No. 27G
August 13, 1932.
Mr. Owen A. Shannon,
Vurtiss-Wright Exijort Corporation,
27 West 57th Street, New York, N.Y.
My Dear Mr. Shannon : Confirnnng our understanding reached in your ofiice,
we are granting to you the exclusive representation on smoke screen and gas
attachments for airplanes and on aerial bombs in the following countries :
Argentina, Chile, Colombia, Equador, Panama, and Turkey.
It is understood and agreed that all inquiries for this type of equipment will
be referred to you and that you will promptly put forth every effort to promote
the sale and use of this equipment in the above-nametl countries.
We agree to pay you a commission or discount of twenty percent (20%)
from our standard list prices for these products.
It is understood and agreed that you will not, during the course of this
agreement, represent or sell, directly or indirectly, any other products in com-
])etition with our products above named, either in this territory or in terri-
tories where you have nonexclusive sales rights.
This agreement shall continue for a period of one year unless canceled by
either party. It may only be canceled upon ninety (90) days' notice in writing,
given by one party to the other.
Very sincerely yours,
Fedekal Laboratories, Inc.,
By John W. Young, President.
Accepted :
CuRTiss- Wright Export Corporation.
Exhibit No. 277
March 9, 1932.
Cubtiss-Wright Export Corp..
27 W. 57th Street, New York, N.Y.
(Attention Mr. O. A. Shannon.)
Dear Mr. Shannon : Replying to your letter of February 23rd relative to
flame thrower, please be advised that inasmuch as we have only had one
inquiry for this from Turkey, we prefer making flame throwers only on request.
870 MUNITIONS INDUSTRY
We do not believe there would be a popular demand for the product suflBcient
to warrant our developing it and pushing it as we have our other products.
Yours very truly,
Federal Laboratories, Inc.,
J. W. Y., President.
JWY : AEH
(" Exhibit No. 278 " appears in text on p. 701)
Exhibit No. 279
Febubary 23, 1933.
Mr. F. C. Nichols,
CoJPs Patent Fire Arms Manufacturing Co., Hartford, Conn.
Dear Mb. Nichols : Mr. Shannon has shown me your letter to bim of Feb-
ruary 20th, in connection with the China situation.
I can fully appreciate how you may be somewhat confused with respect to
the arrangements which you entered into tentatively with IMr. Pawley. I am
somewhat confused myself, but I do know that our interests are his interests,
and when he referred to his company, he undoubtedly referred to the company
which we operate and through which all of our Chinese sales are handled.
We feel it would be less confusing if this Chinese situation were handled just
as we plan to handle the Turkish situation, namely, exclusive sales rights be
vested in the Curtiss-Wright Corporation and we, in turn, would give the China
operating company the exclusive sales right.
We feel, as you know, bearing the expense of sending out to Shanghai a Hawk
plane for demonstration purposes, and for which you have kindly agreed to loan
us the armament equipment so that we might also demonstrate it. This will
pretty well take care of the Shanghai-Nanking district.
We have been actively, through our China representative, pushing the sale
of our equipment in the Canton section, with the result that we now have, and
are holding subject to the issuance of export license, an order for 10 of your
guns. This would, I think convince you of the active steps we are taking to
develop sales for your products in China.
You appreciate, I believe, the disadvantages of several people offering the
same customer the same article. It always leads to confusion on the part of
the customer, with the result that someone else usually gets the business. We
hope, therefore, that you will in the future work through us exclusively in
China.
By copy of this letter, I am asking Mr. Shannon to follow up the matter of
D. M. Kable & Co. which he had taken up with you.
Very truly yours,
Curttss-Wright Export Corporation,
W. F. GouLDiNG, Vice President.
c/c Mr. Shannon.
Exhibit No. 280
Colt's Patent Fire Arms Manufactlring Co.,
Hartford, Conn., Oct. 21, 1932.
Curtiss Wright Export Corp.,
27 W. 51th St., New York.
(Att. Mr. O. A. Shannon.)
Gentlemen : Referring to Mr. Shannon's telephone conversation with us
yesterday, and his request that we mail a price list of machine guns, machine
rifles, and other equipment, as illustrated and described in catalogue of which
a number were sent you a few days ago, we have no printed price lists of
such material. In fact, unless we are satisfied that a government is actually in
the market, we are extremely cautious about filling quotations to be used for
future reference and which in turn might be brought to the observation of our
competitors.
Such a policy also obviates complications which might ensue as a result of
price changes, alterations, improvements, etc.
MUNITIONS INDUSTRY 871
AVe enclose quotations now in effect wliicli, of necessity, are subject to change
without notice.
As to your offering the arms referred to, you are at liberty to negotiate
in Peru "and Bolivia, Turkey after Jan. 15, 1033, and regarding China and
Japan, we cannot at this wu-iting include these markets, but should anything
transpire whereby our joint interests would be served through your offering
quctaticns, if you will duly notify us in advance we will endeavor to afford
you every assistance and protection possible.
On any business you might obtain from the governments named, we would
allow you a confidential commission of 5% ; this, of course, does not include
aircraft guns to be mounted on your planes, regarding which you already
enjoy a confidential arrangement.
Goods suitably packed for export f.o.b. cars. Hartford, Conn., with trans-
portation charges allowed and prepaid to New York City.
If this does not entirely cover the information you desire, and if the proposal
outlined is in any way unsatisfactory, we would be glad to hear from Mr.
Shannon and the writer will go to New York for conference WMth him.
Very truly yours,
Colt's Patent Fire Arms Mfg. Co.,
(Signed) F. C. Nichols, Vice President.
Exhibit No. 281
CuRTiss Wright Export Corporation,
October 27, 1932.
The Altomobile Tire & Tractor Company,
Taxim Gardens, Istanbul, Turkey.
(No. 12) Attention Ahmet Emin Bey.)
Gentlemen : Under separate cover we are mailing you two complete cata-
logues of Colt automatic machine guns and rifles, also two small leaflets cover-
ing Colt automatic machine rifles.
You recently wrote to the Colt Company indicating the possibility of sales
in Turkey for this equipment, and we are happy to say that on and after
January 1.5. 1933, we will lie in a position to offer you exclusive sales r'ghts for
Turkey on all of the products of the Colt Company, provided that we can
satisfy the Colt Company that you can obtain some business for this equipment
in Turkey.
The Colt Company has passed to us copy of their letter to you under date
of October ISth. Tlie situation is that we have more or less assured the Colt
Company that you can give them the best possible representation in Turkey,
and. such being the case, they are willing to follow our recommendations in
giving you the exclusive sales rights in Turkey.
Turkey is being released from Vickers arrangements with Colt as of Janu-
ary 1, 1933, so that we will be free to quote you on any inquiries for their
equipment which you can develop on and after that date.
The Colt Company does not have established prices on their equipment for
foreign governments, but their prices are figured on each particular inquiry,
so that we are not in a position at this time to quote you prices on the equip-
ment specified in the catalogue. You must develop a specific inquiry for a
specific quantity, and when you do this we will be pleased to submit a quota-
tion. You should, at the same time, inform us the amount of commission which
should be included for yourselves.
For your general information, and to give you an approximate idea of prices,
we would inform you as follows :
Price
Standard machine gun, rifie caliber, in the neighborhood of $750. OO
50-caliber field gun, in the neighborhood of 1, 500. 00
Light aircraft gun, in the neighborhood of 600. 00
50-caliber aircraft gun, in the neighborhood of 1,200.00
Automatic machine rifle, in the neighborhood of 300. 00
Automatic machine rifle, monitor type, in the neighborhood of 350. 00
These prices are merely indications and may be higher or lower on any
inquiry which you may be able to submit.
Please advise us further in connection with this machine-gun situation. If
it is going to be necessary to conduct extensive and expensive demonstrations
872 MUNITIONS INDUSTRY
on Turkish soil, naturally these expenses will have to be included in any quota-
tion on the quantity of guns that may be involved.
Frankly, the Colt Company ^is intei-ested in cash business only. They have
an outstanding product, fairly priced, and they are not interested in business
which involves long credit risks and long-drawn and expensive negotiations.
We ourselves will have to bear the burden of any terms whidli it may be
necessary to extend the Turkish Government on purchases, and all of this must
be taken into consideration in the prices to be quoted. We do not, therefore,
wish to make any commitment wliatsoever with respect to prices except on a
definite tender on which all terms and conditions are clearly specified in
advance.
Very truly yours,
Curtiss-Wright Export Corporation,
W. F, GouLDiNG, Vice President.
Exhibit No. 282
(Via air mail, no. 51)
November 3, 1933.
Mr. C. W. Webster,
Paris Hotel, Buenos Aires, Argentina.
Dear Web : Enclosed is letter of October 29th addressed to you by Jjeon,
copy of which he sent direct to Jack Allard.
Jack told me he had received the letter and is greatly disappointed that Leon
finds it necessary to resign.
I am also enclosing copy of a letter he wrote me regarding appointing
Gandara and a copy of a letter I am today writing Gandara — copy of which I
sent to Leon and about which he replied in his letters enclosed.
I believe Leon is right in suggesting we close with Gandara quickly, particu-
larly as Leon is not going back. Even if we have somebody else there like
Travis, he could handle the complete planes, plane parts, and complete engines
and engine parts, and would probably not have the time properly to follow up
the purchases of miscellaneous materials and supplies.
If you close with Gandara, I think the first thing he should do, and at once,
is to prepare a list of the materials, accessories, supplies, etc., the purchasing
department will require for 1934 and send it to us for prices.
I think the best arrangement to make with Gandara would be to appoint him
your exclusive agent on everything except planes and engines and plane and
engine parts, also antiaircraft equipment. Possibly you would even want to
appoint them our agent on everything, the same as Souza Sampaio and Webster
& Ashton. However, if you only appoint them for miscellaneous equipment, if
possible, it should be arranged so that we sell to them for dollars here and they
resell to the Government in whatever manner they see fit.
In one of their letters Gandara asked for prices on Pyle national lighting
equipment. If you make them our agent, they must, of course, agree to make
all purchases through us and cannot offer any competing equipment.
If there is a lighting project being proposed, get them to send us complete
details as outlined in the enclosed questionnaire, including a drawing of the
field, etc., so we can have Sperry make up recommendations and quotation.
Sperry are getting anxious about our not producing any business for them on
lighting equipment and instruments, and unless we get some orders soon I am
afraid they may insist on placing their representation direct with other agents.
Gable me what you do with Gandara and I can start sending them data and
prices of the miscellaneous equipment.
My idea would be, if they are to purchase from us and resell to the Govern-
ment, to give them prices that would net you 10 percent at least, and wherever
possible, as much more as I find it will stand in comparison to prices they could
get direct from manufacturers or others such as Air Associates, etc.
Find out just what they are doing on bombs and police gas equipment and,
perhaps, we can chisel in on it here, as I understand the Argentine police have
bought large quantities of that kind of stuff.
Incidentally, Fairchild sold direct to the Argentine Navy, through Lee Wade
and Montgomery — an order for 12 camera guns for the Vought Corsairs United
is now building for the Navy. This purchase I understand was made by
Captain Leporace, the Argentine Naval Air Force ofiice who has been at Hart-
ford during the building of the Corsairs.
MUNITIONS INDUSTRY 873
Leon told me to stay away from this officer — uot to bother him as he would
get in touch with us when he was ready. Leon says he is a good friend of his
and tliat Leporace is a fine fellow. However, as a result of our uot contacting
him, Wade and Montgomery have had him in hand and I believe have sold
him other equipment. I am writing Leon on this and presume he will now
have us contact Leporace before he returns to the Argentine.
I have arranged with Fairchild to give us 10 percent on the 12 guns — which,
would be about as much as we could get if we sold direct — after deducting
commissions.
Owen.
P.S. — ^When talking with Gandara be sure to mention to them that I reported
I had had a number of conferences with their Mr. Campbell here.
This is a favor to Campbell, who is a fine fellow. If possible, make it appear
that Campbell had considerable to do with our making any arrangement with
Gandara. Let me know what you quote on parachutes so I can advise Irving
and try to get them to protect 3'our price.
Owen.
Exhibit No. 283
#344 December Sth, 1933.
Mr. Joaquin Samper H.
TJntct d Samper, Apartado Postal #536, Bogota, Colombia.
Dear Mr. Samper: Enclosed herewith, for your information, are copies of
letters which we have addressed to the Colombian Consul in New York, one
under date of December 6th quoting on materials necessary to convert the
present Hawks now in Colombia to the electric .starter type instead of the hand
type. This is a matter we had up before and I think we advised you of it at
that time, in view of the fact that it had been reported to us that in operations
in Colombia, particularly with seaplanes, the pilots found it extremely difficult
to start their engines when they were away from a base and a mechanic was
not readily available to use the hand starter. The sugi;estion of the ele'^'tric
.starter, therefore, is to relieve this difficulty and make it thoroughly practical
and easy to start the plane from the cockpit, as is possible in the Falcin.
The same letter also quotes a price for the materials necessary to convert
the present F-2 type Cyclones now being used in Colombia to the F-3 type,
as the F-3 is a higher supercharged engine and permits higher performance
at altitude. The desirability of making some conversions to this type h:is been
discussed hevo with Mr. Escobar and Comdr. Strong and it is suggested that
you discuss this with the authorities in Colombia and see if it is their wish
to do this.
I am enclosing herewith the latest Hawk and Falcon performance data,
showing how the performance varies with the different type Cyclones. You
will observe that maximum performance is obtainable with the F-3 engine, but
it should be borne in mind that the performance below critical altitude and
in take-off will not be as good with the F-3 as with the F-2. as due to the
higher supercharge of the F-3 it is not possible to give full throttle operation
in take-oft" as in the case with the F-2.
The second letter, dated De; ember 6th, outluies our proposal in connection
with Condor bombers in quantities of three, six, nine, and twelve. These are
the quantities that have been discussed here as of probable interest, and I
trust you will make every effort to see that the Colombian Government pur-
chases a good quantity of these ships.
We have, I think, written you very fully in connection with this plane
before so that it is not necessary to repeat all of the details, but bear in mind
that this plane represents the highest performance heavy bomber that can be
purchased, and we think that this plane, both as a landplane and a seaplane,
should be of inestimable value to the Colombia aviation and national defense.
I am also enclosing for your information discussion of the advantages of
large twin-float seaplanes as compared with large flying boats. This discussion
has been prepared by Edo Aircraft Corporation, builders of the floats, and it
applies partifularly to the twin float Condor installation which was made on
Admiral Byrd's Condor for his South Polar expedition. In the next air mail
I will send you a report of the flight tests on this particular Condor.
The prices and deliveries which we have offered in the enclosed letter on
the Condor are exceptionally good, and I think the letter covers the matter
fully so that without further comment you will be thoroughly familiar with
874 MUNITIONS i:ndustry
the subject and will know the best lines to follow in building up a substantial
order.
I :un enclosing herewith copy of letter, dated December 7th, quoting on
additional quantities of Hawks and Falcons. This was at the request of Mr.
Escobar, and we have been requested to submit a proposal fur increased quan-
tities. Needless to say we should like to get as substantial an order as pos-
sible, and believe that the prices which we have quoted for these additional
quantities are most attractive. We have not cabled you anything in connec-
tion with this recent discussion as I understand they are to be kept most
secret and confidential, and I understand that all the communications are
being sent from Washington by special messenger as they do not wish to
entrust any of this information by general mail or by cable. We must expect
you, therefore, to use your discretion in connection with this information
which we have passed along to you. At the same time we must place you in
possession of the facts so that you can push matters from your end.
Yesterday I had the opportunity of meeting General Angel, Chief of Staff,
who was here briefly following a trip to Europe. With him was General
Cortes, who, I understand, is the ranking Colombian general stationed tempo-
rarily in the legation in Washington as military advisor. General Angel seems
interested only in aviation in a general way, so that we did not discuss any of
the more technical or detailed features at present involved. He was, however,
very interested in antiaircraft defense, and Mr. Miranda, together with
Comnulr. Strong, explained the Sperry fire control and the necessity for this
defense, which he readily admitted, and it is probable that following his re-
turn to Colombia he will push for several antiaircraft batteries complete with
Sperry fire control to make them effective. These are, of course, expensive
installations, but in my opinion there is no question but that Colombia, in the
event of hostilities, should have this protection, particularly at the port of
Buenaventura. We would, of course, like to see this business developed in
view of our connections with the Sperry Company and look to you to further
this business.
You undoubtedly know from Mr. Miranda of his connection with a project
of this kind, and I understand that although the Driggs Ordinance Company
is now defunct that he has some connection with another concern to cover the
manufactiu-e of the guns themselves, and that he has formed a company known
as " The American Armament Corporation " to develop this business.
I have also gotten some further information in connection with the 37 mm
aircraft gun about which you asked me some time ago, and while I am not as
yet convinced that this is suitable for installation in aircraft at present. I am
having our engineers investigate the possibility as apparently Commdr. Strong
is favorably disposed to the installation of these guns in at least some of the
planes, the idea being to have it on a flexible mount for the gunner's cockpit
in the Falcon and also possibly in the Condors. If such an installation is
feasible from an engineering point of view, it may be advisable to agree with
his desires in this connection. I shall advise you further in this connection
as soon as possible.
From the information which we have here, it is the desire of the Colombian
Government to get some planes in the heavy bomber category, both of the
petrol boat type, such as the Commodore as they previously purchased, and
planes of the Condor type to be operated as landplanes and alternately as
seaplanes.
In addition to the Condor, they have proposed for the Bellanca Cyclone-pow-
ered air bus converted to Bomber. This plane is, of course, a single engine
plane and, for this reason alone, not comparable with the Condor, which can
maintain flight on one engine alone if the other engine is disabled. However,
the Bellaca, while its pei'formance is also inferior to the Condor, has certain
features in its favor. It is a smaller plane than the Condor, having a wing
span of 65 feet, length 42 ft. 7 in. and over-all height of 19 ft. As a seaplane
Avith a crew of fourteen, giving a useful load of 5,287 lbs., it would have a
gross weight of 11,087 lbs. Disposing of 200 gallons of gasoline, Avhich would
give it a range of approximately 700 miles, it is claimed to have the ability to
carry 2,720 lbs. of bombs and, with the F-3 Cyclone, to have a top speed of
149 m.p.h. at 6,000 ft. and cruising speed of 130 m.p.h. With the fuel capacity
increased to 300 gallons, giving a range of approximately 1,000' miles, based on
the above load-carrying ability, it could carry in addition approximately 2,100
lbs. of bombs.
MUNITIONS INDUSTRY 875
The Condor, with 540 gallons of fuel and bomb loading of over 2,000 lbs.,
rcughlj^ the same as the Bellanoa, has a range of 1,000 miles. To all intents and
imrposes, therefore, with the 2,000 bomb loading, tlie Bellanca and the Condor
w>iiild hare the same range. But the Condor has a higher performance both for
maximum and cruising speeds, and in addition the added safety factor of two
engines and its ability to maintain flight with either engine.
We are having new performance data drawn up for the Condor using the
controllable-pitch propellers which will materially improve the performances
which have been sent to you. These are not as yet completed but they indicate
a top speed at 7,000 ft. well in excess of 170 m.p.h. and cruising speed of
about 150 m.p.h.. and ceiling about 23,000 ft. as compared to the ceiling for
the Bellanca of 16,000 ft.
The Condor is, of course, larger than the Bellanca, having a wing span of
82 ft., length over-all of 48 ft. 7 in. I doubt very much whether the fact
that the Bellanca is smaller is of any material importance, as undoubtedly
as seaplanes they would be operated off of fairly wide rivers, and as landplanes
they would be operated off regular airdromes, and the wing spin would be
of no moment whatever in taking off fi'om an airdrome as a landplane.
The higher performance of the Condor is of material importance in its
favor. On the other hand, being a larger plane with two engines, it is un-
doubtedly more costly than the Bellanca. I am having prepared an exact
comparison of the Bellanca with the Condor, wliich Mr. Escobar has requested,
and when this is finished I will send it to you.
I tliink that the foregoing, together with the enclosures, and the additional
performance data which we will send you shortly, will give you all of the infor-
mation on the present negotiations and will permit you to materially assist the
rapid closing of this business from your end.
I have been informed here by the consul that Captain Uribe is no longer
minister of war and that he has been replaced by Dr. Alfonso Araujo, formerly
minister of public works who will also be temporarily in charge of public works.
I further understand that Dr. Araujo is very favorably disposed towards
American products. I trust that your connections with Dr. Arau.1o are as close
as they were with the former minister of war.
Yours very truly,
Curtiss-Wright Export Corporation,
(Signed) W. F. Goulding, Vice President.
Exhibit No. 284
[Copy]
FILE COPY OF TEXEGRAPHIC MESSAGE
To : Pawley Aviexplor, Shanghai, China.
From: Aeroexco, New York.
May 2, 1933.
translation of coded cable
Refer to your telegram of 2nd inst. We agree to special commission
making minimum net Intercontinent Aviation, Inc., $21,793 if order is placed
promptly ; production situation excellent. Substitution one Browning machine
gun .50 cal., aircraft, net cost to us is $575 additional. New company has
been formed, Sperry Corporation. T. A. Morgan, president ; John Sanderson,
vice president ; which holds Sperry Gyroscope Company, Ford Instrument Com-
pany. Intercontinent Aviation, Inc.. Curtiss-Wright Corporation shares formerly
owned by North American Aviation. General IMotors Corporation now controls
North American Aviation without the above-mentioned companies. T. B. Doe
in North American Aviation. In view of the foregoing and present unset'Med
status of Intercontinent Aviation we are unal)le to conclude agency agreement
with you at present, therefore think it advisable for you to continue as at
present. Best wishes.
T. A. Morgan.
876 MUNITIONS INDUSTRY
Exhibit No. 285
Intebcontinent Aviation, Inc.,
Milton House,
Shanghai, July 25, 1933.
Mr. Wm. F. GotJLDiNG,
Ciirtiss-Wriffht Export Corporation, New York City.
Dear, Biix: No doubt you have seen the several letters I have written to
Owen Shannon and I have intended writing you for a long, time, but owing to
the fact that directly before I left New York I had a long talk with Owen I
consequently picked on him as my correspondent.
I am certainly glad to hear of the large amount of business you are getting
in South America and, incidentally, you aren't doing so badly over here.
I wrote a long letter to Jack Allard directly after I heard of the contem-
plated move to appoint Andersen Meyer your agent over here. I don't doubt
but what you know the contents of this letter by now and I certainly hope it
bad some weight in preventing this move provided it has not already gone
through. It is very difiicut to explain all the reasons for my thinking that
you would be much better off under the present arrangement than with a large
company as agents. Any explanation that one makes in reference to things
like that in China sound perfectly assinine at home, but I don't doubt that you
can see the fallacy of having a large organization as a representative here, due
to the fact that they are not able to wield their sympathies in quite as adroit
a manner as a small organization. With constant changes of political favor
this is an absolute necessity. In order to stay in the swim it is necessary to
have someone continually on the ball. With a big company this would not be
possible because of the lack of personal attention the job would receive. The
British are an example of this. They tried the same form of representation,
but immediately changed back to a small independent organization. I could
go on for pages giving my reasons for thinking that a change would be
disadvantageous.
I understand that Ed. Howard, the ex Aviation Trade Commissioner from
here, is going to New York and no doubt you will get a good slant on this from
him. I don't believe there is anyone in China with a fraction of the knowledge
of aviation sales promotion that is possessed by him. All hands would do well
to lend a willing ear.
I just found out yesterday that Dr. H. H. Kung, the present no. 1, was
informed by the Italian air attache that the Curtiss Hawk was an old dis-
carded Caproni design. I understand that this perturbed Dr. Kung to quite
an extf'P'-. This is an illustr'^tion of ore c." the variouM diffinilties encountered
by age.it.s here. ' The whole thing is dirty business and intrigue.
I think it would be a good idea if you could send me a short resume of the
original design and the consequent development of the Curtiss Hawk. I will
send this on to Dr. Kung ; not apropos of the Italian statement but merely give
it to him with the suugestion that he might be interested in the history of the
devehipment of this ship.
The Italians are demonstrating a Fiat pursuit ship in Shanghai today and
I am up here as " look-see " man for the Americans. This ship is a biplane
with a water-cooled engine known in .Tanes as the C. R. 30 ; 250 m.p.h. is
claimed by the Italians for this ship, but if it will do over 200 I will eat it
lock, stock, and barrel. I am hoping tliat we will get a chance to have a
competitive demonstration between this ship and the Hawk hut I don't think
tlie Italinns want to play. They are a dirty cut-throat bunch of Imsiness people
and do not hesitate to knock our equipment at every possible opportunity. I
am glad to say th;it it has not been necessary for us to resoit to this p'-iictice
as the statement of facts is all that is necessary in regard to tlie Italian
equipment now on hand.
Mr. Engle of the Austin Hangar Company is now in Hangchow surveying the
ground for the factory. I am certainly glad that it is going to be in the same
place that I am.
Y'ou would think that Curtiss Wright should have the whole aviation situa-
tion in tlie palms of their hands with having sold all of these Hawks and the
factory, but such is not the case. The Chinese have as little method and
system about buying airplanes as they have in other respects and if they get
a favorable presentation in some other country in my opinion and that of many
others, they would as soon buy other equipment in spite of the fact that it
MUNITIONS INDUSTRY 877
entirely desysteinizes the whole air force. I won't go into a tirade on Chinese
psychol(jgy but, believe me, it passes all understanding.
We are hoping that Bill Pawley will be returning shortly to get on the job,
as it looks as though there is the possibility of the purchase of additional equip-
ment of observation or attack type. I saw to it that you got this infonnation
by cable although I don't know what you have to offer in the high-speed obser-
vation line except, the A-S attack, which I believe would create a favorable
impression here.
Uayless lias just returned from Canton and I have been talking with him.
He told me the tragic tale of Ed Deeds who was killed recently in a Hawk. He
was an eyewitness and said that Deeds was making slow passes over the field
with power a la Jimmy Doolittle and the next thing anybody knew he had
spun in. This was taken up by ail of your competitors which resulted in some
very adverse criticism of the characteristics of the Hawk. I have done every-
thing possible to show that this is entirely unfounded and have done everything
in the Hawk that I am able lo do, which, although somewhat short of Doolittle's
capabilities, is enougli to convince almost anyone of the excellent flying char-
acteristics of the ship.
The tirst five ships have arrived and I am going to start setting them up
tomorrow. Bayless is coming down to give us a hand, although I might say,
with becoming modesty that liis services are not essential, although they will be
greatly appreciated. 1 liad my no. 1 American engine man take instructions ou
the engine from liim. This came in very liandy.
If there is any information that you think I might be able to furnish you I
would be only too glad to do so and to cooperate in any way possible with you.
I am on the way to the barber to have my pigtail trimmed.
Please give my best regards to all hands and remember me to Mrs. Goulding.
Sincerely yours,
(Signed) Jeu{ry Clakk.
Exhibit No. 286
MK. WEBSTER'S REPORT
New York, October 19, 1933.
Mr. J. S. Allard : I am passing on to you the foUowing information received
from Mr. Webster, legardiiig the situation in Peru:
"The British liave been \ ery active and have a very clever man on the job
here, wlio has maiu.ged to g^^ase certain officials in o/dcr to put across sales.
They have sold six ' i^ airey Cordons ' with Panther engines antl six ' Fairey
Fox ' single seaters with Rolls Kestrel engines.
'• Faucetc has done practically nothing on sales." (Since writing this Mr.
Webster has arranged with Faucett to engage Dan Tobin on military sales and
pay him a salary out of his, Faucett's commissions.)
" The Government is in the market for 12 more ships — Fairey are doing their
utmost to sell the Fairey Fox, two-place, with ihe Rolls Kestrel engine. Their
price is down to $2G,5U0 and they have us licked on performance at high alti-
tudes. The Britisli have sold them on the idea that their fighting will have to
be done at high altitudes.
" The officeis who put through the first 12 British planes have been sent to
England to take care of inspection, etc., and all went over well heeled with
■ conunission ' money.
"At the prices we have to get, it is impossible to handle this sort of thing —
and our prices are still increasing. The prospect is not at all bright and the
company will have to realize we cannot compete unless we get our prices down.
" United are also after this business.
" I have also quoted the police department here on two trainers. It is a new
development that may lead to real business but is it a hell of a job trying to
get our increased prices.
" They don't give a rap about the N.R.A. or the reason why the United States
Government is raising costs — they're interested only in what they have to pay.
The argument that the dollar has decreased in value is no good — their big job
is to get exchange down here and dollars are scarce and they have to pay a
premium to get them. Don't give that as an argument — it only" makes everyone
sore. Up in Bolivia — that is the reason they are not ordering in large q'uan-
878 MUNITIONS INDUSTRY
titles — but in threes and fours at a time — because they cannot get sufl3cient
exchange. There is more business to be had and very soon, in Bolivia, and that
is the reason I am anxious to get up there.
"Again referring to the two Trainers, whicli we can probably sell to the
police department here, our cost is $5,935, which makes the Trainer almost
prohibitive in price compared to other ships. They are willing to pay around
$5,000 c.i.f. Callao for a Trainer, and unless we can get somewhere around
that price we will have to forget about the business.
" Piciise explain to Mr. Smith, Mr. Allard, and Mr. Cramer that selling
flying machines down here now with our increased costs is next to impossible.
" The British are lowering prices and offering other inducements and going
after this busip.ess to beat Hell. The factory will have to realize this and
meet these conditions if they expect to continue in this market."
Owen Shannon.
OS.js
Exhibit No. 287
Custiss-Wright Export Corporation, 27 West 57th Street, New York
Lima, Peru, October 20, 1933.
Dear Dan : The last figures received from New York on the price of the
Hawk land plane with full armament consisting of two guns and bomb rack
is $26,000 c.i.f. Callao. Selling price of the pontoons c.i.f. Callao for the Hawk
Is $3,8-50. If we ship them to Iquitos via Para, cost will be $200 additional,
but I have no accurate information as to steamer sailings.
"We can ship two Hawks within 45 days of order and two per week
thereafter.
By using the new barrell carburetor on the Cyclone engine and carrying
144 gallons of gasoline, the high speed of the Hawk is 205 miles per hour at
8,000 feet altitude. 201 miles at 12,000 feet, and 195 miles at 16,000 feet.
Service ceiling is 23,800 feet and absolnte ceiling 25,000 feet. The cruising
range at 8,000 feet is 700 miles. Play this up for a pursuit ship.
The selling price of the Condor Bomber complete with armament, flyaway
factory, is $63,500 each. We can complete the first ship at the factory in
90 days from order. You have all the characteristics and other data.
I will write you from La Paz giving prices on bombs which are quite in-
volved. If Gilardi asks w'hy we have not reduced the price of the Hawk, you
may tell him that we have done so but that our factory costs on material,
etc., have been greatly increased ; therefore, instead of increasing the price of
the ship to customers, we have maintained that price.
For your information we had a long talk with Romano this afternoon and
looked over the contract for the six Fairey, 2-place observation jobs, which is
the last contract signed. We were under the impression that they ordered
single-seat pursuit planes but this is not correct. It was 6 2-place jobs.
The contract price in dollars was $33,000 each and a little more than $7,000
per set for pontoons. This makes the entire job about $10,000 more per unit
than our Falcon. It would do no harm to mention figures to the Minister,
but of course do not say where you got your information from. It sounds
like highway robbery to me and someone collected at least $100,000 on the
contract as "commission."
Best of luck old top and go to it. Keep in touch with me and let's see some
business.
Sincerely,
Exhibit No. 288
Sept. 17, 1932.
Mr. T. Morgan,
President Curtiss-Wright Corporation, J( Rue Chernowis,
Paris.
Dear Mr. Morgan : We feel extremely sorry that you have not extended a
busines trip to Europe as far as Turkey, where an increasing amount of good,
sound business may be expected for Curtiss-Wright and Sperry. You ai-e, of
course, getting information on the local aspects of things here through as
reliable assistants as Com. Leighton, Major Melviu Hall, and Mr. Farnsworth,
MUNITIONS INDUSTRY 879
Mr. Wite, Mr. Westervelt. Still, it would have been of great use to form a
first-lmnd opinion of the matter, as you have the final responsibility of any
decision.
It is certainly true that your first actual experiences in Turkey are not
encouraging. There is, to begin with, a huge amount of red tape and diffusion
of authority. Secondly, there was a delay of payment in the first business
transaction, which must be a discouraging experience in present times. How-
ever, as Medjit Bey, the under secretary of aviation, has explained to Mr. Farns-
worth, the delay is exceptional and due to the fact that the method of use of
Aviation League money could not be decided for months at the beginning of
the new financial year. The new budget itself was delayed. The method
finally accepted will allow a prompt handling of payments.
From such distance a delay may easily be attributed to lack of means. You
may rest assured that for any financial engagement taken for aviation matters
the money does not only exist theoretically in the budget but is actually de-
posited in cash at the bank. Statements to the contrary are only spread by
competitors, who hope to scare away American competitors from the Turkish
market. A clear example of this was recently delivered by Vickers Armstrong.
The latter persuaded the Colt people that it would be unsafe for them to do
business in Turkey, and that themselves did not care to arrange for a Brown-
ing demonstration in Turkey, because they did not care to solicit business there,
having a great deal of money outstanding. The business mentioned in this con-
nection was the sale of 48 machine guns, making a total of about $25,000.
Within a few weeks of this statement, Vickers Ai-mstrong obtained, after most
strenuous efforts, an order of eight supermarine seaplanes of $600,000, to be
paid half in sterling, half in Turkish pounds. This proves that Vickers-
Armstrong, which has a i)ermanent factory branch in Ankara and has an exact
knowledge of local conditions, considers safe to do business for its own account,
but does not hesitate to use unclean methods to deceive American competitors
and keep them away from the market.
The business actually obtnined by Curtiss-Wright up to the present is the
following :
18 Hawks manufactured in America 324. 000
6 Hawks (materials and motors) 75,000
6 Fledglings (materials and motors) 52,000
Various equipment in connection with Hawks 22, 000
6 months' rent for two Kingbirds 10, 000
Spare parts for airlines 6,000
Shop equipment for Kayseri 27,000
516, 000
The business expected for the next months is the following :
3 300-hp. Wright motors for F 13 Junkers planes 12, 300
40 180-hp. Wright motors for A 20 Junkers planes 120, 000
3 radio sets for ground use and airplanes 30, 000
Spare parts for Hawks and Cyclone 100, 000
Spare parts for Fledglings and Whirlwind motors 20, 000
Spare motors 30, 000
Aerial photographic equipment 20,000
332, 300
A further order of 24 Hawks to be built in Kayseri may be expected as soon
as planes manufactured in Kayseri prove a success. The airlines will also
prove to be a source of continued business.
We are afraid that the nature of the work we have to do is not fully appre-
ciated in New York. European competitors, who consider American competi-
tion as unrightful intruding into their established sphere, are doing evei'ything
to render the task difficult. In addition to this, it needs a constant fight to
sell a quality good in a market where price has been the dominating factor for
the account of a manufacturer who does not see any reason to make the sacri-
fices in procedure and terms cheerfully accepted by European countries.
In order to be strong in this struggle we have associated to ourselves two
other firms.
Now. I must write you frankly about a difficulty we nve up against:
When I wrote you on July 10, 1932, about applying half of the Curtiss com-
missions due to us to our Sperry debt and to send us tha other half, as it con-
83876— .34— PT 4 13
880 MUNITIONS INDUSTRY
stitutes the shares of the two firms we are associated with, I liear that you
liave not received our request favorably, taking it surely for a demand of
another fnvor. From this viewpoint you are perfectly right, because you have
gone to the extreme limit in helping us in the Sperry matter so that troubling
you for a further request in that connection would be more than unreasonable.
Our request would appear in a different light, if it is viewed from the stand-
point of business expediency on the one hand, lack of risk and trouble for
Sperry on the other hand.
Tlie two firms helping us in the Curtiss-Sperry business and spending con-
stantly money, as we do, for it, would lose their initiative, if they don't get
any commission after a certain business is settled and concluded. It is easy
to i-ealize their stand of mind, when one thinks of four years' activity and
expense, spent for Curtiss business.
In spite of this situation, I could very well understand your standpoint of
letting us fight out the difficulties, if the commissions expected from Curtiss
just covered our Sperry debt. As a matter of fact, the commission expected
from the accomplished business and from surely coming business lilje spare
parts and motor orders would cover our debt to Sperry about three times.
So the acceptance of the request about applying only 50% of the commissions
becoming due to the Sperry debt would only mean a delay of a few months in
the complete payment of the debt. As there is no risk and as the debt is sub-
ject to 6% interest, Sperry would not run any disadvantage of showing this
facility against the great advantage which the satisfying of our partners means
for both the Curtiss and the Sperry business in our territory.
Firmly hoping that you will decide to approve of the methods of procedure
outlined in our letter of July 10th, of which we are enclosing a copy,
Yours very sincerely,
Ahmet Emin,
AE/EH
Enclosure.
Exhibit No. 289
finland — cy0l0ne3 — ^united
Febeuary 5, 1931.
J. S. Allaed, New York City.
Mr. BuRDETTE S. "Weight, Washington, D.C.
Dear Buedie: Thanks for yours of the 3rd with the attached copy of letter
to Leighton Rogers on the subject of the cable to be sent to Osborn Watson
about Cyclone tests. Also thanks for the dope about Love's reactioh to what-
ever statements Major Hall is making. Needless to say, I do not believe Hall's
statements are at all radical or unethical, as all cables and correspondence
that he has had with the Finnish officials in which he had discussed 1820-E's
have been based entirely upon information furnished direct from the Wright
Company or from this office. Love has been made to stop his unethical tactics
of running down competitive products, and I think this is just a sample of a
method he is pursuing to meet real competition.
Very truly yours,
J. S. Aixard.
Exhibit No. 290
[Copy]
FILE COPY OF TELEGRAPHIC MESSAGE
To: Aeroexco. ]\Iarch 30, 1932.
From : Melvin Hall, Ankara, Turkey.
Thomas A. Morgan.
(Personal.)
In spite of bitter competition contract (s) for eighteen Curtiss Hawk one-place
pursuit, Cyclone engine, ready for our signature, but all (of) special fund(s)
local aviation association recently made subject to Turkish Government regula-
tions, stipulating all payments foreign purchase (s) not more than 30% before
their total acceptance (s) Turkey. Stop. According to our estimate (of) pres-
MUNITIONS INDUSTRY 881
ent terms will delay previously arranged payment on presentation of shipping
documents Constantinople, Turkey, at a maximum of six weeks. Stop. 30%
(of) payment in advance balance of payment(s) 70% in about six months after
closing contract. Stop. Have tried hard to but cannot arrange (for) better
terms. Stop. Under the circumstances no reason to believe are running a
great risk; embassy of the same opinion. Stop. Fund(s) have been allotted
in the bank covering payment but impossible to secure letter of credit negotiable
instruments on account of Government regulations. Stop. Absolutely cei'tain
can complete in .satisfactory manner, gold-dollars exchange, excluding all risks
any fluctuation in exchange to cost not more (than) small interest charge.
Stop. Turkey unquestionably has acted in good faith on our (my) behalf, are
accepting according to our statement (of) (that) regarding Curtiss Hawk, one-
place Cyclone engine, ignoring oflScial information U.S. Government to the
contrary, in addition to foul intrigue our competitors and especially United,
Aircraft & Transport, in addition to the foregoing paying higher price(s) $3,000
per unit will not take advantage (of) attractive offer our competitors are
quoting, for example pole(s) to take in full payment Turkish raw products..
Stop. Believe that all future sales Turkey impossible unless accept their
terms. Stop. Believe that future business, European, influenced by success
failure liere. Stop. After carefully considering the matter recommend that
you accept. Stop. If you approve of will communicate further with detail (s)
gold-dollars exchange. Stop. Awaiting your instructions.
Melvin Hall.
MF.
cc. Messrs. Morgan, Allard, Webster, Goulding, Smith.
Exhibit No. 291
[Copy from carbon copy]
From : Melvin Hall. Budapest, Rec, June 3, 1930. . A.A.
To: Aeroexco. N 1 37 Budapest, 37 LCD, Aeroexco, N.Y.
Retelhlove tactics followin-:; us with insidious derogatory comment obsolete
equipment impossible dispose of in America, alleged financial difficulties cor-
poration. States Army-Navy orders now hundred percent United equipment,
etcetera. Report follows.
MEIiVINHAL.
Washington file : " European Tour-General." #535
Exhibit No. 292
Intercontinent A\^ATION, Inc.,
Hamilton House, Shanghai, October 16, i933.
Mr. Thomas Morgan,
29 West 57th Street, New York City.
Dear Tom : Hugh Keavney, who signed the attached memorandum, is leaving
for the States on today's boat. On June 6th he received a letter from his wife
containing this message. I don't know who Bill Brookes is but he is reported
to he a Buffalo Curtiss factory employee. It might be very interesting to have
it checked to find dut just who he is and the reasons for his statements.
Keavney came to China in .Tune for Paramount: lost his job and was left in
China, supposedly stranded. He is an ex-aviator and supposed to be a very
close friend of Casey Jones. I understand that Bill Goulding is acquainted with
him and can probably tell you something about his past activities. The con-
tents of this letter were immediately transmitted to Carl Nahmmacher, United's
agent, who has passed it around to everyone in Shanghai interested in aircraft
with the story that the man who received the letter was stopping at the
Metropole Hotel and could furnish definite proof that the ships so'd to the
Chinese were old equipment.
I am running photographs of the China planes being constructed in the
rotogravure section of next Sunday's paper with the statement that these ships
were under construction during the months of June, July, and August 1933.
I do not believe that any lasting damage has been done by this rumor, but
combined with the trotfble we have been having and also the fact that five of
882 MUNiTioisrs industry
the Hawks have already cracked up at Hangchow, it certainly makes it tougli
for us for a while.
Things are moving along fair enough although I have nothing to report (o
you so far on the factory developments. The Chinese Government is still
considering the contract. I hope in the near future to be able to cable you
some concrete news.
With kind personal regards, I am
Sincerely yours,
(Sgd.) W. D. Pawley.
Exhibit No. 293
" Today Bill Brookes stopped in to see if I had heard from you ; he told me
the Chinese in Chinatown had a lot of cash they were going to send to China,
but when the treaty with Japan was signed they got peeved and didn't send
it. He also told me that the Curtiss planes Jimmy Doolittle went over there
with were the same old crates they tried to sell China last year. The only
difference was a coat of paint and other motors and they are another year old.
If you run into them, watch out. They are supposed to be awful.
" If you can check the truthfulness of this story you might be able to get some
thanks from the Government. Jimmy is thought to be studying a newer plane
which resembles those in the shipment. Of course I have no way of checking
this story of Bill's but I thought you ought to know anyway."
This memorandum is an excerpt from a personal letter to me from my wife
dated June 6th and is the only letter that I have received regarding Curtiss
aviation equipment of any kind.
(Sgd.) Hugh Kbavney.
Exhibit No. 294
situation summary, tubkefy sutflementary interim report personalities,
FEB. 27, 1933
Zekai Bey, Minister of National Defense, is believed at present to be well-
disposed but extremely desirous of having something concrete to show in the
way of results justifying the policy of his ministry in turning to America
for military aeronautical equipment and technical cooperation. He is in-
telligent but not entirely to be relied on. To meet his desires, which are by no
means without reason, it appears most necessary to turn out the sample Fledg-
ling at the earliest practicable moment. It should not be lost sight of that all
representatives of competitive interests who may feel themselves adversely
affected by the increasing collaboration of the ministry with C-W and the
orders passed to C-W, band together and with their influential friends, deputies,
newspaper editors, etc., and keep up a constant and heavy bombardment of
the minister's position.
The Prime Minister, Ismet Pasha, is an authority with whom we come less
in direct contact. Nevertheless, he is strongly favorable to the principle of
cooperation with America, very keen on the development of Turkish aviation,
especially interested in the proposed Turkish airline to serve as a link in the
international systems, and keeps himself well-informed on the progress of mat-
ters connected with C-W cooperation. The rapid development of aircraft
mnnufacture at Kayseri is for him, as for other Government leaders, a mat-
ter of major national importance. This fact was perhaps not fully appre-
j^'iated in New York when the technical cooperation contract was signed and
Fledgling bill of materials urgently called for. Ismet Pasha's whole policy
favors the C-W collaboration. If results are produced he can be counted on
to be far more than slightly partial in C-W favor ; if not, he can become a
relentless enemy.
Ferzi Pasha, cliief of the general staff, is believed to be potentially friendly
as long as C-W keeps its engagements with the ministry, delivers the perform-
ances guaranteed, and produces results at Kayseri. He is d'sinterested in
politir^s, desiring only to develop the strongest possible defense force with the
resources at his disposal. He is sufficiently air-minded to build up his air
force at t^^e expense of both the army and the navy. He has adopted certain
Stan lard terms of purchase and acceptance to meet the special circumstance*
in Turkey. From these terms, which European competitors have accepted,
MUNITIONS INDUSTRY 883
he is unwilling to depart. He is strong, impartial, and honest. He wishes
Turkish military aircraft to be not inferior to the best in standard service for
various purposes in any major country, but is unwilling to experiment with
prototypes. He is very lieen to render his country self-sufficient in produc-
tion of military aircraft as rapidly and completely as possible. For this reason
he is apt to prove impatient of undue delays at Kayseri and more impressed by
visible concrete results than by excuses or explanations. One of the features
of the cooperation with C-W that appeals to him most is the fact that the
political considerations and constant diplomatic pressure that would be in-
volved in similar association with any major European manufacturer or
group are missing. He has had unfortunate experiences with certain European
contractors, notably Junkers and Gourdou, and is not likely to be tolerant
of failure to produce results or to meet guarantees. On the other hand, if
C-W delivers the goods, he can be counted on to be absolutely fair and not to
be swerved by petty intrigues.
Abdul Halik Bey, Minister of Finance and former Minister of National De-
fense, is one of the most admirable characters in Turkey. Broad-minded,
honest, reasonable, and far-sighted, he has succeeded under immense diffi-
culties in producing one of the few balanced budgets in the world today. He
recognizes and admits more freely than others the defects in the Turkish
administrative systems and is definitely striving to overcome them. He is
very friendly to C-W. Should there be a change in the cabinet involving
the Ministry of National Defense, he is almost certain to be the next holder of
that portfolio. A better selection for C-W interests could not be found.
Saracoglu Sukru (Sarajoglou Shukri) Bey would probably replace him as
Minister of Finance. Though a man less sound, less sincere, and less devoid of
polities than Abdul Halik, Sukru Bey would be a favorable selection tor C-W.
Col. Mecid Bey (Mejid Bey), former Under-Secretary for Aviation, is an
artillery officer without profound knowledge of technical matters connected
with aviation, and consequently apt to be influenced too much by the opinions
of his technical aides. He is absolutely honest, sincere, hard-working, and
well intentioued, if somewhat naive at times. He is particularly naive and
difficult with respect to financial matters, which he doesn't in the least com-
prehend. He can be very stubborn on occasions though generally indecisive,
has an unfortunately acute memory for all statements, promises, and assurances
made him at any time, is inclined to be suspicious, tries to drive hard bargains
witli contractors without being a shrewd bargainer, and messes too nmch in
detail which he doesn't clearly grasp. His personal character is above re-
proach. After his present tour of duty with troops he will in all probability
return as Under-Secretary for Aviation. Having had much to do with the
formation of the program of technical cooperation with C-W he will undoubt-
edly be friendly and heartily desirous of a successful outcome, though his
hopes and expectations, especially involving the time element, are apt to run
somewhat ahead of practicable realization. Balanced by the more practical
mind of Maj. Ihsau Bey, liaison officer of the General Statt with the Under-
Secretary's office and Technical Section of the Ministry, Mecid Boy can be
really helpful to C-W interests. He hopes eventually to retire as Director-
General of Civil Aviation. If the Ministry's latest proposal to C-W for the
operation of the airline is mutually acceptable to C-W interests and the
Turkish Govei'nment, there may not be any need for such an appointment.
Capt. Hamdi Bey, the only active officer in the technical section at present,
is a wholly inappropriate person for such a responsible position. Ill-informed,
out-of-date, stubborn, and a slave to ritual, he is nevertheless a potential
friend, and especially when handled by Hilmi Bey he can be extremely useful.
He has an important voice in the selection of new types of aircraft and full
authority in writing up the specifications.
Lt. Col. Sefik (Shefik) Bey, is unquestionably sincerely friendly. He is one
of the two most influential officers in the air force. At present commanding
the regiment at Smyrna, he is somewhat removed from the C-W battle front
but nonetheless is a very useful supporter in matters of policy. His visit to
America and his marriage to the daughter of Fevzi Pasha constitute both
very strong assets and distinct handicaps, the latter in laying him open to
accusations of partiality towards C-W on account of the reception accorded
him in America and possible " understandings ", and of favoritism through his
relations with the Chief of Staff. For these reasons he keeps in the back-
ground of C-W affairs as much as possible.
gg4 MUNITIONS INDUSTRY
Lt. Co. Celal (Jelal) Bey, commanding the regiment at Eskisehir, is the
opposite number of Sefik Bey and the other most influential oflicer of the air
force. He and Sefik graduated from the Siime class and have advanced
together ever since. There is a very definite though hidden rivahy between
the two. Celal Bey's opposition to OW in general is doubtless partly due to
his jealousy of Sefik. Celal Bey absorbed in the course of his education in
France a good deal tending to render him partial to French methods. French
standards, and French equipment. He threw his influence in favor of Dewoi-
tines against Hawks and remains consistent to his original reconnnendations.
He is, probably without realizing it, strongly influ.mceil by Selahetin Bey, the
civilian engineer who is the most outspiikenly anti-C-W man in Turkey. Celal
Bey is kept well— though by no means always accurately — informed on all
matters unfavorable to C-W, such as annual reports, statements showing
losses, army and navy procurements not favorable to Curtiss (the recent
big order for low-wing' Boeing pursuits will undoubtedly be strongly featured
here against the Turkish Hawk program), liquidation of the flying service,
closing down of subsidiary companies for lack of oi'ders, ci'ashes, and failures,
etc. it is believed that "this niformation is furnished gratis by Hamilton of
United through Selahetin Bey. Celal Bey statefl to Hilnii Bey, and probably
is thoroughly convinced, that C-W sent a mission over here comprising a pur-
suit plane which did not have sufficient performance to be of any interest to
anyone. In a desperate attempt to produce an answer to the Boeing and to
European pursuit planes, the E Cyclone-Hawk was offered but proved a
failure and wasn't taken up by either the Army or Navy. In further despera-
tion the F engine was substituted and the combiuation is mw being tried on
the dog (Turkey). Its performances were not based on fact but on the desire
to exceed the Dewoitine performances. It cannot and never will meet its
guarantees. Celal Bey maintains, and probably with complete sincerity, that
his only thought is to struggle for the welfare of Turkish aviation, for the
mobilization and operation of which he will be responsible when the day of
emergency arises (maybe he will in part, but certainly not alone). When he
hears such stuff as the above, allegedly from responsible sources, constantly
reiterated by his closest personal friend, it is not siirprising if it has some effect.
C'^lal Bey is further influenced against C-W, in a minor way, because his
pet recommendation to move the regiment to a new field about 4 miles away
and separate it from the school was not supported by Hulse, on grounds of
economy. Hulse was right and was so recognized by the ministry, but it has
not sweetened Celal Bey's attitude. Celal Bey is also strongly opposed to the
spending of any money of the Ministry of National Defense on airlines, though
not opposed to airlines in principle if supported by some other ministry's
budget.
Selahetin Bey is the principal disturbing influence, though not the only one.
Of pleasing personality, great conceit, and infinite audacity, he returned from
a technical education in France (where he was at the bottom of his class) to
build all the military aircraft for the Turkish Government. With specious
arguments he convinced many people that it was foolish to go outside Turkey
for aircraft when he could build in Turkey as well as C-W at a fraction the
cost. His bitter opposition to everything C-W is based wholly on the fact
that he recognizes in C-W the principal, if not only, obstacle to the realization
of his schemes to get control of the production of military aircraft in Turkey.
Without originality or real experience, his first effort was not successful, and
his influence has greatly diminished except with his friend Celal Bey. He con-
stitutes, however, a very annoying and troublesome element, and it is doubt-
ful if anything can be done to change his character and fundamental attitude.
He is not clever enough to realize that he would have had a vastly better
chance to succeed in due course with his program for himself had he sup-
ported C-W whole-heartedly and received C-W's support. It is quite evident
that he receives his anti-C-W information from Hamilton of United, and it
was told Emen Bey a few days ago by Hamdi that Selahetin had a definite
" arrangement " with United. This ties in with the statement to Gillespie by
the United mechanic Butterfield that though they hadn't been able to do much
for themselves in Turkey they at least had queered C-W^'s game here perma-
nently. What the " arrangement " may be is problematical — possibly promise
of a good commission on all United engines sold to Selahetin's ships — but at
all events, it would appear that United are persisting with their destructive
policy of endeavoring to turn C-W business in Europe, when they themselves
cannot get it, to the hands of French, Poles, or, indeed, anyone else.
MUNITIONS INDUSTRY 885
There are many other personalities involved in C-W affairs in Turkey, but
the above-mentioned, except perhaps for Hikmet Bey at Kayseri, whom we
count on to assist Coon and to put the C-W case across, are those whose influ-
ence pro or con seems most likely to affect the immediate course of events.
Hikmet Bey, a young engineer educated in America, has only moderate influ-
ence as yet but is clever enough to assist us fully to build him up to take over
Kayseri eventually and is undoubtedly a strong asset in his present capacity.
(Signed) Melvin Hall.
Exhibit No. 295
iieport no. 2 0 cautley
June 4, 1930.
Confidential.
Subject : Wright engines business in Jugoslavia.
(1) In another report I will try to give you a little Jugoslav background.
Suffice to say for the moment that you positively cannot believe anything that
anyone tells you in Jugoslavia, unless you have remarkable talent for detecting
truth among much falsehood. In Jugoslavia speech is used to conceal one's
thoughts.
(2) Drawing my own conclusions from talking with various kinds of plain,
fancy, and acrobatic Jugoslav liars:
(3) There is no immediate nor easy Wright engine business in Jugoslavia.
That opportunity passed long ago. I have no time to conduct a post mortem.
(4) We absolutely cannot do business in Jugoslavia without a duly accredited
sales agent on the spot. Our present position, with Petrovich as our agent in
the eyes of the Government, but totally unable to do any business for us, is the
worst we could be in. It is an absolute stalemate. Petrovich could get us
some business, I am quite sure. But Smyth will be much better. In order to
make Smyth fully effective, Petrovich must be immediately and finally dis-
credited in Jugoslavia. If he can then be of any assistance, Smyth will handle
the situation on the spot and pay Petrovich whatever commission is necessary
out Of his own commission. For this purpose, am enclosing rough drafts of
two letters, one to the American Minister and one to Jugoslav Minister of War.
Rush. These letters nmst be signed by an ofiicer of the company, president or
vice president, and sent through just as quickly as possible. Send copies to
C.W.X., Paris. Rush. When I cable you, follow them through with another
pair of official letters stating that inasmuch as Mr. W. H. Smyth has been
appointed representative of C.W.X. for Jugoslavia, he is the person empowered
to represent Wright engines there. Rush.
(5) The immediate order for 180 Whirlwinds has evaporated into thin, hot
air. Jugoslavia will insist on going through the motions, at least, of taking a
manufacturing license before ordering any such quantity. This does not mean
that the 180 cannot eventually be resuscitated. Conditions change, depending
upon who gets the graft and how much. For example, Lorraine and Potez,
Salmson and Hauriot, were first in the field here and cleaned up for a while.
Now it is Gnome Rhone and Breguet sitting on top, with Renault coming up
and Lorraine going down.
(6) Competition is enormously keen here considering the small volume of
business (by our standards) available. For example. Gnome Rhone has prac-
tically formed a company, erected a factory, and furnish a first-class factory
manager for the sake of 50 engines a year.
If we want to put up a fight for the sake of 50-60 engines a year maximum,
the first thing to do is to loan the Jugoslav Government a new Whirlwind 300 — a
good one — to be installed in a Fizir advanced training plane and tested for 3 to
5 months. This is the only chance I can see at present to revive the interest
of the army in Wright engines.
If things are still as dull at home as they were when I left, it would be wise
to take a chance on this one engine. I have been told that the Jugoslav
Govenment never fails to buy an engine thus submitted for test unless it is
absolutely no good.
Randolph OAUTLEjy,
886 MUNITIONS INDUSTRY
Exhibit No. 296
Cubtiss-Wkight Expokt Corporation,
Neic York City, April 6. 1934.
No. 105.
Via S.S. Europa.
To : Mr. B. G. Leighton,
Ainerican Embassy, Ankara, Turkni.
Dear Bruck: Mr. B. C. Goss, who is pi-esident of the U.S. Ordnance Engi-
neers, Inc.. who manufacture chemical warfare munitions, has been approached
by an individual in Istanbul in connection with the possible sale of chemical
munitions to the Turkish Government and, more recently, with a plan which
this Turk has submitted to Mr. Goss for U.S. Ordnance Engineers, Inc., to
build a chemical munit ons plant in Turkey.
Mr. Goss is very much interested in the proposition and, incidentally he tells
me it is the only way that Turkey can have successful chemical warfare
equipment- — by building a factory.
Mr. Goss is planning on going to Turkey in the very near future, probably
sailing within the next week or two and may, possibly, sail ^\■ith me. However,
in the event that we do not arrive together, I am writing him a letter of intro-
duction to you and have suggested that he get in touch with you before he
gets in touch with anyone else in Turkey, so that you can give him the benefit
of your experience and advice, and see if there is any way in which Curtiss-
Wright can participate on a commission basis in his projected business with
Turkey. Obviously, we do not want to be involved in any financing or anything
else, but merely to get a commission for the assistance which you will give
him.
Sincerely yours,
J.S.A.
B.M.N.
Enc.
Exhibit No. 297
[Copied from original]
Cubtiss-Wright Export Corporation,
27 West Fifty-seventh Street, New York, July 21, 1930.
Mr. BuRDEfTTE S. Wright,
501 Southern Bldff., Washington, B.C.
Dear Burdie: Thanks for yours of the 17th regarding Mr. Gordon B. Enders
and E. F. Baskey. The information is most interesting, and while I realize
that the ethics of the transaction are very questionable, from all I gather
most Chinese business is unethical and I still think that I would like to have
had a chance at the Chinese business that Enders apparently had in his hand.
This, of course, is not oflBcial, but it is confidential between you and me.
I do think that if Enders had come in here with cash to buy a lot of aviation
equipment to be sent to China and the State Department gave us approval I
would not care much who Enders was as long as I got the cash and the State De-
partment approved the shipment of the aeroplanes. Under present conditions
we did not get a chance to contact with him, therefore we can stick up our
noses in the air and say that we prefer not to associate with men of his calibre,
but the truth of the matter is, I wish we had gotten the order.
Sincerely yours,
(Sgd.) Jack.
J. S. AUard.
BMN.
Washington file : " China."
MUNITIONS INDUSTRY 887
i:xHiBiT No. 298
La Paz, Bolria, March 24, 1933.
Mr. C. W. Webstek,
President Curtiss-Wright Export Corporation,
27 West Fifty-seventh Street, New Yo)-k.
DEL4.R Web: It is too early to report as yet on the situation of tlie Mollendo
Hawks. I saw Lopez yesterday and save liim tlie ultimatum in writing and
the total amount to be paid runs to a little over $i:6.400'.00, incluiling insur-
ance, etc. I am going to see Lopez again this morning and will probably get
some definite information as to what they will do. The aviation oflScials want
the Hawks as soon as possible, and there will be a hell of a fight if the Gov-
ernment wants to cancel them. They can get the money if they really need it,
but the attitude here, as you know, is to let things run as long as possible
without paying.
Cueto is in Arica and has been there since before I left for Lima the last
time. I have received a couple of very childish, threatening letters from him,
and he will get my answer in Arica this morning. I am informed from reliable
sources that Cueto went to Arica for his health, and the chances are that he
will not be back, although I invited him up here to talk things over. I have
made a few investigations but \\ill have to see several people yet to get a fair
picture of the situation. It is quite likely that he will try to sue, and he also
threatens that he will put the matter l)efore the various governments that we
have been doing business with. I got a look at some documents yesterday that
l)ear authority, and iilthough they were confidential I took some notes. Cueto
files the following information regarding himself and his business :
Importer of manufactured articles.
Exporter of national articles.
Agent of foreign manufacturers.
Languages : English, Spanish, French.
Countries : Europe, United States, Chile.
Business done on own account on commission basis.
organization : Private.
Home ofiBce : La Paz.
Branch office: Arica (to be established).
Traveling salesmen employed, several.
Commercial references: Bell & Howell, Chicago; Curtiss-Wright Export;
Mack Motor Truck Corporation, New York ; Laboratories Francia Stgo,
Chile, and Bellanca Aircraft, New Castle, Del.
Agents for — same as above.
Bank reference — any bank.
There was no reference from any of the commercial firms mentioned, but the
two banks here were requested to send in their recommendations and we find
the following :
Banco Central. Feb. 25th, 1933 : " Mr. Cueto Pozo has an agency to act occa-
sionally for Curtiss Airplanes on a commission basis. At the time of taking
this agency Mr. Cueto Pozo was in the Ministry of Foreign Affairs. In order
to safeguard Government money he was discharged from the position in the
Ministry of Foreign Affairs. As a private person he does not own any real
estate, nor does he have money. At present there is a commission appointed
by the Government to investigate concerning the sales of airplanes and trucks
to the Government and establish whether Mr. Cueto Pozo and others have been
unduly zealous in their private dealings with the Government."
Banco Mercantil, February 23rd, 1933 : " Mr. Cueto Pozo is not a merchant.
He has been deprived of the position he held in the Ministry of Foreign Affairs
on account of being involved in the sale of airplanes to the Government. He
does not have capital and does not meet his obligations."
This may not be worth anything to you, but I am passing it on for your
information and to give you an idea of the standing of Cueto in La Paz.
The tail wheels and high skid for the Ospreys arrived O.K., but I will not
have the opportunity of trying them out, as there are no planes left here in
La Paz. Of the twelve Ospreys, they have six left. One Hawk is in the Chaco
and seems to be all in one piece as yet, but the second Hawk has never left
La Paz. Seems that they have no pilot available that they are willing to trust
with the machine. Our dear friend. Major Vargas Guzman, has been trans-
ferred to infantry and is due to leave for the Chaco soon. Col. Jordan is Jefe
of the works and he is the one man that should have had the job since the
beginning.
»»5 MUNITIONS INDUSTRY
Nothing more at present. Cannot give any more dope on the business here,
as the mail goes out 10 : 00 this morning and I have an appointment witli
Lopez at that hour. More on next mail.
Best wishes and regards. Web.
Sincerely,
Cliff.
Exhibit No. 299
February 9, 1933.
Mr. F. ECHENIQUB.
P.O. box 3098, Los Cerrilos.
Santiago, Chile.
Dear Paxcho: Since my return I liave been doing considerable traveling and
have spent very little time in the oflBce.
I regret that I have not been able to write you fully regarding the Bolivian
situation. I ex])hiined to Jerry one day on the telephone the difficulties we
have had witli the Bolivian business and asked him to give you the information.
The Bolivian Government business has been handled and controlled entirely
by Mr. Lopez, comptroller general, and when I was in La Paz, he was very
much upset and concerned because of the fact that we had been dealing
through an agent and paying a commission on the business. He insisted that
all business be handled directly between the Government and ourselves, and
that no commissions would be permitted by the Government. He took imme-
diate steps to discharge from Government service Mr. Cueto Pozo, and de-
ducted from our bills the commissions which were supposed to have been paid.
We have been unable to collect this extra amount and probably never will. He
threatened to discontinue all business relations with us unless we agreed to
this policy, and for that reason it is naturally impossible for me to make
any arrangement with you at the present time for commissions.
I told you when I was in Santiago that I would do the best I could for you
but that it vv'as impossible for me to name a definite amount, and this arrange-
ment will have to stand until we have concluded our business dealings with
the Government. I am, naturally, very sorry that I can do nothing for you
at this time, but you must appreciate the situation and permit it to continue
until I am able to smooth matters over.
In some way the Bolivian Government, through its intelligence service,
learned of our dealings and prices with other countries and what commissions
are normally allowed. Mr. Decker, the Bolivian consul in New York, has been
very friendly towards us, and I am having luncheon with him today.
I realize that everyone, ourselves and yourself included, are going through
rather tough periods now, but there is nothing that I can do at the present
time to help the situation. I probably will be starting for South America
again within the next five or eight weeks, and possibly at that time I can
more fully explain the situation and possibly do something for you. You must
also realize. Pancho, that we went to considerable expense in paying your
expenses from La Paz to New York and return to Chile, all of which, natu-
rally, is charged against you on our books, and I can only repeat that you
must rely upon our personal friendship to adjust this situation in some way
as soon as possible.
I am looking forAvard to seeing you again in the near future, and, in the
meantime, my sincere good wishes to you and Mrs. Echenique, and the best
of good luck.
Cordially yours,
C. W. WEJBSTEai.
i
Exhibit No. 300
Cuetiss-Wright Export Corporation,
La Paz. Bolivia, March 29. 193S.
Mr. C. W. Webster,
President, Curtiss-WrigM Export Corporation.
21 West 57th Street, New York.
DEIS.R Web;: I had an interview with Lopez (his morning with respect to
Cueto and Pancho Echenique. Loi>ez says that the Government has never given
Cueto a letter to the effect that they did not refuse to pay him a commission.
Lopez is giving me a statement to that effect, and I hope to get it in time to
MUNITIONS INDUSTRY 889
enclose in this letter. As regards Pancho, Lopez doesn't even know him. and
assures nie that Pancho never did a bit of business here and had nothing what-
ever to do with any purchases made by Bolivia from us. He is also giving me a
letter to that effect.
Received a cable yesterday as^king what price Rogers quoted on parachutes.
He quoted our price of $335 and turned in an order for 18 chutes, 12 of which
were a part of the order I secured some time ago. They sure sent the money
in a rush for the additional chutes. It might be interesting to know ihe reason.
A short time before the order went through one of the pilots in the Chaco was
shot down with an Osprey, and the observer, uninjured, jumped from the fall-
ing plane wi1h the intention of landing in the Paraguay River. He hit the
river all right, but as he jumped from 1,000 feet with no chute it was just too
bad. So after a concrete example of what I have been telling them all along,
they quickly decided that they urgently needed enough chutes to equip all 1he
pilots. The 12 chutes shipped on the Barhara will arrive this week, maybe
today. • That shipment was sent to Arica and had to be reshipped to Mollendo,
hence the delay.
At 1he ])respnt time there are only 5 of the 12 Ospreys in commission. Of the
seven wrecked, five can be repaired when the spares arrive. One was a com-
plete washout when the pilot landed on orders in a stump-infested field, and one
was shot down by ground flre and burned on the crash.
Col. Santalla is up from the Chaco and is plumb goofy over oTir planes.
When the first Ospreys arrived in La Paz he was all against u« and was very
skeptical of our equipment. At that time he had little to do with things and
he didn't woiry me much. Now he has about 15 hours flying over the front
and can't say enough in our favor.
Am busy trying to push an order for more planes, and with Santalla, Jordan,
and Ernst all on my side, I may get something done.
Therp is a firm here in La Paz, "Webster & Ashton, formerly Webster &
Finnegan, Cnsilla 144, that is a local business outfit with a branch in Oruro.
They have the agency for International Harvester Export and have done consid-
erable busines with the Bolivian Government in trucks. They carry on national
business as well. They want the agency for us in Bolivia and I have thor-
oughly looked up the stfin'ling of the firm, found it O.K.. have talked with the
American Minister, Feely, and have known both Webster and Ashton person-
ally since my first arrival here. Lopez called me In to talk it over and
informed me that the Government was willing to do business with an accred-
ited firm, but not with an individual, and that they were willing to pay a
reasonable commission on business with us for the convenience of having
.«omeone here at all times. Lopez suggested our placing an agency here for the
convenience of the Government inasmuch as I will not be here permanently,
and recommended Webster & Ashton. (I don't know what the hell is the
matter with me; I haven't bad a drink all day and yet my fingers get all
tangled up on this darned machine.) I am enclosing a letter from them. I
don't know what effect the placing of an agency here would have on the claims
of Cueto, but Lopez is all for it. There is one thing that comes to my attention
with regard to this although I believe everything is aboveboard and on the
level. Lopez is in witli Webster & Asliton on a hat f-^cto-y and a retail clothing
and furniture business here and it is extremely difiicult, in view of the control
board, to get dollars for the necessary imports for their business. Having an
agency for American goods would enable them to carry their commissions in
dollars in New York. There may be some kind of a combination between the
parties, but the thing as put up to me sounds O.K. and on the level. Feely
thinks it is square. Anyway, think it over and drop me a line, and it might
be well to write to Webster & Ashton and see what you can find out. It is
true that after I leave here it will be difl5cult for the Government to do quick
business with us in spares, etc., with no representative here and no one to take
care of their complaints or what not. Lopez also informs me that they intend
to establish a ci-edit with an agent, if appointed, so that things can be shipped
immediately without sending drafts through the bank for every amount as
needed. I pointed out that he could just as well establish credit with us in
New York, but he prefers to do it his way.
I rnn a test 'n the Hawk here yesterday on take-off distance and with full
load got into the air in 800 feet on a wet field. The best take-off on dry field
is 4f»0 feet. It is considered nothing short of a miracle up here.
More next week, Web ; best of luck and good wishes.
Sincerely,
(Sgd.) Cuff.
890 MUNITIONS INDUSTRY
Exhibit No. 301
La Paz, Bolivia, Sept. 21, 1933.
CWW #36
Mr. C. W. WB3STEB,
Curtiss-W right Export Corporation,
21 West 57th Street, New York.
Dear Web: I am proceeiling on to Lima today and will miil this letter iu
Arica on my way through. There is absidutely nothing more that I can do
here at the present time, and I may be able to be of some help in Lima. The
supreme decree for three more Ospreys was signed yesterday, but it will be
weeks before a regular contract is made out. That is customary here. Actives
are arranging for payments, and that should go through in a week or ten
days, although they are trying to get the 25% through immediately and theu
go ahead with the balance as soon after as possible. Irrevocable credit will
be arranged as before. As I told you in my cable of the 19th, the order for
three Ospreys will be followed by an order later on for six more Ospreys and
three Hawks. The Banco Central has already been notified that that amount
of money will have to be planned on in the budget. In the meantime the
Trainer deal is shelved. They are thinking, just thinking, of contracting sev-
eral foreign pilots instead of wasting time training more of their own. They
will undoubtedly be German pilots— due to Kundt. Webster & Ashton are
sure live wires and we certainly made no mistake when we took them on. I
had a chat with Minister Feely yesterday and his opinion is that taking them
on was the best business that we have done yet.
Regarding the commmission to be paid Activos, I cabled that my recom-
mendation was 5% of the total amount of the last order. That would be 5%
of $97,180.00, or nearly $5,000.00. As you know, that order was put through
by me some time ago but Activos were darned helpful on the final details of
the deal and were entirely responsible tor gett.ng the mon(>y in cash; something
that no one else without their contracts and influence could have done so
easily, if at all. For your own information, Lopez is, and has been for some
time, a silent partner of Activos and is interested to quite an extent in the
agency and their textile and hat factories. That is not common knowledge,
but it makes it necessary to play ball with the tall friend, as he is the deciding
factor in all purchases — more so than the President himself. Do not mistake
me, Lopez is one of the few honest men in this country and although he has a
personal interest in the sale of Curtiss planes and equipment he would not let
the order go through unless the stuff was entirely satisfactory. Let me give
you some extremely confidential dope that I picked up, no matter where, but
it was in writing :
1. Jorge Zalles, Vice Pres. of Grace & Co., used the Cueto affair as a lever to
try to influence Lopez through the New York Consul to eliminate Curtiss and
take up United Aircraft through Grace. They told Lopez that they could
supply Hawks at $23,000 and Ospreys at $17,000.
2. When the last three planes (that have just been delivered) were on order
the purchase was nearly cancelled because of interference of the Kundt-Bilbuo
combination — through Minister of War Hertzog — to the President. Except for
Lopez and the pilots (as well as my visit here at the time to straighten out
the complaints) the order would have been cancelled and the business given to
United Aircraft and Fokker.
3. Due to Lopez and Activos we were able to arrange full payment on the
last order through irrevocable credit. The President's instructions were to
make payment in the same form as before — 35% only after planes were tested
and delivered.
4. Lopez has been offered 10% on planes and 20% on spares if he will help
swing the business to Fokker. Vickers made him the same offer. (I have
told Activos that we cannot pay more than a flat 5% on all Curtiss business at
the present quotations.)
5. Lopez and Activos have practically assured our future by combatting the
competition, although they could have cleaned up by putting in United or
Vickers.
6. Colonel Williams, American fiscal agent for Bolivia, has told the Govern-
ment that United is much bigger than Curtiss. (I can't quite see where that
comes in nor where it fits into the picture.)
MUNITIONS INDUSTRY 891
So in view of the stroug couibiuation working in our behalf, I think we
should allow the 5% on the last order in order in keep the machinery well
oiled. Our prices can stand it, although our selling costs have been rather
high. Spare parts selling at list should make a fair margin for us, and I
understand that the Osprey carries a fair margin at $18,000 with 10% allowed
for commission. (I should know more about the internal workings of that side
of the game if I am to be of maximum value to the company.) We have never
hiul a chance to get together for a good old instructive critique in the year
that 1 have been with the company, and I am looking forward with much
enthusiasm to our meeting in Lima next month. Naturally, I want to put out
everything I've got for you, and there are a few dark corners — dark as far
as I am concerned — that I would like to get an inside glimpse of.
I don't know whether I have mentioned it before, but be very careful what
dope you put out to Decker. Contact Activos before quoting any prices to
anyone and get together with them. They are on the up and up, but I know the
situation here well enough to tell you to do this. There is a hell of a lot of
intrigue down here, and an unwise word to Decker might start a lot of
unpleasantness for us. You know the game, so you understand the situation.
After the war, when the Government can spare a few mechanics, they may
want to send three or four to the States to glean some information and train-
ing at our factory. Think this over and see if we can fix something up for
the boys.
Tell Damon that the new tailskid on the Osprey is all right and that we can
cut it to any height without any trouble. In spite of the kick that he put
up about it when I first asked him to change it, it decreases the take-off run up
here by a good lot and the landing speed, if increased at all, is so little increased
as to be unnoticable. The actual take-off at La Paz was 6 seconds less than
previously with the low skid. It will also keep the fuselage off the ground in
ViUanumtes and Muncz, where the sand is so deep. Also pass the word along
to the Buffalo factory that the gun synchronizers on the last Hawks were in
working (Uder and saved us a hell of a lot of trouble. Things like that mean
a lot to the field men and are appreciated.
Shorty is going to the Chaco next Friday to look things over and give some
much-needed instructions to the mechanics. This was requested by the pilots
and I left it up to Shorty as to whether he would go or not. He can be of
great help tliere for a couple of weeks both to us and to the pilots and mechan-
ics. He will return here in t me to proceed directly to Buenos Aires by train
before our arrival there.
The invoice for the materials that were shipped up from Santiago several
months ago was presented for payment and the amount passed. The cheek
should be ready in a few days and will be sent directly to New York. The
amount (of which I was never informed one way or the other) was $210.00'
and Activos are adding ten percent for their trouble. In the future on a deal
like that please instruct the office to let me have at least a copy of the invoice.
I had no dope from them at all except to collect for the stuff. I got the in-
ventory prices from Jerry after having received no instructions from the office
in New York regarding prices, and added 10%, sent the list to Ashton for
collection, and found out that he had already been sent an invoice. Needless
to say, my prices did not agree with the others but on the same mail Ashton
received the New York invoice and everybody was happy. Donnelly is leaving
today for Santiago to pick up what materials he needs up here and will send
me a list, or have Jerry sen:l it, of all the stuff he gets. That will reach me
in Lima by air mall and I will send it on to New York immediately. They will
fix the prices and mail the bill to Webster & Ashton direct with a copy to me.
The invoice should include 10% commission' hut should not be noted as such
on the invoice. The amount will be collected and sent to New York (or given to
me to apply on expenses as previously) according to when it is collected. The
ten i^rcent will be retained by our agents.
Nothing more at present. Best of luck and a pleasant trip south.
Sincerely,
(Sgd.) Cliff.
892 MUNITIONS INDUSTRY
Exhibit No. 302
[Copy]
#108.
Via air mail.
May 23, 1933.
Captain C. K. Travis,
e/o American Consulate, La\ Paz, Bolivia.
Dear Cliff: Did you receive the catalogues of the Faii'child Camera Gun
and my letter of March 4th quoting prices, etc., on this equipment?
Fairchild has given us temporary exclusive representation on this equipment
in Bolivia and will only grant us exclusive sales rights if we develop some
sales on it. They are now after us for a report on the prospect of some sales
theie and we hope they are good, as we are convinced this gun and films will
prove a good seller and particularly because of the repeat orders we will get
-on the tilms.
We have already sold thirty of these in China, eight in Columbia, four in
Brazil, and expect orders shortly for two or three from both Salvador and
Venezuela.
I don't know whether Web told you already, but during the past two weeks
we closed orders for nine Trainers, six Hawks, and six Falcons for Colombia,
and another eighteen Hawks for China.
It looks as if Salvador will buy three Ospreys and Venezuela three Ospreys
or Falcons. It is too bad we are not getting anything from Peru except spare
parts orders. I also hope Bolivia will come through soon for some more Hawks
or Ospreys.
Woody showed me the photos you sent him. Talking about beer — up to now
it has not been so good here — no kick, does not average as much as 3%.
Hov/ever, the New York State Commission has just ruled that the bottles must
show the minimum percentage in the future and those breweries that do not
put in the full 3.2 won't have any demand for their stuff — so it should be better
soon. Web and I have a date with Bob Barr to go down to the S.S. Albert
Ballin tomorrow night for some imported beer — we'll have one to your very
good health.
Web is still on the wagon — won't even take beer except on special occasions
and then only a glass or two — but apparently it agrees with him as he has
taken on quite a bit of weight.
The consul general here — a good old scout named Decker — keeps on asking
us what they are doing with the Hawks and Ospreys — we keep telling him we
don't know, as you never discuss their activities in your letters, which is just
as well because I am sure anything we told him would be cabled down to
La Paz prompto. He seems to have a mania for saving the Government money
and passing everything he hears on to them.
Regards.
Sincerely,
(Signed) Owen Shannon.
OS:D
Exhibit No. 303
[Copy]
La Paz, Bolivia, May 30, 1933.
Dear Web: Received your personal letter of the 11th yesterday along with
the other letters and photographs of the new Falcon. Sure is some job and the
performance is indeed surprising.
The situation here seems imchanged as regards ports of entry to Bolivia.
Chile declares one day that they will respect the port treaty with Bolivia and
the next day decide to close shop. Shipments, however, are still coming
through Arica. Nothing has been published regarding the Peruvian attitude
but it seems as though Mollendo will be kept open and at the disposal of
Bolivia. I will notify you immediately of any action taken by the resjiective
Governments to close the ports to munitions. The embargo situation in the
States seems to be getting serious according to the reports received by the
press here. I am trying to get the Bolivian Government to sign up for all
MUNITIONS INDUSTRY 893
future needs before any action is talien in tlie States but it is a slow and
difficult job. Definite decision has been made to order planes and spares to
the amount of 2,000,000 bolivianos but the bank is having difficulty in getting
the local currency transferred to dollars. They have enough now to order a
couple of Hawks and 4 Ospreys and corresponding spares. That order should
go through soon and I am trying at the same time to get the contract for the
balance to be ordered as soon as money is available. Of course the big argu-
ment in favor of that is the embargo situation as you have pointed out.
Regarding the annex to your personal letter, I will try to give you a clear
picture of the situation as regards the agency and quotations of equipment
submitted to the Government so that you will be able to figure the thing out.
Sure was white of you to bring up that suggestion to help me out and that is
one of the many reasons why you will never have to worry about me letting
you down.
I liave already informed Ashton, that, in view of the fact that the present
pending order was negotiated by myself and that no commission was included
in the quotations, he will not be entitled to much, if anything, on the deal.
Naturally he will have to be given something, as well as a couple of others, for
what he lias done in helping the deal along and for his connections which will
enable us to get our money when due. He is absolutely in accord with that
program and will be satisfied with enough to settle some certain obligations
which I could explain personally. He will be perfectly satisfied with 2 percent
or less.
The prices I quoted to the Government are in accordance with all previous
prices with the 5-percent commission deducted. Ospreys at $18,000 and Hawks
at $25,000, spares at list price as quoted in October less 5 percent, and Hawk
spares at list price as quoted to me after the purchase of the Hawks. I am
enclosing a copy of the list as submitted to the Government. You will notice
that I quoted Ospreys with additional, or extra large gas tanks, at $.500 extra.
There is plenty of room to enlarge the main tank and although it may be
necessary to install a gas pump or wobble pump, it could easily be done. I
found it necessary to do this to beat down cimipetition. They will probably
order the standard Osprey anyway but the moral effect of knowing that the
cniising range can be increased helps a lot. Thus the mind works. All in all,
there should be plenty of margin on these prices, especially the Hawks and
Hawk spares, to take care of the unusual selling expense. I will cable you at
your private address in advance of notifying the office of the signing of the
contracts.
I am keeping in close contact with my inside connections and if it becomes
necessary to arrange to get things through I will get busy and keep you fully
informed by cable and letter. By the way, I have no code book and would
appreciate your sending one down to me. Better mail it to Lima, as I expect
to get out of here in 10 days of less.
I have already started talking Falcon, but the price will probably not appeal
to them, inasmuch as they are very satisfied with the Osprey and can get just
as nnich out of them for $10,000 less than the Falcon. Naturally, the Falcon
will perform much better at this altitude than the Osprey, but the plans of the
general staff call for establishing a base for the Ospreys at Villamontes (sea
level) after the war, and keeping the Hawks at La Paz. However, there may be
a chance to place some Falcons up here.
The aeet.vlene gas finally arrived from Santiago, so Donnelly will be through
with his work here in time to leave on next Thursday's train for Arica. It
may be possible that they will want him to come up here again in a month or
s<) to fix up some other wrecks. They are tickled to death with his welding — •
something they thought impossilije outside a factory. His coming up here has
helped us a lot and has put the Hawks and Ospreys more in favor than ever.
Best of luck, Web. and hope to see you soon where we can get those libsters
and that draught beer you mentioned.
Sincerely,
(Signed) Cliff.
P.S. Just got notice from the President through Lopez that the Bolivian
consul in N.Y. cabled that Hawks and Ospreys could be secured for 23,000 and
17,000, respectively. I cabled the office today about it. Sure threw a wrench
ill the machinery and raised hell in general. May spoil our business, but will
do all I can to save the situation and our prices. Sure am enjoying life up
liere — not a dull moment. Saludos.
C.
894 MUNITIONS INDUSTRY
ExHiiUT No. 304
Curtiss-Wright Export Corporation,
Ncic York City, November 6, 193S.
To: Mr. J. A. B. Smith, Mr. J. S. Allard.
(Mr. Webster.)
The following is quoted from a letter received from Mr. Webster today :
" Peru. — My last conversation with the inspector genei'al and the Minister
of Marine, just before I left, was very pronusing, and they are considering
about 10 Falcons and 5 Hawlcs but are not interested in Ospreys. They are
also considering from one to three Condors with wheels and floats. They are
also interested in camera guns and parachutes. The opinion exists that trouble
will be renewed with Colombia.
" Bolivia. — Here the situation is also very interesting. I have had one long
joint session with the Minister of Finance, Lopez, the Minister of War, and
the Minister of Transportation, and another one is scheduled for 6 o'clock to-
night. My one great job is to sell from three to 10 Condors. The matter has
been talked over with the President, and it looks very favorable. The Minister
of War and the Cliief of Staff is leaving tomorrow for the Chaco to be gone
a week or two, and they are taking down all the specifications, photogi'aphs, and
drawings to discuss with General Kundt. The one big problem will be the
financing, and we are to go into that this evening. The order may be split up
to satisfy Gen. Kundt and the I>loyd Boliviano Company and possibly three out
of the 10 ships may have to go to Junkers, although our performance, etc., is
better.
"Any price I quote will include 5% for Ashton & Webster, and in this connec-
tion we will allow them the 5% on past sales. It seems highly advisable as
Lopez, who is the President's right ami, is- a silent partner of the company.
His attitude now is entii'ely different than it was a year ago, and he is sure
pushing our stulf.
" In connection with the possible sale of a large contract, involving around
a million dollars, the Government wishes to know if we cai; grant terms, pro-
viding the Banco Central guarantees payment. I have not yet seriously dis-
cussed this idea, but possibly I will get more accurate information tonight.
I told them that we naturally would do everything we could, but the matter
would have to be discussed in New York. Such a contract would naturally
require a number of weeks to work out, and by that time I will probably be
back in New York, where I can do more good than here. Ashton & Webster
are certainly live ones and very much on the ground and on the inside, and we
could not possibly have done better in signing up with them. The other business
of more Ospreys and Hawks will come along as a matter of course. They are
absolutely sold on them from the President down to every pilot, and they told
me they would naturally continue to use them. Orders will be placed just as
fast as they can get exchange.
" There have been persistent rumors of peace down here, but now they are
generally and officially deuied."
(Sgd.) O. S.
Owen Shannon.
OS.js
Exhibit No. 30.')
Curtiss-Wktght Export Corp.
New York, January Jf, 1982.
SWISS AIR PRICES
Mr. J. S. Allard
The price at which we sold three spare Cyclones to Swissair last January
was an arbitrary figure not based on any particular discount from list, but
fixed so as to fall in line with prices quoted to Fokker about the same time.
Swissair paid for their standard R 1820 E Cyclones with radio shielding and
less two magnetos $6,170 f.a.s. New York. On this basis tb.eir price for an E
Cyclone with standard equipment only would have been $6,159.50 f.o.b. Pater-
son. On our present schedule of discounts (i.e. with a 25% spread between
list and low net) this would amount to slightly more than list less 15%. In
other words, it falls STibstantially in line with our present engine dlscoupt
(15%) to major airline operators.
MUNITIONS INDUSTRY 895
On accessories purchased with the three E Cyclones we allowed Swissair
15% discount with the exception of one small item on which, for some un-
known reason, they were allowed only 5%. Here again their 15% discount
agrees with our present schedule on accessories to major airlines.
On spare parts we have allowed Swissair 20% discount. Our present sched-
ule allows a 15% discount to major airlines but this has been increased in some
instances (namely KLM 40% and Scadta 20%) where no agent has been
involved.
I understand verbally from Mr. Goulding that from now on we are to
reserve a 5% commission for Mr. Zimmermann on all purchases by Swissair
both for their own use as well as for resale. I am not sure, however, how
Mr. Zimmermann wants this handled — whether confidentially or otherwise.
When you find this out in your conversation with him, please let me know.
Philip Shepley,
PS/jc
Exhibit No. 306
Curtiss-Wkight Export Corporation,
January 26, 1933.
SWITZERLAND COMMISSIONS
Mr. P. Woodling: A special, confidential arrangement has been made with
Mr. B. Zimmerman to pay him a commission of five percent (5%) of the list
pi-ice on all Curtiss-Wright engines or spare parts sold in Switzerland. This
commission is to be five percent (5%) on the list price on such sales.
While I am paying Mr. Zimmermnn, in cash, commission to which he is
entitled on sales order no. 1902, invoice #2946, namely, $76.99, because he
happens to be in this country at the present time, the regular procedure which
I have arranged with him is to send bankers drafts drawn to tJie order of B.
Zimmerman, and addressed to him at his home address as follows :
Mr. B. Zimmerman, 93 Breitenstein Str.. Zurich 6, Switzerland.
WFG/f W. F. Goulding.
("Exhibit No. SOT " appears in text on p. 735)
Exhibit No. 308
[Copy]
Dada-Dada & Co.
San Salvador, El Salvador, G.A., May 6th, 1933.
Curtiss-Wrtght Export Corp..
27 West 51tn Street, Neio York City.
Gentlemen : In answer to your cablegram of May 3rd, we have cabled you
on May 4th, as follows : " Quote Nineteen Thousand f.o.b. factory — full payment
New York. Writing."
Our letter of April 26th was very clear : by same we asked you to please
quote the Government $19,000 — for your 420 h.p. Osprey — price f.o.b. factory —
payment cash in New York before shipment.
Herewith we confirm our terms; please give to our Government the quota-
tion of $19,000 — for the 420 h.p. Osprey. Insist upon cash payment in full in
New York before shipment.
From our side, as the Government wants term payment, we shall arrange
with a local bank to effect payment to you cash, as soon as the business is
concluded. The bank will then collect from the Government on term basis.
We are already working on this subject and hope to be able to conclude the
business very soon.
Due to so many offers from other manufacturers, we are working hard, and
we offered commission to different intermediaries in this business. This is
why we asked you to quote the price given above, as more than 70%^ of our
own commission and discount will be distributed to intermediaries.
8,3876— 34— PT 4 14
896 MUNITIONS INDUSTRY
As soon as the business is concluded, we sliall immediately arrange to have
a local bank pay you cash in New York before than shipment is effected.
In the meantime, we remain
Yours truly
Dada-D!ada & Co.
(Signed) Geo. M. Dada,
Oeneral Manager.
Exhibit No. 309
[Copy]
Dada-Dada & Co.,
San Salvador, El Salvador C.A., May 13, 1933.
Cuktiss-Wright Export Corporation,
27 West 57th Street, New York City.
(Kind attention of Mr. Owen Shannon.)
Dear Friends : Thank you for your kind letter of May 6th enclosing copy
of letter remitted by you to Captain Juan Ramon Munes of the Salvadorean
aviation. We have taken due note of everything and since some weeks we
are putting forth all our efforts to get the order for the three military Ospreys
for our Government.
Our Government received many offers from different sources and some of
these offers on a very satisfactory basis and easy terms of payments. However,
we never get discouraged and we worked harder and harder, as we know that
this first order will mean repeat orders for the near future not only for the
Government of El Salvador but also for the other Central American Govern-
ments.
For your guidance, we enclose copy of a pro-forma contract made between
the Government and the Bristol Aeroplane Company of England. You will
note that they offer three years for payment. However through our influence
and good friendship, as well as good relations with the Government oflicials,
we are about to get the order and it is probable that in a few days we close
the deal entirely.
Confidential. — To get such order, we had to use many intermediaries and
friends to whom we are to pay a commission ; consequently about 75%
of our commission will be paid out to intermediaries ; but we do not care for
that if we get the order. We know that this first order will bring us many
more orders in the near future.
Payment.— Following the conditions made to the Government by the Bristol
Aeroplane Co., we have also extended to our Government two years for the
payment. However, you have nothing to worry about these terms, as we will
pay you full cash for the three airplanes ; our local bank will take care of the
business.
Price. — We had to quote our Government a price of $18,975 — for each com-
plete Osprey, c.i.f. La Libertad port (El Salvador). As you see, we have to
pay all charges for freight, insurance, et cetera ; the commission left will not
even cover our efforts, as we have to pay so much for intermediaries. Any-*
how if the Government requests again your quotation, please confirm our price
of $18,975, but specify that this is f.o.b. or f.o. factory price, even if we quoted
c.i.f. Just quote the same price but f.o. factory and specify that this is cash
but that your representatives Dada-Dada & Co. will arrange for term pay-
ment. Thanks you.
In the meantime, we shall cable you the results.
Yours truly
Dada-Dada & Co.
Exhibit No. 310
[Copy]
La Paz, September 26, 1933.
AEROirxco.
Neiv York:
Please deposit Anglo South American Trust Company order of Luis Yver
Vergara lour thousand five hundred dollars without mentioning our name.
Confirm.
ACTIVOS.
MUNITIONS INDUSTRY 897
Exhibit No. 311
[Copy]
Sept. 27, 1933.
(Accounts.)
Messrs. Cubtiss-Weight Export Corpokation,
21 West 57th St., Neiv York.
Dear Sirs : We confirm our cable of yesterday reading as follows :
Please deposit Anglo South American Trust Company, four thousand five
hundred dollars, order of Luis Yver Vergara, without mentioning our name.
Confirm. Activos.
We hope to hear tomorrow morning that the deposit has been made and at
the same time we also asked Captain Travis to confirm this to you direct also.
This sum of $4,500, U.S.C, will go against our commission of 5% on the
2 Hawks and 1 Osprey, plus $31,180.04 worth of spares, as per arrangement
with Captain Travis.
You will no doubt have noted that we do not wish to appear and it would
also be a good thing if you do not appear either.
Thanking you for your usual kind attention to this matter,
Yours very truly,
(Signed) W. & A.
Exhibit No. 312
[Copy]
SEa-TEMBER 29, 1933.
Activos.
La Paz, Bolivia.
Depositing four thousand five hundred tomorrow morning Stop Deposit
Ospreys not received.
Aeroexco.
Exhibit No. 313
New York, October 27, 19S3.
Mr. J. S. Allard,
Peru.
Web writes as follows :
" Have finally come to a definite understanding with Faucett regarding Gov-
ernment sales in Peru. For a time it looked as though it would be impossible
and I finally told Faucett that we would have to make other connections. He
was of the opinion that Travis was working on a commission (so he said)
and was butting into his territory and going over his head. His arguments
were quite childish and Tobin was ready to quit and take on our job if I
couldn't get together with Slim. I finally cabled you that I had broken off
negotiations and the next day Faucett calmed down and agreed to turn Tobin
loose on the job and let him handle all Government business. He will remain
with Faucett and the latter will split his commissions with Tobin. The per-
centage of profit for Faucett will be determined on each sale. Faucett told
me that he had delilierately stopped the machinery order until he found out
just what Travis' status was.
" I have seen the Minister of Marine several times. He is in command of
all aviation. Was told that more equipment was required, but Faucett did
not know about it. Have quoted on 12 Falcons with floats separately. Have
given them a price of $26,400 without armament, f.o.b. New York, for the
standard landplane, $28,500 each for the same ship with armament c.i.f. Callao,
for the Falcon attack without armament, $26,900 f.o.b. New York, and $30,000
with armament c.i.f. Callao. These prices include 5 percent for Faucett and
Tobin. I deliberately increased the price of pontoons to $4,900 per set f.o.b.
New York and $5,400 c.i.f. Callao, as they will require them and it will provide
funds to pay additional " commissions " which will undoubtedly be neces.sary.
This is the way the Fairey Company handled their last business. They held
the complete ship down in price and raised the price of floats, it is not
so noticeable.
898 MUNITIONS INDUSTRY
" I have another appointment this afternoon with the Minister of Marine and
with the Inspector General and Chief of the Materiel Division. It will be
necessary to leave here early Sunday morning for Bolivia and let Tobin follow
the business through. Out at the army field they had 80 students and only
three instruction machines so I will also quote on the trainers. Cabled you today
for* price and I believe that factory can reduce the figures which Carrin'gton gave
me. It seems so ridiculous to send out figures and then instruct us to cable if
lower prices are necessary. Will also quote on Ospreys but I have no costs
on separate floats. It is very probable that the present Inspector General
of Aviation will be replaced within ten days or two weeks and in that case
we will have a much better opportunity of doing some business. The present
man is a weak sister.
" There are all kinds of underground rumors around here about trouble
starting again to the north but, of course, there is nothing oflicial. Bolivia
plans to make one big push as soon as they can in an effort to stop their own
trouble and for that reason will probably buy considerably more equipment.-
OwEN Shannon.
OS.js
Exhibit No. 314
CC sent % American Legation,
Bogota, Colombia, S.A.
APBir, 16th, 1934 (Dictated April 13th).
Mr. Wm. J. Crossweix
Hotel del Prado,
Barranquilla, Colombia, S.A.
Dp:ar Bitx: The last I heard from you was from Miami in a letter dated
March 31st and I do hope this letter will find you in excellent health and really
enjoying your trip to Colombia this time.
Personally. I have been on the sick list for the past two weeks with gi'ippe
and bronchitis and, therefore, would have been unable to take care of the mail,
had any been received from you.
I was very pleased to note that you had such an interesting discussion with
Olano at Pensacola and that he was so friendly to you, as I feel that Olano
will at a later date be a real asset to us in securing business from the Co-
lombian Government.
As to the factory situation, we are all of the opinion that we should " lay
hands off " at the present time, as so far every one of oui* foreitai factories
have been nothing but a headache and we do not feel that we ought to pro-
pose such procedure as most of the foreign countries are more interested than
it appears, in that sort of business, than they are in actually purchasing air-
craft and you know we have a big factory in Buffalo which we must keep busy.
I Iiave discussed the Venezuela situation with Mr. AVebster, as this is part
of his official teri'itory, and he states that he has a very good representative
• in that country but that he has never been able to do anything, due to the
fact that they are not primarily interested at the present time in aircraft and do
not have the money that Comm. Seese appears to think they have. Webster
thought it would be foolish for you to spend the time and money to visit
Venezuela, stating he intends to be in South America shortly himself and make
the trip through all the countries and that he no doubt would hit Venezuela
along with other open territory.
As to the .N-12 airplane, we liave suggested, tb rough the consul here, the
purchase of this type and as they are primarily interested in an airplane on
floats at the pi-esent time and this airplane does not have the performance
even of the Falcon under these conditions, we are rather at a loss in connec-
tion with pushing such a deal, particularly when the costs of such a ship are
comparatively excessive.
BuQ'alo factory is certainly having its fun these days, as they hsive a strike
on their hands whirh has now reached the proportions of daily riots and will,
without doubt, retard delivery of the second lot of Hawks and Falcons aoing to
Colombia. It is hoped now that this strike may be settled today and the men
placed bPck on the job but as things stand at the present, we have about 100
men working in the factory and you know what that means insofar as pro-
duction is concerned.
MUNITIONS INDUSTRY 899
Outside of the above, there is no great amount of excitement, but I liupe
you are finding plenty to do in tiie soutbland and will keep me advised as
to — at least your good actions.
Sincerely yours,
PAH
B
Exhibit No. 315
[Copy]
Export
Paterson, N.J., May 29, 193J,.
Mr. William A. Reeks.
CO : Mr. Hewlett.
Mr. Chapllne.
Mr. Gall.
Lt. RODKIGUEZ,
ColomMa.
Referring to your letter of May 23rd, introducing young Lt. Rodriguez * * *
I had quite a long talk with him last Friday, in the course of which he told
me that he had been up here about six months and had been through the
Curtiss Flying School course at Valley Stream, and was looking forward now
to learning about engines at your service school. His uncle at present holds
an important position on the Colombian air force staff, and is a close friend
of the man who is slated to the next President of Colombia. If things work
out as expected, his uncle will be the next Minister of War, and young
Rodriguez as a result of his instruction and knowledge of aviation secured
during his present visit should hold a fairly important position. I don't
know, naturally, how true this all is, but I pass it on to you for what it ia
worth and suggest that it would be worth while to show this fellow some
special consideration while he is at the Wright factory. I gave him a complete
set of our literature on airplanes and motors, and he seemed well pleased
with his visit to this office.
Philip Shepley.
PS P
Exhibit No. 316
[Copy]
July 25, 1933.
•Captain C. K. Travis,
Casilla lJi29, Lima, Peru.
Dear Cliff : This is in reply to your no. 26 of July 16th. I am sending this
to Lima with a copy to La Paz, as I am not sure of your time schedule.
Apparently some of my letters to you have also gone astray as I previously
explained that is was impossible for me to start south at this particular time,
but will probably leave about the first of October.
Regarding Donnely's salary and expenses on the Bolivian trip, I would
personally like to see him realize some kind of a bonus for the trip but our
company accounting department, as you know, is somewhat hard boiled along
these lines so credit the full amount of $541.70 as paid to you by the Govern-
ment to the company, but retain this amount and include it in your expense
account.
Another item which has not been settled to my knowledge, is the cost of the
spare parts shipped down on that same job. Take this up with Webster and
Ashton and see what you can do about collecting it.
Regarding the Wooten Falton — my idea is to sell the entire outfit to the
Peruvian Government, including the spares, which consist of an engine, landing
gear complete, propeller, tail surfaces, and, I believe, a set of ailerons, which
Peru undoubtedly can use. The chance of closing such a deal would be much
better with the ship in Peru — that is, Lima. The have already attempted to buy
the landing gear, but we turned them d')wn, and then they came direct ta
900 MUNITIONS INDUSTRY
us for a price on a landing gear from Lima by cable. You will have to use
your own judgment in getting the plane up there, and I assume that you will
pick it up in Santiago, fly it to La Paz and when you finish there, proceed on to
Lima. Jerry can handle the shipping of the spares by steamer to Callaeo. I
have previously written to you about the details on this particular transaction.
This letter was sent to Lima.
We cabled you the other day regarding Tony Fokker's cabled request for
prices on twelve cyclones F-3 engines for six pursuit and six observation
planes, which he is attempting to sell the Bolivian Government. It was neces-
sary for us to quote Tony and now it is up to you to see that we get the entire
business, including the planes. He attempted to do this same stunt with us
in Argentina, but we managed to beat him to it. The situation was important
enough to ask you to get back to La Paz as quickly as possible and look into
this matter.
I believe as you do that we can sell Falcons to Bolivia and it seems advisable
that we demonstrate one there as quickly as possible. After you arrive in
Buenos Aires, feel out Colonel Zuloaga on the idea of getting permission to
demonstrate this job in La Paz. Bear in mind that Argentina is closely
lined up with Paraguay and, naturally, is a little unfriendly towards Bolivia.
Do nothing whatsoever to alter our good relations with the Argentine Govern-
ment and bear in mind that we wish to sell this ship to Argentina along with
a contract for the purchase of the manufacturing rights.
We also wish to demonstrate this ship in Brazil, but Brazilian and Argen-
tine relations have never been any too friendly and we may encounter obsta-
cles. Do not press the matter with Zuloaga if he shows any antagonism to
the idea. Argentina is our biggest customer and we must place them first of
all.
We have worked as rapidly as possible in getting you the list of prices
on the machine sliip equipment for Peru. There really was a great amount
of work attached to this project iiud Andy Carrington has done his best. I
hope that your interrupted negotiations will not interfere with getting this
business.
I reiilize that Slim Faucett has not been of great help but bear in mind
that we must retain Slim's personal and intimate friendship and keep him in
good humor. Slim's pet baby is the air line and I know he devotes all of his
time to it. Do what you can to keep him satisfied.
I had a letter from him yesterday in which he mentioned that Jack Jen-
nings was ready to solo, but due to insurance regulations it would be neces-
sary for Jack to quit his job — and that he could not solo while he was employed
by Faucett. This seems rather ridiculous to me and, naturally. I want to
see Jack keep his job. So, when you get to Lima, look over the situation :
talk with Faucett and write me frankly regarding it.
I am sorry that Melgar did not take over the job of inspector general
of aviation of Peru, but, possibly, as military attache in Chile he can still be
of considerable service. If the government intends to put in a foreigner, and
possibly, an American, in charge of aviation, who do they have in mind?
I certainly hope that Grove does not go back in Peru. Why not apply for the
job yourself and see if we cannot work out a situation whereby we could all
profit by it. On second thought, however, perhaps this would not be such
a good idea, but think it over and let me have your suggestions. The ideal
situation, of course, would be to start and steer such a selection in the right
direction and, with your connections and friendships in Peru, you might
suggest one or two men when you return there.
The list of equipment now o'>vued by the Government is certainly an
interesting one and looks and soimds more like a museum than an air service.
We thought we had Jack Hodgson lined up for the Salvador job but we
have word today from Washington that the Government refusetl to release
him. We are now trying to find someone else, but I cannot think of anyone
at the present time. If young Don Kessler was not permanently hooked up
with the Peruvian Air Service we might be able to use him as I presume, by
this time, his Spanish is fairly good.
There is no other information I can think of at this time.
Good wishes and the best of luck.
Sincerely,
(Signed) C. W. Webster.
CWW.JS.
MUNITIONS INDUSTRY 901
Exhibit No. 317
19th January, 1934.
Mr. C. M. Webster,
New York.
Deak Web : Complying with your wishes to keep you in touch with things
at this end, I thought mucli could be gained from Marcial Arredondo, so invited
him and his wife (nee Matilda, Merino's old secretary) out to the place for
dinner last evening. We had a long talk over everything in general, and espe-
cially on the possibility and probability of the Government purchasing new
equipment. Marcial confirmed Alessandri's public statement that the Govern-
ment intends raising funds in the near future for this object, but stated he
could not tell when this would be. Marcial told me quite frankly that Aracena
has his eyes set first of all on training planes, and he has it in his head to
buy Avros, as it is claimed the new type Avro trainer is equipped for primary
as well as advanced training, including gunnery and photographic work. In
other words, all classes of training combined in one light plane.
With regard to the purchase of other equipment, Marcial said he will da
everything in his power to see we are taken into consideration. Marcial has
a very big say in the matter so long as he is sitting next to the President,
and is the right-hand man of Aracena. He promised to let us know in plenty
of time, or side-track the prospective purchase of other planes, if possible, and
if necessary suggest an open competition such as in 1929 before placing any
orders. I personally think we can compete with' anything England or France
have ever built. I therefore suggest you look up and see just what the U.S.
Army is using for training purposes and send us the latest dope on all trainers,
so that I can pass on any important information to Marcial and Aracena. We
have here, of course, catalogues of the latest Curtiss-Wright trainer, but it
seems that the Air Corps wants something more of a ship than this.
With Marcial watching out for us on the inside, I think it best not to rush
Aracena too much, as Marcial claims he is the go-between for Aracena and the
President and he has to be consulted first, so will be able to talk with Aracena
about our equipment and lead him right.
Perhaps when the time comes for buying you will have to make some ar-
rangement to have a Hawk and Falcon or other types shipped down for dem-
onstration, and my idea would be to let Marcial do the flying with, say, Cliff
standing by in case of need.
The foregoing is just my idea of things, and maybe my suggestion is a little
advanced at the present time, but then one never knows how the cat might
jump. Please let me have your ideas or any other recommendations you may
have to make.
Trusting you are keeping well and with kindest regards to Mrs. Webster,
Very truly yours,
Jerry.
Exhibit No. 318
[Copied from original]
CtJKTlSS-WRIGHT CORPORATION
#11
INTEROFFICE MEMURAXDUM
From : Mr. C. W. Webster. Date : March 21, 1932.
To : Mr. B. S. Wright. Place : New York.
Subject : Argentina. Place : Washington,
Export Division.
Your memorandum and copy of letter from Fowler Barker regarding the
Argentine naval mission coming to the United States were very interesting.
Our Mr. Leon sailed from Buenos Aires for New York on Saturday, but intends
to spend four or five days in Rio, and is due to arrive in New York about
April 11th.
I still feel that Zar will nut recommend that a mission be sent to the States,
although it is advisable to watch this possibility very closely. Zar is a very
intimate friend of ours, and wishes to purchase only Curtiss-Wright equipment.
902 MUNITIONS INDUSTRY
and is placing his cards accordingly. He feels that if he sends a mission to
the States possibly complications might develop through the recommendations
of any officers he sends, and his desire is to control things himself as much as
possible.
The Argentine naval budget was recently cut 400,000 pesos, which makes it
impossible to purchase complete airplanes as he originally intended. He be-
lieves he will lui\e sufiicient funds to pnrehDse Ki Cyclones to install in 8
Super Marine Southampton flying boats, to replace 16 Lorraine-Dietrich engines,
and, if necessary, he told us he would defray the expenses of one of our own
engineers to B.A. to supervise the installation of these power plants. Leon is
bringing with him complete blueprints of those boats lor our engineering
department in Buffalo to figure the cost of new engine mounts.
Captain Zar and Commander Jordan, United States naval attach^ in B.A.,
are very good friends, but nevertheless, Zar does )!(it wish to band out any more
information than is necessary, and is making a determined effort to keep away
from a situation which might call for competitive bids from other American
manufacturers. While it is true that a number of Argentine naval officers lean
toward British equipment, Zar has always advocated American equipment
wherever possible. His early training was secured in the United States Navy
at Pensacola, and he married a Pensacola girl, so that he is pro-American all the
way through.
I'll appreciate any more information you are able to obtain through the
Aeronautics Trade Division. Our man Leon is purposely refraining from becom-
ing intimate with the Naval Air attache or any of the American diplomatic
staff in B.A., as we have the Argentine situation pretty well in hand, and we
have found from past experience that the American diplomatic staff expects us
to keep them advised as to all pro.iects on which we are working ; and when
we have done this in the past it has invariably been quickly relayed to Wash-
ington, and eventually finds its way into the hands of our competitors.
Since selling the Argentine Government our license agreement on engines
we have received every contract that has been placed for aircraft material.
The only outside equipment purchased were the Moth training planes, and
this project has gone so far that it was impossible to stop it, and besides we
had no competing machines to offer. Our prospects for securing all business
from the Argentine Government in the future are bright, and we have every
reason to believe that in June, when the necessary funds are available, we
will be able to close our airplane license agreement along the same lines as the
engine license agi'eement. As soon as this is consummated we will have both
the engine and airplane business in the Argentine more or less tied up for the
next ten years.
C. W. Webster.
Washington file: "Argentine."
Exhibit No. 319
[Copied from original 1
Cuktiss-Wright Corporation
#9
interoffice memorandxtm
Export Dn'isiox.
From : Mr. C. W. Webster. Date : Feb. 23. 1932.
To : Mr. B. S. Wright. Place : New York.
Subject: "Argentina". Place: Washington.
In connection with your memorandum of Feb. 20th, I now have a more
complete and accurate picture of the proposed Ai'gentine naval mission and
I am inclined to believe that the entire agitation was started by Commander
Jordan, U.S. naval attache in Buenos Aires, in misinterpreting a conversa-
tion with Captain Zar, Chief of Argentine Naval Aviation.
It seems that some time ago Captain Zar and Commander Jordan met and
Zar mentioned that his budget for 1932 would permit him to buy a certain
number of new ships and that they would be of' U.S. make. Jordan asked
which make and, as Captain Zar didn't wish to tell him he was negotiating
directly with us and on the other hand didn't care to say he didn't know
what he wanted, he told Jordan he planned to ask the U.S. Navy to give
MUNITIONS INDUSTRY 903
him advice when the proper time came. It seems Commander Jordan imme-
diately comnninicated with the U.S. Navy in AVashington informing them
that the Argentine Navy would send some of its men to the U.S. to solicit
the advice of the U.S. Navy in the matter of purchases. Captain Zar, in
discussing the situation with us, claims that he now realizes he made a mis-
take in mentioning the matter to Jordan, because if Washington gives the
matter any publicity our British competitors will possibly get busy and make
it a little harder for us on account cf their lower prices. Captain Zar is
one of our most intimate friends and when the time comes to purchase equip-
ment he will buy from Curtiss-Wright insofar as he is able to do so. His
budget this year allows him only about $250,000 for new equipment, which he
figures is about enough for eight Helldivers or similar ships but the cash
will not be available for four or five months.
We will receive an order for two engines and spares and possibly three
sets of smoke screen apparatus but the complete airplanes will not l)e ordered
for some little time.
I am giving you this picture of the situation for your confidential informa-
tion nnd I believe we should let the mutter drop insofar as AN'ashington is
concerned. Our contacts with Zar are of such an intimate nature that we
have nothing to fear from other competitors, unless something very radical
happens.
It was Znr's intention to keep the entire matter quiet and get his purchase
through for us before any other manufacturer heard of it, but unfortunately
he made a chance remark to Jordan which opened up the entire subject.
je C. W. Webster.
Washington file : "Argentine."
Exhibit No. 320
rCopy]
July IS, 1933.
Captain C. K. Travis,
% Webster d Ashton,
CasiUa l>,Ii. La Paz. Bolivia.
Dear Cliff: I am addressing this letror to La Paz, hoping it \\ ill catch you
there before you finish your present .iob and return to Lima.
We received a cable this morning from Webster & Ashton advising us that
a letter of credit for $98,500 had been established in the Chemical Bank here
to cover the amount of the spares and the three planes on the last order. We
have not yet checked with the bank to determine exactly the conditions of the
credit, but we assume they are satisfact(n-y.
According to Webster & Ashton's recent letters and cables, it appears that
considerable more business is possible in the very near future. We certainly
can use it.
The two Hawks and one Osprey on the last order are going through the
factory as per schedule and we anticipate no delay.
The other day, Mr. Decker, the New York consul general of Bolivia, came
into the ofiice with a cable from the Government instructing him to arrange
for someone to inspect a number of tri-motor Fokkers and a large number of
spare engines offered for sale by the American Airways in Chicago.
I believe we convinced Mr. Decker that this would be a bad deal as the ships
were built in 1029 and had had a hell of a lot of service. From the tone of his
conversation I believe he will recommend to the Government that they give
up the idea of buying second-hand equipment. Use your own diplomatic persua-
sive powers to talk them out of the idea if you can. I believe they offered
three ships and a large number of engines for $30,000, bu;t this is only the
beginning of the expense. The ships would have to be completely overhauled,
crated, and delivered to Bolivia, and before they got through it would cost
them at least $75,000— instead of $30,000.
The Argentine Falcon is due to leave the factory today and should be
shipped from Now York on next Saturday, July 22nd, arriving in Bnenos
Aires about the ninth or tenth of August. I am hoping that conditions in
Bolivia and Peru v.'iil ad.just themselves satisfactorily and in time for you
to be in B. A. when the Falcon gets there. We will order Shorty to proceed
from Santiago to meet you there.
904 MUNITIONS INDUSTRY
Imiiiodiately uvon y nr a^'rival you slrul I c(>iita"t Tolnnel Zul- a.ua and
Captain Zar. Colonel Zuloiia is divectcH- general of aeri nantics and chief
of the Army air corps and Cniita'n Zar is cliief of nayal av ation. Arrange
if possible to dispatch the ship to El Palamar, the Army air station. Work
through Zuloaga and Zar and follow their suggestions. In a recent letter from
Zar. he suggested that we first get the plane to Palamar and possibly later
transferring oyer to Puerto Indio, the naval land station As in the case
of the linited States Army and Navy, there is a certain amount (^f friendly
rivalry between the Argentine Army and Navy services, so, watch your stop
and proceed cautiously and diplomatically in handling youj' negotiations.
Our object, naturally, is to sell the Falcon to the Argentine Government and,
in due course, arrange a contract for them to purchase the manufacturing
rights to construct this plane for the Government at Cordoba. All of these
arrangements wnll be handled by Leon when he arrives there, probably around
the fifteenth of September. His relations with Zuloaga and Zar are very
intimate, so do not attempt to sell but merely handle the plane for the time
being and put on your show and the necessary demonstration. When Leon
arrives he will probably take you into his confidence ;ind give you a line on
our set-up, so do nothing that will interfere with the negotiations which Leon
and myself have already starteil.
You will find that the International Petroleum Company has eighteen or
twenty drums of 85 octane gasoline on hand for our use. You will draw this
gasoline as you need it. I would suggest that the demonstration v/ork be
done with 87 octane fuel — but the engine is .such that SO-octane fuel can be
used later if necessary. This fuel can be purchased any tinse from the Inter-
national Petroleum Company.
If any questions are asked regarding the pi'ice of the Falcon, cable us and
merely state that you will have to olUain the figures from the New York
oflBce.
I have ali-eady written you regarding Cajitain Wooden's D-12 Falcon in
Santiago. We have purchased this from the Government and my intention is
to have you pick it up in Santiago as soon as convenient and fly it to Lima. I
believe that Jerry has already arranged this pennission with the Chile Govern-
ment and you may have to also obtain permission from the Peruvian Gov-
ernment to have it entered duty free. Follow this line with the statement
that we wish to demonstrate it in Peru. There is a quantity of spares to go
with it and which Jerry can ship by steamer to Callao. The Government has
already requested Jerry to sell them the landing gear and other sjiares, but I
have instructed him to hold them, as I would prefer to sell the entire outfit
at a stipulated price. I gave you this information in a previous letter.
In selling this Falcon to Peru, please handle this, if possible, in the same
manner as the other Falcon and Hawk we sold. Payment to he made to me
personally and not to the company, as I have certain commissions that will have
to be paid.
All of these contacts, which you are working now — Peru. Bolivia. Argentine,
Chile — will, naturally, keep you pretty busy, and do not feel that I have for-
gotten my South American geograjthy in asking you to cover this territory
single-handed. However, there is work to be done, and I know you are capable
of handling it.
Owing to the serious illness of Leon's only boy. who is now in California
with him, it will not be possible for him to reach Buenos Aires much before
the middle of September, but he feels that if you can handle the demonstra-
tion during the previous month, he can arrive, say, about the middle of Sep-
tember, and pick up in plenty of time the necessary selling negotiations.
In asking you to lay off all sales negotiations, plea.se do not feel that we do
not believe you capable of handling them, but Leon has spent so much time
in Argentina and knows his contacts so well and intimately, that I believe
we should not upset them in any way. I know that you will appreciate this
situation.
We have three Ospreys to deliver to San Salvador, which you and Shorty
will not be able to handle, as they will be going there about the .same time as
the Bolivian ships and the Argentine demonstrator. I am attempting to get
Jack Hodgson, who spent four years at the head of the Army Air Corps mission
in Cuba, but I believe, unfortunately, that Jack has been transferred to a re-
forestation camp in Massachusetts for six months. He has applied for a
two and a half months leave of absence and I will probably know definitely
tomorrow if he can make the grade. If we cannot get him it will be necessary
MUNITIONS INDUSTRY 905
to find someone else who speaks Spanish and is capable of handling the job.
However, do not worry about this — we will take care of it.
It was unfortunate that you had to leave Peru when you did, but the
Bolivian job seemeil very important and you may have time to finish that
and get back to Peru before it is necessary to go on to Buenos Aires.
I had planned to meet you somewhere on the West Coast about the middle
of this month, itnd also be with you in Buenos Aires, but certain other matters
are coming to a head here in connection with our mutual friend, Mr. Jones,
which I believe are important enough to keep me here for the time being.
Perhaps around the first of October I will be able to leave and pick you up
somewhere along the line.
Please give my kindest regards to any of my friends that you may meet, and
with the best of wishes and all good luck, I am.
Sincerely yours,
(Sgd.) C. W. Webstek.
CWW.js
Exhibit No. 321
CuKTis Wright Export Corporation,
tieio York, January 19, 1934-
Mr. C. W. Webster,
c/o Webster d Ashton,
Casilla 144 La Paz, Bolivia.
Dear Web : I thought I had better send you the enclosed copy of letter from
Lawrence as there may be something in it that you should have. It will
certainly be very unfortunate if we do not get the order for the tiiirty engines
within the next thirty days — I finally succeeded in getting Guy Vaughan to
agree to extend the old price for 30 days and I doubt very much if we can
get any further extension after that. Also, the longer the order is held up,
the more likelihood there is of it not coming through at all.
" Ta " in the letter means our friend who was at Paterson.
I do not think we will be able to get Mason as Mike Gordon tells me they
have been swamped and they cannot possibly spare him. Mike is taking the
matter up with several others in the Wright Company and they may have a
recommendation to make in the near future.
I will, of course, constantly advise you on this as I am fearful that unless
we get somebody down there very soon all the good work Lawrence has done
there during the past will have been offset and if we lose out there it will be
just too bad.
Owen Shannon.
Exhibit No. 322
[Copy]
.January 17, 1934.
Your letter came a couple of hours after our telephone conversation. By
all means do your best to get Mason to go down at once. Hewlett may be a
better man but if this boy is a salesman and is loyal, his knowledge of Spanish
will take him farther. He will not have much to do for a few months but that
will give him a chance to get acquainted, and Zu is happier when somebody
from the office is near at hand. Somebody has to be there to be on the inside
of things or the Inisiness goes elsewhere. Those fellows detest writing me,
with good reasons, and are getting tired of being told that I'll soon be back,
with the result that I am gradually getting out of touch with the real situation.
Men in the various departments are changed periodically and new friends
must be constantly macle. I feel pretty bad about all this, but as explained in
another letter I cannot leave the family in the shape it is, and to go for a
few weeks now and come back would be just a waste of money.
Trouble from W was to be expected. He is paying L's expenses and L does
all he can for him. L has done a lot for Za on one occasion and Za arranged
this spree for L and is giving him free hand. Very likely this man will be
in Za's place three or four years from now when both are due for promotion.
906 MUNITIONS INDUSTRY
He and his brother owe me a few favors of more than ten years' standing and I
am in position to make any arranj;ements with him to counteract W's influence,
once we are all together. Just now he is not answering my letters which. I
suspect, fell in W's hands.
With your letter also came the one I was expecting from Ta. I had asked
him to write the real reason for changing their minds about the Falcon and
Hawk licens(>. He says that while Travis' demonstration was pretty good it
was not good enough to convince everybody. That is one reason. The others
are curtailment of appropriations and the necessity of the engineering staff to
get busy and do something of their own or explain what they were doing in
Europe when they were sent there to study for five years. He says that
neither my presence nor Web's can for the moment rush orders, and that the
only thing which could overcome all these obstacles at once would be for the
jingos advocating preparedness to get the upper hand or for me to resort to
the " old maneuver." He means the trick we turned in 1931 when we sold
the engine license. Unfortunately, this is not possible with the present set-up
in the War Department, the key man being one of the very few not amenable
to anything of that kind. But he is due for retirement this year. At the time
Ta wrote they were about to decide about the order for twenty engines btit
he doubts if it can be placed before three or four months.
Web already knows who the men are and should be the only one to handle
commissions when the time comes. Mason, if he goes down there, should not
be entrusted with anything of this kind until he has been there six months at
least and have proven that he can handle the business. It would be a mighty
good idea if you went through the files and took out all lft«-ers mentioning
names and commissions.
Exhibit No. 323
Ctjrtiss Wright Export Corporation,
New York, September 25, 1933.
Mr. J, S. Allard,
Brazil Mission.
You will be interested in the following quotation from a letter received
from our Brazil agents today:
" We are pleased to say that we have had occasion to talk at length with
Major Oliveira and Captain Mello since their return from the United States,
and that they are highly gratified with all they saw and very much appre-
ciated all the courtesies lavished upon them by .votir company.
" We may confidentially advise you that the reports which have been sub-
mitted by the mission to the Minister of War, are highly satisfactory to your
organization and likely therefore to yield good results."
Owen Shannon.
Exhibit No. 324
New York, Mai) 10, 193',.
Mr. E. S. Cramer.
(Copy to Mr. J. Sanderson.)
Mr. Pawley stated in a recent letter, or cable, that he had a fund of about
$2,000.00 to "take care of the entertainment of General Wong and his party
from Canton. During their visit to this country they were entertained by the
following: Mr. Buchanan in San Francisco; Mr. Moseley in Los Angeles;
Ralph Damon in St. Louis ; Buffalo, Paterson, and the New York office groui),
mainly Mr. Dooley.
I wish you would get together the expense accounts from these various
organizations and submit them to Mr. Sanderson of Intercontinent so that
we can be reimbursed for these expenses.
JSA
BMN
MUNITIONS INDUSTRY 907
Exhibit No. 325
[Copy]
Ukubta & Samper,
Bogota, Colombia, 8.A., April 21, 1934.
No. 47/507.
Mr. W. F. GouLDiNG,
Vioe President, Curtiss-Wright Export Corp.,
30 Rockefeller Plaza, New York, N.Y.
Dear Mb. Goulding : I am in receipt, today, of your letter No. 375 of the
16th instant, together with enclosures, for all of which I am very thankful.
Both the situations of the Condor deliveries, and the machine guns from
Colt, I hope will not bear at all on the Government to molest you on that
account. They have been duly informed by me that there have been a series
of strikes in all aii-plane factories in the States. They know too that the Con-
solidated plant was also under the same circumstances, so they will have to
recognize " force-majeure " as affecting the schedule of deliveries in the Janu-
ary 31, contract. Should the consul make trouble for you please let me know
to see if I can render my services with that aim.
Mr. Love's visit to this city was of so little importance, that I overlooked
the matter completely, and even forgot to inform you of his endeavors. All
he accomplished was to create trouble for Dr. Triana, by presenting him with
a Boeing model for his desk. They discussed an order for six Corsairs, but
it was considered advisable to have only the Falcon and make the equipment
uniform, then add a series of other types. I met Mr. Love and was very
friendly with me. The agency they gave to Manuel Toro, and both he and
Love asked me to cooperate with them, offering reciprocity should I need their
help. I sincerely thunk them both. WTiile here. Love was after the Cuban
pilots who have absolutely no bearing on the Government. As you may know
by this time, they were all taken out of prison to come to Colombia, and have
had no flying at all for the best part of eight months now. They will have to
be trained here. One of them met death, as I told you in my last letter.
Through my good friendship with Comm. Strong, I will be able to meet not
only Mr. Trunk, but most of the important men that may have come with him.
I have enjoyed the confidence and friendship of Comm. Strong, practically
since his arrival, and in spite of his complete and unbreakable reserve as far
as military matters are concerned, I have been able to ascertain that he is not
in the least antagonistic to your products. He is really an excellent man. To
my understanding he will be placed by the Ministry as actual head of the
aviation activities in this country ; I am confident that once he knows all about
the German competition and antagonism to all foreign influence other than
theirs, he will take measures to stop their career.
"With reference to the order for the spart parts and the electric starters, I
can inform you that the ministry wired the consulate over .$37,000 for the
initial payment on these two orders. You will please keep me informed, in
order to see that all is done properly and quickly.
I have just received from Irviu some scarfs to distribute among the pilots
here. I am afraid that the propaganda was sent too late, because I was
informed definitely that the Government had ordered the consul to place orders
with our cumpetitors (Switlik), lor the parachutes they are in need of.
Since I had to pay something like 20 pesos duties on these scarfs, I will ask
you to request from Irviu to deposit iu my account, as usuaj, the correspond-
ing sum in dollars. I ana sending them the corresponding vouchers.
With reference to the pilots and mechanics. I have received a letter from
Dr. Triana in which he informs me that tlie Jan. 31, 1931, contract covering
these points was duly sanctioned by the executive on the 13th of this month
and he requests me to ask you to immediate investigate the possibility of
sending the mechanic down without delay. You will please inform what you
do iu the matter.
Next mail I will forward you a complete list of the equipment the Govern-
ment has, and has ordered, which list you will keep for your private and
strictly confidential files.
"With best wishes I remain,
Yours very truly,
J. Samfeb.
908 MUNITIONS INDUSTRY
Exhibit No. 326
[Copied from original]
Curtiss-Wright Corporation. Interofhcb Memorandum
From : J. S. AUard. Export division.
To: Mr. Burdette S. Wriglit. Date: December 5, 1930.
Subject : Mexico. Place : New York City.
Place: Washington, D.C.
With reference to yours of December 2d on the above subject, first let me-
tell you tliat Mr. Ti;us is not going back to Mexico in our employ, as results-
he has obtained so far have not justitied the expense of keeping a steady repre-
sentative down there. I do not believe that it is any discredit to Titus but
merely is a condition exis.ing in Mexico at this time.
With reference to Colonel Aguilar's? statement to Mr. Farnsworth that Az-
carate has some rather sizeable ordei's from South America, according to Titus
this is not quite true because Azcarate is planning now on building hree small
training planes in his own factory, and flying them down through Central
America in an endeavor to drum up some business for them. Further, according
to Titus, Azcarate's plane is just another plane and unless they are frightfully
cheap, he i)rcbably won't have much luck selling them.
I realize fully that Colonel Aguilar is not doing all his sales promotion work,
for us as a kindly gesture and I would welcome the opportunity of talking
with him. inasmuch as we have no representative in Mexico, on the subject of
his suggesting some representative through whom he could get his compensa-
tion for (he work he is doing for us. We really have quite a problem in Mexico
both on sales and service. There are quite a few Wright motors in service
in Mexico that require servicing, and. frankly, I would welcome some real
suggestions from Colonel Aguilar as to v\'ho would make the best sales and
service representatives for Curtiss-Wright in his native country. And, inci-
dentally, if he does suggest somebody, I would not hesi ate in telling him to
plan on getting his compensation through tliat party rather than direct from
us, as I do not think it is a good ball for us to show the payment of any com-
mission on any sales to anyone other than our authorized distributors.
Please ask Bol) Farnsworth to let me know as far in advance as possible
when he and Colonel Aguilar will be here and I will plan to give them both
some time.
Washington file: Mexico.
(.sgd.) .1. S. Allari).
Exhibit No. 327
[Copy]
Washington Office.
ISleic York City. November 29, 1933.
( Mexico : Report of recent contacts — prospects for business with Mexi-
can Govei'nment. )
Mr. J. S. Ali.ard: This report is intended to outline briefly contacts made
during my recent visit in Mexico City, present my impression of the effective-
ness of our representation there, and to give an estimate of possibilities for
the sale of Curtiss-Wright equijunent to the Government of Mexico.
On October 19, 1933, I visited the oflaces of Watson, Phillips and Co. at Av.
Uruguay 103. Mexico D.F., where I met its president, Mr. Chns. E. Phillips,
Mr. Eric Hiiebner, and others. The firm, which is a trading company of
British origin, has been in Mexico a little more than 100 years, t-eems well
established and reputable, and represents a great variety of manufacturers
and other companies, including a British shipyard, an artificial silk manu-
facturer, two American insurance companies- — including Marsh & McLennan- —
and two American aircraft firms, i.e., Curtiss-Wright and Stinson. Mr. Hu^b-
ner, who is of Austrian birth and English citizenship, has bee i in Mexic i
eleven years, speaks Sjianish fluently, and seems vei'y energetic, handles ;
the aircraft and Speery Gyroscope contacts witli the government. With him .
I visited and talked with .several officials, who received us very well.
MUNITIONS INDUSTRY 909
During the six days in Mexico City I had occasion to meet and talk with
the following:
General J. Azcarrate, at that time chief of the presidential staff and now
military attache in Washington.
General Rodriguez Familiar, now chief of the presidential staff, whose
appointment was announced while I was there, to become effective November 1st.
General Salvador S. Sanchez, subsecretary of the presidential staff.
General Francisco J. Aguilar, until recently military attach^ in Washington,
and now in the intendencia in the war department.
General A. Ruiz, chief of aviation.
Colonel A. Lezama, subchief of aviation.
Colonel Gustavo G. Leon, commanding oflScer of the Second Aviation Regiment.
Captain G. Villasana, director of shops.
Lieut. R. Lezama, brother of Col. Lezama and an aviator, on duty in the
Aviation Department.
Mr. Ponce de Leon, the leading design engineer for surface ships in the Navy
Department.
The situation now is approximately as follows. With the transfer of
General Azcarrate to Washington, his intluence over purchases by the Govern-
ment is apparently at an end, and one of the most serious obstacles to Curtiss-
Wright progress removed. It will be remembered that he has an interest in the
factory that built Vought Corsairs under license, and since has done a great
deal to push the purchase of Boeing lighters. After he was forced to change
his attitude in favor of Curtiss Hawks recently, he tried to give the impression
that he was out of patience with Boeing for having unexpectedly increased
their prices, but he can hardly be counted on as a loyal Curtiss-Wright
supporter.
With General Rodriguez Familiar as the new chief of the presidential staff,
it appears that we may expect to receive very favorable consideration. During
a very satisfactory conference with him, he expressed admiration of our
equipment and agreed entirely with my statement to the effect that the
Mexican Government could not afford lighters having performance inferior
to the Hawk when so many governments have already adopted it as standard
equipment. From all indications Watson, Phillips have arrived at a satisfactory
understanding with him regarding methods of handling the financial phases
of the contracts, although he, of course, has nothing to do with the actual
drawing up of same. He is a relative of President Rodriguez, to whom Watson,
Phillips have access through a tirm of lawyers.
General Ruiz, who is the chief of aviation, leaves matters of technical recom-
mendation and conferences with representatives of manufacturers almost
entirely up to Col. Lezama, his subchief. In leaving us to Col. Lezama, he
said that he would back up whatever plan of action we arrived at.
Colonel Lezama. who was trained at Brooks and Kelly Fields, is very favor-
able toward us. He said that with General Azcarratte now out of the way, the
course ahead would be comparatively clear, and that he would do all he could
to push the purchase of Curtiss-Wright equipment. He has direct access to
General Rodriguez, and it was he, in fact, who arranged for the conference
which Mr. Huebner and I had with the general. Lezama and Rodriguez F.
appear to be in accord and in close touch with each other concerning all
negotiations for aircraft.
Colonel Gustavo Leon, who has been designated to make a nonstop flight from
Mexico City to Buenos Aires, has apparently full latitude in choosing the air-
plane in which to make the flight, such purchase to be paid for, of course,
by the Government. He was at first interested in the Lockheed, but Watson,
Phillips have swung him over to a preference for the Northrop, on the assump-
tion that we would be able to arrange for handling this type for the Northrop
Company. Leon seems so disposed to take the recommendation of Watson,
Phillips concerning type of ship (probably due considerably to certain financial
arrangements), that I seriously doubt if the builder of a suitable type airplane
will be able to sell it there unless the deal is handled through this firm.
General Aguilar claims that he is to be the next chief of aviation, but
since he has made this claim during the four years that I have known him.
it is diflacult to put a great deal of stock in his assertions. Add to this the
fact that he is now being punished by assignment to a relatively unimportant
post for the publishing of a pamphlet in Washington casting discredit on the
Mexican Minister of Finance, for which act he was recalled, and his story
■910 MUNITIONS INDUSTRY
seems even less plausible. He insists that the transfer of General Azcarratte
to Washington does not mean that any of his influence is lost, but I see no
reason to believe this. I purposely avoided calling on Aguilar until the last
day, as I wished to make it only a courtesy call. Watson, Phillips may find
it necessary to play along with him to a limited extent for the reason that
through his presence in the intendencia, which is the contracting division of
the War Department, even though his post is not of importance, he might
be able to seriously delay the signing of contracts, were he so disposed.
Mr. Ponce de Leon, an engineer in the Navy Department, has the task o£
VForking up the design of gear necessary for the carrying and handling of a
seaplane on the deck of one of six vessels being constructed for the Mexican
Navy, by a shipyard in Spain. One or two seaplanes will be purchased for
these experiments, and the selection of type will be up to him to a considerable
extent, as its use will depend on the ability of space and gear on the vessel
to handle it. He and others in the Navy Department have pretty much crystal-
ized their thoughts on an airplane of not more than 250 h.p. I recommended
the Fledgling if they must stay in such a low-horsepower class, but do not see
any particular advantage to this, if a plane more compact and not appreciably
heavier can be offered. They were considering the use of a catapult, only to
enable a plane to be launched when the water is too rough for take-off from
the surface. I recommended against trying to design a catapult, for much
experimentation is necessary before a satisfactory one can be developed, and
it is not possible to obtain design information from the U.S. Navy as this is
<:onfidential information. I pointed out that a sea too rough for taking off
would be dangerous to land in anyway, and recommended that they confine
themselves to hoisting a seaplane over the side for water take-offs. I believe
this idea will be followed, and I have agreed to obtain information concerning
necessary clearances between wings and the ships' hull, and length of hoists
to allow for rolls. I hope that we can avoid having to design export ships
for catapulting for the time being at least. Our Osprey as a seaplane should
be a suitable plane if the catapulting idea is abandoned.
POSSIBLE BUSINESS
1. There are immediate plans for the development of a pursuit squadron,
starting with six airplanes. The money that was set aside for this purpose
several months ago was used for other purposes, to meet an emergency of
some sort in a different branch of the army. They are now endeavoring to
dig up enough for a 25% deposit on six Hawks, with the idea of providing the
remainder from appropriations for the first half of 1934, which money when
and if appropriated would become available after January 1st of 1934. They
seem convinced that the Hawk is the ship they want and since proponents of
Boeings seem to be out of the way, it appears quite certain that ours is first
choice.
One thing which helped interest in the Hawk was the word given by Law-
rence Leon to the effect that we would give them a license to manufacture
Hawks without any charge for same. There are some who do not believe that
they can keep abreast of developments if they manufacture themselves, because
of the time required to get new planes into production as the types advance.
Since the total number they would build would be comparatively small, this
view seems reasonable. With General Azcarratte gone there will probably
be less pushing for manufacturing rights. I recommended that they consider
only completely manufactured planes for this year, all to be built in Buffalo,
and that a license, if desired, could be discussed after delivery of these.
Since returning to this country I have heard that President Rodriguez
was financially interested in the factory venture which General Azcarratte
promoted, in which the Corsairs were built, and that through it he lost quite
a bit of money. If this is true, he might favor a proposition for further manu-
facturing in that factory, if it held promise of helping him get back some of
his losses. If the idea of manufacturing in Mexico were to be entertained,
it would of course be necessary for us to send someone to Mexico City to
discuss it and work out contractural arrangements.
2. Tho Aviation Department plans to ask Congress for money for eleven
modern observation airplanes for next year. If such money comes through,
our agents will make a drive to sell the Falcon. If the present apparent good
feeling toward Curtiss-Wright continues, we should have at least as good a
chance as anyone else, and probably better.
MUNITIONS INDUSTRY 911
3. There is talk of a troop transport for 25 or 30 people, but two transports
carrying 15 soldiers each would serve their purposes as well, and the idea
seemed acceptable to the few that I talked with about it. I don't believe
there would be much difficulty in selling them on the greater flexibility in the
use of two 15-passenger transports and the fact that if one should be involved
in an accident, half of their investment would still be intact. They hope to
get money for troop transport purchases out of next year's appropriations.
4. Tlie new program also includes two ambulance planes. These, if pur-
chased, would be comparatively small, single-engined cabin planes. Perhaps
we could offer a couple of E.A.T.'s Kingbirds at prices too attractive to turn
down. The Travel Air Six should be a desirable type also.
5. There is some di!?cussion of a plane for coastal survey and photographic
work. Whether this can be a land plane or whether it will have to be an
amphibian will depend upon the major jobs selected for it. We will probably
hear further from our agents on this.
6. The Navy Department is interested in a seaplane for carrying on ship-
board, as described previously. I think we should push the Osprey with floats.
If a plane of this type is used, they will have to abandon the idea of a cata-
pult, as it would be even more difficult to develop a catapult with a car suit-
able for launching a twin-float seaplane than for a single-float type.
7. Definite plans are being made for a nonstop flight to Buenos Aires by Col,
Leon, as described previously. If we succeed in making arrangements with
Douglas to sell a Northrop, there seems to be little doubt about making this
sale.
Since returning to Washington, I have discussed this with John Rogers of
the Douglas Company, at which time I told him that the only chance to sell
this plane is through our agents in Mexico City, and explained the reasons. He
said he would pass it on to his company at once, and believed that it might
change their attitude. He said that some time ago Douglas was dealing
through an agent there, and President Rodriguez had asked that it be discon-
tinued and that all future dealings be directly through him, and that this is
undoubtedly the reason that Douglas refused to allow us to offer the Northrop.
He thinks that with President Rodriguez now being satisfied to deal through
an agent, especially with a new chief of presidential staff who is closer to him,
that Douglas might permit us to go ahead.
8. There is another independent nonstop-flight venture being fostered. This,
I understand, will have to be financed mostly by funds outside of the Government
itself. A young American engineer who calls himself Dr. Walther, and who
is now in the employ of the Government, is working on the design of a ship
for this flight. The ship would be designed and built right there, and the flight
would be from Yucatan to Spain. General Azcarrate apparently has something
to do with pushing the construction of this plane, but officers in the Aviation
Department don't favor the idea. Walther plans on the use of a Wasp engine,
but I talked Cyclone to him and he asked for installation drawings and i)er-
formance information. The whole idea seems so poorly founded and lacking
for general sympathy that I think it will die of its own weight, and with
Azcarratte out of the country now, it has even less to support it. It hardly
seems worth while for us to bother about. Walther was at one time employed
by Curtiss and when I met him two or three years ago in Washington, he was
with Vought.
ENGINES
The sale of engines will, for the most part, be contingent upon sale of air-
planes, except that in all cases we will undoubtedly be able to sell spare engines
along with the airplanes.
The above summarizes my viewpoint of our possibilities in Mexico at the
present time. It has been influenced considerably, of course, by the viewpoint
of our agents there, and while I believe it to be accurate, there might be other
forces at work, or attitudes existing in the minds of persons up to and including
Ihe President, which would make it desirable for us to use other more direct
forms of contact. However, I think that for the time being we should continue
to allow our agents to handle the situation, and see what they can produce.
Appropriations there are, as in many countries now, uncertain ; and until the
money is actually set aside, it is impossible to obtain contracts.
It might be desirable for an executive of the Export Company to make one
or two trips to Mexico City during the next six to eight months, at which time
.S:)876— 34— rr 4 1.5
912 MUNITIONS INDUSTRY
it might be well to try to tulk with the President himself, to be sure that he is
in sympathy with us and is satisfied with the way our affairs there are being
handled. He seems to be involved in all aircraft purchases. In the meantime
I may see a bit more of General Azcarratte iu "Washington just for the purpose
of picking up additional slants which might help us to visualize the situation,
although I do not feel that we can accept his vie^Toint as an accurate estimate
in itself.
Very truly yours,
(Signed) Robert L. Earle.
Exhibit No. 328
[Copy]
Department of Commerce,
Bureau of Foreign and Domestic Commerce,
Aijartaclo 2007, Mexico, D.F., June 13, 1933.
OflBce of the Commercial Attach^,
Mexico City, Mexico
(Confidential)
Cuetiss-Wright Export Corp.,
27 West 57th St., New York. N.Y.
Gentlemen : For some time we have been in touch with Watson, Phillips &
Co. Avenida Uruguay 103, Mexico City, with respect to their representing you
in the possible sale of military airplanes to the Mexican Government. As a
matter of fact, we contributed considerably towards interesting them in your
planes as their representative has come repeatedly to our office and talked
over with us the possible American representations available and for the pur-
poses now under consideration we strongly urged the possibilities of your Hawk
type of machines.
We are now confidentially advised that the Mexican Government, Military
Department, is contemplating the purchase of anywhere from three to 10 planes
of the pursuit type, the requirertfents of which might be satisfactorily met by
the Hawk pursuit type.
The Watson, Phillips representative called on us this morning and showed
your letter of June 9th. This firm feels that for the business that they have
in mind, your letter is not sufficiently clear on the matter of protecting them in
case they make a sale for you. You are undoubtedly aware of the manner in
which purchases of aeronautic equipment are some times made by foreign
Governments, and it is a reasonable desire on their part to be protected in full
in the matter of commission to themselves sufficiently large to enable them to
meet all requirements.
Watson, Phillips have already urged strongly your planes with the authori-
ties here and it would be indeed unfortunate if after their preliminary work
sonre other person with pretensions to influence in those circles which determine
purchases reap the fruits of their efforts.
Very truly yours,
(Signed) Chas. H. Cunningham,
Oommeroial Attach^.
Exhibit No. 329
[Copy]
Watson, Phillips & Cia. Sues., S. en C.,
Avenida Uruguay No. 103, Apurtado Postal 07,
Mexico, D.F., 29th June, 1933.
Messrs. Curtiss-Wright Corporation,
29 West 57th St., New York.
Dear Sirs: W'p have to acknowledge receipt of your favor of the 21st inst.
from whicli we note that as you have been in direct correspondence with the avi-
ation officials of the Mexican Government during the past several months
regarding their military airplane requirements and have supplied them direct
MUNITIONS INDUSTRY 0^3
with complete data together with prices, you do not feel inclined to enter into
negotiations for representation in this country.
Naturally if you wish to work this matter directly we can only wish you
every success, but we venture to say that unless you have a rejiresentative hei'e
familiar with the politics of the matter and with influential connections your
chances of obtaining orders are very slender, more especially as the Boeing is
beinj? pusheil very hard and in all probability will now obtain the order as
their is no other hard opposition. We may say also that a representative of the
Lockheed is now in this city from their factory in Burbank, Calif., but even he
will not get far unless he connects with someone who can put him in touch
with the right parties.
We regret your decision in this matter, more especially as we had already
taken up this matter in the highest quarters, but naturally you cannot expect
us to continue our labours unless we can be sure of some protection and also
be in a position to quote. We are therefore considering this matter as closed
as far as your firm is concerned.
Thanking you aLso for j'our quotation for the used plane, which lias not
been accepted by our client, we remain.
Yours very truly,
CHEP/p (Signed) Watson, Phillips & Co.
("Exhibit No. 3.W' appears in text on p. 758)
("Exhibit No. 331" appears in text on p. T.">S)
[VIA AlPt MAIL. #2.".4.1
Exhibit No. 332
July 24, Il>33.
Mb. Lawrence Leon,
63't Loicell Avenue, Palo Alto, (Jalifornin.
Dbae Lawrence: Supplementing my other letter of today regarding Mexico.
Mexico ordered seven or eight fleet trainers and one of their officers has been
at the Consolidiited watching their construction.
This officer told Hewlett that the order was secured for (."onsolidated by a
Mr. D. Morgan Hackman, Pasco 156, Mexico City, and that he was in good
position to get business from the Government.
He also told Hewlett that Boeing had made a net bid direct to the Gov-
ernment which iiad not been accepted.
Also enclosed is copy of a letter from Watson, Phillips & Cia, which is
self explanatory. We have not replied to them further.
We understand from another source here that Azcarate always wants to
be taken care of but is very careful aljout it and works through some third
party. Up to now we have not been able to find out who this party is.
We have not appointed any agents for military sales in Mexico so we could
be free to deal with whomever we found was Azcarates' man.
The prices we quoted could provide for a commission of 5% to Azcarate or an
agent.
However, before doing anything definite on this you had best check with us.
Regards.
Sincerely,
Owen Shannon.
Exhibit No. 333
Curtiss-Wright p]xP0RT Corporation,
27 West .57th Street, Netvv York,
Mexico D.F., August 5, 19S.T.
Dear Web: Here is the situation: First of all I found at Palacio Naci<jnul
that a request was forwarded a month or so ago to Washington, thru the
Mexican Embassy for permission to send six flying officers to one of our pursuit
914 MUNITIONS INDUSTRY
fields to receive some tiaiuing in the event that Boeing or Curtis ships were
purchased (this is how General Aguilar in Washington heard that his govern-
ment was about to buy pursuit equipment aud made advances to Bob Earl
and probably also to United). It seems that our government turned down the
request and this people feel very peeved about it, knowing that many foreign
officers have been trained at U.S. Army fields.^ Azcarate spoke very frankly
to me stating that a contract with Boeing, which was all ready for signatures,
was canceled by order of the President and it has been decided that this
equipment shall be purchased anywhere but in the States. He also said that
inquiries have been already di.spatched to England and Italy for sending the
men there as well as purchasing the ships there.
I, naturally, told Azcarate that if he had spoken to us about it we would
have solved the problem by either getting the necessary permission from our
War Department or by having the six men brushed up on fast ships at some
of our own fields but he insists that the men must go to a military school.
Azcarate is out for Boeing and he only inquired about our prices in order to
show that they are higher than Boeing quotations. He told me the higher
performance is not necessary as Mexico is not going to fight the United States.
He is not interested in the Osprey and wants to standardize on P. & W. engines
because they already have sixty of them on hand.
These diflBculties can be surmounted. My problem was to contact and interest
another man with as much influence and this I did thru Watson, Phillips & Co.
Our man in the Prosidencia now is Col. Rodriguez Familiar, a very close friend
of the President and his protegee. There will be a lot of squabbling but I
believe the colonel will have his way in a few weeks time. I have never seen
any country where graft is so freely taken for granted.
Watson, Phillips & Co. is the oldest British firm in Mexico, having been in
business over a hundred years. They are very active and the financial rating
is high. I looked up two other firms but was not as favorably impressed. We
need not fear their being partial toward British products, they have been too
long in this country and will favor whoever gives them a better deal. They
have some American employees, use only American cars and only recently
could have sold a British plane to the British Chargee d'Affairs but preferi'ed
to sell him an American ship instead.
Before seeing these people I inquired about them from different sources,
including Mr. Glover, the commercial attach^ who recommends them, the
National City Bank, and the ofticers at the Army aviation field and shops.
They represent, among many others, John Thornycroft, Ltd. (ships and ma-
rine engines), Merryweather & Sons, etc. They are, naturally, interested in
having an agency contract, but I told them that we would prefer to try them
on this (leal first and see how things come out. It's mainly on account of their
connection at the national palace that I wrote them the letter, copy of which
is enclosed. It's an agreement that can easily be terminated by simply writing
them another letter, if we want to do so at any time.
Pass the above information to Sperry who, as you know, cabled me to make
inquiries as to who would make a suitable agent for their products. Watson,
Phillips signed up the Mexican Government for a lot of equipment to go on
the boats which are being built in Spain and inquired about Sperry instru-
ments, but could not get anywhere with Schmidt who represents Sperry here.
They are very anxious to get the Sperry agency.
Besides the six Hawks, sixteen engines are needed, and the technical staff at
the shops are working on a report showing all the reasons why a change from
P. & W. to Wright should be made. I promised a Dodge sedan to the chief
engineer in charge of the shops if he is successful in switching this initial
orders to us.
I gave Watson, Phillips the revised engine price list, dated April of this
year, from which I cut off agents' discounts and Curtiss-Wright Export costs,
leaving only list prices, and told them that we would give them ten percent
discount up to ten engines and 15% on orders for more than ten engines. They
are to advise us if they find it necessary to increase the prices. Naturally,
all expenses connected with sales must be borne by them, except this particular
gift to the factory engineer, if the deal goes thru, on accoimt of the fact that
Watson, Phillips would not make any money on the six Hawks, as 5% is barely
enough to pay all rake-offs and the price cannot be increased, we having
^ The Am. Embassy knows nothing of this request.
MUNITIONS INDUSTRY 915
quoted $24,000 to Azcarate. There is a chance that Azcarate will be kicked
out soon, though, in which case things will change quite a bit.
This country has been neglected and I wish I could remain here a few
months. They are going to buy a lot of stuff in the future, no doubt about it,
but I must get out of here, am pretty sick, don't know if it is the altitude
or what. Besides I must go and get my family ready to return to B. A.
I knew there would be more grief about the smoke screen equipments sold
in the Argentine. The Navy had to junk theii-s, and I expect a lot of kicks
and trouble when I get back. I suggest you write Zuloaga and tfU him that
we raised hell with Federal and made them refund three hundred dollars
which Zuloaga may deduct from the balance he owes us on this order (1,332
dollars). Very likely not even this will satisfy Zuloaga because by this time
they probably found out, as the Navy did, that this equipment is absolutely
useless. I collected $1,332, or half of the total, but had to pay $400 commis-
sions. As I already told Owen, I had my doubts about our being able to
collect the balance, after seeing the Navy's experience with the things, there-
fore I told the boys that if we could not collect the remaining $1,332 we would
have to deduct the $400 I gave them from the commissions due on the tool
contract. Accordingly, when you send me the balance of commissions, keep
$400 and I will advise the parties in B. A. that they will get these $400 if and
when we receive the balance due on the apparati. In this way we will not
lose any money.
Our friend wrote me that he needs money to pay for a few things, including
a new car, before he goes back home next month, and asks me to send his
share as soon as possible. Hope you told him I would write him as soon as I
get back home as per my cable of today. The contract must have been
liquidated by this time but I suppose it will take a few days before you get
the last payment.
According to my cable, this letter should be air-mailed from here but I
have changed my mind, too dangerous not only on account of its contents
but also because in order to avoid a lot of red tape and a deposit of $250
at point of entry, I came as a tourist instead of as a business man. If I were
caught it would be an expensive affair, so I thought a couple of days delay are
preferable to taking the risk. Will air-mail from San Antonio.
So long and best regards to all.
Yours sincerely,
( Signed ) La wreince.
Exhibit No. 334
[Copy]
Watson, Phillips & Cia. Sues., S. en C.
IMPOKTADORES Y EXPORTADORES
AVENIDA URUGUAY NO. ICi
APARTADO POSTAL 67
Mexico, D.F., 23d August 1933.
[Confidential]
Messrs. Curtiss-Wright Export Corp.,
27 West 57th Street,
New York, U.S.A.
Dear Sirs : Further to our letters of the 9th and 16th inst., we wish to give
you the following further information with regard to the state of affairs in
the various Government departments connected Vi-itli the purchase of the six
pursuit planes.
We are glad to say that, as far as we can be sure, everything is progi'ess-
ing very satisfactorily in your interests. The Aviation Department has made
an official report to the Presidencia on the various planes offered for the
purpose, Boeing, Bristol, and Curtiss. This report has been seen by our repre-
sentative and is distinctly favourable to your machines. We are also pleased
to say that matters have been satisfactorily arranged in other quarters and we
believe that we can count ujwn support in the necessary quarters when this
916 MUNITIONS INDUSTRY
question comes up for decision, which should be within the next ten days, if
all goes well.
We expect to be requested to submit our official quotation in the near
future, and for your guidance we wish to state that this will be $26,000 U.S.
cy per plane, if six are ordered. Should you by any chance receive any fur-
ther direct communications in regard to prices we earnestly request you
state that you have been obliged to revise your original quotation, either on ac-
count of rise in price of material or due to our intervention as agents, and sup-
port this figure. This has been done for reasons which you will doubtless appre-
ciate, and we can assure you that same will in no way prejudice your chances
of obtaining the order, on the contrary.
We also have to inform you that Colonel Lezama, Assistant Chief of the Air
Department expects to be in Tulsa, Okla., within approximately one week to
receive the Fleet planes recently purchased l)y the flying school. This would
bQ a good opportunity for you to interview this gentleman and submit any
additional information which you may deem advisable, but we would impress
upon you that this should be done in a discreet manner, and without any adver-
tising, as Mr. Lezama does not wish it to appear that he is favoring any particu-
lar make of plane.
We have been in touch with the Presidente del Comite pro Vuelo, Mexico-
Buenos Aires, Colonel Gustavo, G. Leon, with a view to impressing upon him
the benefits of using either a Curtiss-Condor or a Northrop model for this
flight. The authorities are still desirous of building a plane here for this
purpose, but all those in a position to know are convinced that this will be
entirely impracticable, and that the plane will have to be bought, if the flight
is ever made.
We do not believe that the funds available for this purpose will suffice for
a Condor model, and we would therefore be glad if you would submit an
estimate for a Northrop Sky Chief with all details and prices. We would also
be obliged if you wou4d furnish us with detailed specifications and prices of
your Wright Cyclone 700 h.p. as also your 14-cylinder Whirlwind model. Any
information which you can submit in this regard will be of great assistance
to us»
We await with interest your reply to our various letters, and can assure you
that we are dealing with this whole subject with all energy.
Yours very truly,
(Signed) Watson, Phillips & Cia.
CHEP/p
P.S. — ^We wish to state that we have been able to convince the Air Department
that Wasp motors should not be furnished with your planes, and they are in
agreement that should you receive the order Wright engines will be supplied,
and will in all probability be standard for all planes here in the future.
Exhibit No. 335
[Copy]
H. O. Claywell,
Mexico, D.F., September 23, 1933.
New address, % American Club.
Curtiss-Wright Export Corporation,
29 West 57th Street, Neio York.
Attention Mr. Owen Shannon.
Dear Mr. Shannon : Thanks for your favor Sept. 12th. I regret misunder-
standing. However, this would not have happened had I not received the
military catalogs.
I congratlate you upon your representative who actually is not a c^'uimeivial
one at present but one of the very highest Government authorities and a very
expert one — a splendid gentleman and an excellent friend of mine.
Regarding representatives as mentioned in the third paragrtiph of your letter
Aug. Sth wherein yon stated that you have decided not to clesignate anyone
as our representative or deal through any agent on the sale of military or
commercial planes and engines to the Government of Mexico, this is what
confused me when you wired later S/14 you wore already represented here. etc.
MUNITIONS INDUSTRY 917
Will you please quote me air mail on your model A16C. Sport Biplane com-
plete with cowling and motor mount, including everything less engine but
with metal prop and also with wood prop with engine installed.
Me to furnish engines Comet 7-cyl. 165-hp. model 7 E.A.T.C. #47 radiaJ
total weight dry 400#.
For a quantity of five to be taken individually over a period of six months.
Awaiting your early favors.
Very truly yours,
H- O. Claywell.
Exhibit no. 336.
[Copy]
October 28, 1933.
Mr. Robert L. Earle,
Cicrtiss-Wright Export Cori).,
29 West 57th Street, 'New York City.
[Confidential]
Dear Mr. Earle : The order for six Hawks may be obtained sooner than we
expected. Since you left Mexico City very important conferences have taken
place betwen ourselves and several parties of whose names you are aware. We
are not able to give you all inside infonnation, but please have full confidence
in our actions in the near future, and would add that prompt action is abso-
lutely necessary in this case.
The most important point at this moment is the " financial " end. Accord-
ing to your company's letter of Sept. 7th the price of $24,000.00 still stands
good and for important deals in the future with the same department, and other
reasons, please ask your director to kindly cable us confirming that you main-
tain above-mentioned price for this deal. For various reasons we have to
ask you if you could increase our commission on the above amount from 5
to 10%, because in this case we could perhaps obtaii! the sales contract Immed-
iately. If possible our sales price to the Governnnnit of $26,000.00 should be
maintained as this is of utmost importance. Delivery should be as soon as
possible and the money for this deal is already set aside.
Please take great care that no news about this proposition should reach
Mr. Azcarrate. If he should inquire about certain moves in Mexico, please
keep him in suspense as this matter must be kept secret until everything has
been definitely decided.
When cabling, please refer to the price only, and do not mention anything
which refers to the aviation department.
Please send some forms of Curtiss- Wright contracts such as usually used
in such cases. May we sign contract for your account and delivery.
Yours very truly,
(S/d) Watson Phiixips.
Exhibit No. 337
Watson, Phillips & Cia Sues., S. En C.
AvBNiDA Uruguay No. 103, Apartado Postal 67,
Mexico, D.F., March 2nd, 193^.
Messrs. Curtis s- Wright Export Corp.,
30 Rockefeller Plaza,
New York Citij, U.S.A.
[Strictly confidential]
Military Aviation Department.
Deiar Sirs : We have not reported for some time on this matter, but today
we are in a position to let you have news of importance. We shall give you
all details as far as we can by letter but many other details will have to be
kept pending till the matter is ready for final discussion, and when we shall
have an opportunity of talking to one of the ofiicers of your company.
918 MUNITIONS INDUSTEY
Sr. Lezama just arrived from a four-weeks trip with the son of Mr. Calles, to
whom he gave instructions in flying. Mr. Calles jun. is going to purchase a
plane in the near future for his private use.
A special commission which was very busy at the aviation department for
the last few weeks in making a close study of conditions and movements during
1933, just finished their study and a new program together with new ideas
about this Dept. are under consideration.
We were informed confidentially of the exact position in this matter, and
also were asked confidentially to make out a certain rejiort, which will be
modified after we have given same in, according to the conditions and possibili-
ties of the department. An entirely new arrangement and system will be
established. The Talleres del Departmeuto de Aviacion will be taken over by
a new management and transformed into a factory, similar to the one which
Gral. Azcarrate once had in Mexico. The civil, as well as military aviation
construction program, will be taken into consideration, but the military aviation
depart, will furnish only the funds necessary for construction, repairs, up-
keep of planes for this department. We can tell you that Mr. Calles jun.
himself is active in this work already and that his father might be the main
stockholder and pei^iaps director of the new company.
Mr. Calles already received all the information we could give him, after
which we were asked for further data which we mention below.
They requested us to write to you asking you if you could furnish us with a
rough sketch and outline of a plant for assembling and also for manufacturing
for the most essential parts. They would like to make an arrangement with
you whereby you help them to establish the plant and to break them in, in
connection with manufacturing and assembling Curtiss-Wright motors, planes,
etc. We know that you cannot possibly give them details for such a plant
without knowing the exact plan of their work and their resources, but per-
haps you can let us have some idea of what you would propose to be a suit-
able plant for Mexico, giving them a rough idea about the cost of such a
plant approximately.
We now hnve to give them only an idea of the prices for the following
models of planes, and under which condition you would let them manufacture
same here. Also how many of each type they had to buy in order to give
them the licence and facilities of manufacturing same in the new plant.
1. Trainer, Osprey, Falcon, Hawks.
2. Price each (ordinary sales price).
3. Quantity of planes to be purchased in order to obtain licenses.
4. Material and motors to be purchased only through you for your planes.
5. In what way would you help them to start assembling and manufac-
turning your planes in Mexico.
6. Other conditions to be put forward in regard to this matter.
Prices : at factory. Including 10 percent commission, but do not mention the
amount of commission in future letters.
For each of your models we have sufficient data and catalogues, but we
must make a short description for each model in our next proposal, and
therefore ask you to state this in your letter, too, as maybe some changes
have taken place in the meantime, and we want to have the exact description
of these models at present.
In the meantime we are busy keeping in touch with all the responsible
parties and we do our very best in pushing the matter wherever we can. We
shall advise you at once of any news in the matter. We expect to see your
Mr. Webster in Mexico in the very near future on his return trip to New
York.
Yours very truly,
Watson, Phillips «& Cia.
Exhibit No. 338
[Copy]
Frank Shekidan Jonas,
277 Broadway, New York, December 27, 1933.
Mr. Owen Shannon,
C/o Curtiss-Wright Aviation Corp.,
Neic York City.
My Dear Owen : Thanks very much for your most amusing Christmas card,
which gave me a laugh, and Lord knows we need one these days.
MUNITIONS INDUSTRY 919
The Paraguay and Bolivia fracas appears to be coming to a termination, so
business from that end is probably finished. We certainly are in one hell of a
business, where a fellow has to wish for trouble so as to make a living, the
only consolation being, however, that if we don't get the business someone else
will. It would be a terrible state of affairs if my conscience started to bother
me now.
I am sorry I missed Webster when he went thru'. I was in Sao I'aulo the
same day as he, but I only learned of this after he had left. Candara tells me
that he is returning shortly, so I hope I will see him when he does.
How does it fee! to be able to get legally drunk? It will probably lose all
its zest and interest, and we all will be on the wagon. The heat is simply
terrific here, which upsets my stomach, so perforce I have been walking the
straight and narrow. You probably shivered all day Christmas, while I very
nearly had a sunstroke playing golf.
Owing to the Government in Argentine taking off the lid on exchange, it has
raised hell here with imports, as the peso fluctuating to such an extent, that
nobody can calculate what the landed cost of goods will be upon arrival.
Every day some new ruling goes into effect, and we are all up in the air.
From all indications, unless I receive orders to the contrary, I should be
home about the first week in March, and I am looking forward to seeing you
all. Wishing you a Happy & Prosperous New Year, I am
Sincerely;
(Signed) Frank.
FSJ:RJ.
Exhibit No. 339
[Copy]
Urueta & Samper H. (Sucesores) Joaquin Samper H.,
Negbgocios V. Reipresentaciones.
Bogota, Colombia, K.J.., December 12, I'JJJ.
No. 476
Mr. W. F. GouxDiNG,
Vice President, Curti^s-Wright Export Corportaion,
30 Rockefeller Plaza, New York, N.Y.
Dbak Mr. Gouu)Ing : Thank you indeed for the information contained in
your letter no. 345 of the 5th inst., and for the enclosures received therewith.
These we have read with extreme interest and pleasure for it is evident that
efforts to convince the Govei'nment of the need and advisibility of making
immediate additions to our air force have been effective. The likelihood of
failure of the Rio Conference has aided iis considerably in this endeavor.
As a matter of fact, we have been constantly discussing with the Seccion
de Aviacion the advantages to be obtained in making new purchases now,
emphasizing to them the fact that in addition to obtaining more satisfactory
deliveries they would make a considerable saving over the prices they would
have to pay if they waited until the emergency occurred and then had to
rush the manufacturer, which would cause higher manufacturing costs, due
to the necessity of employing overtime. For a long time they held the idea
that it was to their advantage to hold off buying as long as possible in order
to obtain the very latest innovations when they did purchase. We were
finally able to convince them of the fact that basic changes in design were
very improbable and that the minor improvements in detail could be easily
incorporated in models already in their possession.
With reference to the Condors we have been concentrating on these and
hope to obtain results. At the present time there seems to be more interest
in advanced trainers, particularly at the school at Call, and we are keeping
after them quite closely.
With reference to the contemplated order for the Hawks and Falcons, we
sent you last night our telegram, copy enclosed, which reads :
" Please make immediately courtesy call in my name Pradilla, Hotel
Pennsylvania. Explanation Air Mail tomorrow."
From very reliable sources we obtained the information, confirmed yester-
day, that Mr. A. M. Pradilla, business man, partner of the firm G. Pradilla &
Co. of this city, who was going to the States on business, has been appointed
by the Government, by means of a confidential decree duly signed by the
President, head of the armament commission which will operate both in the
920 MUNITIONS INDUSTRY
States and in Europe. Though Mr. Pratlilla has no knowledge whatsoever of
armaments, etc., he will act as a business man in order to negotiate with
the different manufacturers once the equipment has been picked out by the
commission.
The Government is putting the finishing touches to a contract to be entered
into with the local banks here for the loan of $10,000,000 for national defense,
of which, immediately they are obtained, $5,000,000 will be drawn for the
use in mentioned purchases by the consulate in New York. The other
$5,000,000 will be sent to Europe, to our consulate in London.
Funds, hence, will be made immediately available and all purchases will be
paid by the consulate against shipping documents as it has been the custom.
Going back to Mr. Pradilla, he is a personal friend of mine and has been
for many years. His personal reputation is good, though it has been said that
his firm has used methods not quite in accord with a proper moral ethic. You
will find him rather pompous, but really he's O.K. As a merchant he is clever
and knows how to use the " chisel ", generally obtaining advantages in as far as
prices are concerned.
In requesting you to make a personal call in my name, I have sought two
objects : One, to put you in contact, personal contact, with this gentleman, so
that if and when the case arrives, you will be known to him and be in a better
position to negotiate; second, that, he being a personal friend of mine, he will
appreciate the call, without suspicion that there is a purpose behind it. As
I informed you, his mission is not known, since his appointment has been kept
strictly under cover. I will sincerely appreciate any information which you
may be able to give me as to the activities of Mr. Pradilla, as well as to the
outcome of your call and further contacts you will have with him.
Before he left, he informed me that he would be located at the Hotel
Pennsylvania ; however, you may also locate him through the Central Hanover
Bank."
Any additional information which you may be able to give me with refer-
ence to the order for Hawks, Falcons, and Condors will be sincerely appreciated.
In turn, we will keep you duly posted as to developments at this end. Of course
we will push the orders as much as we can, both with Minister Araujo (with
whom I enjoy very good friendship) and with the aviation section.
With sincere good wishes and best personal regards, I remain,
Yours very truly,
(Sgd.) J. Samper.
P.S. As you know, all planes purchased by the Government are set up and
test flown by the Scadta, who charges a high percentage for their services,
amounting sometimes to over 20 percent of the value of each box received.
I have been discussing with the Government the advisability of having you
quote the prices on airplanes on the basis of delivery in Colombia after each
ship has been test flown here by yourselves. For this service you would be
entitled to a higher price, of course, and both the Government and yourselves
would have the advantage that each unit would be delivered by the factory,
so, to say, doing away with the services of Scadta, which have not been as
satisfactory as it may seem. Will you kindly give your ideas on this point,
to further discuss the matter with the Government? An early reply would be
sincerely appreciated.
Exhibit No. 340
[Copy]
May 20, 1934.
Dear Parm : The rather colorful and buoyant days of the Minister of War
are finished and I am now back to the normal procedure of testing airplanes
again. Trunk, commander of the American outfit at Cartagena flew the Minis-
ter back to Barranquilla on Tuesday with a 3-Hawk escort and I tagged along
in another Falcon with the Minister's aid. I told you that the Minister is sold
on Falcon transportation, and sure enough I received a request thru the Min-
ister's Aid to fly him to Palanquero, Thursday, on his way to Bogota. I was not
overly anxious for this trip because there are many miles of tough jungle
between Barranquilla and Palanquero and the War Minister is quite a respon-
sibility on such a jump, however, I took him and everything turned out fine.
He had a smooth, comfortable ride which is somthing the Scadta pilots never
seem to care to give their passengers, so I am convinced that he will use a
Falcon at every opportunity from now on.
MUNITIONS INDUSTRY 921
During my contacts with the Minister he seemed to tliiiik tliat he should have
the 37 mm. gun installed on the Falcons and Condors probably as a result of
the urging of Comm. Strong and Miranda (American Armament Co.) but I
think I effectively discouraged the installation, principally by giving him the
experience of the U.S. Army with the big guns.
The Minister had to rush back to Bogota because of the progress mads at
the Peace Conference. Last night's Bogota paper stated that an agreement
had actually been signed and, as nearly as I can gather from other sources and
the report is authentic. It therefore looks as tho there is no call for the
purchase of more airplanes at this time. My general impression is that we
don't have to do any more boosting of our products, that every one takes for
granted that their equipment is the best which can possibly be bought. How-
ever, their maintenance organizations are terrible and, no matter how good the
airplanes, they won't take care of themselves. I therefore intend to do s< me
urging in the direction of good maintenance before leaving. I have done quite
a bit of talking about the value of the demonstrations over Barranquilla ;ind
Cartagena from the viewpoints of satisfying the people as to where their taxes
have gone. I have also tried to paint a picture to the Minister's aid of the
value of such a demonstration over Bogota. If these people can become air-
minded enough they will be willing to appropriate enough money to take care
of their air force which will of course work out ultimately to the mutual
benefit of Curtiss and Colombia.
With regard to my departure, I could stay here indefinitely and still find
things to do, however, after the setup of the present order of planes is com-
pleted I believe I will have finished what I came for and then I have had just
about enough. The 3rd Falcon has been flown, the 4th will be ready Monday
or Tuesday, the 5th is about 30% along and will probably be ready sometime
this week. They will start on the 6th this week and it should be ready the
middle or latter part of next week. I should therefore be thru in Barranquilla
in less than 2 weeks. As I have previously written I want to spend a short
time in Cartagena before leaving the country which I will do after all planes
are assembled here and then I think I can leave. Anything I might stay for
beyond that would be in the nature of conducting a grammar school for
Colombians which is a hopeless and endless task.
Regarding Moloy's departure, I brought him back from Palanquoro the other
day and took him over to Cartagena where I want him to spend a week or so
with the Americans. They like him very much at Palanquero and hated to
let him go but he was spending his time on old equipment and at this time I
think the new equipment is much more important. He can go back to Palan-
quero later for a while, say for 2 weeks, and by the end of that time I hope
they will have assigned a few Americans there. At this time I believe that a
service man should be here for the setup of the coming order of planes. T have
made several requests for some of the American mechanics to be stationed here
during the current setup but because of general chaotic conditions none have
been assigned. Trunk has agreed to send one over Monday and I have offered
to even help out with his expenses for a few days, if necessary, because I
believe it will be a good investment to have one or two of those fellows familiar
with these planes. Whether Moloy has to stay for the coming setup or not,
the more knowledge of these planes that we can distribute, the better they
will be taken care of. I am going over to Cartagena Monday to get set on the
possibility of setting up the new planes there and I will make full report for
the next mail. I will have to reserve final recommendation on Moloy's return
until later on after I have worked with these Americans. I will appreciate
advice from you as to when we may expect delivery of the new order.
I do believe that we should as diplomatically as possibly get the setup of the
coming order out of Scadta's hands. I have no complaints other than negli-
gence but they simply don't take the interest that Americans w-ould take, nor
do they have the knowledge of this type of construction that Americans would
have. For instance we have had several cases of ribs being' broken by men
walking on the wings. I found one airplane (the 3rd Falcon) where the hinee
pins for the rear beams of both lower panels had been too short (Buffalo's
fault), had gone ahead and left the hinge pin in unsafeties. In Moloy's absence
I do all the inspecting and fortunately caught it before flight but occurrences of
this nature are frequent and lead me to believe that whereas it is very con-
venient to have full use of the Scadta plant here (machine shop, welding
apparatus, etc.), with careful inspection on the part of Buffalo we will be bc^tter
off in if the work is done elsewhere.
922 MUNITIONS INDUSTRY
Guess I have about run down for this time. I am still looking forward to
hearing from you in connection with the gas tank troubles, what you want me
to do about the trainer, and various items mentioned above. I am enclosing
some Barranquilla newspaper clippings in connection with the Minister's visit
which you will undoubtedly find interesting. Let me know what you think of
the various discussions above and anything you might want me to do before
shoving off.
With best regards to you, and I will write again for Thursday mail.
Sincerely yours,
WirxiAM J. Crossweix.
I Copy.]
Exhibit No. 341
[Copy]
JuTY 28, 1933.
Via air mail— #126.
Captain C. K. Travis,
Casilla 1429, Lima, Peru.
Dear Gliff : Your letters nos. 29 and 80 of the 19th and 20th came in just
as Web was leaving on a trip that will take him out of town for the next
week or so.
We noted that there are good prospects of another order for six to nine
planes and sure hope that this comes through soon. As a matter of fact, I
was talking with the consul general, Decker, today and he is firmly convinced
that the scrap down there will be over within the next month, and in that
event we doubt very much if they will purchase any more of the Hawks or
Ospreys.
Another point to keep constantly in mind Is that all factory costs here are
increasing rapidly since our Government started on its inflation program and
unless the orders for the new ships come in within the next few weeks we
will have to increase our prices considerably. In this connection, will you
please let us know by return air mail what your ideas are as to the amount
of commission we should pay to Ashton & Webster on the present order and on
future orders, bearing in mind that our costs are increasing continuously and
at the present prices there is very little margin of profit for anyone.
I am passing on to the factory your suggestions on the O.-prey and will
let you know by next air mail what they suggest can be done.
We will arrange to have fifteen or twenty cartons of Chesterfields packed in
one of the plane or spare cases and will let you know later the case in which
they are placed so that " Shorty " can be on the lookout for them and you
can hand them out to the pilots there. Neither Web or I remember receiving
a letter from you before on this subject.
I cabled you to let Donnelly make his own arrangements with the Bolivian
Government for his salary, traveling expenses, etc.
We cabled Ashton & Webster that we would ship all of the plane and
enfjine spares with the three ships, excepting the propellers, Imt n<iw we
find that the Buffalo factory will be unable to ship the Hawk spares out until
about the first week in September. We are doing everything possible to better
this delivery but at present it looks as though Buffalo would not be able to
improve it much, if any. The engine spares will go out with the plane.
The principal reason foi- the delay in getting out these Hawk spares is that
we did not receive the payment for them until a few days ago and at the
same time Buft'alo received another order for ten Hawks for China, which in
addition to the twenty-six Hawks and thirty-sonie-odd A-8 attack jobs they
are building for the United States Government has pretty well swamped the
factory at this time.
Regards.
Sincerely,
OwEx Shannon.
OS:D
CC : La Paz
MUNITIONS INDUSTRY 923
Exhibit No. 342
Cubtiss-Wright Export Corporation,
New York City, August H, 1983.
Via air mail
No. #137
Capt. C. K Travis,
% American Commercial Attache,
Buenos Aires, Argentina.
Dear Cliff: Your letters of July 19th ami 2iith arrived while I was away
from the office. I believe Owen Shannon has answered them fully, and I can
only add that I hope the job in Buenos Aires progresses satisfactorily and
that you will be able to get back to La Paz in time to take care of the arrival
of the last three ships.
If Webster & Ashton are able to work fast enough they may be able to get
the additional nine or sixteen planes closed before the war ends. The consul
general in New York seems to feel quite certain that the mess will be cleaned
up within a month. I certainly hope we will be able to get some more business
before this happens.
With reference to the suggested changes for the Osprey l)y Jorilan. these
suggestions arrived here too late to be incorporated in the last machines
ordered for Bolivia, but on any future orders I believe they should be taken
care of. It means an additional cost of about $250, but possibly this can be
absorbed.
The cost of raw materials have increased considerably, and it may be neces-
sary to raise our price of $18,000, especially if we intend to pay Webster &
Ashton the five percent commission that they are asking for. Incidentally,
please write us or cable us as soon as you receive this letter, giving us your
suggestions as to the commissions that Webster & Ashton are entitled to.
Sincerely,
C. W. "Websteb.
CWW.js
Exhibit No. 343
CWW #35
La Paz, Bolivia, Sept. 13, 1933.
Mr. C. W. Weibstek,
Curtiss-WrigJit Export Corporation,
21 West 57th Street, Neiv York.
DejlR Web: The 2 Hawks and the 1 Osprey will be ready to test early
next week and can be delivered immediately with the exception of one of the
Hawks. We cannot deliver that until I receive the propeller hub nut that I
cabled for. There was a slip-up somewhere on that and one of the Hawk
propellers came down with a nut for the other type of crankshaft, the one
that lias the threads all the way out to the end of the shaft. Consequently
the nut is too short and cannot be used. I will send it back as soon as the
other one arrives.
There was some damage done to the crates in shipment and we found one
Hawk stabilizer badly smashed up. The second rib from the inside was com-
pletely crushed and the rear spar was twisted and kinked. The fabric was
also badly torn. The wing crate for the Osprey was evidently dropped some-
where along the line and all the leading edges of the wings were dented at
the support point of the crate. That was fixed up without any difficulty,
as we were able to smooth out the dents without going into the wing. As
I advised you by cable, Lloyds agent here has adjusted the matter of the
stabilizer and it will be replaced by a new one without any effort to repair it,
inasmuch as it belongs on a new plane. We will repair the damaged one here
as well as we can and use it for a spare. The certificate on the adjustment
should go out on this air mail or the next, direct from Lloyds.
An effort should be made in the New York office to got the shipping docu-
ments down here without so much delay. In the case of the last shipment
of spares the documents were mailed by steamer mail and got here 3 weeks
after the spares had arrived in La Paz. In the meantime the spares couldn't
924 MUNITIONS INDUSTRY
be dispatched and there was hell to pay. It was just yesterday that the
documents arrived and they were able to unload the cases. In the past there
have been several cas'es where the documents were late in arriving and held
up the detail. Sometimes it has been due to having sent the letters by ordinary
mail which only arrives here every 2 weeks, and sometimes due to mis
addressing the letters. There was one case where a package was sent to
" the Chilean Consul, Arica, Bolivia."
The model of the Hawk caused quite an impres'sion here and of course
everyone wanted one. We are going to have some more made here at the field.
The original will be presented to the aviation school which is perhaps the
only way to dispose of it without causing any hard feelings. It will be kept
in the Casino.
The kicks that Colonel Bilbao turned in to the General Staff on Curtiss
planes and engines seems to have been squashed very definitely and effectively.
There was quite a fuss about it if you will remember a few weeks ago. It was
our staunch friends here among the pilots that turned tiie trick. They who
have been flying our equipment went to the Contralor and General Staff on
their own initiative and made written statements regarding the planes. These
statements were by no means vague and every one boosted our stock. As far
as I have been able to find out, there was not a complaint made by anyone
but Bilbao. Colonel Jordon took the matter up directly with Bilbao and General
Kundt and vociferated as follows, " I have had nearly 500 hours in Hawks
and more than 250 hours in Ospreys and they are absolutely satisfactory
in every respect. When you birds begin to know something abuut fiying, you
will see why the Curtiss planes are the best that we have ever hjid."
When I left Buenos Aires I bought 3 pairs of Meyorwitz goggles with
triplex lenses to present to 3 of our best supporters here. I have arranged
so that is can be done without any* hard feelings to the others. I felt that
some appreciation should be shown some of the pilots such as Jordan, so I
went ahead and bought the goggles. I had mentioned the matter several times
to New York in past months and suggested that they send down a few pairs
of goggles but had no reply of any kind. I am putting the charges on my
expense account and consider it money well spent. Lopez told me in a con-
fidential and friendly chat yesterday that if it liadn't been for Jordan and two
or three others that he named, that the last order for planes would have been
canceled and that our competitors would have been given a chance. Lopez
also told me that Knndt recommended the purchase of 3 more Ospreys and
3 Trainers on the strength of pilots' reports. The order has been approved
but there will be the usual delay in getting the money.
In connections with new planes, please let me know as soon as possible if
we will have to quote higher prices. I received some information to that effect
some time ago but nothing definite. It was simply stated that in view of the
inflation and consequent increase in cost of labor and material that it might
have to be necessary to raise our prices and not to quote until advised.
There is an order pending at present for plane and engine spares amounting to
about $66,000. The order has been approved and the money appropriated but
they are planning to convert most of that amount into planes in addition to
the six that they are about to order. That is right up our alley as spares
will have to follow sometime.
The war will probably last for months yet according to the looks of things.
It v.ill all depend upon how long Paraguay c:ni keep going. At any rate, the
government is financing the war for another 6 months and making provisions
for a year. They have made arrangements for a loan of B^30,000,000 which
they will receive in a very few days, and arrangements for an additional loan of
B^25,000,000 if needed. Just how much of that will be converted into foreign
currency, I have not been able to find out, but I presume that the greater part
will go to war materials and planes. They can and will use their credit
for internal purchases and army pay roll.
I cabled today for quotations on bombs and to find out if we can sell direct
from Federal Laboratories or if Grace & Co. here have an exclusive agency.
They sold the last order of bombs and are after this order. We must beat
them to it if humanly possible. The order calls for .'^00 fifty-pound fragmenta-
tion, 300 one-hundred-pound, 500 one-hundred-ten-pound, and 200 two-hundred-
twenty-pound demolition bombs. Those seem like odd sizes but we ought to
be able to furnish them with bombs of approximately those weights.
MUNITIONS INDUSTEY 925
There is going to be some business in ground macliine guns, but I under-
stand that there is an exclusive agency liere for Colt and they are already
quoting on the deal. They have a lot of Vickers guns iu the Army here and
it was planned to keep them standard but it seems that Vickers can't deliver
under seven months from order and that Colt can deliver 50 guns in five weeks
and at forty percent under Vickers prices.
Three Junker bombers have recentlj^ been purchased, but we had no chance
at that business, inasmuch as Lloyd Aereo Boliviano is in the deal and have
agreed to take the planes for their line after the war. They are convertible
jobs and Junkers is standard equipment on the Lloyd Aereo line.
I am making up some lists of machinery and other things that we may be
able to sell in a few months. There is no chance now to get the stuff across,
as they consider anything except actual fighting equipment as an unnecessary
luxury. Camera guns, lighting equipment, Sperry hoi'izous, radio, etc., come
under that head in their eyes also.
In connection with the Trainers, will it be possible to mount a larger engine
for use in La Paz? I doubt very much if the standard 1G5 would get oft" the
ground up here with a student. I wish you would take that up with the
factory and see if they can put out a job with a suped-up seven-cylinder job.
The R-540 I think it is. It is possible that the training school will be estab-
lished at Villamoutes after the war (that is where it is now) and La Paz
will be the base for fighters. P>ut whether the scliool will be at sea-level
Villamontes or 14,000 foot La Paz, it would be necessary to have a trainer
that could operate from both places.
It is certainly too bad that Leon is unable to proceed to Buenos Aires soon.
Of course I don't know a thing about the business arrangements there, but
it looks like my work there was wasted, at least partly, in not having a
follow-up immediately after the demonstration. I hope that the delay will
not have any detrimental effect on business there. As you know, I was unable
to do much without knowing what it was all about, but we will hope for a
better schedule next time. We cannot neglect Bolivia ; they are our best
customers at the present time. A small country but they have come across
with nearly half a million dollars in the past year and are good for quite
a bit more if the war lasts.
Donnelly is still here and seems to have a job for several weeks or months
more. They have made him a captain at his request and has been a couple
of weeks in the Chaco on welding. He is due to arrive here tomorrow to fix
up another wreck that happened last week. One poor devil had terrible luck.
He made three successive flights here with an Ospi'ey and had a minor craekup
on each one. On the fourth flight he unwisely let the ship swerve on him on
the take-oft" and he just about had flying speed when he connected with a
large rock pilce at the edge of the field. Sheared his landing-gear clean off
and rolled him end over end three times but didn't hurt him a darned 1)it.
Don gets $75 per week plus livhig expenses, but he will earn it when he repairs
that wreck.
They have two old Fokker D-7's here that have been lying in the hangar
for seven years come December mas o menos and they are going to have Don
weld them up and get them on the job again. I have tried to talk them out
of it on the grounds that the tubing is bound to be rusty and eaten inside and
that they will turn out to be coffins for someone, but they have just received
new wings and engines for them. That was some of Vargas Guzmans' doings
las year before they got wise to him and kicked him out of the service.
Can think of nothing more except the mater of commission for Webster &
Ashton and am not finished with that yet.
I am going to Lima as soon as I can leave things here and will meet you
there on the 11th of October as per your plans. This is a hell of a place and
the customary cold in the head is again upon me and I've cried a quart of
tears while writing this letter. I've had summer, winter, autumn, and fall ;
cold weather, hot weather, and indifferent weather during the past six weeks
and forgot to bring my red flannels up liere.
Best of luck, Web, and I'm sure looking forward to seeing you soon.
Sincerely,
(Sgd.) Cliff.
926 MUNITIONS INDUSTRY
Exhibit No. 344
Curtiss-Wright Export Corporation,
Camilla 809S, Los Cei^iUos, Santiago, Chile, 2/15/33.
Mr. C. W. Webster,
Curtiss-Wriffht Export Corporation,
29 West 57th Street, New York City.
Dear Web : I was pleased to receive last Saturday your letter #70 of 30th
January.
Iiei;arairig the idea put forward by Comandante Aracena for the building of
12 Falcons for Ecuador, we have not heard any further news on this subject.
All the data we gave the comandante has been forwarded to the Eucadorian
Government and that is where the matter stands at the moment. Perhaps
you ci.uld find out from your representative in Quito, Senor Flores Gueera,
something definite on this question, but suggest, of couse, you do so in a casual
way, so that it will not interfere with any plans the government may have
in view.
With regard to the Falcon and Hawk, I confirm cables exchanged in this
connection. Since cabling you this moi-ning, Pancho phoned to tell me that he
had been promised permission to fly the planes out tomorrow, and if this
be the case I will cable you immediately we know that authorization has been
given by the Chilean authorities.
Senor M. Cruchaga, the Foreign Minister — and who, at the same time, has
been Acting Minister of National Defense — presided recently at an antiwar
meeting held in Mendoza with the Argentine authorities, the object being to
try and induce Bolivia and Paraguay to cease hostilities and go to arbitration.
It was also agreed that neither Chile or the Argentine would lend any assistance
to either country with arms or munitions. So, in a nutshell, we can see why
it has been so difficult to dispose of the Falcon and Hawk to Bolivia or
Paraguay.
The newly appointed Minister of National Defense, Senor Emilio Bello
Codecido, arrives from the States by the Santa Clara today. By the same
steamer is arriving Senor Zalles, the Bolivian Minister in Santiago last year,
who, you will recall, came to see us in the factory in July and wanted to buy
Falcons for his Government, but nothing matured. Senor Zalles probably has
instructions about the purchase of the Falcon and Hawk, and we must wait
a day to see what transpires.
I do not know from whom Pancho obtained permission, as only yesterday
we received notice, passed down from the Foreign Minister, that on no account
must the Falcon and Hawk leave the factory. The only way to get these
ships out is for an agreement to be made between the Bnlivian and Chilean
Ministers, and I am anxious to know what news Pancho will give us tomorrow.
At the same time Jim Spencer is still working on selling the machines to
Paraguay, but apparently he is meeting with more difliculties than Pancho.
We cannot do any more than we have already done to dispose of the Falcon
and Hawk, and you must not lose sight of the fact that Chile represents her-
self as a peace-making nation and has promised not to provide or assist in
providing war material to any of the belligerent S. American countries.
Since writing your letter under reply you will have received mine in reference
to the Rambler and now await your instructions.
As matters now stand it would seem very difficult for us to get an offer
for the European Hawk. There is no hope whatever of the Chilean Govern-
ment acquiring this machine, and the only way I think you could dispose of
it would be your dealing direct with other countries at S. America at present
engaged in warfare. Jim Spencer has been trying to get an offer from the
other side, but nothing has come of it.
I note what you write about Jim Spencer and quite appreciate your attitude
before dealing direct with him. In conversation the other day, he told me
he had received your letters, so I did not make any comment on what you
wrote me.
The whole trouble in trying to make deals of this nature is that there is
excessive graft to contend with. The Bolivian and Paraguayan Ministers know
of our offer and yet they prefer dealing through agents. They both know
our figure and the agent's figure, so you can imagine who has to take a share
between sale and purchase prices. Jim has been working the deal for Bolivia
and Paraguay through the Argentine. His figures are the same as Pancho's
and he knows perfectly well that his commission is includorl in anvthing he
MUNITIONS INDUSTRY 927
cau get over $15,000. If he could make $1,000 on each plane for himself, I
think he would be lucky. The other $i',00O would be paid to the other inter-
mediaries.
Have not seen Salvador for at least a month. He must still have the hump.
We have just received a letter from the Air Corps stating that in view of
the high quotation for the Sikorsky spares, they have decided not to place the
order and will effect the repair with what element they have in the Maestranza
in El Bosque.
The dope and other material arrived here yesterday, all O.K. The Santa
Barbara shipment is the only one still pending and we expect the decree will be
signed this week.
Work on repairs is proceeding steadily ; except to complete the 3rd ship
(Hawk #7) by week-end. Falcons Nos. 2 and 29 have now been officially
handed over to the Air Corps. Total costs on these two machines will be
advised New York by next mail, so that you may deduct same from the Air
Corps funds in your possession.
Thanks for your kind wishes. Kesler is still hanging around wnitlng for a
chance to fly away the Hawk and Falcon.
Best regards.
Sincerely,
J. V. Van Wagner.
Exhibit No. 34!i
[Copy]
Air Mail #93 May 15, 1933.
Mr. V. J. Van Wagner,
Casilla 3098, Santiago, Chile.
Dear Jerry : With reference to your several private cables and also your
letter of May 6th, regarding Arucena and Bofil. it seems to me that if the
Peruvian Government is anxious to acquire equipment we should be able to
work out some sort of deal with them. I cabled you this morning, as per con-
firmation attached, in an effort to find out who Bofil is. Is he a direct rep-
resentative of the Peruvian Government and, if so, what delivery must they
have and how much are they prepared to pay?
It seems strange to me that you have not been able to sell them the Wooten
" Falcon." There is a ship for immediate delivery along with a quantity of
necessary spares. My only object in flying the ship out of Chile into Peru
is to make it available for sale to the Peruvian Government and to circumvent
any possible sudden decision on the part of Chile to prevent the delivery of
munitions to Peru. I have given you full instructions on the Wooten Falcon,
so please stick to them in making a deal.
It seems to me that Aracena's requirement of receiving the price of new
Falcons and Hawks for his obsolete and worn present equipment is absolutely
unreasonable. In my opinion, it would be a very satisfactory deal for Aracena
to trade, if necessary, 2 used Falcons or 2 used Hawks for one new Cyclone-
Falcon or Hawk. It would naturally cut down the number of planes in service
but would give them modern equipment. He evidenly is still remembering the
deal of last summer and fall, which was more or less of an accident but, at
the same time, we were delivering new and unused equipment, although we
admit that it was under-powered and more or less obsolete — nevertheless, it
was new and had not been flown over many years as in the case of the present
Hawks and Falcons.
If Bofil, in representing Peru, is anxious to buy equipment and. as you
expressed it, " urgently ", I wash you had cabled us when you first met
him and given us the opportunity of shooting at the proposition in some form.
You mentioned that you had told Bofil that you could not deal with him.
Never make this blunt statement to any prospective customer but always string
along with them leaving the door open for some kind of negotiation. We might
have been in a position at the Buffalo factory whereby a production order was
coming through for another customer on which we were ahead of schedule and
that some of these planes could have been diverted to another customer in an
emergency. Such would have been the case several weeks ago when we were
delivering Cyclone " Hawks " to China. Unfortunately all of these Hawks have
just been delivered. Bear this in mind and in the future always keep us fully
informed.
8.3876— .S4—PT 4 16
928 MUNITIONS INDUSTRY
Air mail me immediately all the iufonuatiou you can secure regarding the
possible action on the part of the Chilean Government in connection with the
proposed closing of Chilean ports to Bolivia. I harly believe that this drastic
step vi^ill be taken but, nevertheless, the newspapers here are predicting it.
Follow all these political events as closely as you can and keep us supplied
with information.
If there is a possible chance of making a deal between Bofil, Aracena, and
ourselves, I think I would make a quick trip down the West Coast to sit in on
it but I naturally do not wish to leave at this particular time unless it is
absolutely necessary.
Your letter of May 6th states that President Alessandri and the Minister of
National Defense and Aracena are very anxious to keep the factory operating
and commence on new production. How in the world does anyone in Chile
expect to do this unless they find some dollars? My letter of May 4th,
instructing you to close the factory tight unless Aracena and the Government
finds some business for us still stands. The Government cannot possibly
expect us to keep operating for the benefit of the Chilean Government and at
our expense.
I also cabled you this morning asking if Wooten had turned over his Falcon.
I have been urging the Air Corps in Washiugrou to cable him instructions and
they have agreed to do so. I'lcase follow this up and keep me advised. Regard-
less of whether you sell the Wooten Falcon in Santiago, please get it started
for Arica as soon as you can and notify us by cable when you expect it to
be there so that we can arrange with Faucet t to have one of his pilots pick
it up. In connection with this ship, do not rely upon or request Pan American
Grace to supply the ship with gas and oil. You will have to make an arrange-
ment with Chilean National Airways for fuel.
In shipping your spares to Peru, do so in the most efficient way without
using the Grace Line, consigning the shipment to Faucett and immediately
notifying him by cable and also cable us. In other words, move this equip-
ment into Peru as rapidly as possible.
Also keep me advised as to what action you take in delivering the " Rambler."
During this period of political unrest all over South America, circulate as
much as you can among officers and people in an effort to obtain infor-
mation pertinent to our business situation which may effect sales and shipments
in all of the South American countries.
Also please bear in mind that the deal for Wooten's Falcon is absolutely
confidential. Do not permit stories to be circulated around Santiago about
our purchasing the ship, to whom we are trying to sell it, and the price we
get for it.
Sincere good wishes,
C. W. Webster.
(Personal & Confidential)
Exhibit No. 346
Ankara, April 7th, 19S4.
Mr. T. A. Morgan
Curtiss-Wright Export Corporation,
B.C. A. Building, 30 Rockefeller Plaza, New York.
Dear Tom : I'm writing this to you direct, as I assume Jack will be on his
way out here before this letter arrives in New York.
Here are some important factors which must be kept in mind, as of great
possible influence on affairs out here. A few days ago Mussolini made a speech
in Italy in which he talked very frankly about his views regarding Italy's fu-
ture lying in Asia and Africa. It probably didn't create any stir at home —
you may not even have noticed it. But you can believe that it has caused a
great stir out here. The Turkish ambassador has called on el Duce to ask
him " what do you mean, Asia etc." El Duce, of course, replied that he didn't
mean Turkey. And on the surface all is quiet. But if you know anything at
all of the background of Italy's aspirations in Turkey — tangible evidence of
which lies always at Turkey's front door in the form of the Italian mandated
islands — you can well believe that these last utterances of el Duce's have made
a most profound impression, which mere diplomatic assurances will not dispel.
And under the surface there is every evidence of a determination to see that
no stone is left unturned to see that Turkey's defenses are in shape. And
MUiSriTIONS INDUSTRY 929
aviation defenses are receiving the most serious attention of tlie big shots in
the government.
The machine gun episode for Hawks is just one indication. When I cabled
you the other day that we have been asked to consider this one as a national
emergency, I can assure you that I wasn't kidding. They're in deadly earnest
about this.
There is every evidence that the long delay in the Kayseri project has now
received the renewed attention of the Prime Minister and Chief of Stalf, and
I should not be the least bit surprised to see a break come almost any day.
When I was in Zejai's office today, in walked the Prime Minister in person —
all unannounced, a most unusual procedure. I don't know what was the pur-
pose of the visit, because I, naturally, withdrew at once. But several indica-
tions are that the Kayseri affair was very much in the foreground.
There is every reason why they should press this matter to conclusion, and
I'm rather expecting that Ismet Pasha will take it in hand to see that it is
concluded, and that very shortly.
Pretty well-confinned reports are that a tentative decision lias been reached
also to start active and energetic efforts at once to nugniont their air pro-
gram greatly. There is talk of an immediate budget for 170 planes to be
purchased this summer. Al.so rumur.s of a sei)arate aviation department.
All this may be ju.st idle talk, but I am strongly of the opinion that it is
really firmly founded. If it is — and if (as appears to be the case) the Prime
Minister and the Gazi are really taking it upon themselves to push this mat-
ter— we may look for some real action at any time.
Greece has much the same underlying attitude toward Italy that Turkey
has. The Duce's speech took place since I left Greece, so I have no way of
knowing what is the reaction tliere, but knowing the general political back-
ground, I would expect the Greek reaction to be similar to that in Turkey,
and I should not be surprised to hear that Greece's indecision on aircraft
matters has been converted into a definite program.
It's too early yet to say exactly wh.at will happen. I feel quite certain that
there is no likelihood of any ojifn hivaks. I'm [ i!o believe that this little
speech of el Duce's is going to result in a material augumentation and acceler-
ation of Turkey's aviation program, and may have a very similar result in
Greece.
Please don't forget this background. It is very important.
Yours sincerely,
(Sgd.) Beuce G. Leigh ton.
An incident. — I complained yesterday to the Minister that a numl)er of
materials for Kaiseri had been delayed in the Customs House Ankara for two
months. Today there was great to-do over the fact that the officer in charge
of the Ankara warehouse — a major — has been ordered to ten days under
arrest for dereliction of duty. I have an idea that the delays will be less
long in future.
(Sgd.) B. G. L.
Exhibit No. 347
[Air Mail 78]
Januaky 31, 1933.
Captain Clifton K. Travis.
Compania de aviation Fauoett, 8.A.,
Apartado lJf29, Lhna, Peru.
Dear Clif : According to your last letter, you planned on being in Lima on
February 6th ; therefore, I am addressing this letter to Lima.
Bill Goulding and Shannon have been exchanging cables with you regarding
the payment, and I hope that you were able to straighten out this financial
situation before you left La Paz. If we can in any way allocate the funds already
cabled up here so as to cover the remaining portion of the Osprey and the
spare parts, I believe it is the thing to do. In any event, we do not intend
to release the 2 remaining Hawks that are now in New York until the con-
tracted payments have been made. In view of present conditions in Bolivia,
I believe we would be making a grave mistake to permit the Bolivian Govern-
ment to get too far behind in their payments. The situation at Chaco is liable
to blow up any time and if it does, the natural move for the Bolivian Govern-
930 MUNITIONS INDUSTRY
ment to make, and in view of their past performance, would be to default on any
payments that are due. Therefore, let's hold them to their contracted pay-
ments. If the show does not end this coming summer, they naturally will have
to have additional equipment. I realize that the Government is abdUt broke
at the present time, but they generally find the funds for munitions when
necessary. In the future, if you have to make additional contracts, try to
get your last three payments in New York, eliminating the final payment in
Arica as called for in the two previous contracts. I know this is going to
be rather difficult, in view of the precedent established, but do the best you
can.
I had a talk with Mr. Nichols of the Colt Co. last week and they have given
their representation to a former Army ofiicer, and according to our agreement
with the Colt Co., we are entitled to commissions only on machine guns
installed on airplanes or shipped with airplanes, which eliminates us from
participating on contracts for gun spares unless those contracts are placed
directly with us. Bear this in mind and follow this situation closely so when
the Government anticipates purchasing spare gun parts or complete spare
guns, see that these contracts are placed directly with you. I understand that
the Colt Co. is not favorably impressed with their representative and would
prefer working with us, providing it does not complicate their contract with
their agent.
Sincerely hope that the Peruvian Hawks gave you no trouble.
Please give my kindest regards to Jack Jennings when you see him and
also give him any and all breaks that you can. He is down at Ancon as an
assistant mechanic with Jugielski in setting up the Hawks. Also give my
kindest regards to Slim Faucett, Dan, Slim Carlton, and the rest of the boys.
With the best of good luck and sincere good wishes to you and Mable,
Yours sincerely,
C. W. Webster.
P.S.- — As soon as possible let us have the full report on the Peruvian Hawks
by cable and follow it up in detail with a letter. Also, what opportunity of
selling Peru a few more Hawks? Have turned over your receipt to Mr.
Jones.
C. W. W.
Exhibit No. 348
[Airmail #84]
Fkbrltary 8, IdoS.
Capt. Clifton K. Tea vis,
% Compania de Ariaciou Faucett, S.A., Apartado 1429, Lima, Peru.
Dear Cuff : Your two letters of January 26th, addi'essed to Sliannon and
myself, have just arrived, also your cables regarding the delivery of the first
two Hawks for Bolivia.
It was a great satisfaction to know that the Bolivian Government was
entirely pleased with the performance. I agree with you entirely on the policy
of nondelivery of equipment until all government accounts have been settled.
Someone in our organization slipped up on the shipment of the first two
Hawks in consigning tiiis material to La Paz. and when the other two Hawks
go South, they will be shipped to your order so that it will be impossible
for the Government to take them out of Customs until you have personally
cleared them. I realize the difficulties that you have been up against and
we can only do our I)est.
Although you say there is an apparent scarcity of government funds, I still
believe that Bolivia will be required to purchase additional aircraft equipment,
and the dollars will be found somewhere when required. In my opinion, the
real activity is just beginning, not only in the Chaco, but around Leticia as
well. National pride and stubbornness will not permit these countries to
quit until they blow up through absolute bankruptcy, and while the show is
going on, it is our job as distributors of munitions to get our share. If we
don't, someone else will.
I am firmly convinced through personal conversation, while in Buenos Aires,
that moral and financial support is coming and will continue from Argentine
on behalf of Paraguay, and Bolivia will be required to find similar support
either through the Standard Oil Company, or through wealthy nationals, such
MUNITIONS INDUSTRY 931
as Patino, whose business and financial interests are at stake. I am still of
the opinion that before these two " comic opera wars " are finished in the
north and south that practically all of South America will be involved — so
watch your step and play your cards accordingly.
I am anxious to get down there again as quickly as possible, and will
probably make the grade between 6 to 8 weeks at most.
We can look for considerable activity on the part of Mr. Jones and his
friends sometime during their coming winter (June, July, August).
While in Peru, and as soon as convenient, give me a frank picture of the
Peruvian situation, and do what you can to assist Faucett in closing additional
business there. For your confidential information, their friends to the ex-
treme north are still purchasing heavily. You might use this in your official
conversations but in a very careful and diplomatic manner.
I have just heard that they intend to assemble the Hawks at Las Palmas
instead of Ancon, which indicates that they intend to take them through to the
Maranon River on wheels and shift to pontoons to reach the Amazon.
In connection with the Cueto situation, he has written U9 that the Govern-
ment has officially advised him that they did not request us to withhold his
commission. Will you kindly mention this to Lopez and, if possible, have
Lopez write you or us a letter stating that the Government will not sanction
payments of commissions to any agenf and insist upon direct dealings with the
Curtiss Company.
Jerry Van Wagner has informed me that efforts are being made to dispose
of the Hawk and the Falcon now in our factory, and with which you are
lamiliar, to Bolivia for a certain price. Do what you can to promote the sale
of these two ships, as such sale will have a direct bearing on my future deal-
ing with "Jones." I would like to unload them as quickly as possible so that
I can begin other negotiations for the near future.
Shall be very glad, indeed, to purchase for Melgar the equipment which
you itemized, and will immediately take the matter up with the Consul General
in New York. I would like to make Melgar a present of this eipupment but
it is impossible to do so, but we will give him the advantage of our best prices.
We can also take care of the flight instruction of Melgar's son at the Valley
Stream field, and will secure the dope on costs as quickly as possible, and take
this up with the Consul General.
The office sent to you on December 7th the photographs and specifications
you mention. These were sent to you, care of Lopez. If you were unable to
pick tliem up, let us know. We are also sending you immediately a supply of
stationery, air-mail envelopes, etc., in care of Faucett in Peru. These will go
forward in possibly several packages in order to get by the Customs.
By the way, for our records, is the parachute which you are using the one
with my name stencilled on the harness?
I think of nothing more at this time.
The best of good luck and good wishes to you and Mable and the youngster.
Sincerely yours,
C. W. Webster.
Exhibit No. 349
Curtiss-Wbight Export Corporation,
La Paz, Bolivia, October 26, 1933.
Dear Owen : Am writing this letter at midnight — just returned from dinner
after a late session with Loi>ez and the Minister of War. Our plans have
somewhat changed. Cliff, instead of going along with us tomorrow, is leaving
for the Chaco on Saturday with the Minister of War and the chief of staff
for a conference with Gen. Kundt and aviation officials at the front. The
Government wishes to acquire 10 hirge lioml)ing pianos and it is a choice between
Junkers and ourselves. Lopez and the Minister suggested that Cliff fly down
there with them and the job is so important that we decided that if necessary
we will have to delay the Argentine business. I'll go along to Santiago and
across to B.A. and he will join me there just as soon as he can make it. He
may be a week late but we'll have to make the best of it.
The flnancial end of the job is naturally all important. Lopez wislies to
make a deal with us for the bombers and probably other material which
will run to possibly between $800,000 and $1,000,000. His suggestion is that
932 MUNITIONS INDUSTRY
they make an advance payment of 25% with a possible contract and tlie
balance in monthly payments over a period of 18 months with the Banco
Central of Bolivia guarantee back of the contract. The only thing I could tell
him was that I'd take it up with the New York oflBce. Personally, I am sure
that such a contract is as good as gold, but, of course, JAB and the others
will have to be satisfied. The Banco Central is naturally the Government
bank and receives all the Government's income. The income from tin alone is
about $200,000 a month. This letter will reach you about the time I arrive
in Buenos Aires and if JAB and the others think it is important enough they
can phone me at the Plaza Hotel in B.A. It is my opinion that no definite
decision will be reached until I have returned to New York but, on the other
hand, they may rush their program. It is my intention as I told you in my
other letter to return here the latter part of January. If we cannot accept
the Government's proposition the business will probably go to Junkers or
United or the British who seem to be inclined to accept similar terms. Please
take this proposition up with JAB and in fact let them read this letter and
then give me their reaction by cable in B.A.
Hope we can come to some kind of agreement as there is plenty of business
here. Lopez told me tonight frankly and confidentially that Bolivia had no
intention of making peace until they got what they were after and, if necessary,
the entire Patino company could back their stand. "Will be waiting for JAB's
opinion.
Sincerely,
Wee.
Exhibit No. 350
[Copy]
April 20. 1933.
Dear Leon : Thanks for your cable. Sorry things turned out as they did, but
possibly I can be of use to you even though I'm not on the pay roll. The
thing I'm most interested in now is the matter of representation. Your cable
gives me the impression that you are not interested in improving the quality
and efficiency of your representation here. If that is the case, I'm afraid you
are making a great mistake, for there is a fine order in the air and I should
like to see you get it — and if I were with you I'd hope to share to a small
degree in the profit.
I refer to an order for 16 Loenings. The Government is, for some reason
that I have not figured out, in a great hurry to acquire that number of amphib-
ians and I know that they are giving preference to Loening. They are also
thinking of Douglas. That latter company has a representative here who is
about as effective as yours. I am definitely informed that Loenings are wanted
and in all probability you will be hearing of this through Castro Lopes, though
so far as I know he had not even gotten wise to the business yet. The clique
that makes the purchases does not feel that it can do itself justice by dealing
with them.
I luive written to Web today, and am writing you to give you the picture as
it looks to me. The Cia Provendns is a fine outfit for this type of l)usiness.
I have given Web an idea of tlie firm and of its good connections. Tlie firm
of Souza Sampacio & Cia, Ltda. Rua General Camara 73. which used to live
exclusively on government business and which like Mayrink Veiga has staged
a comeback, is an excellent house. This outfit I lielieve to be as good as
Provendas, and I doul)t that there is little to choose between these tv.-o and
Mayrink Veiga. So for the love of Mike, get some action up the)-e in the
matter of an agent. Almost every day I have the question put to me by army,
navy, or business people as to why Curtiss does not make an effort or show some
interest in this market.
I realize that Web is not losing sight of the financial end of things. To my
mind, that is one of the most important, and I can say that I feel certain that
if exchange is given to anyone in Brazil it will be given to suppliers of the
Government, and of all classes of suppliers, those handing war materials come
first in the present set up. If dollar credits are not available in advance, then
sufficient milreis to enable you to buy your exchange in the bootleg market will
be given. That's where it would be well for you or some other representative
to be on the job.
MUNITIONS INDUSTRY 933
Let me hear from jou as how things are going, and when you will be com-
ing through here.
Sincere regards,
Pierrot.
Hope you can plan to stay over here a few days, it will pay you. I'm sure.
But arrange to have your present connection canceled before you get here
to facilitate your work.
Cable address : Amcomat, Rio.
Exhibit No. 351
[Copy J
W. H. Smyth-Beograd,
Belgrade, March, 18, W3:i.
Mr. Melvin Hall,
% American Consulate, Ankara, Turkey.
Deiar Major Hall : On March 13th, I received your telegram from Ankara
reading as follows :
" Do prospects justify visit of Vaughan President Wright now northern
Europe. Telegraph Melvinhall Amembassy Ankara."
I investigated the matter thoroughly and wired you last night to Ankara as
follows :
" Yes for eventual rush orders. Gould of Pratt Whitney working here."
For your information, it appears that the French Legation in Belgrade has
been bringing very heavy pressure to bear on the Yugoslavian Ministry of War
and that as the result, the Yugoslavian air force will probably take Jupiter
7-cylinder and Jupiter 9-cylinder motors for their main requirements and pos-
sibly some K-14 for a few special cases. There is talk of using Jupiter 9-cyl-
Inder motors on some old planes which are reported of doing 400 kilometers
an hour, and there is a possibility that this plane will also be adopted as
standard.
Somebody has put the rumour around here that you have been spending
such a long time in Turkey because the Turkish Hawks have not come up to
their promised speed and that you are having a lot of trouble with the Turkish
Government about this. This rumour has probably been put out by the Fi'ench,
but in any case if you have time on your way back from Istanbul, it might
pay you to stop here and to go to Novi Sad to refute the rumour in person.
At the same time you could break the good news to Stauojevic about the reduc-
tion in price and the announcement of the SR-lS20^F-5 plane.
Even if the French should secure the general order for motors and planes,
I believe we should be able to sell at least a few motors to the air force on
the basis that if and when a war breaks, the Curtiss-Wright Company will be
one of the tirst in the position to give them quick delivery on date, and it will
be well for them to have some practice on these motors so as to know what to
expect from these planes.
I understand that Mr. Gould of the Pratt & Whitney Co., has been here for
the past week working hard on the air force.
Hoping to have the pleasure of seeing you in Belgrade on your way to Paris,
I remain,
Yours very truly,
(S.) W. H. Smyth.
(" Exhibit No. 352 " appears in text on p. 778)
Exhibit No. 353.
[Copy]
February 17, 1932.
A. B. Mercantile,
Helsingfors, Finland.
(Attention: Engineer Schroderus.)
Gentlemen: We are pleased to advise you for your information that the
Lithuanian Ministry of Defense has ordered from us five (5) Challenger
934 MUNITIONS INDUSTRY
engines for installation in their training planes. We believe that you will
desire to communicate this information to the Finnish Ministry of Defense.
We would also advise you confidentially that the Turkish Government has
passed an order to us for twenty-four (l'4) Curtiss-Hawk single seater pursuit
planes with Cyclone engines, six (6) Fledgling training planes with Whirlwind
engines, together with a quantity of spare engines. Tliis information is not
for publication and is to be communicated by you only in a confidential manner,
should you deem it desirable to inform the Ministry to this effect.
We enclose herewith a confirmation of our telegram to you of this date, in-
forming you briefly of the new type of light observation and reconnaissance
plane which we are now in a position to offer at a remarkably low price. This
plane has a very high performance and is equally satisfactory mounted on
wheels, floats, or skis. Should the Ministry be interested we would be pleased
to forward full details of speciflcations and performances.
With kind personal regards from the undersigned.
Yours very truly,
Curtiss-Wright Export Corporation,
Melvin Hall,
Vice President & General Manager.
MH
EMG
enc. 1.
(There was no exhibit marked " No. 354 ")
Exhibit No. 355
Aw Mail
185
FE33RUARY 9, 1933.
Mr. Elmeb J. Faucett,
Compania de Avlacion Fancett, S.A.,
Apartado 1^29, Lima, Peru.
DELiR Slim : Just received a letter from Jerry Wagner stating the Peruvian
Government is insisting upon a duty of 5 percent on a declared value of $3,000
for bringing the " Rambler " into Peru from Chile, and is also insisting that the
duty be paid in Chilean pesos at an exchange of 45 pesos to the dollar. This
is the bootleg rate of exchange — the official Government rate being 16.50 pesos
to the dollar. The Peruvian Government is entirely out of order in their
demands. Will you kindly see what you can do about it?
If the " Rambler " is taken into Peru, please have it definitely understood
that the machine does not belong to you, but is the property of the Curtiss-
Wright Export Corporation of New York. This is for the purpose of pre-
venting any possibility of confiscation during the period of the Government's
little comic-opera war.
Sincerely hope the work of setting up and delivering the Hawks will progress
smoothly. Jack Jenning's dad had a letter the other day stating that it
was probable that the Hawks would be assembled in Las Palmas, instead of
at Ancon. This leads me to ])elieve that they intend to ship the pontoons
up the Maranon River, and fly the ships on wheels to that point, instead of
going in directly from the west coast over the hills to the Amazon with
the pontoon equipment.
Is th&re any possibility of selling Peru additional Hawks or additional
equipment of any kind?
I am very anxious to get back to Lima as quickly as possible and may be
able to leave here within the next 4 or 6 weeks.
Please remember that no spare engines have yet been purchased for the
Hawks, so please bring a little pressure to bear on the Air Corps officials and
on Mr. Fardo, and see if this business cannot be concluded in the near future.
For your confidential information, you might diplomatically inform interested
parties that your neighbor to the extreme north is still purchasing in large
quantities. Do not overlook such items as bombs, ammunition, machine guns,
equipment, etc.
My kindest regards to all the boys and best of luck.
Yours sincerely.
C. W. A^'e:bstek.
P.S. — Are you serious about the little party on March 4?
MUNITIONS INDUSTRY 935
Exhibit No. 356
[Copy]
338 November 1st, 1933.
Mr. Joaquin Sampep. H. (Umeta «& Samper),
Apartado Postal 536, Bogota, Colombia.
Dbiar Mr. Sampeb: Sorry to say that the press of other matters has prevented
my writing you recently.
Lt. Gonzalez arrived here and delivered the two films which we have found
very interesting to see. I am having copies made and will return your nega-
tives when this is completed. I am somewhat at a loss, however, just how to
return them as I imagine there would be all kinds of custom difficulties if we
simply mailed them to you. Please let me know, therefore, the procedure we
should follow in this connection.
I am very favorably impressed with Lt. Gonzalez, and we have arranged,
together with Mr. Olano, to take him into our factory in Buffalo just as soon
as the necessary government permission is obtained, where he will have an
opportunity to study the methods which we employ in the manufacture of our
aircraft. Mr. Olano felt that this was the purpose to which he wished Lt.
Gonzalez' efforts directed. You may be sure that we will do everything to see
that his stay in Buffalo is pleasant, interesting, and instructive.
We have recently signed with Mr. Olano a contract covering one more
Trainer. The price at which the plane was to be sold is $6,22r).00 f.o.b our
factory, St. liOuis. While the contract is prepared and signed here, Mr. Olano
explained that, due to the emergency situation no longer existing, it was neces-
sary to have this contract approved in Colombia before we could proceed with
the order and receive the customary deposit. Although this contract was
signed on October 16th, we have not yet been instructed by the consulate here
that authorization has been received from Colombia. You might look into
this matter in Bogota and see if you can hurry it up.
In one of your recent letters you refer to the attack-type military monoplane
which we are building under contract for the U.S. Army — Army designation
A-12. We have not sent you any information on this plane other than the
official release due to the fact that we are not permitted to give out any
information on this plane by the U.S. Government. This is in accordance with
their customary policy whereby newly developed planes are not released for
export sale until they have been one year in operation by the U.S. Government.
We will be very pleased indeed to submit full specifications and details on this
plane just as soon as it is permitted by the Government here. It will be very
interesting for Lt. Gonzalez to be in Buffalo while we are building up these
forty-six planes now on order for the Government. We expect the first of these
to be completed along in December, so he will be there just at the right time.
When we will be able to offer these planes for export sale, we do not know,
but it may be several months before we can do this. Meanwhile, I think you
should concentrate your efforts in endeavoring to get further orders for Hawks
and Falcons, as we feel that the Colombian Government, now that they have
made such a splendid advance in building up an air force, should not permit
these efforts to lag. There is no telling when they will need a very strong air
force.
We also suggest that you give very serious consideration to the Condor
bomber, full particulars on which we have recently submitted to you. We
know of no better plane in the world which is available to the Colombian
Government to be compared with this Condor bomber.
Sometime ago you indicated that the Colombian Government would replace
the Hawks and Falcons which had been lost. We are very anxious to know
what the developments are along these lines.
According to Lt. Gonzalez, the current opinion in Colombia is that the nego-
tiations with Peru will come to naught, in which case Colombia will again be
faced with the necessity of a strong air force. We know, as a matter of fact,
that Peru has not been idle in adding to their equipment, and, unless Colombia
maintains and increases their air force which they have now started, they will
lose the advantage which they now have.
We note with interest your activities in appointing a representative in Call
to be near the school, and we should be very interested to receive reports
of the school's operation and advices in connection with our planes operating
there. You will recall that some time ago you submitted reports in connec-
936 MUNITIONS INDUSTRY
tion with various complaints about the Trainers. We liave written you fully
in this connection and are awaiting your advices as to what action we should
take. We want the Colombian Government to be thoroughly satisfied with
the equipment which they have purchased from us, and as you know we have
offered to make good any defects that there are, but we must know what
these are.
We have sent, as you requested, a number of booklets to your Call office.
We will, of course, continue to correspond directly with you in Bogota as
in the past.
I think you know that Mr. Olano has resigned as consul general here in
New York and has now gone in for aviation in a serious way. He has ar-
ranged, together with Mr. Santos, to take the United States Navy course at
Pensacola, where he is now. I have been in conference with him on this
program for many months past, but as he requested that I treat this confi-
dentially, I have not felt free to tell you anything about it. I have done
everything possible to assist him in his plans and will continue to do so.
It will be an excellent thing for Colombia to have these Navy-trained officers
available. Mr. Olano is very enthusiastic about the development of aviation
in Colombia, and with the thoroughly practical groundwork which he will
obtain during the next year while undergoing his training, it should make him
not only a most competent pilot but give him great experience and knowledge
of aviation in general. I am very pleased indeed that he is taking this course.
He has the great natural ability as a pilot, and I have cooperated with him
here in arranging for him to do quite a little flying before he went to
Pensacola.
Mr. Oscobar is now acting consul in New York and I am confident that our
friendly relations will continue there.
We must, however, look to you to actively push the sale of our equipment
in Colombia, and we trust that you will spare no efforts in endeavoring to
arrange for the Colombian Government to place some further orders. Any
information you can give us in connection with this matter will be greatly
appreciated.
Kindest personal regards.
Sincerely,
Curtiss-Wkight Export Corporation,
(Sgd.) W. F. GouLDiNG, Vice President.
WFG/f
P.S. — Have the models for the minister of war been located?
P.P.S. — Have just received your letter dated Oct. 28th, #465. We have not
received any report from Todhunter outlining further details in connection with
the troubles experienced with the Trainers. Kindly check up on this and send
us a copy.
I have noted your remarks about the models and hope that these will be
located very shortly. Please keep us advised regarding the developments of
your investigation.
W. F. G.
Exhibit No. 357
Lima, December 16th, 193S.
Mr. Owen Shannon,
Curtis s-W right Export Corp., New YorTo City.
Dear Mr. Shannon : I have a number of notes and communications on my
desk not pertaining to any direct interchange of letters between ourselves but
that I felt like writing to you about if for no other reason than that of giving
you a feel of the pulse in Peru.
Sales of airplanes are off for the time being, principally for lack of funds.
The arrival of the last of the English ships together with the arrival of the
first batch of French airplanes has probably been just as important in slowing
up my work. The political situation in the country has taken a turn towards
the bad, and I understand from Web that the Rio conference will turn out to
be useless.
MUNITIONS INDUSTRY 937
The Peruvians apparently have just received a good burning on the Fairy
Fox. This ship at sea level cannot catch up vs'ith our old Stinsons, with the
Stinson cruising at 1,750 r.p.m. and the Fairy running wide open. I'm thinking
the Colombians will have a few good chuckles with their new Falcons at all
altitudes under 15,000 feet and in all probability at the high altitudes as well.
These things are being pointed out to all the oflScers not concerned with the
purchase of the English and French equipment.
The first French airplanes to arrive have been Morane trainers with
120 hp. Lorraine engines. The ship looks flimsy compared especially with the
Fledglings and the Consolidated jobs here. The French pursuit ships are the
Petrel (probably a Nieuport) with 500 hp. Lorraine engines. This ship is a
high-wing monoplane with ic^ing radiators. The French claim 35,000 feet ceiling
but in South America, very few people believe a Frenchman anyway.
I am unable to get a decent figure for the Wooten Falcon. They have offered
a price of $5,000.00 which is ridiculous and it appears improbable that they
will pay more unless we get a change of inspector generals, at which time I
could bring the matter up again. Please advise Web in this connection. This
ship needs recovering badly and I feel that the price agreed to between Web
and Faucett is reasonable. This ship should be flown at least once a month in
order to keep the motor from rusting, even though the motor is being turned
over a few times once a week. I think the Ecuadoreans might buy this ship if
it was recovered ; why not contact Flores Guerra about it?
The trigger motors have arrived and I am attempting to have orders issued
whereby I can be assured that they will return the old ones.
On our bomb quotations, we are lower than any other American quotation
but still a little higher than the Vickers people. Our deliveries are far superior,
however, and we stand a good chance of securing this business.
As regards your #10 of the 28th ulti., better send me along the three instruc-
tion books as requested. All the ones previously sent to the Faucett Company
have been properly distributed.
I understand thru Web that Casey has a new portable boundary light. We
might be able to sell some here for use down in the jungles. Web had with
him a working model that I would like to get if he brought it home with him.
Will you be kind enough to mail me a pair of "American Transport " goggles
with calobar lenses. These are for my own use. I will mail you the necessary
funds the moment I hear from you.
Proposals have been submitted on all the items we have exchanged cor-
respondence about. I am still waiting for prices on horizons and directional
gyros. Will appreciate this information as soon as available.
Sincerely yours,
Dan E. Tobin.
Exhibit No. 358
March 15, 1934.
To : Tobin, Lima Peru.
From : Webster.
Good work have received deiwsit. Stop. Airmail contract immediately and
have minister marine instruct bank Chase to establisli irrevocable credit balance
Stop. Confidentially your competitors have just placed order 23 additional
Falcons, 15 Hawks, but no deposit yet. Stop. Strongly recommend Peru make
deposit inunediately additional Hawks, Falcons, for delivery priority. Stop.
Your present schedule ends May 28 but starting May 14 can deliver two addi-
tional airplanes each week until .Tune 1st, then four each week until July 1st,
then nine per week but you must act inunediately. Stop. Can begin delivery
Ospreys forty days at rate of two possibly three each week depending quantity
c.i.f. price $18,500 each including two l)ombracks. machine guns, and $1,000
commission. Stop. Have guns for nine Falcons, tliree Hawks, but Colt factory
swamped possibly neces.sitating Euroi'eaJi guns for additional contracts will
this be satisfactory. Stop. Recommend using Cyclone two engine and aluminum
finish. Advise will telegraph later regarding Condors and used planes but
sell Wooten Falcon for $10,000 including $1,000 commission. Stop. How about
parachutes.
938 MUNITIONS INDUSTRY
Exhibit No. 359
[Copy]
[Via ail- mail— #101]
May 3, 1933.
Captain C. K. Travis,
c/o America/)}, Consulate, La Paz, Bolivia.
Dear Cliff: Tlie Faircliild Company is anxious to know wliat the prosijects
are for the sale of some of tlieir aerial camera guns in Bolivia, catalogues and
prices on which were sent you with our letter of March 9th. As I advised you
at that time, Fairchild have given us temporary exclusive representation on
their guns, which will not be made permanent unless we can produce some busi-
ness for them. As we expect this gun to be a good seller, we are anxious to
get their permanent sales rights on it and hope you can get an order for some
in the near future.
During the past few days the New Yorli papers have carried stories of the
Bolivian planes bombing some of the Paraguanian rail centers with consider-
able success. We are glad to see they are at last making some real use of their
planes, and hope their success will convince them of the advantages they would
gain by getting more of the Hawks and Ospreys.
From one of your recent cables, we thought this might be the case and that
they planned ordering three more Hawks and six Ospreys.
We hope these orders will be forthcoming quickly, as Buffalo will soon be
cleaning up their present Hawk production, and if the order came in now we
could give them nnich better delivery than later on.
If there are any prospects of getting some business for cartridges, links or
bombs, let us know the sizes and quantity, as we believe we can now quote
prices that should get the orders, particularly if we do not have to include
any agent commissions.
As Web probably wrote you, Jinnny Doolittle put on a successful demonsta-
tion of the Hawk at Shanghai and is now on the way to Canton to demonstrate
the first of the lot of eighteen ordered by them.
What is Bolivia using for training ships?
Our Trainer with the five-cylinder Whirlwind boosted to 220 hp., would
give them pretty good performance at La Paz. We could also equip it with
slots, if desired.
You could offer them the standard two-place Trainer with the 220 hp. Wright
in lots of six at $6,000.00 c.i.f. Arica. The slots would cost an additional $300.00.
We could ship the first Trainer in five to six weeks and at the rate of two
per week thereafter
We have supplied some of these Trainers to China, and are now building six
for Colombia.
We are also building three Fledglings for Colombia and if we could get an
order in the next few weeks for some for Bolivia we could start shipment
in about six to seven weeks and one per week thereafter.
On a lot of at least six Fledglings, equipped with the seven-cylinder Whirl-
wind boosted to 340 hp., without armament, you can quote $15,000.00 c.i.f.
Arica.
The armament, consisting of one synchronized gun, one flexible scarf mount
and flexible gun, and two A-3 bombracks, would cost $2,000.00 per plane extra.
The 340-hp. Whirlwind Fledgling will give a performance at La Paz of 110
m.p.h.. high speed, landing speed, 30 m.i).h., ceiling. 23.000 feet.
Until we started building the three for Colombia we had not been in pro-
duction on the Fledglings since 1930. However, it should be especially suitable
for primary military training at La Paz. As you probably know, Brazil still
has. I think, eight in use of the ten (used) ships they bought in 1931. These
ships had all had considerable use here before being sent to Brazil.
Colombia also has three Fledglings still in use that they bought in 1931.
In September we offered used Fledglings through Cueto, but no more of these
are available now.
Colombia now has on order three more Hawks, three Falcons, three Fledg-
lings, and six Trainers with the 195-hp. 5-cylinder Whirlwinds.
We have heard a rumor tliat Peru has bought two Corsairs, but have not yet
gotten confirmation of it.
I sure hope you can close some more orders soon, as things have been slowing
up here during the past few weeks, and there does not seem to be much other
MUNITIONS INDUSTRY U39
bu^^iness in sight, except possibly Argentina and China. Several of the Central
American countries are talking about planes, but they are all so broke we can't
expect to get much from them.
I hope you are not finding that altitude too much for you.
Regards from the crowd here.
Sincerely,
Owen Shannon.
OS:D
Exhibit No. 360
CuRTiss- Wright Export Corporation,
^eic York, February 10, 1933.
Mr. Lawrence Leon.
Avenida Roque Saenz Peiio 890,
Buenos Aires, Argentina.
Dear Lawrence : Newspapers the last few days have been carrying stories
about the pending and probably political and revolutionary upheaval in
Uruguay.
I believe it would do no harm to slide over to Montevideo as soon as con-
venient and contact the proper officials in an effort to promote the sale of
aircraft or any class of munitions. Also, in this connection, do you think it
advisable to make a personal contact with Paraguayan Government officials
in Asuncion.
I know that this is a rotten trip to make up the river, but it seems to me
that the Bolivia-Paraguay trouble has not yet reached its peak and the condi-
tions instead of becoming better are gradually getting worse. If such is the
case, it will be absolutely necessary for Paraguay to find the money for the
purchase of aircraft and other munitions. If we are able to sell them any-
thing, we will have to work very carefully and quietly, and possibly work
through you, as an individual, as the Bolivian Government would naturally
raise " merry hell " if they believed that we were dealing with tlieir enemies.
Yours sincerely,
C. W. We^jster.
P.S. This morning's newspaper carried a short story about Berrisso's pro-
posed flight to New York, up the west coast. Do you think he will actually
start this time and, if so, let me have any information you can as we will
naturally like to see something of him when he arrives.
c. w. w.
Exhirit No. 361.
[Copy]
CuRTrss- Wright Export Corporation,
La Pas, Bolivia, May 11, 1933.
OS #10
Mr. Owen Shannon,
Curt is s-W right Export Corporation,
21 West 51th Street, Neicn York.
Dear Owens: This will acknowledge your letter #101 which was received
today. Thanks for sending it c/o the consulate; that enables me to get this
letter off on the mail tomorrow morning.
Regarding the camera guns, I went to work on that as soon as your letter
and description was received, or rather, as soon as I arrived back in La Paz
in March. The Government here has a flock of French camera guns that were
purchased some years ago and I was informed definitely that they were not
in the market for more guns. As a matter of fact, the attitude here seems to
be against anything that cannot be used for actual fighting. For example, the
practice bombs did not go over at all. I pointed out that actual money could be
saved by training their pilots to some degree of efficiency in bombing, but no
interest nor action was taken. They still have a number of old porcelain
l^ractice bombs but there has been no effort made to use them. I will tackle
the camera-gun proposition again, but I am sure there will be no results. AH
940 MUNITIONS INDUSTRY
attention here is centered on actual fighting and they lose sight of the fact
tliat the only way to produce efficient fighters is through proper and intensive
training.
You are quite right in assuming that the Bolivians are making good use of
our planes in bombing. They have created a real menace to the Paraguayans
as well as u deep fear. The Chief of Operations in the Chaco (Air Corps)
has been urging the Government for several weeks to buy six more Ospreys
and three additional Hawks, and the decision now, after having passed all the
minor departments and the General Staff, rests with General Kundt, Com-
mander in Chief of Field Operations. As I wrote Web, I expect a definite
answer from the Government late this week or early next week. Slowness and
red tape is still the order of the day here. There also might be a chance to sell
some Travelair bombers. Some of the Brass Hats who are in positions of
power here, although they know nothing whatever of aviation, seejii to think
that the answer to the whole situation is a flock of 4,000-pound bombers. The
remark was made that the Ospreys and Hawks were toys because they only
carried some 460 pounds of bombs. That, of course, is the natural reaction of
these people after all of these bombing expeditions with really good results.
They have gone bomb-minded.
As regards bombs and cartridges, Europe has that pretty well sewed up as
they can offer them at much lower prices than we possibly could on account of
the exchange and cheaper labor.
I was sure surprised to learn that Jimmy Doolittle is in China. I'll bet my
last dollar that he sure put on a real show for the Chinese. Sure would like
to be over there to test and deliver the Hawks.
Bolivia still has a few Vickers Vendaces of a near pre-war vintage that they
are using for trainers. They also plan to repair and place in service some old
French Caudrons that have been lying around in the hangars for a number
of years. They are not interested in new trainers at present. Fighters is
what they want.
I am pushing our equipment with every ounce of energy but I think that
aside from the Ospreys and Hawks, and possibly the Travelair bomber, there is
little chance of introducing new equipment. Anyway, it is a consolation to
know that aside from three Junkers tri-nK)tors presented to Bolivia by Patino,
there hasn't been a single plane sold here with the exception of our own.
Webster & Ashton will soon be able to take over here on business details
and as soon as I finish the technical side of the negotiations I am going to shag
my fanny out of here and go down to the coast where I can get a breath of air
with some oxygen in it.
Best of regards to the gang in New York.
Sincerely,
(signed) Cliff.
Exhibit No. 362
[Copy] /
(Casilla 627. Cable address "Recneps")
James H. Spencer,
Santiago, Chile, Fe'bruary llf, 193S.
Mr. C. W. Webster,
Curtiss-Wright Export Corporation,
27 West 57th Street, Neiv York.
Dear Web : Your letter of Jan. 31st duly received and you have of course
been advised by Jeri-y of my negotiations with him. It was for this particular
reason that I did not reply to your cable of December 30th.
The situation at present is as follows:
Paraguay, with whom I have been dealing thro' the minister here in Santiago,
and also thro' an official of the same Government in Buenos Aires, have shown
an interest in at least the " Hawk " that is here. They made a counter offer
for tins machine equipped with armament and bomb racks, but the offer was
so ridiculously low that Jerry told me that it was no use even to consult you.
Only yesterday the subject came up again, and I have stood pat on the price
of $20,000, including armament, which, as you will see, does not cover very
mucli margin, as against your figure of $15,000 without guns.
MUNITIONS INDUSTRY 941
I am of course in hopes of something materializing, but all these countries
seem to take a mouth of Sundays to decide anything.
On the other hand, Bolivia with whom I was also negotiating, showed an
interest, and the Bolivian Minister here did quite a lot of cabling over the
subject.
Then Echenique started negotiations at a lower figure — with tlie result that
my early work was lost. As I now untlerstand the situation, Bolivia will buy
if Chile loill concede the permit to fly these two machines to La Paz.
The ditiiculty of more than one person dealing on this kind of business is
obvious, and governments will not go very far with any intermediary unless
he can show proper credentials. In the pre.^ent case it was one of lower
price, and a desire to buy two planes so that they should not go to the enemy.
It now remains to be seen wlio will eventually, if at all, obtain possession of
these macliiues. I have advised Paraguay that tlie one who puts up the money
first in New York will be the owner.
Chile, Argentine, Peru, and Brazil are trying to bring about a settlement of
the Chaco dispute, and the two first countries (on the surface at least) are
trying to prohibit any war munitions reaching destinations thro' their
respective countries.
1 don't see how they expect to force such an issue, as both the warring
countries have international treaties on this point, which gives them full
privilege.
In the meantime both countries are fighting, with the long odds in favor of
Paraguay.
If you plan returning here before long, please let me know, as I would like
to take advantage of your trip to ask you to bring me a few things.
With kind regards.
Sincerely yours,
(Sgd.) James H. Spenceb.
Exhibit No. 363
Cubtiss-Wright Expoet Corporation,
Casilla 3098, Los Cebbillos,
Santiago, Chile, March 15th, 1933.
Mr. O. W. Weestee,
Curtiss-W right Export Corp.,
29 West 57th St., New York City.
Dear Web: We cabled you on the 13th that the Peruvian Ambassador de-
manded immediate action with regard to delivery of the Hawk and Falcon,
and the following day received your cable " O.K. delivery." From this mes-
sage we understood that the $36,000 held by the Chase National Bank had
been placed to your credit without restrictions.
Now, the whole trouble is in getting permission to fly the ships out of the
country. Since the money was first deposited in New York, Pancho has come
along almost every day to say that he expected authorization the following
day, and we are now in just the same fix as we were then. The Peruvian
Ambassador came out to the factory on Monday and took up a very furious
attitude over the business, saying that he had complied with his part of
the contract and that it was up to us to deliver the goods. It seems quite
evident that Pancho has been blufl5ng the Ambassador all along by saying
that as soon as the money was paid the ships would fly away, little thinking
of the difficulties to be met in trying to do so. With the present action taken
by the Chilean Foreign Minister to foment peace in S. America, he cannot
possibly give his consent to allow war material to leave Chile, especially to
a country engaged in warfare. Consequently, we are stuck in the mud.
Pancho has just left the factory for the ministry in an endeavor and as a
last resource to obtain permission to ship the machines by steamer to Callao
and the Peruvian Ambassador has offered to pay all expense to be incurred
in boxing and freight. This will not hide the fact that the planes are intended
for Peru and will become known by everybody sooner or later. So we reall.\
think the minister will not offer any kind of facilities. We are at a loss to
imagine what to do further, as we have thought out every iwssible way of
getting the machines out of the country, even going so far as trying to get
permission to fly them to the States.
942 MUNITIONS INDUSTRY
Pancho sold the ships placed at the factory ready for flight so he says, so
what more can we do? He has requested us to cable you place the $3,000, on
each ship to his credit in the National City Bank, but we have deemed it
necessary to wait until something definite has been arranged about getting
the planes away before doing so. If the ships cannot leave the factory (we
have specific instructions from the authorities that under no circumstances must
the leave the hangar) we may even be asked by the Peruvian Ambassador to
refund the $36,000 and consider the contract rescinded. Should anything de-
velop one way or the other we will cable you immediately.
You will doubtless have heard of the unfortunate mishap which befell McMil-
len last Saturday in the fiying from Mendoza to Santiago in a Fairchild,
resulting in his death and that of the radio opei-ator. From official reports
he apparently had motor failure and tried to make a landing on the top of
a small mountain, but in trying to get in short, Smithy seems to think that he
caught a down current which made him crash into the side just a few meters
from the top. Both McMillan and his companion were found burnt to a cinder.
The accident happened only 30 kilometers from Mendoza.
The Rambler is ready to fly up to Peru and Kesler will take off as soon as
we head from Faucett as to destination.
No expense has been incurred on export dues, these being waived by the
Peruvian authorities on instructions from Lima.
Hoping to see you down here very soon and may you bring some of your
usual luck with you.
Kindest regards and wishes.
Yours very sinppfely,
J. V. Van Wagner.
KxHiBiT No. 364
[Copy]
Cuetiss-Wbight Export Corporation,
New York, March 30, 1933.
Mr. Jerry Van Wagner,
Casilla 3098, Santiago, Chile.
Dear Jerry : Your March 22 air-mail letter arrived this morning.
Was glad to hear that the Hawk and Falcon got away safely and with
oflScial permission.
Again please remember to refrain in all of your letters sent to this office
from mentioning the name of Orsini. You can always refer to him as " Jones."
Also do not converse with anyone regarding sales of machines or equipment
going to other countries or any transactions concerning them. As mentioned
in my previous letter, conditions are becoming very acute and I do not wish
our files to contain anything with a bearing on this business. You can always
send any necessary letters to my home and thereby keep them out of our files.
It is perfectly all right for Pancho to mess around with things providing
his activities and statements do not conflict with our present arrangements
in other countries.
It is true that the Ir«nch closed a contract with the Peruvian Government
for 23 or 35 million francs credit which is to be spent exclusively for French
equipment — complete airplanes, armament, radio, photographic, and other ma-
terial. The Peruvian Government agrees to pay 700,000 francs per month,
and is calling for complete delivery in 8 months. If the amount is 35 million
francs ($1,400,000) the payments of 700,000 francs ($24,000) monthly will
extend over a period of 5 years. A contract of this nature is not at all
acceptable to us and we would not even consider it. I am quite sure that
after the material has been delivered, the French outfit will find itself very
much out of luck on the remaining payments. This contract is identical in
many ways with the previous contract with United Aircraft, except that the
amount has lieen increased and the time has been extended. In view of past
Peruvian Government performances and the fact that United Aircraft is still
holding the bag for about $700,000, I cannot possibly conceive of anyone stepping
into another and similar situation. I believe it is merely a move on the
part of the French, with French Government backing, to make a gift to the
Peruvian Government of this aircraft equipment for the purpose of establishing
French equipment in Peruvian Government service. I also believe that the
MUNITIONS INDUSTRY 943
French will follow their usual practice in handing the Peruvian Government
a lot of junk and that the ultimate reaction will be very much in our favor,
I hate to think of the Peruvian pilots flying this French equipment against
Colombia and the 700 h.p. Cyclone Hawks.
I am giving you this information so that you may be in a position to offset
any adverse publicity which may be passed around Santiago.
At the present time, I understand that 12 Breguet, 12 Potez, and 12 Morane
machines have been designated and that training planes also will be provided.
Please see Commandante Aracena or other Air Corps officials and advise
them that you have been instructed by the New York office to close the Los
Cerrillos factory unless the Government sticks to its agreement to i^rovide
necessary work to keep it going. This means that the Government will have
to order the necessary material to rebuild additional Hawks and Falcons.
Also, you have not replied to my previous question as to what has become
of the dollars that were sent to Chile for the credit of the Chilean Government.
Has this money been spent for the purchase of material in fureign countries
or is it still in the National City Bank?
It is absolutely impossible to maintain the factory on an inoperative basis
as its costs are prohibitive.
Another matter which I wish you would take up immediately and possibly
through Dias Lira is the question involving the possible manufacture in the
Santiago plant of airplanes intended for other South American countries.
This is in view of a possible embargo on the part of the League of Nations and
the United States Government. In other words, would we be permitted to
ship material into Chile for assembly and fabrication for such countries as
Colombia, Ecuador, Peru, Bolivia, etc.
Another point which you brought up in a previous letter is the fact that the
Chilean Government would undoubtedly require us to pay a tax on the 10
Falcons which were sold last summer and fall. If this mater comes to a head,
please remind the Chilean Government that we paid to them $3,000 com-
mission on each of these airplanes and that we certainly do not intend to
pay the Government additional sums on this business. You can remind
Aracena, but I do not believe that he is in back of such an idea, or any
other officials, such as our two young laywer friends, that they are in no
position to ask us to pay a tax on this business. I think you understand what
I mean.
Give Rogers of Irving Air Chute Company all the assistance you can. I told
the Irving Company that the Chilean Government had not repacked their
parachutes since the day they purchased them two or three years ago and it
is highly advisable that some steps be taken to install a parachute depart-
ment in the Army Air Corps for the proper handling and servicing of their
chutes. Also remain as closely as you can to Rogers and see that he makes
no price proposals without first consulting us. He did this in one or two
other countries and it seriously embarrassed our business dealings. He must
remember that Curtiss-Wright Export is selling representative of Irving in
South America and that he must be guided by our policies and our prices^
He is a direct factory representative but has no authority whatever to quote
prices to our customers without first consulting us.
Regai-ding Byrne and the story you told Woodling, I feel that there is some
action that you can take to prevent him from circulating around Santiago and
recounting stories of his connections with Curtiss-Wright. If ho is still a
British subject, why not take this matter up with the British Embassy and
see if something cannot be done to curb his activities.
Is Merino still in Santiago and what is he doing? The last time you men-
tioned him he was connected \^ath the National Air Lines but recently Mac-
Gregor told me that he had left his outfit and was doing nothing.
Also is Marcial Arredonda still in the Air Corps and what is his connection?
Our particular situation in Chile involving the factory is slowing up
considerably and it is imperative that something be done immediately to make
the Air Corps realize the factory faces a complete shut-down unless they
step on the gas, order some material and permit us to proceed with the
overhaul of some of their cracked-up ships.
It is highly advisable that you ascertain what has become of the dollar
acount which we established in the National City Bank in Santiago for the
Government's credit. It is naturally our desire to draw on this particular
83876— 34— PT 4 17
944 MUNITIONS INDUSTRY
account for the purchase of necessary factory material in preference to using the
dollar reserve in our own hands in New York and which is rapidly disappear-
ing. As soon as this is spent, the factory cannot possibly operate.
Not having been in Santiago for a few months, I have not the true picture
of affairs but my impression is that Aracena has slowed up and is doing
practically nothing to keep the ball rolling. Please see him immediately
and bring" this matter forcibly to his attention.
Do not forget that we still have available Conqueror Hawk in Holland.
You might mention that to your friend, the ambassador, but in all correspond-
ence regarding this particular individual and subsequent sales, I believe it ad-
visable to carry on your correspondence with me, personally, instead of running
it through the office in case of possible future percussions. If you were
able to secure the release of the Hawk and the Falcon going to Peru, it is
assumed that additional permission could be obtained for other operations.
Get onto this job immediately and let me have all the information obtainable
and what we could possibly expect in the way of Chilean Government coop-
eration or in the way of cooperation from individuals.
In one of your last cables, you state that the Hawk and Falcon were
delivered without armament. What happened to the material in the tail
of the Falcon?
Kind regards and best wishes to you all.
Yours sincerely,
C. W. Webster.
P.S: Have you sent the Rambler to Peru?
Exhibit No. 365
[Copy]
TJeueita & Samper; H.,
Bogota, Colombia, 8.A., April 3, 193^.
43/504
Mr. W. F. GOXTLDING,
V. pres., C urt is s-W right Export Corp.,
30 Rockefeller Plaza, New York, N.Y.
Dear Me. Goulding : Since writing you last, March 24, I have received your
letter #369 of Mai'ch 22. This has served to confound me further, for as you
know from cables exchanged between us I have been working under a continual
series of assertions, denials, and confusion. I have only recently been assured
by the highest executives that the order for the six Hawks and eiglit Falcoiis
had been definitely placed at last, but your letter under reference, listing the
difliculties which had been encountered there, together with previous contra-
dictions, causes me to again doubt that the business has been actually con-
sumated and so until I receive your written or cabled confirmation I shall
continue to suffer the harassing uncertainty as to what has or has not been
done.
Whereas, I can appreciate your viewpoint regarding your policy of not
restricting sales to any one country in a certain geographical division, you
can likewise understand that the position taken by the directors of your
firm to sell to Colombia's potential enemy has greatly jeopardized future
sales possibilities to this country. I have, of course, expended every effort
to counteract the unfavorable impression created at the ministry when tliey
received the information, but what the result will be over an extended period
of time only time can tell. As you have undoul)tedly guessed the usual con-
fusion prevails in that sector and any definite prophesy would be of little
value.
Referring again to the discussed order of 14 additional units, I sliould ap-
preciate being informed at the earliest opportunity under tlie supposition that
the order has been placed, what arrangement was decided upon regarding the
machine guns.
The list of recommended spare parts has been delivered to the proper author-
ities of the aviation department and I hope to soon be able to advise you of a
favorable decision regarding the placing of the order.
Yours very truly,
Urueta & Samper H. (Sues)
J. Samper.
MUNITIONS INDUSTRY 945
Exhibit No. 366
CuRTiss Wright Export Coeporatiox,
Casilla 3098, Los Cerillos, Santiago, Chile, May 6, 1933,
Mr. C. W. WB3STER,
Ctirtiss Wright Export Corporation,
29 West 57th Street, Neio York City.
Dear Web: Your letter dated April 27th, #86, to hand this morning.
With regard to the shipment of material to Peru, we have already cabled
that according to the Chilean customs law, transshipments are permitted in
any port, without being called upon to pay import duties, but as the material
is for war purposes, it would be necessary for you to get definite information
from the Chilean consul general in New York, before embarking on such a
venture.
Regarding the other question you wished us to take up with Diaz Lira, and
about which we have written you previously, we confirm our cable of the 4th
inst. as follows :
(Part) "Government issuing decree making effective paragraph 7 your
agreement Jessen dated 30th Sept. 1932."
Aracena and the Minister of National Defense are very anxious' that the
factory should be kept going, and if possible commence on production again.
The President, Senor Alessandri, is very interested in the factory and would
like to see our activities increase.
In my letter of 29th April I wrote about a visit we had from Mr. Bofil, who-
was interested in buying six planes, with armaments for Peru. We have had
another visit from Mr. Bofil, and he showed us a letter he had received from
the Peruvian commercial agent in Valparaiso, whicli proves that the Peruvian:
Government is actually interested in acquiring six airplanes as soon as pos-
sible. According to Mr. Bofil the commercial agent has more power in these
questions, than the ambassador, as he is responsible for the purchase of mate-
rial and produce for the Peruvian Army. We advised Mr. Bofil that we could
not do anything in the matter and it would be necessary to make some ar-
rangement with the Chilean Government if Peru wanted. six plants urgently. -
It seems that Mr. Bofil is well-known in the Government and has been at work
trying to get the Air Corps dispose of the three last machines repaired iu
the factory and three others undergoing repair. The director of material was
sent out yesterday by Aracena to talk the matter over with us, and the idea
is for us to take over the six planes — in a figurative way — and for us to sell
them to Peru. The Air Corps will fix the price and the money will be placed
to your credit in N.York. This money will then be utilized in buying modern
equipment for Chile. Everything looks pretty hopeful and the Air Corps are'
anxious that the business results. As soon as anything definite has been ar-
ranged I will cable you.
To our caljle referred to above we added : " Permission Falcon ready few
days."
We expect early next week to have Capt. Wooten's Falcon ready for flight to
Arica with all papers in order. Marcial Arredondo will not be able to fly the
machine up the coast, but we will get hold of another reliable pilot. Up to now
Capt. Wooten has no word from Washington that we have taken over the
Falcon, so we cannot very well take off the numbers and signs until he does.
Perhaps he will receive this week-end some instructions from tUe States in
this connection. The only work which will be done is painting out the U.S.
signs and we will also dope the fuselage. With this covering of dope, I think
the fuselage will be O.K. and remain in first class condition for a long time.
As requested we will send the accessories and spare parts to Faucett by an
early steamer. You suggest British or Italian lines. I think it will be more
convenient to have them shipped up by one of the Chilean boats, if there are
no restrictions on such materials leaving the country for Peru.
Best regards and wishes.
Yours very truly,
J. V. Van Wagner.
946 MUNITIONS INDUSTRY
Exhibit No. 367
CuRTiss Wright Export Corporation
CaslUa 2098, Los Cerillos, Santiago, Chile, 29th April, 1933.
Mr. C. W. Webster,
Curtis Wright Export Corporation,
29 West 57th Street, New York City.
Deiab Wejb : I confirm the recent cables exchanged regarding Capt. Wooten's
Falcon. After advising you that the Peruvian Ambassador had told us no re-
ply to our olS'er had been received from his Government, we received a visit
fronT a Mr. Bofil on the 20th of this month, with the object of making a deal
for some interested party in Peru. He gave us to understand that the Peruvian
Government wanted to acquire urgently 6 airplanes with armaments. It all
seems very queer to us that outsiders are allowed to deal in these matters and
from the foregoing it would appear that the Ambassador is playing some card
with Mr. Bofil. Outside Aracena and the Paraguayan Minister, no one else
other than the Peruvian Ambassador should have known that Capt. Wooten's
plane was for sale. As you apparently wished us to dispose of the U.S. Army
Falcon to anybody, we therefore made the same offer to Mr. Bofil who seemed
to know the machine was for sale. The day we received your cattle advising us
to have the Falcon sent up to Arica with destination Lima, Mr. Bofil came to
tell us that his " client " was about to close the deal. In view of your instruc-
tions we had to tell Mr. Bofil we could not do the business. We have had the
Falcon registered in my name and taken out the necessary documents ; we are
still short of the most important item, and this is the Government's permission
to fly the ship to Arica and then out of the country. Aracena is trying to use
his influence with the Foreign Minister and Minister of National Defence, and
will let us know how he makes out in a day or two. You must not forget the
great trouble we had in getting the other Falcon and Hawk away. Arredondo
will return from his vacation next week and we will see if it will be possible
for him to fly the plane to Arica.
We cabled you this morning that Capt. Wooten is still without news from
Washington about the ship being taken over by us, and we hope instructions
will be cabled him in this respect at any moment, so that we can proceed to
take out the U.S. Army signs and paint on the new registration number.
The Rambler has been ready to fly since Thursday, but has not been able
ito get away owing to bad weather. We secured the services of Senor
Echegaray (Salavador's friend) and he took off on Thursday morning but re-
turned after an hour as he could not get through the clouds. We had to
install a reserve tank in the front cockpit to carry sufficient gas to make the
hops up tlie Coast to Arica. Also we put in new spark plugs. All expense
incurred on the Rambler will be charged to New York through our books in
/the usual way.
Donnelly left for LaPaz yesterday. He will fly as far as Arica and take the
rtrain from there to the Bolivian capital. Cliff Travis cabled to say that an
. autocarril may be sent down for Donnelly. You must remember that from
;.yesterday we lose Donnelly's time, whilst he is away, at the rate of one dollar
per hour.
The. other day we received at the factory one of the two extra fuselages the
Air Corps wish to have repaired, but I found it in even worse state than the
rejected fuselages lying on the floor, and in my opinion is beyond repair. I am
consulting the director of material as to what should be done with this fuselage.
I am obliged for the photographs and information sent with your letter #83
of 5th April, and will turn over to -the right quarter the material required for
publication in the historical album of the Chilean Air Service. I do not think
any further information will be necessary.
With regard to your cable enquiry as to whether it would be possible to
transship material in Arica for Callao, we confirm our reply after consulting
Diaz Lira on the matter, that the Chilean customs law permits reshipment in
any port for any outside destination. We suggested, however, that, as yours
is material for war purposes, you consult the consul general in New York
wnether any difficulty would be met in effecting transshipments in Arica. Such
material, of course, could not leave the customhouse, and therefore would not
pay import duties. You would have to appoint a shipping agent in Arica to
MUNITIONS INDUSTEY 947
attend to the transshipments and customs formalities, and we suggested Messrs.
Grace (Arica Agencies, Ltd.), who have the best facilities in that port.
We have not heard a word from Pancho yet ; presume he is still in Lima, but
have no idea what he is doing up there.
Kindest regards.
Sincerely yours.
J. V. Van WAGNE31.
Exhibit No. 368
CuRTiss Wright Export Corporation,
NeiO York, March 28, 1933.
Mr. jEaRRY VAX Wagner,
CasiUa 309S, Santiago, Chile.
Dear Jerry: Enclosed is a clipping from a New York newspaper regarding
the delivery of the HaMk and Falcon to Peru. I am quite sure that you did
not deliberately hand out this information as in times 1 ke these it is advisable
to refrain from any kind of publicity in connection with contracts in South
America and especially with those countries that are in the state of war. In
fact, do not release publicity of an.v kind unless instructed from here.
Today we received a cable from Lima asking us for prices on Colt-Browning
gun equipment for both the Hawk and the Falcon. I immediately cabled you
asking what armament, if any, was supplied. I recall that possibly the
Falcon might have been partially supplied.
If you have not already done so, please advise immediately by cable to
my personal address any developments in connection with Wooten's Falcon.
I prefer to bury this transaction as much as possible as far as the office
goes in order to prevent any possible adverse publicity.
The situation involving Peru is becoming very acute and is liable to be
more so in the very near future. It looks to me like an embargo.
Best of luck and good wishes.
Yours sincerely,
C. W. Webster.
Exhibit No. 369
[Via Airmail]
Castro Lopes & Tebykica
RUE da ALFANDEGA Sl-A-4 AND TEL. 3-5.304
CAIXA POSTAL 2101, RIO DE JANEIRO
RUA S. BBNTO 3C-2A S/LOJA, BALA 17 TEL. 2-1459
C'AIXA POSTAL 2672, SAO PAULO
Kio DE Janmro, NovcDihcr Jf, 1932.
Mr. C. W. Webster,
President Curtiss-Wriqht Export Corp.,
21 West 57th Street, Neiv York City.
Dear Sir : Not having heard from you, since your departure for the South,
we assume that you have returned to the United States via the Pacific coast,
contrary to your intention of passing through Rio on your way back.
Complying with your verbal instructions, we withdrew the proposals we had
submitted to the Government in behalf of your company. Orders were placed
for 23 Voights. 14 Boeings, and 15 Wacos, and in view of the delay in shipping
these planes, due to lack of cover for exchange, additional orders were placed
for other types : 2 Belancas and 20 Faireys.
Recently 28 more Wacos and 20 Moths have been purchased by the Gov-
ernment. ' Of the previous orders, 7 Voights, 15 Wacos, 2 Belancos, and 20
Faireys have so far been delivered.
Among the planes seized from the Sao Paulo Government after the close of
the revolution, there are seven Falcons which are believed to have been
smuggled via Argentina. We have been interpellated at the Ministry of War
regarding this business, which is still being investigated by the Federal author-
ities, and as they mistrust that during your stay in Buenos Aires you were
948 MUNITIONS INDUSTRY 1
instrumental in getting the Falcons in Sao Paulo, we would suggest that you
send us a memorandum clarifying the situation, in order to enable us to act
in your interest in the event of a possible incompatibility being attributed to
your company in connection with future government business in Brazil.
The experience derived from the Sao Paulo revolution has prompted the
Federal Government to expand its aerial preparedness. Accordingly, two or
tliree new military airjwrts are being projected and the establishment of a
local airplane factory is being seriously considered, also a further increase of
the military air fleet is being strongly advocated at both ministries (War and
Navy).
If we are to continue as your exclusive agents for Brazil we would naturally
expect your formal appointment to this effect, followed by your support in the
form of sales ammunition (airplane illustrations, specifications, performances,
pricing tables, etc.) to enable us to go after the prospective business herein
outlined.
Thanking you beforehand for an early reply, we are,
Yours cordially,
Castro Lopes & Teibyrioa.
Exhibit No. 370
[Copy]
Cuktiss-Wright Export Corporation,
New York, January 21, 1933.
Mr. S. Sampaio,
Consul General of Brazil,
n Battery Place, Neiv York.
Mt Dear Mr. Sampaio : Confirming our conversation regarding the airplanes
sold to the Santiago factory, and which later in some way seem to have found
their way into Brazil, I wish to advise you that this entire transaction has
been definitely closed, no material is left undelivered, and all funds paid to us
have been entirely used. In other words, the contract is closed with no surplus.
We are still very anxious, as I advised you, to open negotiations with the
Brazilian Government for the sale of aircraft and aircraft material and also for
the sale of spare parts for the Wright Whirlwind engines installed in many
of the airplanes now in use in the Brazilian Ai'my Air Corps. It would be
very much to the advantage of the Government to purchase these parts direct
from us instead of through one of the airplane builders, and these builders
naturally would have to purchase them from us and would expect their com-
mission. This is a matter which you intended to take up with the proper
Government officials.
Another matter of great interest to us is the idea of an airplane factory in
Brazil. The proposal in connection with this was submitted to the Brazilian
Gfjveriiment about a year ago, but up to the present time no action has been
taken. I should like to have some information along these lines at your earliest
convenience.
Yours very truly,
CtJBTISS-WRIGHT EXPORT CORPORATION,
, President.
C. W. W^ebster
jc
Exhibit No. 371
[Copy]
[Seal— 57]
Brazilian Consut.ate General,
New York City, January 23, 1933.
C. W. Webster,
President Curtiss-Wright Export Corporation,
21 West 57th Street, New York City.
My Dear President Webster: I received today your letter of January 21st
and I want to thank yon very mu; h for sending it. May I quote below the first
paragraph of that letter:
MUNITIONS INDUSTRY 949
" Confirming our conversation regarding,' the airplanes sold to the Santiago
factory, and which later in some way seem to have found their way into Brazil,
I wish to advise you that this entire transaction has been definitely closed, no
material is left undelivered, and all funds paid to us have been entirely used. In
other words, the contract is completely closed with no surplus."
Inasmuch as .vou are so kind as to confirm by letter our conversation, under-
standing my necessity of sending a document about it in my final report of the
matter, I am sure that you will understand my request for a detail of the
referred conversation which it did not occur to you to mention, and which it is
my duty to make clear to my Government.
In our conversation you said to me that all the airplanes, which you num'bercd
at eleven, were all delivered, the respective funds received, and payments made
for them about the end of September 1932, but positively before the end of the
revolution in Sao Paulo. In other words, the contract in question was com-
pletely closed with no surplus before the end of that revolution.
I will be grateful to you if you will confirm also by letter this detail, which
I consider necessai'y in my report.
About the other matters referred to in the second and third paragraphs of
your same letter, I am giving to them my best attention and will write to you
very soon about them.
With anticipated thanks for tlie new favor I am requesting, I remain,
Very sincerely yours,
(Signed) Sebasttao Sampaio,
Consul General of Brazil.
Exhibit No. 372
[Copy]
Curtiss-Wright Export Corporation,
J^eio York, January 28, 1933.
Mr. Sebastiao Sampaio,
Consul General of Brazil,
Brazilian Consulate General,
New York, N.Y.
My Dear Mr. Sampaio: Complying with your request of January 23rd. and
confirming our conversation regarding the airplanes that were sold in Buenos
Aires and delivered at our factory in Santiago, Chile, and which you state
eventually found their way into Brazil ; all of the machines contracted for were
delivered and the payments received by the end of September 1932, which was
before the end of the revolution in Sao Paulo.
I tiiist this is the information that you require.
We are still awaiting information from you regarding the possibility of
supplying the Federal Govei-nment with engine spare parts, and tnist that we
may hear from you regarding this project in the very near future
Yours very truly,
Cxjrttss-Wright Export Corporation,
C. W. Webster, President.
CW/w
("Exhibit No. 373" was marked for identification only)
Exhibit No. 374
[Copy]
[Air Mail #92]
May 13, 1933.
Mr. V. J. Van Wagner,
Casilla 3098, Santiago, Chile.
Dear Jerry : Your cable reading as follows was received yesterday afternoon
at the house.
950 MUNITIONS INDUSTRY
"Aracena offers sell outside ten Falcons, three Hawks on condition be
replaced latest type. Quote price, c.i.f. Valparaiso water-cooled Conqueror
Falcons, Hawks excludin,i^ all commissions."
I have studied carefully this cable but it infers several possibilities and
being uncertain, I cabled you today as follows:
" Retel don't entirely understand proposition. Has Aracena customer for
Falcons, Hawks ; if so, where or must we find a customer? Price ten Conqueror
Falcons, two guns, bomb racks, twenty-nine thousand dollars each. Three Con-
queror Hawks, two guns, twenty-five thousand each. Same ships with Cyclone
deduct one thousand dollars each and get much better performance."
A doubt exists in my mind whether Aracena, himself, has a customer for
his used Falcons and Hawks and will handle the sale, or whether he is merely
giving us the opportunity of finding a customer for his used equipment and
expects to obtain a price sufficient to cover the same number of the late
type of Falcons and Hawks. If this is so, he must still believe in Santa Claus,
as I certainlv do not know of any country in South America willing to pay
$28,000, for used D-12 Falcons and -$24,000, for used D-12 Hawks. Assuming
that this is the case, he must be thinking of the deal last summer and fall
when we cleaned out the Los Cerrilios factory. I do not expect that this
opportunity will present itself again. On the other hand, he might be privately
dealing with Paraguay, Bolivia, or Peru, and possibly Ecuador, but it seems
ridiculous on the face of it that any of these countries would be willing to
pay such fantastic prices for used equipment vinless they were in desperate
need of these planes and wanted immediate delivery.
In view of the present situation in South America, with Argentina, Chile,
and Peru, considering the closing of its ports to Bolivian munitions shipments
and in general declaring their neutrality, it appears that Aracena might have
considerable difficulty in securing permission to ship any kind of airplanes
out of Chile.
There are so many possibilities connected with this whole project that I hope
you have already air-mailed me the detailed particulars. If any deal is con-
summated, please bear in mind that payment must be made in dollars in
New York and be entirely free from any Chilean Government taxes.
You called for prices on the Conqueror Falcon and Hawk. The Cyclone-
equipped machines would not only be $1,000 each cheaper, but would have a
better performance and we certainly would recommend them.
The enclosed photographs were taken in Buffalo the other day during flight
tests of a Falcon on floats, equipped with the F-2 Cyclone of 700 hp., with full
military load, consisting of pilot, gunner, 300 pounds of bombs, and 5 hours
of fuel, it showed a maximum speed in excess of 175 miles per hour. Bearing
in mind that these tests were made with floats, it is reasonable to assume that
the ship will do at least 180' miles per hour with wheels. This same plane is
also built for attack purposes with 2 additional guns installed in the lower
wings. These would make practically no difference in the performance.
For your information we are building a demonstrator to send to Buenos
Aires and should be ready for shipment in from 4 to 6 weeks. This will go
down on wheels for inspection of the Argentine Army and Navy and probably
will also be demonstrated in Rio.
This really is a flying machine and for its price cannot be equalled anywhere
in this type of plane that can be offered for sale in foreign countries. Of course,
w^e have other and more modern planes coming through the experimental depart-
ment, but which we are unable to offer except to the United States Government.
Please continue to send me all the information you can on the Ara(?&na
project and it would possibly be advisable to continue to contact me at the
house as I have a sneaking idea that Peru might be involved and I do not
wish to embarrass other sales negotiations with other countries.
My sincere good Avishes,
C. W. Webstek.
mw.
ends.
MUNITIONS INDUSTRY 951
Exhibit No. 375
[Copy]
Cuktiss-Weight Expobt Cokpokation,
:tfew York, February 28, 1933.
Mr. Salvador Sanfuentes,
Casilla 3098, Santiago, Chile.
Dear Salvador : With reference to your cable of February 27th and your
letters to Mr. Woodling and myself of November 29th :
You have apparently forgotten our conversation in Santiago covering this
matter. At that time, I explained to you that you could not expect a com-
mission of 5 percent on the sale of the last 10 Falcons, but that I would handle
the matter of adjustment find take care of your interests to the best of my
ability. You were apparently satisfied at the time of our conversation, and
the tone of your letter of November 29th was somewhat of a surprise to me.
Going back to the original contract with the Chilean Government, you will
remember that 40 machines were specified, 20 to be Falcons, on which a one-
third deposit was made, and 20 more of a type to be decided upon later. Only
10 Falcons were ever delivered and paid for, and these in pesos, which we
were unable to withdraw from the bank, and it then became necessary to close
the factory and maintain the cost of an inoperative plant at great expense
to the Curtiss-Wright Company. Later we had the opportunity of selling the
5 Falcons to another customer and subsequently the remaining 5 Falcons to
the same individual. The arrangement of disposing of these 10 Falcons, how-
ever, involved the cancellation of the remaining 10 Falcons on order for the
Chilean Government and also the cancellation of the 20 additional machines
specified in the original contract. This naturally caused a complete upset
and breakdown in our entire financial set-up for the expense of building and
equipping the factory in Santiago, training the 25 mechanics in the United
States, and the attendant cost of their transportation to and from the
United States.
Tlie selling price to our new customer on the first 5 Falcons was $31,000
each, . but it was necessary to pay the Chilean Government a commission of
$3,131.51 on each plane, in addition to a commission of $4,000 on each plane
to other parties in Buenos Aires in order to close this contract. The Curtiss-
Wright Company, therefore, received only $23,868.49 each on the first 5 planes,
which was $3,000 per plane under the price called for in the Chilean Govern-
ment contract. On the succeeding 5 Falcons, we received from our customer
only $27,500 each, but it was necessary to pay the Chilean Government a
commission of $3,151.51 on each plane, and to other people $500 each on the
first 3 of these planes, and $1,500 each on the last two planes. Therefore, on
the 10 Falcons cancelled by Chile and sold to the other customer, Curtiss-
Wright received only $230,684.90 instead of the contract price of $268,684.90,
or a loss of $32,000 on the Chile contract.
In your letter of November 29th you were demanding 5 percent commission
on a contract for 10 Falcons sold to the Chilean Government, which the
Chilean Government was unable to go through with and cancelled. It is true
that you worked on the ultimate sale of the cancelled material to another
customer and you are entitled to some commission, but I cannot conscientiously
recommend to my company that they pay j^ou 5 percent on the full Chilean
contract price which was never received by my company. The matter will have
to be thoroughly discussed and an adjustment made, as I explained to you
while in Santiago.
The other matter of 20 percent commission on armament sold to ns by Chile
is entirely out of order, as our customer refused to pay us a higher price than
that quoted by the Chilean Government, and this armament was delivered by
us to our customer at exactly cost price. This money was retained by Curtiss
and applied against the Chilean debt to Curtiss-Wright. This arrangement
assisted us in delivering the spares which were on order, and on which you
are entitled to your 5 percent commission.
You also refer to one-third payment to Curtiss by the Chilean Government on
the original contract price. This one-third payment was returned to the
Chilean Government when the contract was canceled.
952 MUNITIONS INDUSTRY
According to our books, we owe you 5 percent commission on tlie contract
for spare parts, which amounts to $58,269.60; your commission being $2,913.48.
Against this there is charged $59.56 for automobile tires purchased for you by
Jerry in 1931, and charged against your commission account, leaving a balance
in your favor of $2,853.92. This is all the company owes you, with the exception
of the commission on the 10 Falcons, which will have to await a mutual
adjustment.
Any time you wish to confirm the foregoing statements or figures, we will be
very glad to place the books of the OurtiSs-'W right Export Corporation at your
disposal.
I had planned to return to South America in March, but now my plans are
rather uncertain, so if you are coming to the States, we can adjust everything
very quickly, I am sure.
Mr. Woodling is opening an account in your name in a New York bank, and
depositing your balance of $2,853.92, and will send you the bank-deposit book
and a check book.
I sincerely hope that everything is progressing smoothly. I am sorry we
could not accept your proposition of selling the two planes in the Santiago
factory for $15,000 each, delivered in Argentina, this price to include your com-
mission and delivery expense. It will be necessary for us to receive at least
$15,000 each, delivery " as is " at the Santiago factory. You know that it will
be impossible to secure official permission to deliver this material in Argentina.
My sincere good wishes to Marianita and yourself, and I am looking forward
to seeing you both soon.
Sincerely yours,
C. W. Webster.
Exhibit No. 376
COMPANIA DB AVIACH')N " FAUCB ".
HoTEC, Bolivae No. 296, Lima,
Lima, 19th May 1933.
Mr. C. W. Webster, 'New York.
Dear Web : Regarding the sale of aeroplanes here, many things went against
us which we could not help ; first, the Douglas 0-38-S were at least 15 miles
slower than Douglas stated, did not have the cruising speed nor range nor
ceiling. When the *' Hawks " arrived without electric starters and Bank &
Turn instruments, they did not like it at all ; than as we all know, the " Hawk "
is slow on floats, but I believe they would have bought more if it had not been
for Secretary of State Stinson's note to Peru, of course it was true but it
created a very bad feeling against the North Americans. Everyone was very
angry, Luis Pardo told me that he would never buy any more American aero-
planes under any consideration.
Then you remember that Peru's products, such as sugar, cotton, copper,
wool, etc., cannot enter the U.S. on account of high tariffs, thanks to Hoover,
but go to England ; Peruvians do not like it at all. Then they talked of em-
bargoes in the States and the possibility of delays in getting ships that did not
touch in Colombian ports to bring the goods from the States ; delays in delivery
caused Peruvians to turn elsewhere for their goods. We know that they
bought 6 " Falreys " from England, they got immediate delivery from stock ;
these seaplanes are supposed to have a top speed of 200 per.
Then some French interests gave their up to 25,000,000 francs, and I believe
they soon expect to receive some 27 aeroplanes. Web., it is the liiggest mess
you ever saw in your life, no head or tail to the show, until just recently when
the new president appointed a person to control all purchases.
I suppose you know that all our planes are on the other side of the " Hill ",
Dan and Red also. The Government stopped our coast service on 21st of
April, and Dan, Red. and Pinillos went over on Sunday, 23rd, April, in nos.
4, 2, and 6, and I took no. 8 over on 4th May. We are just now finishing no. 5
and it will have to go too, unless the was should be called off soon. Dan and
Red are with the Government now.
As soon as I finish no. 5 I want to start a new job, and install a " Cyclone "
(our rebuilt Stinsons carry 1,400 lbs. of pay load at 115 m.p.h.). I have every-
thing except some tubing and the tie rods for the wings. I got the spares from
Posey, Portland, Oregon, a long time ago, and they cost us $05.00 for four spares
in the rough against Stinson's $130.00 for one finished one. I want to build this
MUNITIONS INDUSTRY 953
ship with 30 square feet more of surface, 4" wider and 4" higher and about
12" longer. I am sure this job would cruise at 140 or 150 m.p.h. by cleaning
up the landing gear.
The Government is highly pleased with our Stiusons and I am sure if I can
get this job out within 3 or 4 months, I can control the commercial field in
Peru, and then get connected up with Chile. I must do something as prices-
asked in the U.S. are so high that we cannot ever expect to buy the lowest
priced job on the market now. I do not expect that this job, outside of the
motor propeller and instniments will cost me over $4,000 — dollars gold to
build — based on the experience and labor costs of rebuilding our Stinsons. This
job would go to any place in Peru and get off again with a full load.
Could you get me a man experienced in building fuselages from the Travel
Air Factory, and at what price? Just make a few inquiries and let me know,
do not tell anyone just yet. Also what about a stress engineer, or who could we
get to stress the job? Curtiss Stoner has helped me a good bit, he is good but
has not the time to spare.
The public is complaining every day, and wants our service back. Panagra
is in a hell of a fix now. they cannot very well raise prices now, and they also
cannot afford to run a Ford where they do not get the $1.80 per, and so they
put on the Lockheed, and the public does not like it at all.
We are certain that the new president will put the country straight soon,
exchange has improved considerably, all Peruvian products have gone up and
everybody is looking forward cheerfully.
What have you heard in New York regarding " Faucett's outfit " since P. A.
took over the China company? Westervelt wrote me some time ago that all
their stock might fall into the hands of P. A. This is private. Everyone is
disgusted with the Ford that Jasper sold to the Government, it cost $5,000,
plus $8,000 freight. Red took the Ryan over the " Hill " yesterday, the " Fledg-
lings " are in daily use and everybody is happy. They are fitted with " Chal-
lengers " and they also have three spare motors ; I expect to send you an order
for spares soon. Jack is working at " Las Palmas " now.
The " Rambler " had a forced landing in Chile and broke the propeller, .so it
is still there.
With regard to shipments to Peru, why ship anything by Grace unless very
urgent? They even refused to ship two sets of cylinders to New York yester-
day, so we are shipping by the Pacific Steam. These are the last two sets of
cylinders to be reground. We now have 5 motors reground, all with the new
forged pistons, new valves, new front sections of crankcase, new propellers on
all ships, oil radiators, instruments and shock struts, motors equipped with
10-1 blowers. On my way over to San Ramon. I reached 19.000 feet witli four
passengers and about 100 lbs. of baggage. No. 2 turned out to l>e a good job
with the new Wright J-6. The next day after it went over the " Hill " a
Peruvian pilot taking off with a Fairchild (Panagra) crashed into the left
wing of No. 2 and completely destroyed the wing and lift struts (the only
damage) the Fairchild was completely wrecked.
Hope to hear soon from you, keep your chin up and your nose dry. Best of
luck.
Yours,
(Sgd.) Slim.
Exhibit No. 377
[Copy]
Curtiss-Wright Export Corporation
27 West 57th Street, New York City
Fabrica Chilena de Aebopla.xos
Casilla 3098, Los Cerrii.los, Santiago, Chile, August 22nd, 19S3.
Mr. C. W. Webster,
% Curtiss-Wright Export Corp.,
29 West 57th Street, Neiv York City, U.S.A.
Dear Web : I have just received your letters nos. 107 and 108, and it was
good to hear from you after such a long absence.
I appreciate very much your remarks on the factory administration, and
am glad you do not hold me responsible for the bad luck we have had. I am
954 MUNITIONS INDUSTRY
also glad at the way you have treated Shaw and he is very grateful to New
York for their consideration. Donnelly is in the Chaco and I have not had
any news from him since he left. I still have his checks so cannot get a
signed receipt for them until he comes back.
Referring to cables exchanged in regard to the Government's offer of nitrate
lor new equipment, we have still been unable to get complete details from the
Minister of National Defence. He has been doing a round of inspection during
the last few days and it has not been possible to interview him. Salvador
expects to see him tomorrow, and will then again refer to this matter. I have
already written that Horace Graham is in Europe so cannot consult him in
this connection.
I intend calling on Messrs. Buchanan & Co. this evening or tomorrow and
discuss with them the proposals given in their letter to you of 13th July last.
It occurs to me that they are mixed up in the nitrate business and probably
want to pull off a deal for the Government. I cannot think of any customer
other than the Chilean Government, but it seems rather strange that we should
be asked to consult you with a view to carrying out the business, and at the
same time Messrs. Buchanan state in the last paragraph of their letter " that
the possibilities of business are great and when this purchase is put through
it will only be by us." It sounds interesting and will let you know probably by
this mail the outcome of my interview with Buchanan & Co.
We are still pushing forward the law for tax exemption; Aracena advised
us some time ago that it was on the verge of being signed, but it appears to
be still awaiting the signature of the President. We can only keep asking
about it until the final stage be passed.
My farm is looking in good shape after having planted a few hundred more
fruit trees and cleared all the rough stuff away. I am moving out there about
the middle of next month and will let my house in town for the summer.
Thanks for your kind wishes, which both Diana and myself heartily
reciprocate.
Very sincerely,
(Signed) Jerry.
P.T.O.
COEEEO AB3?E0
P.S. — I was into see Messrs. Buchanan & Co. this morning and, as I thought,
they are in the nitrate market for the Chilean Government and wish to pur-
chase new equipment for the Air Corps, Linea Aerea, the Militia Republicana,
and private individuals. Buchanan & Co.'s agents in New York are Gibbs &
Sons, and they will attend to all the negotiations from that end. I suggest,
therefore, that you get into contact with Messrs. Gibbs and find out complete
details, as I really think there is a great possibility of good business.
Messrs. Gibbs are nitarte distributors, so they will find a market for this
product, and you will merely have to quote your prices for airplane equipment
and spare parts, etc.
Salvador was in to see the minister of national defense on this same matter
last evening, but do not know how he made out. I will keep you posted of
future developments from this side and will thank you to advise me how
you make out at your end.
(Signed) Jerry.
Exhibit No. 378
Ex lis
Curtiss-Wright Export Corporation,
Tslew York City, November 8, 1933.
To Mr. J. A. B. Smith,
cc Mr. Allard, Bolivia:
Mr. Webster writes as follows regarding the terms of payment on the pros-
pective order for Condors from Bolivia :
" I had no time to write you from La Paz just before I left as every minute
was spent with Government oflicials right up until the train left. Bolivia
wants to acquire 10 bombing planes and will take at least 7 and possibly all
of them from us, providing we can make a mutually agreeable deal. They will
spend from $800,000 to $1,000,000 with us if we can get together. Their
proposition is this: Pay 25 or 30% cash with the contract and the balance
MUNITIONS INDUSTRY 955
in equal monthly instalments over a period of 18 months. The entire con-
tract to be guaranteed by the Banco Central. Of course, this is their propo-
sition and I believe I can probably get a larger cash payment and posstlily a
shorter period of time. The Banco Central, while not a government l)ank,
holds all the government's gold reserve and also the " Miners Drafts " which
are really monthly taxes from the tin mines, are paid directly into the bank tO'
the extent of about $200,000 per month. I went over to see the President of
the Banco Mercantile, whom I know, W, A. Pickwoad, who is also General
Manager of the Antofagasta-Bolivian Railroad and who has lived in Bolivia for
a great many years. The Banco Mercantile is Patino's bank, and I believe also
that Pickwoad represents Dillon, Read & Co., although I am not sure. Pick-
woad old me that if I were able to have the President pass a law through
Congress covering such a proposition and authorizing the Banco Central to
make such monthly payments and then draw my contract under that law —
specifying that money from the miners' drafts were to be used for the con-
tract—the Banco Central to make such payments monthly direct to us and not
through the government — that such a contract was absolutely sure. I went
back to Lopez and the Minister of War and put that proposition iip to them.
They both told me that such an arrangement could be made and requested that
Travis go down to the Chaco immediately in company with the Minister of War^
Chief of Staff, and President of the Banco Central and go over the entire-
aircraft program with Gen. Kundt. Travis started down by train and 4 days
on trucks and will come out through the Argentine frontier after this session-
and meet me in Buenos Aires the latter part of the week.
" Take this letter up to JAB and Tom Morgan and Jack AUard and let them^
read it. Here is the way I figure it might be done, providing, of course, tliat
New York is inclined to consider such a proposal. The price I would quote-
would take care of an ' extra commission ' and delivered in La Paz by a'ir, tlie'
Condors would be sold for around $70,000. For example, if the contract was^
$800,000 and we were paid around $250,000 cash, the balance, or !>5.10,()00,
would be spread over 12 or 18 months whichever was decided upon. It would
require G months or possibly a little less to turn out the 10 ships and if tlie
period was 18 months we could have been paid at the expiration of that time,
in round figures, about $430,000, consisting of the original $250,000 deposit and
6 months installments of about $.30,000' each, so that the gamble would not be-
great. No commissions would be paid to anyone until the entire contract had '
been paid for. This entire project, of course, will have to be thoroughly <lis-
cussed with New York and I believe I will have time to get back home before
they will wish a definite answer, and can start back here again within a few-'
weeks after my arrival in New York.
" We have Junkers to compete with as well as the British and both have
expressed their willingness to play with Bolivia. I was told frankly by
Lopez, who, by the way, is just about as strong as the president, and by the
Minister of War, that they have no intention of quitting the war until they
get what they are after. Pation himself in Paris is supplying funds constantly
and with the backing and guarantee such as I have outlined I believe tbat a
contract would be absolutely safe. I was also asked to secure about 8 good
Army bombing pilots who might be available and out of jobs and looking for a
little excite and money, to come down with the ships and go to wo- k in
the Chaco for the government. This was a confidential request so do not
mention it even to the Consul General. I believe your figures on costs of
flying the ships down are somewhat high, as Panagra fly down their Fords
and the cost is considerably lower; however, this is a matter that can be worked
out later. If this project is interesting to New York, you can phone me at
the Plaza Hotel in Baires but cable me first and let me know what day and
time you intend to call.
" We have not been able to get very far in Chile. Today is a ' fiesta ' with
everyone off their jobs. Have an appointment with Aracena tomorrow morn-
ing and have .spent the last two days with Merino. While he is only connected
with the Linea Nacional, he is the only individual that seems to be getting
any money to spend on aviation. Aracena seems to be a weak sister. INIerino
claims that he will have in the neighborhood of a million dollars next year
for aviation and frankly and confidently urged us not to let go of the factory,
but, nevertheless I intend to talk it over with the President. Merino is very
close to the President and is consulted about everything in connection -n'ith
aviation, to the extent of going over the head of the Minister of War. I wonhl
not be surprised to see Merino back at the head of Army aviation by the first
956 MUNITIONS INDUSTRY
of the year. He told me today that he wniits commercial ehips as well as
Hawks and Falcons and also training jobs. I can give you no more informa-
tion than this until I have gone further into it tomorrow or next day.
" Harvey Brewton is here and have spent much time with him. He expects
to leave on Sunday's plane for Bolivia and will also probably go down into
the Chaco. Shorty Berger is also down there and additional spares, including
engines, will undoubtedly be purchased. I did not answer your cable about
the Osprey payment as you will undoubtedly have it within a day or two.
Last Friday in the Minister of War's office I saw the signed order to cablo
the funds to New York but it usually takes a few days of red tape to get it
through. The full payment for the Trainers was also signed by Lopez but had
3iot reached the Minister of War, so that should go through this week or early
;next week. Remember that we have had exceptionally good business from
Bolivia so try to be as patient as you can on the payments.
*'As I told you in a previous letter, the Peruvian Government wishes also
to make a similar deal with us for material as the French accepted. The
French have been paid everything on schedule time and are asking to double
;the present contract. It is possible to work out a plan whereby we would
:ibe paid directly by the International Petroleum Company from taxes due the
■government for material in the neighborhood of a million dollars. Both this
project and the Bolivian project can be discussed with New York when 1
arrive there just before Christmas. In the meantime, I wish JAB and the
.others would give it some thought. As I told you before, Peru expects to mix
things again with Colombia. In this connection, if there is trouble on the
part of Colombia objecting to us selling Peru, we can make a deal whereby
the material would be intended for the Bolivian Government and shipped along
•with their orders to MoUendo. Bolivia and Peru are working very closely
\together. Chile has now lifted the ban on shipments to Arica for Bolivia
and is asking for the business through her ports but Lopez told me that he did
not wish to hurt Peru's feelings and although it was more ditficult to ship
through Mollendo, he intended to play ball with Peru."
(Sgd.) O.A.S.
Owen Shannon.
OS:js
Exhibit No. 379
[Copy]
La Paz, Deceml)er 15,. 1933.
Mr. C. W. Webster,
JJurtiss-Wright Ejoport Corporation,
New York,
IMt Dear Wee: Thanks for your letter of December 6. Your other letter
mentioned therein has not turned up yet. The mail service here is slow and
you nmst be careful what you say in letters. . .^ ^, /-. ^
Condors —Two of the ministers are at present down in the Chaco. One of
them is the new INIinister of Defense— Benavidez— who you met in Lopez' office,
and the other is Jose Antonio Quiroga. the new IMinister of War. A hst of
new acquisitions has been made up by the Contraloria, amongst which we have
managed to place 5 Condors, but there is some talk of the Estado mayor mcreas-
insr this ouantitv to 9 units. In their list each machine appears at $70,000,
use The position today is that they await the report of these Ministers
and more important still nobody knows whether the war will last or not. At
Dre'^ent the League of Nations Commission is in La Paz, but everything is kept
so quiet that nobody knows what is happening. The general feeling is that
the war will go on and at present the Government is busy making its financial
arrangements As vou know, as from January 1 Bolivia's tin-export quota is
hein-lncreased by some 4,600 tons of fine tin per annum and the Government s
intention is to take up 2,000 tons of fine tin for itself in order to acqu "; niore
sterlin- This would bring them to £400.000. This scheme may prove difficult
to work as it will mean that the Government itself will have to buy and ship
its own' quota of tin, so it may happen that the miners will be obliged to
deliver 100% of their monthly shipments in drafts on London to the Banco
Central de Bolivia. At present they deliver 60% nominally ; I say nominally
because the miners are supposed to hand over as little as possible against their
shipments.
MUNITIONS INDUSTRY 957
With regard to onr proposition, the Government's idea would be to get as
long a credit as possible- — say, up to 24 months, which, of course, is far too
much. With the increase in the tin quota we have suggested that as they
must have credit that the sale of 5 Condors be guaranteed by Patino Mines in
New York, or Simon I. Patino liimself, both guarantees being perfectly good,
and I have no doubt you will agree to this in the event of our pulling this deal
off. Naturally, our aim is to give them as little credit as possible and with
the safest guarantees. No doubt the Government will also make the consul
in New York intervene in the price question and probably also in dealing with
Patino Mines, but before doing anything please cable us in case you are
approached.
There is absolutely no doubt that things are moving in the right direction
for us, and if they do buy anything, our Condors will be bought. It will inter-
est you to know that a sale which was being negotiated by Junkers, together
with the Lloyd Aereo Boliviano, for 2 tri-motors was cancelled yesterday. This
was a difficult job because in the event of purchases being made the Lloyd Aereo
assist the Government financially by paying for part of the machines for their
own account.
We are right on top of matter and any developments will be cabled up imme-
diately. I have the feeling that even if we do not — well, the full 5 or 9 ma-
chines— that we shall get something.
Cyclone etigines. — This has been a worrying and unpleasant business and for
some days it looked as if we were all in the soup in spite of the fact that
most people saw through Bilbao's game. Fortunately, however, things have
now completely changed with the assistance of Colonel Jordan. His tele-
graphic report from Cochabamba, and his personal expose here were both
excellent and the whole affair, we think, has blown over to a great extent. One
important thing is that Bilbao is to get out and Jordan will be made chief of
aviation down there which is a God send for us. Both Cliff and Brewton
are still down there and I have again wired Travis that he should stay there
as long as possible specially whilst the two Ministers are still there. It is
possible that Lopez will be going down as well in which case I shall ask Cliff
to wait for him in Munoz or Villamontes.
I think our position as regards the Junkers' competition will also change, as
Kundt is now out of It. Penaranda and Toro are now the chiefs down below,
and Toro specially is a good friend of mine, and a great admirer of the Osprey.
He told me this himself when he was up here a few days ago.
I am sorry that I cannot give you more definite news, but everything is
undecided at present. My own feeling is that unless Paraguay comes across
with some fair proposition on the war, will carry on and meanwhile Bolivia is
making her own financial arrangements in case she has to carry on and mean-
while Bolivia is making her own financial arrangements in case she has to
carry on. Fortunately, we are in the happy position of being able to export a
valuable metal like tin, and with exports actually about to increase.
Travis's presence in the Chaco is most important, as the pilots are very
friendly indeed towards him and he is very discreet in his ways. Brewton,
with his knowledge, of course, is also very valuable, so between the two some
excellent work must have been done. Berger is here and he started assembling
the first Osprey this morning. Tlie other two have not arrived yet, but we
expect on tlie Alto at latest on Wednesday next. We have no news from you
as to the shipment of the trainers, and if no advice has come by mail when
you receive this letter you might cable us, as they are anxious to get up
quickly. We may sell another two trainers. I am pushing hard on this be-
cause this will make all the pilots, specially the new ones, think Curtiss-Wright,
which is bound to have influence on future purchases.
My respects to Mrs. Webster, and with best saludos from Webby and self.
Yours aye,
(Sgd.) Tony.
P.S. — If the deal looks like coming off, your presence here early in January
will be indispensable. We shall cable you about this later, however. Mean-
while, I hope you will also pull off your other Condor sale.
(" Exhibit No. 380" appears in text on p. 804)
958 MUNITIONS INDUSTRY
Exhibit No. 381
[Copy]
April 5th, 1934.
Mr. RoBEETO Escobar,
Acting Consul General, Consulate General of Columbia,
21 West Street, New York, N.Y.
Dear Mr. Escobar : You know from copy of agreement wliicli I handed you
that we had agreed to furnish and recommend certain personnel to go to
Colombia. The agreement I have reference to is one dated January 31st, 1934,
under which we were to furnish an expert in the flying of Condor planes, to
accompany the planes to Colombia, and remain there for a period not to
exceed three months to give instruction at the school fields in the handling of
the Condor planes.
We have selected one of our pilots from St. Louis who is expert in the oper-
ation of the Condor. His name is Harvey Grey, and he will be ready to go
to Colombia when the first Condor is ready. Quite probably you will wish to
take advantage of his services to fly the flrst plane to Colombia.
Under the terms of the agreement this pilot will actually be employed by
us and the Colombian Government will, in turn, reimburse us on account
of his services. While we would be quite agreeable to his flying this first
plane to Colombia, due to this question of the pilots being in our employ, it
must be clearly understood and agreed that no responsibility attaches to us
after our delivery of the planes on floats, as per the contract, at our airpoi't
in North Beach. The third clause of this agreement is intended to t-ake care
of this situation.
In addition to this one pilot, we also agreed to recommend for employment
by the Colombian Government, the personnel necessary to fly the Condor planes
to Colombia. Assuming that Mr. Grey would pilot the first plane there would
remain the requirement of two additional pilots. Due to the nature of the
flight, and the importance of safe arrival, we feel that only the most competent
pilot personnel should be considered in this connection : men who have had
experience in flying planes of this type over long water hops.
Therefore Mr. Damon, president of our company in St. Louis, who is con-
structing the Condors, after considerable selection, recommended the necessary
two men for this work. We have been in touch with both of these gentlemen
and have discussed, tentatively, with them, the nature of this employment.
They are both available, and ready to go when the planes are ready. They
would both, however, like to know, as far in advance as possible, whether or
not they are to be employed on this mission. I would suggest, therefore, that
this matter be decided as soon as possible.
One of these men is Harry D. Copland, whose address is Garrison Road,
Hingham, Mass. The other is Ira Smalling, room 501, Beaver Bldg., Madison,
Wise, c/o Oscar Schwartz.
Both of these men have had considerable naval experience flying multi-
engine seaplanes, so that they are thoroughly familiar with water flying and
navigation, both of which subjects are of the utmost importance in this flight
to Colombia. Both men have been flying continuously for a number of years,
and their experience and hours of flight on multi-motored planes, both land-
plane and seaplane, is well over 1,000. Both men have previously been em-
ployed in the Curtiss-Wright organization, and are well and favorably known
to us. We have no hesitation whatever in recommending them for this mission,
both on the basis of their experience and personality. Both men have sug-
gested that if they are to make this trip that they be definitely assured as
far in advance as possible to give them an opportunity to gather all of the
data possible in connection with the particular route to be followed. Both
have had flight experience in this southern area, having been airline pilots
on similar routes. They wish, however, to post themselves fully on existing
conditions and to determine exactly the particular route to be followed, and
they point out that on account of weather conditions and the scarcity of
facilities, they cannot plan too carefully on such a flight.
Both men feel that they should receive for this particular mission $500
and expenses — assuming, of course, that the entire mission would be completed
within one month from the date of their employment, and if the trip exceeds
a period of 1 month they should receive additional compensation at the rate
of $500 per month. It has been our experience that for a mission of this
kind it would be very difficult to interest a sufficiently high-grade pilot for
MUNITIONS INDUSTRY 959
less than the amount specified, and we really feel that in consideration of
the nature of the task and experience required, also the responsibility attached
thereto, that this would not be a high amount to pay.
If you should desire any mechanical personnel we will be pleased to recom-
mend them in addition to the pilot personnel. Of course, a copilot is desirable.
At the time I was in Colombia the possibility of certain Colombian pilots
coming up here was discussed, but if this is not done you may wish to use
certain other personnel which you are organizing for Colombia, in the capacity
of copilots.
One of our St. Louis mechanics seems especially interested in making this
trip. His name is George Clark, who formerly made trips for us to Latin-
American countries. He is a very expert mechanic and has a very pleasing
personality, speaks Spanish, and in addition to his aircraft mechanical
knowledge is an expert on armament.
Of course, we assume you will have radios installed in these planes. This
is practically a necessity for this trip, and we will be glad to make recom-
mendations with respect to radio operators. Frankly, we think that it would
be easier and better to have these recommended by the company which furnishes
the radios.
In addition to the foregoing personnel, we also agreed to recommend an
expert Wright engine mechanic competent to instruct and supervise the mainte-
nance and care of Whirlwind and Cyclone engines. This requires a very high
grade, intelligent mechanic with a certain amount of instruction experience
and, in this connection, we recommend Mr. George Langille, whom the writer
introduced to Mr. Pradilla on April 3rd. I understand Mr. Pradilla was
favorably impressed with this man and it is simply a question of whether
the Colombian Government wishes to employ a mechanic as mentioned in
our agreement under which we agreed to make certain personnel recommen-
dations. The foregoing will, I believe, discharge our obligations in connec-
tion with this agreement, and we urge you to advise us promptly just what
you wish us to do. I assure you it is our desire to cooperate with you to
the fullest extent and assist you in every way in obtaining the services
of expert personnel. If we can be of any further assistance in connection
with the employment of the men mentioned above, do not hesitate to call
upon us and we will do everything we can to help you.
Sincerely yours,
Curtiss-Wright Export Corporation,
W. F. GouLDiNu, Vice President.
WFG/f.
ExiBiT No. 382
[Via air mail]
No. 53
March 30, 1934.
Mr. Anthony Ashton,
Messrs. Webster & Ashton,
Gas ilia 144, La Paz, Bolivia.
Dear Tony : I have been so terribly busy here the last few weeks that I have
not been able to write as frequently as I wished. In order to bi'ing you up to
date, I am covering the entire situation as it stands today.
In answer to your letter of March 17th, we are very glad that you finally
were able to get a definite decision from the Government. The matter dragged
along to such an extent that if you had not acted when you did we would not
have been able to get machine guns. As a matter of fact, it was not until this
week that we finally received a definite delivery schedule from the Colt Com-
pany. In addition to that, our own factory found it necessary to increase prices
and I was forced to cable you to withdraw our quotation. Your deposit arrived
March 20th and it was not until March 26th, or last Monday, that I was able
to get the company to accept the order. If I appeared to be curt with you,
it was because I was having a hell of a job here trying to save the business.
I realize that you have your own troubles, and many of them, but so do L
I returned from La Paz on February 8th and advised the company that the
contract was closed, just as the Minister and Lopez indicated. Both of these
83876— 34— PT 4 18
960 MUNITIONS INDUSTRY
gentlemen had asked me to do certain work up here in connection witli the
delivery of Condors, while arrangements were being made in Bolivia for the
contract. As time dragged on and nothing happened, I was in a very em-
barrassing ))Osition. Then the Government began asking for lower prices. I
had made myself very clear, definite on price, during conversations with the
Minister and saw no reason for further discussions along this line. In fact,
if they had waited any longer the price would have been higher.
We were also dealing with other customers, and your original delivery
promise, owing to your delay, had been given to another purchaser. However,
despite this fact, we will stick to our original promise and have the first ship
ready at the factory in about seventy-five days.
In this connection you cabled last night asking for date of delivery on the
first Condor. I replied as per capy enclosed. You will remember, Tony, that
my promise while in La Paz was seventy-five days. You instructed me to make
it forty-five days and " not to worry." This was done, so it is now up to you
to smooth over any argument.
Delivery inspection : During my conversation with the Minister he asked me
if we would permit the Bureau Veritas to inspect before delivery. I inquired
as to what that organization consisted of and about the expense and was told
that the expense would be very small. So I agreed to it. I have since made
inquiries about that organization and found it to be a French outfit, which is
not so good, but I will have a talk with their representative on Monday. I can-
not give you any other information in this letter.
The entire idea of having the Bureau Veritas inspect the Condors before
they leave for La Paz is the most ridiculous thing I have ever heard of. It is
merely useless expense and a nuisance. They probably never saw a Condor be-
fore and what good can be gained by having their man in St. Louis? Haven't
we delivered enougli airplanes to convince the Government that we are more
to be depended upon than an outside party? Does the Government believe for
one moment that we would start a bunch of American pilots, all friends of ours,
on a 6,000-mile flight unless the ships were O.K., and what good could the
Bureau Veritas do? We certainly do not intend to permit them to come into
our factory and instruct them what goes into the manufacture of a Condor.
This would result in considerable delay and much expense and would necessitate
a higher cost. The only thing that we will permit the Bureau Veritas to do
is to receive the ships at our factory in St. Louis in lieu of having complete
airplanes inspected in Bolivia as in the past. However, I will write you more
about them on Monday.
Pilots : While in La Paz I offered my OAvn services gratis and as a frienaly
gesture, to handle the delivery of the Condors. I also agreed at the request
of the Government to secure some pilots who would remain in Bolivia and
handle them in service. I told the Government that it would cost from $150
to $200 per week for good pilots. I can now secure them as I cabled you for
$600 for one chief pilot, $500 for three first pilots and $400 for copilots. The
Government now decides that these men have to accept 30% of their salaries
in National currency. All the good pilots want American dollars and will
not accept any part of their salaries in National currency. You must have
this adjusted quickly.
Delivery costs : While in La Paz I told the Government that it would cost
approximately $8,000 per machine for insurance and flight expenses. It will
not be less than that. I also asked the Government to transfer $32,000 to
New York to apply against those costs. I do not care if they send me the
money or send it to the consul. In fact, I do not care if they send it at all,
but if they wish to get these Condors to La Paz, they should send it to some-
one in New York and quickly.
Within a few weeks we will have to start spending money in connection
with that job and you cannot send to La Paz for funds each time it is necessary
to do a little traveling or to order gas and oil to send to each place en route.
You do not realize the time and work it will require of me to handle this job.
First we must apply to the Department of C<immerce for ships' licenses and
numbers and these will have to be issued in my name. We must then apply
for and receive permissi(m from each of the countries over which we will fly
and then secure permission to land at the various overnight stops. We must
al.so contract and pay for gas and oil and have it placed at each of the over-
night stops. We must also station a man at each of these places to handle
fuel and make necessary arrangements for the ships when they ari'ive. All of
this costs money and the Government must make it available for me if they
MUNITIONS INDUSTRY 961
wish me to do the job. They cannot expect me to cable La Paz each time
that I need a few dollars. I have a man In Washington on permits now and
I am advancing his expenses myself.
Insurance : I spent all morning with the insurance people arguing about costs.
On Monday morning I will have their definile proposal and will write you
again.
Bomb racks : In answer to your cable of March 27th, the racks on the Condor
wings will carry bombs from 30 to 120 lb. each and in the fuselage from 30O
to 1,100 lb. If the Government intends to use bombs of more than 600 lb.
these same racks in the fuselage will accomodate them.
A few days ago Mr. Decker, the consul general, came to the office, acting
upon cable instructions from the Minister of Defence, to discui^s various phases
of the Condor situation. He argued about the high-priced pilots and tl'.e cost
of flying the Condors to La Paz. Please be good enough to advise the Govern-
ment that if they believe our estimated costs are too high for pilots and ihe
delivery of the Condors, we will only be too glad to have them take over the
job themselves. There is absolutely no profit in it for us and we are doing
the job merely as a friendly act and would be greatly relieved if they would
have the consul or someone else do it for us. It would seem advisable to us
to deliver all four Condors at one time, but judging from your cable last night,
asking for a delivery date on the first Condor, that you wish us to send them
down separately. I am fearful that if we follow this procedure that consider-
able conversation and possibly criticism will result from some source and that
obstacles will be encountered in order to delay some of the ships. However,
if the Government wishes us to send them separately, we will be very glad
to undertake to do so, but please have it understood that we will not be respon-
sible for any diplomatic move that might be made by other countries to prevent
us from flying these ships to Bolivia.
I believe this covers the entire situation to date and on Monday, I will write
you regarding insurance costs and the Bureau Veritas.
My sincere good wishes and the best of luck.
Sincerely your.s,
C. W. Webster.
P.S. — Please extend to Shorty our best wishes for a speedy recovery and keep
us constantly advised as to his condition.
P.P.S. — It will also be necessai-y for the Government to place an order for
parachutes for at least Bight pilots and copilots for the Condors and while they
are about, they might just as well increase this number to 25 or 30 to take
care of their necessary requirements.
Exhibit No. 383
[Copy]
HOTET. DEL PRADO,
Barranquilla, Colomhia, South America, April 25, 193^.
Dear Parm : I am enclosing herewith copies of other correspondence with
the usual set for Burdie and one copy of this letter for Ralph Damon.
I spent last week-end in Cartegena with Conun. Strong and the American
pilots and mechanics who have recently arrived, 24 pilots and approximately
the same number of mechanics. Comm. Strong is in a little hot water and
it is mostly in his interest that I am writing this letter. It seems that Comm.
Strong left the States with the understanding that pilots were to be recruited
who are willing to fight if necessary and instruct Colombian students other-
wise. Contracts were drawn up accordingly and every one was very happy
until the press got wind of the movement. The State Department then had
to take official cognizance to which they were forced to react negatively in
order to maintain a strict neutrality in South America. The pilots were told
that passports would not be issued with the fighting clause in their contract
and that should they engage in actual military combat after arriving here the
consuls would be instructed to take up their passports and they would auto-
matically lose their citizenship. A new contract was therefore drawn up,
with the permission of Bogota, which eliminated the fighting clause. It seems
that Comm. Strong was not consulted regarding this new contract and it was
his understanding and intention all along that these pilots immediately
organize as a fighting squadron and begin training as such at Cartagena.
962 MUNITIONS INDUSTRY
When Comm. Strong met the pilots and was informed of the above happen-
ings he. asked for an immediate decision as to which of the two contracts tliey
intended to keep, letting them know that he would not compromise. If they
intend to instruct only they will fly only training planes and vice versa if
they intend to fight. They unanimously decided to stick by the second contract,
in other words, instruct only.
Comm. Strong is quite incensed as a result of their decision and I presume
that he is sincere in giving the impression that he didn't know of the second
contract. At any rate he wants to take immediate steps to get other pilots
down here who are willing to fight. He indicated to me that he will be in hot
water with the War Minister who also thought this group would function as
a fighting unit (as to who gave the permission for the second contract in
Bogota, Quien sabe?). I therefore told him that I would give you all the
dope in order that you may help recruit new pilots if you so desire.
He thought that Ralph Damon could interest the Naval Reserve unit at St.
Louis as some of these fellows had previously indicated a willingness to go
in for flying of this sort. Please understand, however, that there is no
obligation whatever for any action on the part of the Curtiss Co. He wanted
you all to know just as another agent so to speak for contacting the type of
pilot who is desirable.
He wants men with military fliglit training (or naval) who have been trained
in dive bombing and airplane gunnery. A high type of individual is necessary
in order that Colombia may have the best impression possible of Americans
which impression will be reflected by their use of American goods and
equipment.
Comm. Strong has consulted a lawyer here who advises that it is impossible
for anyone to lose citizenship unless it is renounced or allegiance sworn to
another flag. This may or may not be true but it does seem to me that citizen-
ship could not be taken away for so small an offense as fighting in a foreign
country.
With regard to the inducements, Comm. Strong advises that a contract with
the fighting clause will be given for one year. This country has a big aviation
expansion program afoot and there will be considerable opportunity in the field
for five years to come. Contracts will in all probability be renewed if the
pilot party so desires. The pay will be $500.00 per month, half deposited in
the U.S. and half payable in Colombia in pesos at the official rate of exchange
which incidentally is considerably below the commercial rate.
I don't know whether you will wish to do anything about this or not, my
opinion is probably not. At any rate if you do, I would suggest having the
pilots write Comm. Strong at Hotel Granada, Bogota, addressing him as Mr.
J. H. Strong. I would suggest that of course in any contacts with pilots it be
made perfectly clear that the Curtiss Co. is in no way responsible for anything
other than merely letting them know that Couun. Strong is interested. Since
Ralph Damon's name was mentioned by the Comm., he may or may not wish
to acknowledge receipt of this information to the Comm. direct.
I think I will have to bear some of the brunt of this holocaust by giving
some of the Cuban pilots now in the country instruction on floats in order
that they may begin training as a tactical unit.
With best regards.
Sincerely yours,
William J. Crosswell.
Exhibit No. 3S4
[Copy]
Februaky 6, 1934.
Mr. Robert L. Earle,
g/o Curtiss-Wright Corporation.
501 Southern Building, Washington, D.C.
Dear Earle : Jack AUard has asked me to write and see if you could obtain
from the Army a list of about twenty-five recent graduates of Kelley Field,
together with their service records, from which we could pick a number for
ferrying airplanes to a foreign country with the possibility that they might
obtain employment with that foreign government.
We understand that a number of Kelley graduates have been discharged
recently and these are the men to whom we refer.
MUNITIONS INDUSTRY 963
There exists an opening for a man in China to act as machine-gun instructor
who may also be selected from this list.
Thanking you in advance, I am
Sincerely youre,
Interoontinent Aviation, Ino.
pgz/mk.
Exhibit No. 385
[Copy]
Februaey 13, 1934.
Mr. Robert L. Earlei,
Curtiss-Wright Corporation, 501 Southern Building,
Washington, D.C.
Dear Earle: I talked with Mr. AUard regarding the specifications for pilots
and he advised that he does not wish to disclose any information regarding
what countries the pilots are to go to. He wishes you to obtain the names of
pursuit, bombardment, attack, and observation pilots who are interested in
going to a foreign country and a specification from them as to what country
they would like to go.
I'i^'om time to time we have occasion to send men out and we would like
to have in our files information concerning a number of such pilots.
We also suggest that you approach the Navy on this subject and obtain a list
of Navy-trained pilots who may be available for such work as we at times
have occasion to send out aii'plaues on floats.
I would suggest that you have Lt. Hollidge write us fully giving complete
information as to himself with I'eferences whom we may contact and that you
supply us with as much information as you can concerning him in connection
with the position of machine-gun instructor in China.
AVe are not sure that this position is still open but it will pay about 800
Hongkong dollars a month and should afford an opportunity for an Army-
trained man to continue his work along military lines.
Sincerely yours,
Intekcontinent Aviation, Ino.
Paul G. Zimmerman.
V>gz.mh
Exhibit No. 3SG
CuRTiss W;;iGiiT Export Cokporation,
^^cw York, April 27, 1933.
Mr. Jerry Van Wagner,
Casilla 3098, Santiago, Chile.
Dear Jekry : We cabled you today as per confirmation attached.
The Grace Co., owing to considerable pressure from the Colombian Govern-
ment, has refu-sed to accept shipments consigned to the Peruvian Government
or to Faucett, which makes it necessary to ship to the Canal for reshipment
on British or Italian vessels.
The thought occurred to us that we might circumvent the difficulty by
shipping to Arica and reshipping from there to Callao. Inasmuch as the
Chilean Government has closed the port of Arica to Bolivia, it is possible that
they will take similar action with Peru. I would suggest that you take this
matter up with Dias Lira and see if permission can be obtained to go into
Arica and then come back up north to Callao.
In connection with Wooten's Falcon, we have taken this over from the Army
and wish to have it recovered as quickly as possible and spend as little money
as possible in putting it in presentable condition. Begin immediately with
your application for pt rmission to fly it north to Lima. This particular matter
will have to be handled very diplomatically and carefully. If Pancho Echenique
could obtain pennission for the Hawk and Falcon to go into Peru, you should
have no difficulty in securing permission for this Falcon. The object is to
get it out of Chile as quickly as possible, and arrange for Arrendonda to fly it
up to Arica possibly, and for one of Faucett's pilots to take it up to Lima.
964 MUNITIONS INDUSTRY
The accessories and spare parts will have to be shipped on a British, or
Italian, or another steamship, consigned to Faucett. It will be impossible for
you to use the Grace Line. Please make arrangements as soon as you can and
advise me when the material has actually been delivered into your hands and
send me a complete list of all equipment.
Sincere good wishes.
Yours very truly,
C. W. Websteb.
Exhibit No. 387
[Copy]
Javier. Diaz Lira, Attorney,
Santiago, April 20, 1933.
Mr. J. VAN Wagnek,
Mamiger Ctirrtiss-Wright Export Corp., Cittj-
Dear Mr. Van Wagner: After a number of conversations that I have had
with several officials, I want to confirm to you what I mentioned in my letter
of the 10th inst., to the effect that there is not any difficulty, as respects the
Government of Chile, in the Curtiss Company extending its activities of building
planes for sale and exportation to other cuuntries. There is no regulation,
neither in the law nor in the contract which resulted in the setting-up of the
factory in Chile, that might prevent that activity of the company which you
represent.
On the Government's part, the initiative of the factory is considered not only
with acceptance but even with evident pleasure, I have today discussed this
matter fully with Mr. Diego Aracena, Chief of the Air Force, who told me
th:it he accepted with enthusiasm the notice that the factory would intensify
its work and production of airplanes for sale in Chile or in foreign markets,
and, knowing the importance and benefit that this would mean to the country
and to the advantages that would also accrue to the National Air Foi'ce, he
would support all protection with reference thereto before the Government.
On my part, although I don't see any legal reasons that could hinder Mr.
Webster's plan, nevertheless, as a measure of prudence and courtesy to the
Government, I recommend that you send a letter to the Chief of the Air Force,
informing him of the company's plan and request his conformity with the
assurance that it will be well received.
With this in view, I am enclosing a proposed letter that you can study
and consult with Mr. Webster on same if you deem it necessary.
Very truly yours,
(Sgd.) Javier Diaz Lira,
Exhibit No. 388
April 15, 1933.
[Via airmail, no. 22]
CiA DE AviAcioN " Faucett " ; S.A., Aptdo 1429,
Lima, Peru.
Gentlemen : We just received advice by telephone from the Barr Shipping
Corp., our forwarding agents, that the Grace Line notified them they would be
unable to accept any shipments consigned to you that moved on their steamers
via a Colombian port. Evidently the Grace Line is taking a strong hand due
to the fact that they have been subject to considerable pressure on the part of
Colombian Government authorities in carrying material of a military nature.
Our information is that the Colombian Government knows you are buying
material for the Government of Peru, and consequently, is making every effort
to prevent such material from reaching Peru.
While we have not been oflicially informed of this from the Grace Line direct,
we will take this matter up with them on Monday with a view of having them
change this ruling. As far as we can see, there is no reason why they should
refuse shipments consigned to you when the same thing may apply to hundreds
of other concerns in Peru buying material which ultimately may reach the
government. At any rate, if the refusal is definite, we could arrange to ship
all your goods via the Canal. This would necessarily delay delivery of material
to you considera'jly in view of the infrequency of sailings from Europe of
MUNITIONS INDUSTRY 965
steamers that do not touch Buenaventura. We understand the service from
Europe of steamers via the Canal direct to a Peruvian port is about once a
month.
It may be possible that you might be able to appoint your shipping agents in
Clallao to receive goods in your name, and in that way avoid the Grace Line from
putting a stop to direct shipments for your account. You could no doubt
arrange to have the government and, likewise the Peruvian counsul in New
York accept shipments free of consular fees and duties, so that the Goveniment
may continue to get material through you. We could declare the material by
other terms on the bill of lading so as to throw the steamship company off the
track; e.g., we could declare engine parts as "internal combustion parts";
" spark plugs " ; other aeroplane parts could likewise be changed ; e.g., " steel
tubing " in place of aeroplane parts ; '' lacquer " instead of " dope ", etc., etc.
We suggest you act on this immediately and give us the name of your for-
warders by cable, referring specifically to this letter number for our guidance.
We will write you further as soon as we have had an opportunity to discuss this
matter with the steamship company.
Very truly yours,
Cubtiss-Wright Export Corporation,
S. J. Abelow.
(" Exhibit No. 389" appears in text on p. 810)
Exhibit No. 390
[Copy of telegraphic message]
To : Aeroexco, New York.
From : China Co., Shanghai, China.
Date: April 3, 1933.
About 1 to about 2 months ago I suggested Minister of Finance enter (s)
(into) contract (s) acquiring large number (s) (of) military airplane (s) as
protection against possible American embargo (upon) Stop Minister of
Finance have signed contract (with) Intercontinent Aviation, Inc., March
29th for 96 military airplane (s) subject to cancellation 15 days notice either
party (ies) (to) Stop No description (s) plane (s), no price (s), no delivery
date mentioned Stop Please notify Department of State of this contract
stating that Chinese Government aviation expert(s) to decide about on type(s)
at a later date No publicity of any kind must not be given this matter as
Minister of Finance exceedingly anxious (to) transaction not to be known
anyone except Department of State official (s) Stop It must be understood
that this is not purchase (s) agreement (s) and is a contract (s) (for) for the
purpose(s) (of) protecting Government against embargo (upon) this contract
give us moral advantage (s) over competitor (s) Stop Writing fully.
mf cc Messrs. Morgan, Smith, Webster, Goulding, Shannon.
[Copy of telegraphic message]
To : Aeroexco, New York.
From : China Co., Shanghai, China.
Date: April 3, 1933.
Jouett reconnnended purchase 40 Northrop Aircraft Corp. bomber Stop He
has suggested that he be authorized (to) return to United States in order to
negotiate purchase (s) at not more than $40,000.00 each Stop If you can work
out some extremely attractive deal on the basis of 30 and 40 I^orthrop Air-
craft Corporation and 27 Curtiss Hawks consider it advisable quote immediately
Stop Love United Aircraft Exports pressing hard for business understand
offering attractive price Stop British very active effort to sell I am doing
everything possible.
cc Messrs. Morgan, Smith, Webster, Goulding, Shannon.
966 MUNITIONS INDUSTRY
Exhibit No. 391
[Copied from carbon copy. Written in pencil: South American Tour 1931]
JUI.Y 8, 1930.
Mr. J. S. Allabd,
Curtiss-W right Export Corp.,
21 West 57th Street, Neio York City.
Dear Jack : The following Is a more or less complete outline of the conver-
sion Mr. Famsworth had with Fowler Barker this afternoon. Undoubtedly
you are cognizant of all these facts, but it will do no harm certainly to jot
them down.
It seems that Mr. Young recently received rather lengthy reports from the
Commercial Attache at Buenos Aires and Montevideo expressing their appre-
hension over strong European aeronautical competition. There is to be a
British aircraft carrier in a river Plate around December 21st, cari-ying about
20 assorted airplanes of English manufacture. Italy has stationed de Pinedo
as Air Attache in Buenos Aires and is evidently making a strong bid for busi-
ness. The French position was greatly strengthened by the recent trans-
Atlantic flight carrying mail to South America.
There evidently was a consultation between Captain Fleming, our Military
Attache for Argentina and Uruguay and the two Commercial Attaches iu
these countries, and Leigh Wade, who as you know, is down there representing
the Consolidated people. This conference resulted in the determination to
attempt to arrange some sort of a demonstration from the United States to
counteract the European activities. The Department of Commerce will possibly
interview the, leaders of the aircraft industry here and see what their attitude
would be toward sending a group of planes to South America, possibly some
of those participating in the national .air tour this year. It is thought
possible that if the manufacturers so desire, a delegation of them will interview
Secretary Ingalls and gain his consent for the use of one of our carriers to
transport the planes to South America, citing the action of the British as a
precedent. Undoubtedly this demonstration if ever made tangible would visit
the international aeronautical exhibition to be held at Montevideo during the
first half of February 1931.
I am quite sure that this idea has not been broached to any of our competitors
and nothing may ever come of it, but in the event that something does materi-
alize we will at least have had a little bit of warning.
Very truly yours,
RPF-MB-4571
Washington File : " South American Tour, 1931."
Exhibit No. 392
[Copied from carbon copy]
Washington Office, September 29, 1930.
BtTRDETTB S. Wright, Washington, D.C.
J. S. Allaed, New York City.
Carrier Trip to South America.
I was in Mr. Ingalls' office this morning and his office urged that we push
in every way possible the completion of the arranging for the carrier to go
to South America. Comdr. Moulton believes that we must take the matter up
with the White House by possibly a head of the Aeronautical Chamber of
Commerce. I know that you are handling the matter as representative of theirs,
together with tlie help of the Department of Commerce. It looks as though
I may be out of town Wednesday of this week at Dayton, but I am hoping that
I may be able to delay the trip until Thursday in order to be here when you
are here on Wednesday.
Very truly yours.
BSW/LH-5641.
Washington oflBce : " Carrier Trip to South America."
MUNITIONS INDUSTRY 967
Exhibit No. 393
[Copied from original]
Cubtiss-Wkight Export Corporation,
October 7, 1U30.
Inter-ofBce correspondense.
From: J. S. Allard.
To: B. S. Wright.
Subject: Naval carrier to South America.
Thanks for yours of October 3d on this subject, and as a result, Leigh
Rogers and I are today drafting the letter for Fred Rentschler to present to
Mr. Hoover.
We will try to get this thing through in the very near future.
Sincerely yours,
(Sgd.) J. S. ALL.VRD.
EMN.
AVashington file : " Naval Carrier to South America."
Exhibit No. 394
Inter-office memorandum.
[Copied from original]
Curtiss-Weight Corporation,
Export Division,
March 11, 1931.
From : IVIr. C. W. Webster, New York.
To: Mr. Burdette S. Wright, Washington.
Subject : Chile, visit of Comandante Merino.
In line with my telephone conversation this morning, Comandante Arturo
Merino B., Sub-Secretario of the Interior for Aviation, is the chief of all
Chilean aviation — Army, Navy, and civilian. He is the biggest foreign cus-
tomer we have and is entirely responsible for all our business in Chile.
During the recent visit of the Prince of Wales to Chile, the Prince person-
ally invited Merino to visit him this spring, which invitation was accepted.
His original plan was to proceed to England first, and then visit the United
States, but we have persuaded him to visit the United States first in order to
witness the Air Corps manoeuvres during May. He has agreed to this program
providing an oflScial invitation is extended to him by the U.S. Government
through the War Department as a foreign observer.
This means a great deal to us, as Merino has never been out of his own
country and has always been partial to European methods and materials until
we began to supply him with equipment a few years ago. It is up to us to
lean over backward in selling Merino American ideas, methods, and equip-
ment, and upon liis arrival here we are arranging an elaborate and extensive
program calling for visits to various airports in this country. If possible, we
would like to have you arrange for permission to visit various Army and Navy
stations and have him meet the Army and Navy Secretaries, and, if possible,
President Hoover. This seems advisable and necessary in order to offset the
efforts of the Prince of Wales.
Until 1926 the entire Chilean Air Service was equipped with British material.
It is now about 90% American.
If Merino comes to the United States, he will fly as far as Miami as the
guest of Pan American Airways. We intend to pick him up at Miami with a
private machine and bring him to New York. It is possible that I will have
finished my work in Chile, so that I can accompany him back to the States.
Your efforts to supply an official invitation promptly will be appreciated, as
I would like to extend our own personal invitation not later than the first of
next week.
I am leaving Wednesday, March 18th, for Miami, where I will pick up the
Pan American Airways, arriving in Chile the last of March.
In order to further emphasize the importance of making these arrangements
for Comandante Merino I should mention that we have at present orders
968 MUNITIONS INDUSTRY
amounting to $1,200,000 for the Chilean Government with another million or
million and a half ready to be closed within the next month or so.
Many thanks for your kind cooperation.
C. W. Webster.
jc (Sgd.) WEB.
Washins'ton file : " Chile."
Exhibit No. 395
[Copied from carbon copy]
Washington Office, Angust 12, 1930.
Burdette S. Wright, Washington, D.C.
J. S. Allard, Curtiss-Wright Export Corp., 27 West 57th St.
Poland
Colonel Foy of the Military Intelligence Division called Farnsworth to his
office this morning and showed him some correspondence received from Major
Emer Yeager, Military Attache at the American Embassy, Warsaw, Poland.
Major Yeager, among other things, said that the performance of our pilots,
planes, and motors, made a profound impression in Bucharest and Rumania.
He happened to be standing by the side of the Chief of Rumanian Aviation in
Bucharest while Doolittle was doing his stuff. The chief apparently expected
the wings to drop off the Hawk at any moment during a power dive and had
never seen anything at all like Doolittle's performance.
In Warsaw, Captain Cannon seems to have carried off the honors with his
superb handling of the Fledgling. He apparently put it through completely its
paces leaving a firmly seated conviction of the stability, steadiness, and re-
markable performance of the plane. As one Pole expressed it, he made it do
everything but dance. All in all, the officials, including French and British
Attaches, were deeply impressed with the power of the motors and the strength
of the ships.
Another dispatch deals wiht the jealousy of the French and English aroused
by this flight. Shortly after our demonstration was finished, France made
an official flight with high ranking officers to Warsaw and Baltic countries.
This trip was made very secretly and with a minimum of publicity. Major
Yeager tells of a flight of British airplanes to twelve Balkan and Scandanaviau
countries to be made in September. This is supposed to be merely an official
flight of the Royal Air Force, but Major Yeager learned from reliable source
that it was deflnitely planned to off-set any good impressions of American
aviation made by our Curtiss-Wright tour.
Colonel Foy also had a dispatch from Warsaw enclosing what seems to be
Polish pilot's licenses awarded to the members of the flight by the Chief of
Polish Aviation as a mark of his appreciation. These insignia and accompanying
letter are being sent to me here and I shall in turn forward them to you.
Yours very truly,
RPF/LH-4965
Washington File : Poland.
Exhibit No. 396
Helsingfors, Finland, Fchruanj IS, 1931.
The American Charge d'AFFAiRs,
American Legation,
Helsingfors.
Sir : Pursuant to our conversation of this date, and complying with your
suggestion, I beg to submit herewith a copy of communication prepared by the
undersigned for translation into Finnish and submission to the Minister of
Defen.se and certain other high authorities of the Government of Finland who
have some interest and voice in the choice of a suitable high-powered aviation
motor for the Finnish Air Force. This communication will be submitted in
original to the Defence Minister tomorrow.
It appears probable that a decision will be reached in the very near future
with respect to a moderate initial order of new motors, which immediate order
will in all probability lead to further and more important orders for the
same type of engine later in the current year. I am assured that the responsi-
MUNITIONS INDUSTRY 969
ble technical authorities of the Finnisli Air Force, while not in unanimous
agreement, favor our Wriglit " Cyclone " R-1820. Should the decision be in
our favor, it will be the first important aeronautical business in the Baltic
countries placed with American manufacturers.
I have warning, however, that the decision may be influenced by political
considerations, and I have good reason to believe that the Gnome et Rhone
Company (French) are bringing considerable pressure to bear in an effort
to secure this business for their " Jutiper " or " Mercury " engine which they
build under license from the Bristol Aeroplane Co. (British). This pressure
is of a nature which reflects little credit on the business ethics of the Gnome
et Rhone Co. The Finnish Air Force possesses a certain quantity of Gnome
et Rhone " Jutlpers " and I believe that some fourteen of these engines are
now in the Gnome et Rhone factory near Paris for overhaul. The company
apparently agreed to carry out this overhaul free of cost, but once having
received the motors they appear now to boj using them as a lever, coupled
with threats of making difficulties in future with respect to spare parts for
the other " Jutipers " in Finnish hands, to force the Finns to divert their
projected order for new motors to Gnome et Rhone.
Our Euroi>eau competitors are undoubtedly using both economic and political
arguments against American manufacturers, and have succeeded in convincing
certain of the Finnish officials in high authority that America is out of the
question, or at least not dependable,, for geographical and political reasons,
as a suitable source of supply for military equipment. I believe their arguments
fundamentally unsound and have attempted to combat them in mj' communica-
tion to the Minister "f Defence.
It has been suggested to me, and quite strongly, that it would be very helpful
if the American Legation should use its good offices in this instance to combat
this propaganda of uur European competitors and accredited representatives
of their respective governments. Confidentially, I may mention that Colonel
Vuori, Chief of the Finr.ish Air Ftsrce. who has stated frankly that he favors
the "Cyclone" advised me last night that it would do a vast amount of good
if the Charge d'Aftaires could talk personally with the Foreign Minister, the
Finance Minister, the Defence Minister, and possibly the Minister of Com-
merce, on the politico-economic situation as it may affect the subject of this
memorandum, stressing especially the fact that the United States would be a
dependable and rapid source of supply for Finland under all conditions that
might conceivably arise. It may be that certain of the grounds for such a
contention that I have advanced in my communication to the Minister of
Defence will meet with your concurrence.
It is possible that trade arguments will also be advanced against us, which
would seem answerable in view of America'.s friendly relations with Finland,
the recent decision of our Treasury Department respecting "dumiiing" and
the vast amounts of money loaned to Finland by the United Stat<>s and
potentially available for future loans.
Any assistance in this matter that you may deem proper to afford will
undoubtedly be of value to American export business in general, as well as
being greatly appreciated by the undersigned and the interests represented
by him.
Respectfully,
Curtiss-Wright Export Corporation,
Melvin Hall, Vice President.
Exhibit No. 397
MEMORANDUM
June 19, 1934.
To : Thomas A. Morgan.
From : Albert I. Lodwick.
Subject : Importance of the export market to the aviation industry.
1. From a national defense standpoint, it is essential that a large number
of men be trained in the manufacture of aircraft in order to produce large
quantities of aircraft in case of an emergency. Therefore, it is a distinct
advantage to this country to maintain the greatest possible sales volume of
970 MUNITIONS INDUSTRY
American aircraft and engines abroad in order to provide employment for the
largest number of men.
2. It is estimated that 75% of the cost of producing an aircraft engine
is for labor, that is, including the labor involved in the material and acces-
sories furnished for the production of an engine.
In the manufacture of airplanes it is estimated that 66% of the total cost
of an airplane is for lobor, that is, including the labor involved in the manu-
facture of accessories and materials required for the production of the air-
plane.
llie export business of the aeronautical industry during 1933 provided
10,620,000 man-hours of labor.
3. The export business has enabled a number of American aviation com-
panies to continue operation. Without this business many American aviation
factories would have been forced to close their doors, resulting in further
unemployment as well as reducing the sources of supply for military and
commercial aircraft which would be of vital importance to our Government
in case of an emergency.
4. All aircraft and aircraft engines of a military nature must first be re-
leased by either the Army or Navy before an American manufacturer is per-
mitted to ship these products to a foreign country. This policy definitely pro-
tects the United States from a national defense standpoint by retaining the
latest plane and engine developments exclusively for our own military and
naval air forces.
5. The export aviation business reduces the cost of airplanes and engines to
the United States Government due to the fact that a proportion of the fixed
charges and overhead is charged to the foreign business.
6. The greater the number of countries purchasing our airplanes and engines,
the greater our knowledge of the potentiality of their air force. Our pilots,
mechanics, and salesmen procure very valuable knowledge of flying conditions,
terrain, available landing fields, in foreign countries, which would be of great
military value in case of an emergency.
7. Licenses to manufacture American aircraft and/or engines in foreign
countries have been granted, after approval by the tjnited States Army or
the United States Navy, in several cases to foreign manufacturers. It usually
takes from two to three years for foreign companies to manufacture the
American product, by which time that product would be in the obsolescent
stage in the United States. Any restrictions upon the exporting of American
aviation products will doubtless cause our foreign customers to divert their
trade to foreign competitors, thus building up the aviation industry in foreign
countries, to the detriment of American aviation. It will also encourage for-
eign countries to establish their own aircraft and aircraft engine manufactur-
ing plants rather than depend on the United States and their source of supply.
Such action by many of our present export customers would seriously affect
the status of the aviation industry in the United States who are dependent upon
the export field for over 35% of their sales volume.
8. The following table indicates the increasing importance of exports to the
total production of the aviation industry. In 1933, over one-third of the
entire production of aeronautical products was shipped to foreign countries.
Aeronautical exports were larger in 1933 than any other year in aviation
history. The important part played by exports in relation to our total pro-
duction is due not only to the sales promotion efforts and the high quality
of our products, but is also due to the cooperation the industry has received
from the commercial attaches and other United States Government repre-
sentatives located in foreign countries. These figures are of even greater im-
portance when it is realized that American aircraft available for export is in
the obsolescent stage and that it must compete with foreign products which are
released for export in many cases after passing the experimental stage.
Foreign countries have likewise assisted their commercial companies in develop-
ing business by sending their naval aviation units to foreign countries to demon-
strate their latest types of flying equipment. An example of this was the
visit of the British Navy to Turkey in 1929, and the flight of 35 Savoia
Marchetti Torpedo and Bombing planes from Italy to Athens, Constantinople,
Varna, and Odessa, in June 1929.
MUNITIONS INDUSTRY
971
Total United States prodMCtion as compared to exports of American aircraft,
aircraft engines, parts' and accessories
Total pro-
duction '
Aeronauti-
cal exports
Percent
of total
Total pro-
duction '
Aeronauti-
cal exports
Percent
of total
1928
$64, 662, 491
70, 334, 107
60, 486, 177
$3, 664, 723
9, 125, 345
8,818,110
5
12
14
1931
$54, 520, 627
34, 861, 185
25, 676, 165
$4, 867, 687
7, 946, 533
9, 203, 978
8
1929
1932 .
26
930 - -
1933
32
1 Production figures are used due to the fact that reliable sales figures are not available for years prior
to 1930.
The above table indicates that the export business is more essential now
than at any previous time. This business enables many factories to continue
operation which will be of inestimable value to the Nation in case of an
emergency. Any restrictions placed on the exportation of aeronautical equip-
ment will divert this business to foreign competitive manufacturers as well as
encourage foreign nations who are now our customers to establish their own
factories to manufacture the products which now give employment to thousands
of laborers in this country. Many factories must be kept in operation in times
of peace if they are to meet the demands that an emergency creates.
9. During the past two years, the aeronautical exports of the United States
have been larger than those of any other country. The following table indi-
cates that the United States exports in 1933 totaled $9,203,978 compared to
$6,210,171 for the United Kingdom, our nearest competitor. The United States
exports in 1933 almost equalled the combined exports of the United Kingdom
and France. However, this enviable position has only been held by American
aviation during the past two years. This situation has been brought about by
the satisfactory operation of American airplanes and engines abroad which
have resulted in large repeat orders during the past two years. Undoubtedly,
some of our foreign competitors would welcome an embargo in those countries
which have transferred their purchases of aeronautical equipment to the
United States, and in this way injure the aviation industry of this country.
An examination of the following figures will indicate the increasing impor-
tance of American aeronautical products in the export field :
Exports of aeronautical equipment from the United States, Great Britain,
France, and Italy, 1928 to 1933
United
States I
United
Kingdom 2
France ^
Italy *
1928
$3, 664, 723
9,125,345
8.818,110
4, 867, 687
7, 946, 533
9, 203, 978
$6, 466, 898
10, 620, 086
9, 971, 900
8, 441, 734
6, 107, 130
6, 210, 171
$5, 469, 027
8, 455, 283
8, 278, 452
4, 559, 979
2, 693, 393
3, 035, 907
$2, 160, 909
1, 157, 080
332, 055
1,179,032
1 272 236
1929
1931
1931
1932
1933 .
2 218 974
Total... .
43, 626, 376
47,817,919
32,492,041
8, 320, 286
■ Department of Commerce, Bureau of Foreign and Domestic Commerce, Trade Statistics Division.
* "Accounts Relating to Trade and Navigation of the United Kingdom ", December 1933, December 1931,
and December 1930.
3 "Statistiques Mensuelle du Commerce Exterior de la France", December 1933, December 1931, and
December 1930.
* "Statistica del Commercio Speciale de Importazione e di Esportozione", December 1933, Decembe
1931, and December 1930.
10. In connection with the rivalry between the United States and European
nations for the export business of the world, it is interesting to compare the
wages paid in order to determine those countries which have a price advantage.
An examination of the following figures indicate a decided advantage in favor
of our European competitors.
972
MUNITIONS INDUSTRY
Average cost of labor per hour in aircraft and aircrafit-engine manufacturing
plants
United States
England
France
Cents
Aircraft manufacturing
Aircraft engine manufacturing.
Cents
Cents
In spite of the fact that England and France pay lower wages for skilled
labor required in the manufacture of aircraft and aircraft engines, they pay
far higher prices for their military aircraft engines, as is indicated by the fol-
hjwing figures. The prices paid by England and France doubtless enables
their engine manufacturers to carry on an aggressive experimental engineering
program as well as show a profit from their operations. Such a policy keeps
alive production facilities which would be of inestimable value in case of an
emergency.
PRICE PER HORSEPOWER PAID FOR MILITARY AIRCRAFT ENGINES
England, $15,000 per horsepower.
France, $18.35 per horsepower for liquid-cooled engines.
France, $12.50 per horsepower for air-cooled engines.
United States, $11.50 per horsepower for liquid-cooled engines.
United States, $7.98 per horsepower for air-cooled engines.
SUMMARY
During the past few years the United States exports of aeronautical prod-
ucts have increased to such an extent that the United States leads the world
today in the export field. The export business constitutes a large part of
the total aviation production in the United States. The establishment in
foreign countries today of American aviation products is extremely important,
due to the fact that many nations are today formulating the nucleus of an
air force.
In future years the demand for aircraft products will undoubtedly increase.
This not only means added aircraft purchases but means annual purchases
of spare parts and accessories to keep their planes in operation. Further,
it is necessary for these countries to purchase and set up equipment for the
maintenance and repair of aircraft. If this machinery is set up for American
planes, and relations with these countries are satisfactory for several years, it
will be very difficult for our foreign competitors to obtain the expert business
we now enjoy. These countries who are now building up an air force will
purchase aeronautical equipment from France, England, Italy, or some other
foreign country, if they believe that trade restrictions in the future may pre-
vent their procuring spare parts for the American flying equipment they are
purchasing today. Thus, the aviation industry of foreign nations will benefit
to the detriment of the aviation industry in this country. Congressional in-
vestigations, embargoes, pacifistic talk, and propaganda will doubtless cause
some of our present customers to buy abroad, due to the tmcertainty of delivery
and the uncertainty of obtaining spare parts in the future. The greater the
volume of aviation business in this country, the better our national defense.
Restrictions on aviation exports will not only send business to our foreign
competitors but will tend to cause more unemployment in this country, de-
crease the productive capacity of our factories, and weaken our national
defense.
A policy of continued investigation, uncertainty of the future, and trade
restrictions will likewise encourage many foreign nations desirous of build-
ing up an air force to establish their own airplane and airplane-engine fac-
tories rather than depend on the United States as a source of supply.
The problem settles down to a question of whether factories in Europe or
the United States will enjoy this foreign business.
Albert I. Lodwick.
AIL : RMW
MUNITIONS INDUSTRY 973
Exhibit No. 398
December 10, 1929.
Mr. LEaGHTON W. Rogers,
Chief Aeronautics Trade Division,
Bureau of Foreign and Domestic Commerce, Washington, D.C.
Dear Mr. Rogers : The Curtiss Aeroplane Export Corporation has recently
consumated contracts for sale of military pursuit airplanes to the Dutch
East Indies and to the Siamese Government. There contracts have finally
been obtained after several months of work through the combined efforts
of our representatives and those of the Bureau of Foreign and Domestic
Commerce.
We wish you to know how much we appreciate the splendid cooperation of
your Division and of the Bureau and of the assistance given by your men
in the field and your oflice in Washington. It is very probable that the con-
tracts might not have been obtained liad it not been for the service which
your organization was able to extend, as, of course, there are certain angles
of situations and information which can be obtained by an otlicial representa-
tive of the United States Government, which would be impossible for a private
individual to gain.
I certainly hope that the relation between this company and your Division
may always remain as happy as they have been in the past and that you
wili continue to allow us the privilege of calling upon you for assistance in
the furtherance of our foreign business, not only in the countries where you
have already assisted us but, I hope, also in more extensive fields included in
our future program of expansion. I can see where the assistance you might be
able to give us in newer fields which we have not yet reached, could be of even
greater service to us tluin in those where we have already carried on negotia-
tions, as, of course, making the initial step in new territory is the most dif-
ficult part, unless contracts have already been established ahead of us and we
are able to use them for guidance.
Again thanking ydu for the splendid cooperation I wish to remain.
Very truly yours,
(Sgd.) BuKDETrE S. Wright.
RLE/CC^2244.
Washington file: General.
(" Exhibit No. 399 " appears in text on p. 819)
Exhibit No. 40O
[Copied from carbon copy]
January 31, 1930.
Mr. Leighton W. Rogers,
Chief Aeronautics Trade Division,
Bureau of Foreign and Domestic Commerce,
Washington, D.C.
Dear Mr. Rogeks : You, I know, understand the difficulties which are con-
fronting American aircraft manufactui'ers in the field of sales. The over
production of the past year, and the reorganizations and mergers in the industry
are bringing about a general reorganization and intensification of sales methods.
It will be necessary for us to indulge in much more intensive effort in foreign
markets during the coming year than it was in the past.
The recent stock market conditions and their effect on the business of
the country as a whole emphasize the need for such efforts in foreign markets
by the aircraft industry.
My company has expressed its appreciation in no uncertain terms of the
assistance which it has received from the Department of Commerce, and in
sales problems, especially exports, from the Aeronautics Trade Division. As
an example, your aeronautics specialist in South America was instrumental
last year in paving the way for, and in the consummation of, a sale for six
of our airplanes in Brazil — a market from which we had not received any
business for years. Such contributions to marketing constitute aid of original
and outstanding value.
Because of the strong competition offered by European aircraft manufacturers
in the Far East, the embargo against United States aircraft in Australia
974 MUNITIONS INDUSTRY
(which it has been impossible to have lifted through diplomatic channels and
by correspondence) and the missionary work which should be done at this time
in the Far East in general, we are naturally very much interested in having
an impartial observer for the aeronautics industry cover those territories in the
same manner in which South America has been covered by your Bureau. The
time is particularly opportune to have a qualified aeronautics man visit Aus-
tralia, New Zealand and, if possible. South Africa. The Chinese market needs
attention particularly because of tlie price competition offered by European
makers.
We have known for some time that the Department was asking Congress
for funds to enable it to carry on and extend this foreign field work for the
aeronautics industry, and this letter is being written to ask you about the status
of that request for appropriations. Frankly, the company wants the assistance
which these appropriations will bring into being.
Very truly yours,
BuEDETTE S. Weight, Vi'ce Presi^nt.
Washington file: General.
Exhibit No. 401
[Copy]
Department of Commerce,
Bureau of Foreign and Domestic Commerce,
Washington, May 12, 1933.
Confidential.
In reply refer to .... 45.
Mr, C. W. Webster,
President Curtiss-W right Export Corporation,
21 West 57th Street, New York, N.Y.
Dear Mr. Webster: Kindly refer to my letter of April 14, about the visit of
the Brazilian Army Air Service officers who arrived yesterday on the " Southern
Cross." It would be impolitic, I believe, to mention the proposition mentioned
below to the Brazilian gi-oup now here.
In connection with their visit, I note from correspondence from our Rio de
Janeiro office that Captain Henrique Dyott Fontenelle was not included in the
mission and, according to our office, was the principal advocate of Brazil's pur-
chase and virtual standardization upon American aeronautics equipment.
The Rio de Janeiro office suggested that some American manufacturers, or
group of them, might desire to pay Fontenelle's way to this country, taking
advantage of tlie present low steamship rates. First-class round-trip passages
from Rio de Janeiro to Chicago and return now available for about $250.00, such
round-trip passages being good for a period of six months in connection with
the Century of Progress Exposition at Chicago.)
It is understood that Captain Fontenelle can arrange to make the trip insofar
as leave from his duties is concerned. This man has been placed in charge of
the organization of the observation group of the Army.
I quote from a report dated April 13 from Mr. Pierrot, and am pleased to
attach the statement referred to therein :
'* I have just secured a copy of the recommendations made by Fontenelle
during the first two weeks of the revolution, when the War Dept. was in a
quandary as to what type of equipment to purchase, and when a tremendous
amount of pressure was being brought upon War Dept. officials by French and
British manufacturers to buy their equipment. This translation of Fontenelle's
report is of particular interest in substantiating the statements I made in my
letter to the effect that he, more than any other single flying officer, had been
responsible for the purchases of the large number of American planes acquired
by the Army during the latter months of the revolution."
I am passing this suggestion on to you without any recommendation on my
part, as well as to other United States manufacturers likely to be interested,
and who have been active in the Brazilian market.
Please let me have your reaction.
Very truly yours,
(Signed) Leighton W. Rogers,
Chief Aeronautics Trade Division.
Inclosure 68209,
MUNITIONS INDUSTKY 975
Exhibit No. 402
Februaky 18, 1931.
Confidential.
Memorandum for Mr. Dickson, Charge d' Affaires.
Referring to previous conversations on the subject of the pending purchase
of aeronautical equipment by the Finnish Air Corps, for which they have
appropriations totalling approximately SMKs 60,000,000 (residue from 1930 to
1931 new allowances), the immediate purchase of 10 airplanes engines, possibly
18, at around $6,500 each, which has been debated for a number of months is,
according to my latest information, to be decided on within a week or 10 days.
As you know, two American companies, the United Aircraft Export Coi'pora-
tion of New York, with their Pratt & Whitney " Hornet B ", and the Curtiss-
Wright Export Corporation of New York with their Wright " Cyclone 1820 "
are competing with French Gnome et Hrone " Bristol Jupiters ", English Arm-
strong, Siddeley's " Jaguar Major " German Siemens-Halske's SH 20 ", and a
German made Pratt & Whitney " Hornet A". I have in confidence from re-
sponsible officials of the Air Corps that the consensus of opinion of the Techni-
cal Board appointed to examine engines suitable for the needs of the Air Corps
is in favor of the Wright " Cyclone ", with a noticeable amount of sentiment
favoring also the other American engine — the " Hornet B ". Undoubtedly,
however, at this particular moment, the " Cyclone " is most favored. There is
too a body of opinion which has grown out of experience with French, English,
and Gennan engines, and training of the air force personnel, in the countries
mentioned, strongly favoring respective French, British, and German engines.
The ramifications of the tendencies to favor European engines involve personal
inclinations, friendships, former alliances, and various other unidentified
reasons.
It now appears, within the past several days, that while on the whole the
American engine is best liked, it is doubtful if a decision to give the order for
this particular group of engines will be tendered to America — ^and undoubtedly
the company receiving the first order will logically be given the orders to fol-
low— because no one in the council considering the purchases is willing to take
the responsibility for giving the order to America. There have not been hereto-
fore any American engines used in Finland (there is one engine from America
now on test with the Ministry of Defense — a Wright " Cyclone 1750"), because
of a more or less inherent belief that the Finnish Government would prefer to
turn its orders to Europeans countries on account of possible closer political
affiliations with European countries in the event of war. The argument used
is the above in a general way, but specifically it is stated that the comparative
distance of the United States from Finland, and of the European countries
mentioned, makes the possibility of securing supplies when needed must more
problematical. As a matter of fact, it is the experience of importers of Amer-
ican goods here such as machinery, automobile, and other manufactured arti-
cles, that their orders to the United States are frequently filled and deliveries
made to Finland in much quicker time than orders for similar products sent to
European countries. A case in point is the Wright " Cyclone 1820 " test engine
sent to the Air Coi-ps for trial. This engine was shipped from New York on
June 27, 1930, and arrived in Helsingfors, July 15, 1930. The order had been
placed for the shipment a week or so before June 27. The Armstrong- Siddeley
" Jaguar " so I am told by people in the Ministry of Defense, took a consider-
able longer time to get here, being shipped from England, due principally to the
length of tinae between receipt of the order and the actual shipment of engine.
The relative shortness of deliveries from America is due to several factors
inherent in American business methods (1) fast production, (2) prompt atten-
tion to orders, and (3) direct steamship connections between New York and
Helsingfors each week with a scheduled time of 14 days between the ports.
This present engine order is of considerable importance to American aeronau-
tical manufacturers ; it represents the first order of any importance for engines
for military use to be made available to American manufacturers in as advan-
tageous a prospect ; it is definitely the first order for airplane engines which
American manufacturers have had as good a chance to get in Finland ; if this
order goes to America, it opens up very good prospects for future business in
Finland, and would very much strengthen the chance for doing business in
surrounding countries, in the Baltic States and Scandinavia. One of the Ameri-
can companies, the Curtiss-Wright Export Corporation, has devoted consider-
able time and money in following up this opportunity, which I uncovered in
83876— 34— PT 4 19
976 MUNITIONS INDUSTRY
October 1929 ; in June of last year they sent a demonstrating mission of three •
airplanes to Finland at large expense and since then have had three highly
paid men visit Finland for varying lengths of time. The United Aircraft Export
Corporation have also sent one man to Finland in connection with this matter,
having shown an active interest in it some months after Curtiss-Wright had
earnestly taken it up.
In view of the apparent political sentiment in the government here against
the purchase of American engines, even though the Technical Board in the
General Staff prefer the American engines, I believe that it would be of con-
siderable assistance if certain government officials who might have a say in
the final decision could be informed of the facts in the matter, as to American '
deliveries, etc.
Cordially yours,
OSBORN S. Watson, Commercial AttacM. .
Exhibit No. 403
Deipabtment of Commerce,
BUBS1A.U of FoREaox and Domestic Commence:,
Washington, March 24, 1931:
In reply refer to 45.
Mr. J. S. AiXARD,
Vice President and General Maiuiger Curtiss-Wright Export Corporation,
27 West 57th Street, Neiv York, N.Y.
Deak Jack: Attached is a copy of a confidential letter from Commercial'
Attache "Watson at Helsingfors, and of a memorandum which he wrote to the •
Charge d' Affaires of the Legation there, concerning the status of the Finnish.,
airport engine order.
As you will see, the recent delay on the part of the Finnish Government in
placing the order is due to increased pressure being brought to bear on the-
part of some of your European competitors.
Very truly yours,
(Sgd.) Leiighton W. Rogees,
Chief, Aeronautics Trade Division. .
Inclosure 38875.
Exhibit No. 404
Office of the American Commercial Attach^,
Helsingfors, Finland, February 23, 1933.
Director Burrvu of Foreign and Domestic Commerce,
Department of Cominerce, Washington, D.C.
(Attention: Mr. Leighton W. Rogers, Chief, Aeronautics Trade Div.)-
Subject : Finnish Purchase of Czechoslovak Airplanes.
Sir : I have inquired into the method of construction used by Smolick on the
airplanes which the Finnish Government has contracted for and for which
they also have a building license. From what I can gather, the construction
used by Smolick is the dural and welded steel tubing plan as used in the •
United States. I believe that the wing construction is with wood longeron
and dural ribs. This is the construction which is referred to in Jane's All ■
the World's Aircraft with respect to airplanes preceding this model.
In connection with this Czechoslovak purchase, even though it was a propo--
sition of a kind of baiter, the very fact that the Finns bought from the Czechs
instead of from the English makes me believe to a certain extent that all
of this official pressure by the English is not as effective as it might be. I
have heard the sentiment voiced recently that perhaps this official pressure
proposition has gone a little too far u]^ here. I sincerely trust that this is the
case. A few days ago at a dinner the secretary of the legation was talking
to Mr. Ryti, the Governor of the Bank of Finland, about Finnish Government
purchases, and Mr. Ryti categorically stated that it was a Finnish Government
policy to buy the best things they could at the cheapest price, regardless of
political considerations. This sounds rather funnv to me in the face of some-
MUKITIONS INDUSTRY 977
recent Finnish Government purchases from England, but I am taking a spai'k
of hoi>e from this Czechoslovak order. I expect our two big companies at
home, who really have spent a considerable amount of money up here in Finland,
are more or less inclined at this time to let this particular small territory
ride for the time being. They have not had anybody up here at all since I
came back. Both of them have very good agents, but I do not think that
pressure from headquarters from time to time is a very salutary thing.
I certainly hope that it may be possible within the not too distant future
for some sort of cooperation to be brought about between the American aircraft
firms who do a good deal of export, as referred to in Mr. Warner's article
about which I wrote you a few days ago so that we may then lie able
to take off our coats and drive right into the middle of these government
orders.
(" Exhibit No. 405" api>ears in text on p. 821)
Exhibit No. 406
[Copy]
In reply refer to 45.
Department of Commerce,
Bureau of Foreign and Domestic Commerce,
Washington, March 12, 1932.
[Confidential]
Mr. C. W. Webster,
President Curtiss-Wrir/ht Export Corporation,
27 West Fifty-seventh Street, -New York, 2V.Y.
Dear Mr. Webster: As you may have already heard, there is an aviation
mission on the west coast from Canton which arrived in Seattle on ^larch S.
It consists of Brigadier General Woo G. Garr, commander of the second
squadron of the Canton Aviation Bureau, and Colonel S. Iv. Yee, Director of
the Cantonese Intelligence Bureau. These ofhcers are representing General
Chang Wei Jung, Commander of the Canton Aviation Bureau whom you will
recall as former Chief of the Nationalist Air Force at Nanking. According to
Trade Commissioner Edward P. Howard, they came to inspect aircraft fac-
tories and advise the San Fi-ancisco Chinese regarding airplane purchases
for presentation to China.
I could not advise you of their presence in the United States before, since
I was requested not to from China. For obvious reasons I urge your keeping
the information contained in this letter in strict confidence. Under no cir-
cumstances should any publicity be given out about the mission.
I understand that the two officers arrived from Seattle at San Francisco
yesterday, where they will stay for approximately two weeks. They will
then proceed to Los Angeles, Chicago, Detroit, Washington, New York, and
Boston. I shall endeavor to arrange it so that they will visit Buffalo.
You will be interested to learn that there is in San Francisco a joint com-
mittee of the Chinese Chamber of Commerce and six Chinese trading com-
panies which requested our San Francisco ofBce to help make a iireliminary
survey for the use of the mission of pursuit bombing and observation planes.
This joint committee has raised some funds from Chinese-Americans for the
purchase of planes. Whether the Chinese-Americans in other cities who are
reported to have raised, or to be raising, funds for this purpose will see the
delegation is unknown. It is assumed that the officers will survey this field
while here, if these activities have not already been consolidated by the San
Francisco committee, since, as you know over 90 percent of the Chinese-
Americans are Cantonese. Cleveland, Buffalo, Syracuse, Boston, and Detroit
have been mentioned by the press in this connection.
When our office in San Francisco asked our help we sent out one of the
catalogs of Curtiss military planes ; also, photographs of the YP-20 and the
02C2 " Hell Diver " with statements of performance and specifications. In
passing this information, we mentioned, because of the Chinese preference for
air-cooled engines, that some other Curtiss-Wright planes, as made for the
United States military services, were liquid-cooled and if the committee and
978 MUNITIONS INDUSTRY
delegation were interested in these, your corporation would be pleased to
furnish details.
You can get in touch with the mission through our Mr. Wesley As^h. District
Manager. U.S. Bureau of Foreign and Domestic Commerce, at 310 Custom-
house, San Francisco. In doing so please make no mention of the fact that
I suggested this action.
Very truly yours,
(Signed) Leighton W. Kogebs,
Chief, Aeronautics Trade Division.
(" Exhibit No. 407 " appears in text on p. S23)
Exhibit No. 40S
Febku-'lky 21. 1933.
Mr. H. P. MacGowan,
Acting Commercial Attach^,
Edificio del Banco Hipotecario de Colombia,
Bogota. Colombia.
Df.ar Mb. MacGowan : I want to acknowledge receipt of your letter of Feb-
ruary 1st aud extend our appreciation of the great assistance we can always get
from your office.
The Department in Washington advised us that they had a cable from you
asking us to submit information on the planes that we are able to offer. As we
have already passed this information, by cable, to Joaquin Sami>er. and knowing
his close contact with you, I have simply cabled you in reply that he has all
the necessary information. We have, I think, made a most advantageous offer
on more Hawks and Ospreys and I hope something will result. Delivery is
always an important factor and on these two planes I think we are in a position
to make deliveries that cannot be equalled by any other company. My own
opinion is that they should have more of both of these planes, aud with the
equipment consisting largely of these planes they will have a fighting air force
which would give them command of the air.
Mr. Samper has advised me of Benny Mendez accident in one of the Hawks,
and while I have written him a brief note expressing our best wishes for his
speedy recovery, I shotild appreciate it if you see him personally to tell him we
are indeed sorry to learn of his accident and trust that he will soon be all right
again. We are. of course, following the press advices with respect to develop-
ments, but always appreciate hearing from your office what is going on.
The service man, Osborne, whom you mentioned, did not go to Colombia.
We are sending another man, Harvey Brewton, who will probably arrive in
Colombia within two weeks, and if he gets up to Bogota I told him to get in
touch with you.
Kindest personal regards.
Sincerely yours,
W. F. GonLDiNG, Vice President.
WFG/f.
Exhibit No. 409
[Copy]
Paris, May 23, 1932.
JuLiEX E. GiX-LESPiE. Esq.,
American Commercial Attach^,
American Embassy, Istanbul, Turkey.
Dear Jltien : The attached copy of a letter to the Secretary of Commerce,
which I am enclosing for your information, is self-explanatory.
I am indeed appreciative of the cooperation which we have received from
the Department of Commerce and particularly from yourself. Your assistance
and wise counsel have been invaluable, and when I say that we are counting
greatly upon your good advice and collaboration in our future dealings with
the Turkish Government, you know what I mean.
MUXITIOXS INDUSTRY 979
I have lately received extremely bad reports from both Italian and French
constructors with respect to their dealings with the Turkish Government, and
the difficulties which have been created in practically all contracts with the
Turkish governmental departments as an excuse for delaying and reducing the
payments called for by the contracts. It seems to me that the Turkish Govern-
ment is now very much on trial with respect to American business. We are
calling upon them to meet their obligations promptly and honorably, as we
propose to meet ours, and when they do so I am convinced that this favorable
experience will be of assistance to the Turkish authorities in future dealings
with the United States. Should the occasion happen to arise, which I trust
it will not, I suggest that this might properly be pointed out to the authorities
concerned by you or the Ambassador.
With kind personal regards and best wishes.
Sincerely yours,
Mexvin Hall.
MH/rbs.
Exhibit No. 410
[Copyl
May 11, 1933.
Mr. Julian Gullespie,
American Commercial Attach^,
American Enibassy, Istanbul, Turkey.
Deur Gillie: Yesterday I wrote Henry the first letter simply because I
wanted to hold up your letter until I could give you some definite informa-
tion about what we are going to do on the Kayseri situation. I would must
rather have written you first as I have the deepest appreciation for your
many courtesies to me Avhile I was in Turkey, but I thought you would under-
stand by reason for holding up the letter and I assure you that my apprecia-
tion is none the less sincere by making this the second letter to Turkey since
my return.
In the first place, I cannot begin to thank you or Inez for what you did
to make my stay in Turkey pleasant. Also your courtesies, when the two
Helens were with me, were equally appreciated by them. With all the fussing
and fuming I did about my long stay in Turkey, I really had a good time and
enjoyed the experience. The gootl time was solely enjoyed with and through
you. The experience was gained in my work with the Government and our
agents. Tour courtesy in letting me use your oflBce as you did will always be
remembered and your good nature and sound judgment and assistance to me in
cur discussions of my many problems were priceless.
Yesterday I received your cable about the Kayseri situation and I am grateful
for your thoughtfulness in sending it to me. When you send such cables or
incur any expense on Curtiss business will you please collect the costs from
Bob Farnsworth. There is no reason in the world why your office should
stand these expenses and I want your definite promise that you will collect
them from Bob.
I have the complete approval of the board of directors to replace C5apt. Coon
at the factory and to send out the necessary personnel to step up production
to completely satisfy the Turkish Government. Today I am interviewing Bob
Simon who has had a vast amount of experience in factory management with
Fairchild. Berliner-Joyce, and ourselves. He has been highly recommended by
Ted Wright of our Buffalo plant and if my interview with him satisfies me he
Avill probably be the man we will send out and you may rest assured that we
are working just as fast as it is humanly possible, and will get him out there
on the earliest boat. Substantially, my plan is to do as I told you when we
discussed this problem in your office. Nothing will be said to Coon until his
replacement arrives and the replacement will tie in with Emin Bey and Bob
Farnsworth before proceeding to Kayseri. Then if Bob is available, he and
Emin Bey should take this replacement down to Kayseri and introduce him
{■nd get him started. If Bob is not available I would suggest that Ferdie
Hulse be the man to go with him. The replacement will have a suitable letter
to Capt. Coon outlining the situation and Bob or Hulse will be instructed as
to the procedure to follow to get Coon back home. Fortunately, my board of
980
MUNITIONS INDUSTRY
directors understand the situation in Turliey much better than I had hoped for
and they are with me 100% in my present plans and I looli for results that we
can be iiroud of and which will satisfy the Turkish Government.
I have the approval of submitting a counterproposal to the Govei'nment on
the new air-lines proposition and work is progressing most satisfactorily
here on drafting a proposal. I hope to send it out by steamer within the
next week and believe that the Turkish Government will realize from the
proposal the sincerity of Curtiss-Wright in working on all of their aviation
problems with them.
I am sorry that the Hawks have not been accepted as yet but I have had
some encouraging news from Bob and I cannot help but feel that the Turkish
Government are doing all that they can to protect themselves against criticism
in the procedure they are following on these further tests. I am sure every-
thing will come out all right and the net result of our experience has been that
we have learned a valuable but very expensive lesson.
I showed the two reels of my movies last night and the picture that I took
of you and Henry coming out of the Embassy is excellent, Helen and I will
cherish this picture and show it many times just to have a good view of
your good self.
Please give my very best, in which Helen joins me, to Inez and the chil-
dren and tell Mary Howard that I still love her and will come back to Turkey
some day to see her. Also again many thanks for all you did for us and
here's hoping things work out to your entire satisfaction as I am sure they
will. The best dope I can get on the situation in the future for Department
of Commerce is that even though the Department's activities in foreign fields
are curtailed the good men such as yourself will be retained on the job under
either the State Department or the Consular Service, or in some manner, and
I am sure that nobody will replace you in the matter of value to the Govern-
ment. Don't work. We all hope for the best and you may rest assured that
you have some great boosters working for you here.
Most sincerely,
J. S. Allard.
BMX.
Exhibit No. 411
[Copy]
PAA-Via Pan Air.
Apeil 20, 1933.
Dear Web : Had Leon's cable this morning, and want to tell you that I
appreciate Leon having thought of me, and that I realize that conditions are
not such now as to justify you in adding to the expense of your organization.
I have intended writing to you for some time, that is, for the past two weeks,
in connection with your representation here. You've got to get a good outfit
with the best possible Government connections. Don't lay off this market now
in the hope that there will be another mix-up which will put the ins out.
Even if that occurs, it is no reason wliy you should sit by and see chances for
business go by the boards. There is considerable talk right now, and some de-
gree of certainty that there is going to be some more buying by the Government.
I know that there is definite interest in the acquisition by the army of a
number of bombers. That business could be worked up if you had a good out-
fit here to handle it for you. I know that Mayrink Veiga is working on it.
I also know that M.V. are working actively on a proposition for an amphibian.
The Government wants 16 amphibs — Loening preferred. I have told Lafayette
I would communicate with you to see what could be done in the matter of
having you quote him. If Loening or Douglas are not yet bought, they will
buy French stuff. Here's a chance for you to knock off a pretty piece of busi-
ness. I know that you are wondering where the dollars are coming from.
Has anyone lost any money yet on the supplies they made during and after the
last revolution? Don't worry about money. This Government, which will
elect itself for at least four more years, is giving the War Dept. pretty much
everything it asks for, and so long as Americans continue to drink coffee there
will be dollar exchange. The financing can be handled, with a little ntanaging
at this end.
There has been a tremendous amount of interest recently in your representa-
tion. Several firms have asked us to communicate with you but most of them
MUNITIONS INDUSTRY 981
'4iave been of the sort that I did not feel that it was worth while to call to
jT^our attention. The Cia Provendas (Cia. Promotora de Vendas) Ediflcio A
Noite, sala 1316, is the best of the lot, and has all sorts of good things to
recommend it. It is all set so far as its ability to handle Government business
is concerned, particularly in the War and Navy Depts. One of the directors
of the firm is a brother of the interventor of the State of Rio de Janeiro, and
others are all tied up with politics. Obviously, the crowd would not be so
hot if there were a change of Government, but I have never seen things quieter
here than they have been in the last four months. The local boys took all the
fight out of the Paulistas, for the time being, at least, and I feel certain that
'Tve can expect a few more mouths of calm, at least, unless the elections result
in some local disturbances. I don't think that you can count on another real
revolution for some time.
Coincidence — just now Castro Lopes called me on the phone to ask me to
have you advise him of his standing. He wants to know whether you are still
interested in having them continue to work for you. He also said that there
is considerable interest in your equipment. Write him a letter and tell him
that you have decided to cancel the arrangement you had with him, in view
of the unfortunate financial situation and the inability of Curtiss to get any
business from the Federal Government in the past two years.
The group of Brazilian pilots (Army) that is going to the States is scheduled
to leave on the Southern Cross, arriving in N.Y. on May 11. You will want to
see to it that you or someone from your organization meets them and take
care of them.
Maj. Plinio will be in charge of the group. Mello and Wanderly and Julio,
all friends of mine, will be on the junket. They will visit the principal fac-
tories, and I am depending on you impressing them sufliciently in Buffalo to
sell them the idea of buying Curtiss. They expect to go as far as Seattle.
Let me have a word from you personally about your intentions in this
market. Do me the favor not to just let things go along as they are now for
I'm telling you, you will regret it. There is going to be some more money
made here soon, and you should be in on it. Let me have a reply immediately
as to the Loening business. These planes are intended for Amazon service.
On this business it would be well to let me know what you think of handling
it through Mayrink Veiga. They are hot on the business, and I feel sure they
can put it across. Provendas also could handle it, and are in a great stew
because you have not communicated with them. Inasmuch as Leon will be
coming back soon, you may want liim to do the appointing when he gets here.
In that case, it would be advisable to cancel with Castro Lopes before that
time so that he will have a clear field.
With best regards to you, Leon, and the other boys in the office I have met.
Sincerely,
( Signed ) Pierrot.
Pan American Airways System. A Maior Rede de Transportes Aereos do
Mundo.
("Exhibit No. 412" appears in text on p. 828)
Exhibit No. 413
[Copy]
Aer-P-1-EMN Navy Department,
Lll-4 (2) Bureau of Aeronautics,
WasMngton, D.G., Aitgust 5, 1933.
From : Chief of th6 Bureau of Aeronautics.
To : All Inspectors of Naval Aircraft, U.S.N.
Subject : Policy Concerning Sale Abroad of Airplanes, Motors, and Accessories.
References :
(a) Aeronautical Board Case No. 13, approved by Secnav. 10/13/26.
(b) Aeronautical Board Case No. 34, approved by Secnav. 1/6/30.
(c) Aeronautical Board Case No. 52, approved by Secnav. 10/12/32.
(d) Buaer. Itr. Aer-A-ML, A2-14 (3), A7-1, dated 5 June 1933.
1. References (a), (&), and (o) serve as a guide for this Bureau in its
action relative to requests received concerning the release for export sale of
airplanes, aircraft engines, and accessories. These references have been ap-
982 MUNITIONS INDUSTRY
proved by the War Department as well as by the Navy Department and conse-
quently the policy based thereon is a joint policy followed by the Chief of
Air Corps, U.S. Army, and by the Bureau of Aeronautics.
2. The following is a summary of the provisions of references (a), (b), and
(c) insofar as concerns matters which affect inspectors of naval aircraft and
contractors for aeronautical material.
Policy
3. The War and Navy Departments will encourage the American aeronauti-
cal industry in developing foreign business and assist in such development so
far as consistent with national policy and the needs of the national defense.
The following general policy governs the consideration given the differing
military values of various items of equipment. This policy is subject to ex-
ception when desirable in any particular case, and each case is determined upon
its merits. Decisions will be made by the War and Navy Departments in
specific cases.
(a) Release for foreign sale, or public description, will be withheld indefi-
nitely on equipment containing features so novel as to constitute new inventions
of purely military use.
(b) Desiigns including such features of marked novelty, either in general
layout or details of construction, which have prospect of commercial usefulness,
may be sold outside the services or abroad one year, generally, after going
into regular production. The exact time of such release will depend upon the
importance of the novel features concerned and will take into consideration
the practicability of maintaining secrecy if the airplane is to be used from
flying fields open to the public. Due consideration will also be given to the
magnitude of the potential demand for the commercial product.
(c) Release will, in general, be withheld for approximately one year after
going into production in the case of airplanes of purely military types, without
prospective commercial value, whose performance or flying qualities are of such
special interest that their early test by pilots outside the American services
may be considered unwise.
(d) Airplanes, engines, and equipment which contain no strikingly novel
features, but only efiicient assembly of well-known elements, may be permitted
foreign sale at an early date. Such permission may follow immediately after
the completion of an experimental order and its test by either service. Such
sale of any service type abroad shall be made without military equipment in-
stalled which either in itself or its mounting involves any important feature
of novelty or consists of ordnance and armament equipment in use in com-
bat and/or fleet operating organizations. No release of such ordnance and
armament equipment for foreign sale will be made either with the airplane or
separately unless a precedent for this release has already been established,
or unless equipment of that model has been declared surplus.
(e) No negotiations for the sale abroad of aircraft power plants, or aero-
nautical accessories, which have been developed primarily for or with the
assistance or direct encouragement of the W^ar or Navy Departments, or whose
usefulness is primarily or exclusively military, should be initiated without the
permission of the Department interested. Similar permission should be re-
quired prior to any public exhibition or the publication of any description of
such items.
PROCEDUBE
4. The following procedure will be used in carrying out the above policy :
(a) The Aeronautical Board will not be required to consider all requests for
the release of aeronautical equipment, but in lieu thereof
(b) The Chief of the Army Air Corps or the Chief of the Bureau of Aero-
nautics, according to which Department may have paramount interest in the
case in question, is authorized to investigate the request in the light of exist-
ing policies and, after joint conference when a proper course of action has
been decided upon, prepare an answer for the signature of the appropriate
Secretary. Action taken in all such cases will be reported to the Secretary of
the Aeronautical Board as a matter of record.
(c) In cases where the Chief of the Army Air Corps and the Chief of the
Bureau of Aeronautics fail to agree, the matter shall be referred to the
Aeronautical Board for action.
MUNITIONS INDUSTRY 983
5. It is directed that the foregoing information be conveyed to all contractors
who now or in the future may be expected to be under contract for any of
the material in question.
6. Attention is invited to reference (d) for instructions relative to the meas-
ures to be taken for safeguarding material in a confidential status.
(Signed; facsimile) E. J. King,
E. J. King,
Rear Admiral, U.S.N.,
Chief of Bureau of Aeronautics.
Copy to: CNO, DNI, Comdts. 3d, 4th, 5th, 9th, and 13th N.D.
Exhibit No. 414
Ootober 12, 1932.
Mr. F. C. Nichols,
Colt's Patent Fire Arms Manufaotvring Co., Hartford, Conn.
Dear Mk. Nichols: The Automobile Tire & Tractor Co. has sent us copy
of their letter, dated October 1st, addressed to you, which I believe you will find
of considerable interest, particularly with respect to the tests which your gun
is undergoing in Turkey.
With respect to Emin Bey's closing paragraph, relative to remuneration for
their efforts in developing business, I think that this is something that can
best be covered through ourselves as, naturally, we always arrange to pay
him a commission on sales and I think that all we need to take into considera-
tion at the present time is in connection with aircraft type guns which we
hope wdll be ordered for installation in our Hawks in Turkey. Of course, if
this develops to a standardization of the Colt gun for all aircraft for the
Turkish Air Force, you may be running into some complications with your
Vickers arrangements, but that is something we could probably work out later.
I should appreciate it if you would send me a copy of your reply to Tatco's
letter and hope that you will not get involved in any question of commissions
with them withous discussing the matter with us.
In another letter which I have just received from Mr. Farnsworth, he refers
particularly to the recent visit of General MacArthur to Turkey, and the fact
that General MacArthur was received with great pomp and enthusiasm by the
Turkish dignitaries. Naturally, the General was made familiar with the busi-
ness which we are carrying on with the Turkish authorities and, apparently,
he talked up American military equipment to the skies in discussions which he
had with the Turkish general staff. Bob Farnsworth says that for safety sake
he is not putting down in black and white what was said, but I rather gather
that your equipment and ours did not suffer from lack of praise. This, of
course, is for your confidential information.
Very truly yours,
Curtiss-Wright Export Corporation,
W. F. GouLDiNG, Vice President.
WFG/f
Exhibit No. 415
[Copy]
New York, May 28, 1934.
Mr. P. A. Hewlett,
Sperrij, Central America:
In reply to your memo of the 17th, we regret that as all of our business
with Salvador and Panama is direct with the Government, we have no knowl-
edge of the financial responsibility and credit standing of either Dada-Dada
& Co., or Guardia & Cia., our agents in the above respective countries.
We have no agent in Guatemala but make all of our contacts through General
John A. Considine, who is a major in the United States Army, loaned to the
Guatemala Government.
Major Considine suggests th.at it would be more satisfactory for us to deal
directly with the Government through him rather than attempt to deal through
any local agent, as his recommendations ai*e followed by the President in the
purchase of all types of military equipment.
984 MUNITIONS INDVSTKY
The Government of Guatemala has not recently made any purchases of air--
craft and it is nor likely that it will do so in the near future.
OwEXN Shannon.
OS.ja.
Exhibit No. 416
Febbcary 3, 1932.
Mr. Lawrence Lex>n,
Arroiio SSO, Buows Aires, ArgoititKi.
Dear Lawrence : For your information. I enclose herewith a letter which I
wrote Burdette Wright, who is in charge of our Washington office, in regard to
the assignment of a U.S. naval officer to accompany the two Argentine naval
officers who. we understand, will shortly arrive here for the purpose of select-
ing and purchasing aircraft equipment.
We are proceeding very cautiously in Washington and believe that when the
request is made to our Naval Intelligence, if it is not already made, we can
more or less guide their choice and see that an officer is selected who would
most properly fit the job.
This letter also acknowledges your letter of January ISth regarding the
Fokker situation. It is comforting to know that he is definitely out of the
picture and I sincerely hope the matter will adjust itself in the near future so
that we can proceed with the Argentine contract.
The information regarding the possibility of Sperry business has been trans-
mitred to Messrs. Gillmore and Patterson at Sperry. I had lunch with them
several weeks ago and the information I gave them is practically the same
as you gave me in your letter.
Conditions in Brazil are becoming more active and it seems advisable that
someone from our organization stop in there as soon as convenient and see
wliat can be done. I had a couple of letters from Figueira in the last mail, one
of which outlines the proposition which they are working on for the export of
between 500.000 and 600.00C' tons of manganese to the United States through a
New York concern, the dollar proceeds of which would be devoted to the
transaction involving the building of 40 military ships, probably Hawks, in
a Brazilian factory along the lines of our proposal. Since making them a
factory proposal, however, conditions here have changed considerably and we
would prefer to have the Government oiierate along the same lines as the
Government of Argentina is doing at the present time — build and operate a
factory of their own. purchasing the manufacturing rigiits from us together
with technical assistance and information.
Independent of a factory proposal they wish us to quote on 12 each. Cyclone
Hawks. Hell Divers, and Falcons. They state that they have about $800,000
to spend this year on aircraft equipment and urge us to send down a demon-
strator, a Hawk. Hell Diver, or Falcon type. Figueira mentioned that the
British are sending down fighters and that the Fleet Comixrny has Leigh Wade
down there at present with two training type machines and that the Gennan
Junkers also has demonstrator jobs on hand. It is impossible for us to send any
demonstration machines into Brazil with the exception of a Cyclone Hawk,
and in order to do this it would be necessary to bring back from Holland and
rebuild with a Cyclone engine, bring the entire ship up to date, the Hawk,
used two years ago on the European mission. This would require at least
three months' time.
Figueira mentioned that Brazil just purchased 35 Irving chutes.
I believe it is necessary that you spend a week or two in Brazil on your way
home as it is beginning to look as though the Government intends to start
something in the very near future.
Matters pertaining to our present contracts witla the Argentine Government
seem to be running along smoothly although not as rapidly as we might wish.
Taravella finds that jigs, tools, and fixtures will cost considerably more money
than the Government at first anticipated, and he is now reducing the list of
material as much as he can so rhat the total amount when he cables it to
Argentina will not scare the Government off the entire project. It is our
belief that the entire list of material as submitted to us by Taravella will '
not be required by the Cordoba plant, as the Government will probably not be ■
able to build as many engines as they expect to and that many operations
could be handled by hand instead of by machine, thus making it unnecessary
to acquire all the equipment they are calling for.
MUNITIONS INDUSTRY 985
We have not yet heard from Pita in Paris regarding the advance payment
on the seven Cyclones. Taravella cabled him again last night. It is Taravella's
opinion that Pita is about to be recalled to Buenos Aires and for that reason is
stalling on the job.
I hope the general situation is coming along satisfactorily and that we may
soon be able to receive our advance payment on the 50 sets of Cyclone parts.
My sincere good wishes and hope the physical condition is steadily improving.
Yours veiT trulj",
C. AV. Webstee.
jc.
(" Exhibit No. 417 " appears in text on p. 830)
Exhibit No. 418
[Copy]
Inter-ofiice memorandum.
Curtiss-Wright Coeporatiox,
Export DI\^SI0N,
Washington, D.C., June 12, 1933.
To: Mr. R. L. Earle.
Subject : Central America.
We are informed that a Major A. R. Harris has been acting as U.S. military
attache to the legations in all five Central American Republics and Panama.
If this is so. it would probably be very much worthwhile for you to see
him and load him up with Curtiss-Wright dope, catalogs, etc. If he is to be
in New York before his return South, we would like to have an opportunity
to see liim.
Of these six countries, we believe we have fairly good agents in Panama
and Salvador, both of which have bought Curtiss-Wright equipment. By the
way, we just received an order from Salvador last week for three Ospreys,
which, we understand, is the first military equipment purchased by them.
We understand Guatemala, Honduras, and Nicaragua are contemplating
purchasing planes as soon as they have funds, and, as you already know, Hon-
duras is planning to buy two or three ships now.
It is, therefore, important that we use every possible channel to put Curtiss-
Wright planes across to all of these countries and Major Harris might prove
helpful.
Up to this writing, we have had no contacts in Costa Rica and it might
he worthwhile to stop in at their legation and give them the dope on our ships,
particularly the Osprey and Trainer. Also find out to whom we should send
information down there and what the prospects are of their making any
purchases in the near future.
Sincerely,
(Signed) Owex Shanxox.
Owen Shannon,
mw.
Washington file.
(" Exhibit No. 419" apjDears in text on p. 831)
Exhibit No. 420
[Copy!
Weight Aeronautical Corporaticn,
Paterson, N.J., May 23, 193 i.
To: Curtiss-Wright Export Corporation, New York City.
Subject : Proposed contract with Argentine Government for Cyclone and
Whirlwind engines.
In view of the fact that we believe it would be to the advantage of all con-
cerned if the Argentine Government purcliases Cyclone F-2 engines instead of
9S6 Mv:::i:. xs ryiirsTEY
" c- -■ -: r F-o Mc'wers on hand (,S:3-1>.
,. - _- y— 3 ex.^p: ria: i;.e Cycl ne F-2
-i-l lir Cr-lviie F-3 eagli-e lias S : 31 : 1
" r" ~^'*"to F-3
- - :.ioilines.
_ r 7 : 1 Di .. - - ^-^u: gear in
j^ne. In :iie rear sec-
: :' i_:-jie this change
r F-2 ai^ine it is
T evait of national
r is supe-
- _. - T. ... ; ^ > to 50
: n-_: - utpat of LToO r.y : .. sea
wer to the CydoEt T-o ri-iane.
- " -■ :r -he above r -r - '-
:_ ; : T 1: 7'. aTailBl>lr _. r
: : T~age oper
' ^ :: ^ur«erior
. ; : : - ~r less we£.: r
' feet aMtude, tiie F-2 Crdones will not deto-
„rf. Tbevef ore nai^ 87 octane fnd it is possible
-n witliont damase. This cannot be ckme with
- - 'e <9etaited foil opoi in tbe cnstomarv
a attendant eaqtenses.
er shears in reserve, all F-2 Cydcmes
:n times of necessitr c»r when special
1- 1-: ^-Tjione is readily available having
e 5.500 feet altitude and from
T^ - - . _ rade than the F-2 Cyclone.
K8VIKW OF COin&JlCT
We hare had vanoos iiiahrru of oar <x^anixation look over the pn^osed
eontnKt nd offer flie foOovne — gpfiiwB :
1. Aye 1. — (a) Azfade 1. Mm*eriml comirmeU€ for.— We bdieve the word
" jmSH '" siMNild be ** mdls."
(b) Vnikar ** BetariftwamJ' — Please correct "Hornet" to read "E.G.": add
to I iiiiii— < III BigpBed wifli C^done engine — " one cylind^* head flioiiioconple
with 15 £e^ lead and mdiraUiig gaqge;' t«lce out — ^^ corre^ondins odlector
ring canpfetEL"
As JOB know, we do not Bmgptj cMeetoT rings ^th onr Cjdone engjnes.
igBfcjiij eoHectfK' riosB axe not eonsidered standard egoipmait with Cyclone
itiiMii as Taiioas nrnta—ilir—i differ and require diffn^it exhaust c<>Uectors.
Tte tTpe of fnhmaai^ eoOetlar ia 100% dependeiU <m the ^pace inside the cowl,
«iiaiw«i»i juMJiMiiiip tar emA type and different shapes. Tbej are wholly de-
jriMJial on design of tlie iMdi»M«al aJTiiiaiio Hiis dioald be explained to the
Aigeaiines widi respect f» Oe Crciane engine.
Howcm, we win r^iMMJi b/P of typical exhaust coDeetor systems and
data flawing the area him wiiij ta prevent back pressure. If the Argentines
are iBwlffr to Banafiaetare their own ezhanst colleeti^ rin^ in the Argentine,
we woold be williiig, apoB their w«^"g as eonqdete drawings and fall data of
their jiaifaHatiifii. to haie fJitrfM^ nngs made op for them at their own
2. Fm§e 1 amd pmge 2, TTaiiTfna cfaadani propellers. — ^We assmne we will
not ainij these but Oiat job wiH take care of matter. We wonld suggest
ia any evcBt that to« aujuae the CoOffwing inlEormatkm from the Argentines:
(a) Ma «!■■!■■■ dtimwm^mr of fvopdler that it is possible to nse on the
gireB airplanee— still aHuataiaii^ V^ff^ ground dearanee-^roper gronnd
dearaaee is the U.SJL m 9 inchesL
(b) &ve the tiiliniiliri high speed of die airplane in qpiesdon at the critical
■Hah«ii> nf flM- rtT"*. *■* * ntmtU ahf fhf r it In rmr trf tfr TTlii^l— jn"*
<rf the C!Feiane-pr-=rere- r'--^"
3iu2rrTro5rs ixdtjstby 987
3. Page 3, time of delitery. — We can make following deliTeries F.A.S. New
York.
(a; 2 Cyclone SGR-1S2I} engines and 2 Whirlwind 250 H-P. engines, 30 days
after notification that contract has been signed.
(bi 13 Cyclone SGR-lS2iJ engines and 13 Whirlwind 230 H.P. endues— 90
days after shipment of ab<jve engines <a>.
4. Page 6, technical documents. — •*► "3. Assembly drawings ot each type of
motor, where dimensions of same :iiay be determined exactly." We do not
hare these and therefore c«:'nld nc't si^piy. However, the information wludi
we believe they acraally want wr>ald be ss^Ued under " 2 — besides the longi-
ttidinal and cross-sectional cut drawlngs."^
(b> "4. Installation drawings of the otI, gas, and • • *." Would supply
drawings of typical installations.
t c ) '• 5. The constructive " Tooend riBg ' or NACA cowling • * *." This
-hould be secured from the mannfacrvrcT e4 eowls.
(d) 6. Installation drawings and rosTTBCtion^ for propell^^. Ton would have
to secure from Hamilton Standard.
5. Page 9, neic orders. — Please rewrite this to read as follows:
•• The Government reserves the rigbt of iaereasing the constituent items <:f
all or any one of the materials called for in the present contract, in whatever
limits it may deem desirable, and the sfl(>p6er agrees to furnish same on the
same terms and tmder the same teehaieal eoaditions set forth in cjntraet 452.
article 5. last subdivision, provided, howerer, sadi rig;ht is eierased by the
Government within 00 days from the date on whi^ this contract is executed
by the Supplier and provide! the repaired driiv«ies are not beyond the mano-
facruring c-apacity of the st^jpiier.
6. Inverted flight, acrobatics. — The carberetors, both 2 and 4 barreL on the
Cyclone engine have a "bypass" wM(^ has a metered fuel flow at rated
power. This permits inverted fii^t (aLiOfcatie) at full throttle rated power
without difficulties.
If inverted flight ( acrobatics ► are dene when the Cyclone is "throttled
back " (or less than rated power ►, the Cyd«oe engines will ran ~ rich " owing
to the fact that the " b.vpass " meters the fuel fl^ow for rated power, btit
otherwise no difficulties will occur.
7. r.S. Army inspection. — If the Argentines desire U.S. Army inspectioQ of
their Cyclones when being buitt at ©mr plant, this can be arranged by getting
in touch with us. and we win contact the Array inspector now stationed here
at our plant, who will arrange the matter. The Army inspector has been
contacted and we have been given assurance that he will be able to arrange
this. The inspection he will give the Argentine engines will be identical with
the inspection he customarily makes for the U.S. Army and will indude full
inspection, right through maiMifaemring. through testing, and to shipping.
The Argentines will be required t» par the Army inspector the following for
the inspection:
Cyclone geared S123. 00 ?«• engtne
Whirlwind 250 direct . lOtt 00 per engine
The following will apply to gen^^tw^ aa^ sAarters :
Per generator $5. 00
Per starter 5.00
Will you please also inform us oo this pwnt as to whether or not the
Argentines are interested. In mt^ respects sceh an arrang«n«it as outline»i
above will be to the best advantage of the Argentines if they require other
inspection than ours. It would. nndeobtedlT, cost them much less than if
they had their own inspector on the job and they will have the assurance of
the U.S. Army insx^^^tor who is stationed at oar plant and who is entirely
familiar with our engines.
S. Certification of shipping paper*. — If the Argentines so desire, arrangements
can be made so that the U.S. Army iDSi)eetar certifies the shipping documents
to the effect that the engines being sMw)ed are tte same as those which A. T. C.
has been granted for the type in question.
9. Proof of use by U.S. Ann^ ami UJ?, Xary. — It is not definite whether the
U.S. Army or U.S. Navy would issue any written statement to the effect that
they are or had bought certain materials. However, we believe we can supply
you with copies of statements isisued l^ the Aeronautical Chamber of Com-
988 MUNITIONS INDUSTRY
merce, giving the Army and Navy contract awards and showing contract
numbers of same. This will also show type and kind of engine. If this will
be satisfactory, will you let us know?
William: A. Reeiks.
CC: Messrs. George Chapline, T. M. Lucan, W. D. Kennedy, W. E. Colviu,
Philip Shepley.
Exhibit No. 421
Lima, Peru, April 23, 1934.
IXSPECTOR GeXERAL OF A'VIATIOX,
Lima, Peru.
Sib : We wish to submit herewith our proposal for the combination Curtiss
bomber, troop transport and ambulance plane. Specifieations, performance
data, and photographs are contained in the catalog attached.
The price on a quantity of three Condors, delivered in flying condition at our
factory in St. Louis, equipt with 5 Colt machine guns, bomb racks, bomb sights
and containing the necessary equipment for troop transport. 12 litters for
ambulance work, complete blind flying instruments, etc., is $72,-500 each. The
additional cost for ixtntoon equipment is $11,000 each.
We can deliver the first plane at our factory in St. Louis within 90 days of
receipt of first payment and deliver one additional plane each 10 days
thereafter.
The best terms of payment that we are able to offer is one third of the
contract price at the time of contract and the balance in four equal monthly
installments to begin .30 days after the first and advance payment, which means
that the payments would extend over a total period of 5 months. It is under-
stood that the balance of the two thirds payments would be covered by an irre-
vocable credit in a New York bank. Owing to fluctuating costs and other
pending contracts this proposal is valid for only a 30-day ijeriocl from this date.
We also wish to submit herewith a pi'oposal for the latest type of Curtis
Attack plane, known as the U.S. Army model A-12. Complete specifications and
photographs are attached.
This plane is the most modern fighting unit of its tj^pe ever developed and
has been furnished only to the U.S. Army Air Corps. Providing we have a
contract for at least 10 planes we will be able to secure permission from the
U.S. Government to build it for Peru. The selling price for 10 planes CIF
Callao, equipt with 5 machine guns and bomb racks is $48,950 each and $6,500
each additional for the pontoon equipment.
We believe we can secure prompt permission from the U.S. Government to
accept a contract from Peru and depending upon this we could probably deliver
the first machine in Buffalo within 90 days and continue at the rate of one
plane each 10 days thereafter.
It is also probable that we could extend the same payment tei'ms as on the
Condors.
Yours very truly,
(" Exhibit No. 422 " appears in text on p. 836)
Exhibit No. 423
[Copied from carbon copy]
Washington Office, October 16, 19S1.
Burdetts S. Wright, Washington. D. C.
Mr. W. F. Goulding, New York City.
(China, possible release of Navy 02C-1.)
I understand there are about five or six undelivered 02C-l's coming through
at Buffalo for the Navy. As I wired you. Comdr. Dillon is very much against
our taking these ships but I have talked to him and know that we will not
lose his friendship should we go over his head. Capt. Cook, the Assistant
MUNITIONS INDUSTKY 989
Chief of the Bureau of Aeronautics of tlie Navy Department, told me that
. if it was urgent he would certainly look with favor on helping us out.
I accordingly ask by wire as to the urgency of the matter. We will go right
after it if it is bonified and worth while.
Very truly yours,
BSW/lh-3673.
Washington File : " China ".
Exhibit No. 424
[Copy]
Istanbul, Turkey, Febmat-y 19, 1933.
Captain Hamdi Bey,
TeGhnical Section, Ministry of National Defense,
Ankara, Turkey.
My Dear Captain : In compliance with your request, I have pleasure in giving
. you a brief memorandum on the subject of the most recent types of bombard-
ment aircraft developed in America. American experience has indicated that
the slow-moving and unmaueuverable heavy bomber with a verj- large bomb
load is a less effective weapon than the high speed, more maneuverable type
carrying a moderate bomb load. For that reason all the latest type of bombers
designed for the American Army are built for a boml:) load of approximately
900-100 kgs. only, but with a very high speed which renders them nuich less
vulnerable to attack either by hostile aircraft or antiaircraft cannon.
The most recent of these medium bombers are the Martin, the Douglas, and
General Aviation, all of which are built with two model F Cyclone engines as
their power plant. Between these there is little choice in performance and
general design, but the new Martin is the fastest of them all, and is not only
the fastest bomber in the world, but also is the fastest airplane in the world
powered with more tiian one engine. I enclose a pliotograph herewith for your
information of the Martin bomber which is known as the B-907. This plane
is still on the secret list of the United States Army and consequently we have
not available any detailed performance figures. Should the Government of
Turkey be seriously interested in this or any other of the latest types of
American bombing planes, we believe that it will be possible to secure release
by the United States Army on special application.
The. Martin bomber is a semilow wing monoplane with a large wing spread.
The fuselage is of metal monocoque design and every effort has been made to
reduce wind resistance by careful stream lining. The wings are internally
i braced which eliminates the necessity for exterior struts or wires. The
landing gear is so designed as to be retractable in flight.
The entire airplane is constructed of aluminum alloy consisting of thick
. smooth sheets riveted to the framework of channel and tubular sections. This
form of construction is very expensive, and the cost of building the Martin
i bomber is very high. I cannot give you exact figures at the present time
but will be glad to obtain these in due course should the Turkish Government
be really interested.
For your confidential information the speed of the Martin bomber is very
considerably over 300 km. per hour.
This is all the information that I am able to give you at the present time
concerning this airplane. The Glenn Martin Company is not a part of the
-Curtiss-Wright Corporation but is entirely independent of any other group
and is on most friendly basis with Curtiss-Wright. We are therefore in a
position to secure the greatest possible consideration and the best terms in
i respect to any orders placed by the Turkish Government. In bringing this
airplane to your notice, though it is not built by ourselves, we are following
•our policy of cooperation with you to the end that the Turkish Government
shall have the best possible aviation equipment which can be obtained anywhere
in the world.
Yours very truly,
Melvin Hall.
990 MUNITIONS INDUSTRY
Exhibit No. 425
[Copy]
Export
February 23, 1932.
W. F. GouLDiNG, New York Office.
Mr. Ralph S. Damon, Bristol, Pa.
KETTSTONE BOMBERS FOR CHINA
This \A'ill confirm teleplione coiiversatit)ns with you today, relative to prices
and deliveries on Keystone Bombers, of the B-6-A type. We understand that,
based on the present production situation and provided the order is received
without delay and prior to completion of your present Army contract, you
would undertake to supply us with bombers of any quantity up to ten, at a
net price to you at Bristol of $42,000 each, less engines and armament — your
price to include internal bomb-rack installation, together with all bomb-
release mechanism and mount for the tioor gnu. In other words, the plane
complete, less tlie following which we would furnish :
2 Cyclone engines.
3 Browning guns.
2 flexible-scarf ring mounts.
Gun sights for the 3 guns.
With respect to deliveries, we understand that you can furnish the first
plane within sixty (60) days, two planes per week for the ensuing four
weeks, and three each week thereafter. Futhermore, if release of any of
the planes which you are now completing for the Army is accomplished, that
you would be in a position to give us the first one of these planes in forty (40)
days.
We understand that export packing would be extra, and that the price as
quoted in your letter to us of November 13th relative to the Argentine inquiry,
of $2,500.00 per plane would apply.
We are today telegraphing to San Francisco a quotation based on the fore-
going and will inform you of any further developments.
W. F. GOULDING.
WFG/f
Exhibit No. 426
Cubttss-Wkight Corporation
inter-office memorandum
export dtvision
No. 55 October 3, 1932.
W. F. GouLDiNG, New York Office.
Mr. BuEDETTE S. Wright, Washington, D.C.
(Brazil)
Thanks very much for your letter of September 29th which I am passrsing
along to Web.
Of course it is embarrassing to answer questions as to why United secured
this Brazilian business. I think probably the best answer is as you have given
it, to the effect that United was able to get release on United States Government
contracts to give the best deliveries.
Another matter is the question of financing. Apparently United was able to
work this out to their satisfaction, but just how it was done I am not entirely
aware. As a matter of fact, I think it was worked out in connection with the
Farm Board's coffee, but you don't need to tell people this if they don't know it.
If you can get any really reliable reports from the Department as to how
the situation is shaping up, I would certainly appreciate it. Newspaper reports
seem to indicate that the Federal Forces have all the best of it, but I wonder
if this really is the case,
W. F. GOT-TLDING.
WFG/f
MUNITIONS INDUSTRY 991
Exhibit No. 427
CuRTiss- Weight Corpokation
INTER-OFFICE lIEilO.
EXPORT
October 3, 1932.
W. F. GouLDiNG, New York Office.
Mr. Guy Vaughan, Paterson, N.J.
Jack Allard has passed me your letter of September 28th giving information
which you gathered from Gene Wilson that fifteen Vought Corsairs with
Hornet engines have gone to Brazil. We understand that this is entirely
correct and that further shipments have been made.
This is the order that United got which involved considerable financing and
which United has featured on the financial pages of the newspapers to boost
their stock.
There are many phases of this Brazil situation which do not appear in the
newspapers and, while it may be somewhat embarrassing to explain why United
has secured all this Brazil business and apparently we have gotten none,
nevertheless if you knew the actual situation I don't believe you would feel
that United is doing all the business in South America.
You, no doubt, realize that United had under construction for the Govern-
ment a number of Corsairs and Boeings which the Navy released to permit
them to offer excellent deliveries to Brazil. Unfortunately, Curtiss-Wright
had no Government contracts which could be diverted for such prompt de-
liveries. The fact remains, however, that United, having taken this Brazil
business, is not in as good a position to give deliveries on other orders for
other countries as we are.
You are aware, I believe, of the orders which we have recently taken for
the so-called " Osprey " which we are building in St. Louis, and there are
excellent possibilities of getting some Hawk business, due to the fact that we
are now in a better position to give deliveries than United.
Don't think for a minute that we are asleep at the switch in this South
American situation ; Web is down there and he went to Rio first. He has done
some very good business for us since he reached Suath America.
W. F. GOULDING.
WFG/F
Exhibit No. 428
CuRTiss Weight Export Cobpobatton
New York
Buffalo. N.Y.,
January 7, 1933.
P. A. Hewlett.
We have just received a telegram from Cuba saying that 4 pilots will be
here Monday and will probably go to Buffalo Tuesday to fly the ships away.
We quote below their telegram so you can take action on it.
" Referring to your letter December 27th I advise you that Lieutenants
Gustavo Alfonso, Jose Barrientos, Pedro Duarte, Carlos Torre, sailed yester-
day on Steamer Santa Barbara, to bring planes to this country stop and ma-
chine guns and parachutes should be shipped in one case stop Insignia same
as Curtiss Hawk numbers 19, 2,0, 21, and 22. I ask you to do the necessary
with Army or Navy for four winter-flying suits which will be returned to them
immediately."
Pack the 4 guns and 2 chutes as directed. Mark the case —
SIXiBErrARIA DB LA GUEERA Y MARINA
CUEKPO DB AVIACION
HABANA #1
and ship freight to Barr in the usual way.
83876— 34— PT 4 20
992 MUNITIONS INDUSTRY
You will know what to do about the flying suits.
Most important of all the ship are not to be flown by the Cubans until we
wire you that we have received money. It was expected today but has not
yet arrived.
If there are any questions that we can answer, phone us Monday morning or
acknowledge by wire that everything is O.K.
A. B. Carrington.
Exhibit No. 429
Febeuary 7, 1934.
Memorandum for Lieut. H. E. Eegan.
Subject : Loan of propellers.
When talking with you yesterday concerning the need for propellers to meet
deliveries on a certain foreign contract, I thought that three 2-bladed propellers
would take care of the situation. However, I have since found that our export
Falcons do not use the same propeller as the export Hawks and therefore we
really need a total of six instead of three. The propellers needed are as
follows :
1. Three 2-bladed propellers 10 feet in diameter having no. 1% blade root
and according to Navy drawing no. 5S6S or Navy drawing no. 5704".
2. Three 3-bladed propellers 9 feet 6 inches in diameter having no. 1^ blade
root and according to Navy drawings nos. 5SG8 or 5704.
The need for these propellers is occasioned by our having negotiations with
a certain foreign government for a number of airplanes, which must be
delivered within a short period of time. The delivery of the tirst three Hawks
and the first three Falcons, both of which are powered by direct drive Cyclone
engines, must be earlier than we are able to obtain deliveries on propellers.
We have contacted all propeller manufacturers and find that Hamilton-
Standard can give us the best deliveries but even these will not be early enough
to meet our needs for the first three Hawks and the first three Falcons referred
to above. Inasmuch as the entire contract is contingent upon our meeting the
delivery requirements of the customer, we are exceedingly anxious to somehow
make arrangements to obtain these propellers within the required time.
It would therefore be greatly appreciated if the Bureau of Aeronautics could
arrange to loan us three each of the two types of proi>ellers described above,
upon our guarantee to replace them in the very near future. We would desire
to take delivery on the two-bladed propellers within the next two weeks and
will guarantee replacement of them by not later than the first week in April.
The three-bladed propellers will be needed before the middle of ilarch and we
would guarantee replacement of them by the middle of April. It is presumed
that arrangements could be made to have the replacement propellers inspected
by the Navy inspector at the Hamilton-Standard Co. as they are built.
The Bureau's kind consideration in arranging for the loan to us of the above
six propellers will be sincerely appreciated.
Yours very truly,
Robert L. Earle,
Washiufftoii Rei)rcsentative.
Exhibit No. 430
[Copied from carbon copy]
September 10, 1929.
Honorable F. Teubee DA\nsoN,
Asst. Secretary of War for Aero)wi(tic^,
War Department, Wai^hington. B.C.
Deae Mr. Seceetary : The Curtiss Aeroplane Exixirt Corporation is negoti-
ating a contract with the Peruvian Government for a quantity of airplanes,
including 12 biplace planes which accordingly require 12 sets of rear gun
installations.
It is requested that authority be granted by the War Department for the
sale of the following material to the Curtiss Aeroplane Export Corporation,
it being understood the same is on hand in the Ordnance Department :
24 Lewis flexible machine guns, model 191S
72 ammunitions pans or magazines
12 carriers for six magazines
MUNITIONS INDUSTRY 993
24 deflectors for shells for Lewis guns
24 extension charging handles
2 fillers for magazines
2 handles for magazine loading.
It is similarly requested that authority be granted for the sale of the
following equipment, which it is understood is available in the Air Corps, at
Wilbur Wright Field, Dayton, Ohio:
12 duplex Lewis mount, type G-2
12 double trigger control. Type H
12 double gun brace, type OA-259
12 scarf ring mounts
12 ring sights for flexible Lewis
12 wind vane sights for flexible Lewis.
Yours very truly,
Washington File : " Peru."
Exhibit No. 431
[Copied from original]
War Department,
Washington, D.C., January 21, 1930.
In reply refer to G^/2.5057-1
Mr. BuRDETTE S. Wright,
Curtiss Aeroplane Export Corporation.
501 Southern Building, Washington, D.C.
Dear Mr. Wright: With reference to your letter of September 10, 1929,
relative to the sale of certain Air Corps and Ordnance material to the Curtiss
Aeroplane Export Corporation, it has been finally determined that the items
listed are in excess of prospective War Department needs in the quantities
enumerated.
Before the transaction is consummated, however, it will be necessary for
you to obtain the approval of the State Department as to the exportation of
the property in question for the purpose mentioned.
Sincerely yours,
(Sgd.) F. Trubeb Da\^son,
Assistant Secretary of War.
W^ashington file : " Peru."
Exhibit No. 432
[Copied from original]
Ctjrtiss-Wright Export Corporation
interoffice correspondence
October 30, 1930.
From : J. S. Allard.
To: Burdette S. Wright.
Subject: Air Corps policy on exporting of aeronautical equipment.
Dear Burdie: Thanks for yours of the 29th on the above subject and also
on the subject of how certain munitions of war can be declared surplus, and
whether or not commercial firms can buy such equipment and resell it to
foreign countries at a profit.
It wouM certainly be nice if it develops that we can buy bombs from the War
Department and sell them again, at a profit, to an approved foreign government.
Now, with reference to the work Captain Beveridge is doing in revising the
Air Corps policy, I do not know what suggestions we can make in addition
to what apparently Farnsworth has already made to the captain. It goes
right back to the same subject that we have discussed many times in the past,
and that is, if we can have a definite workable policy that is not too tied up
with red tape and a lot of detail work, it will answer our purpose, but if the
Air Corps is going to insist on a policy that precludes quick action in the
landling of preliminary negotiations, it is going to be a serious detriment to us
994 MUNITIONS INDUSTRY
in the securing of any foreign business. It would seem to lue that they could
outline a clear, concise policy of just what equipment they will be interested
in with referenee ro expi>rt. and give us blanket approval on certain equipment ;
and on other equipment on which they want to know to which country it is
going, require us to make a report of the countries to which we are quoting
such equipment, as soon as we make the quotation, and without having the Air
Corps give us a prompt answer, so that before our negotiations have pro-
eeeiled too far. we can have something definite for our prospective customer.
I Delieve that a simple policy can be formulated that will be more along the
lines of business procedure rather than service procedure. We all know that
service procedure is a complicated process and we have got to sell the Air Corps
on the idea that when we are doing business it is most detrimental to have
to conduct part of the business on the service-policy basis, and that, while we
are most anxious and willing to cooperate with the Air Corps and do every-
thing to their complete satisfaction, we would appreciate it if they would
consider our position in the matter and try to draft up a policy that is simplified
and workable under the conditions which we must operate, and these condi-
tions frequently require rapid cable quotations and information which cannot
be delayed several hours, days, or weeks.
If there are any details that you want from us, I will be glad to give them
to you, but, on the whole, I think the above covers the situation.
Very truly yours,
(Sgd.) J. S. Allard.
"Washington file : General.
(" Exhibit No. 433 " appears in text on p. S41)
Exhibit No. 434
[Copy]
Curtiss-Weight Corporation,
Interoffice Memorandum.
Export Division,
WasJUngtou, D.C., March 31, 1933.
Subject : Argentine.
Mr. BuRDETTE S. Wright.
Attached is a copy of a letter to Mr. Morgan which may be of interest to you.
For your information, we are giving you a line on the possible future con-
tracts with the Argentine Government.
As you know, we have already delivered 50 sets of the model E Cyclone
engine to be machined up and assembled in the Argentine Government factory
at Cordoba. In addition to this, we are supplying the entire tool equipment
for the factory. This is in addition to between 35 and 40 complete engines
of the Whirlwind and Cyclone models already delivered.
We now have pending a contract similar to the Cyclone parts contract which
will call for between 50 and lOO sets of "NMiirlwind engine parts to be ma-
chined up and assembled in the Government factory. This w'ill also probably
involve the purchase of the necessary factory tool equipment.
In addition to this, we have pending the contract for between 15 and 20
complete sets of Cyclone Hawk parts to be assembled in the Government fac-
tory and which also involves the purchase of the necessary Cyclone engines.
We also have pending a contract for the conversion of S twin enaine British
Southampton flying boats to Cyclone engines instead of Lorraine-Dietrich
engines. This involves the necessary engineering work and 16 engine mounts.
It is. possible that suflScient funds for the conversion of all 8 planes will not
be available this year and in that case 4 or 5 will be converted.
We are also negotiating for 8 or 10 Cyclone Falcons for the Argentine Navy
to replace Vought " Corsairs " now in service. We are up against a serious
obstacle in that the Falcon has never been in U.S. naval service, except the
Marine Corps, and the Argentine Navy will not accept equipment not having
been used or specified by the U.S. Navy.
It is the desire of Captain Zar, Chief of Naval Aviation, to use the Falcon
or any other suitable and capable Curtiss-Wright plane in preference to
MUNITIONS INDUSTRY 995
United Aircraft equipment but we must provide him witli all possible data
and conversation in support of his ultimate selection of our material. Will
you, therefore, kindly supply me as quickly as possible as much information
as you can in support of this idea. For instance, How many Falcons were
used by the Marine Corps; officials to supplement our sales arguments? Also
how many Falcons used by the Army and their written reaction as to their
service and efficiency?
Your usual prompt cooperation will be appreciated.
C. W. "Webster.
CWW/w.
end.
Washington, D.C.
Exhibit No. 435
[Copy]
(Ex. 159 from Navy files)
CuRTiss- Weight Corporation,
27 West 57th St., A^ew York, Airril 6, 1933.
Please address reply to
Southern Building,
Washington, D.C.
The Honorable SBCREn-ARY of the Navy,
Navy Department, Washington, D.C.
Sir : In connection with possible sale of aircraft to South American countries,
■we have received a request that we obtain from the Navy Department and from
the War Department a statement of the experience these two departments
have had with the Curtiss Falcon type of airplane in service. The questions
involved include :
(a) The number of planes of this general tyi^e purchased to date.
(&) The type of missions they have been engaged on such as observation,
attack, and light bombing.
(c) The experience with this type of construction from maintenance and
overhaul standpoint.
(d) Statements that the plane has been adopted as a service type and has
rendered good service.
We woidd more than appreciate a short statement along the above lines which
we could forward to our agents for them to use in connection with the possi-
bility of obtaining contracts on this type of airplane.
Any assistance that the Navy Department can give us in this regard will be
of great advantage.
In view of the War Department having had extensive use of this type, similar
letter is being addressed to the War Department.
Respectfully,
(Signed) Burdeitb S. Wright.
Vice President.
BSW/CC-749
Exhibit No. 436
[Copy]
Aer-P-6-ems
Lll-4(2)
QM (28) April 20, 1933.
My Dear Mr. Wright: The Secretary of the Navy has referred to this
office your letter of April 6, and accordingly the following information is
furnished :
(a) Four OC-l's and twenty-one OC-2's were delivered between January
and May 1928 ; there are at present seven of these operating with Aircraft
Squadrons WCEF, San Diego, Calif.
(b) Seven of these planes were used in Nicaragua from February 1928
to June 1931 on observation, ground attack, and light bombing missions ; nine
were used in China on observation missions ; this type has been used in
996 MUNITIONS INDUSTRY
the United States for observation and attack training; individual planes of
this type have been used for aerial photography.
(c) The following notes apply to the type of construction, maintenance,
and overhaul :
(1) Trouble was experienced with the fuselage cross brace at the forward
landing-gear fitting. This brace has to be reenforced with steel.
(2) The webs from the tail skid assembly all pulled out and had to be
replaced with steel.
(3) The wing fittings in the center section had to be reenforced.
(4) After the above changes were made overhaul and maintenance condi-
tions were excellent ; many of these planes were flown 700 hours between
overhauls ; engines and parts needing attention were easily accessible.
(5) The following observations may be of interest:
(a) One plane which had been submerged in salt water for 36 hours was
corroded so badly that it had to be surveyed.
(b) Longerons struck by bullets were shattei'ed by the impact, there being
considerable tearing around the bullet hole.
(c) These planes were originally designed to be powered by the D-12
water-cooled engine ; when the P. & W. Wasp was installed a great deal of
trouble was encountered with fixed gun fittings.
(d) This plane was used for several years as a Marine Corps observation
plane and as such rendered excellent service. The long cruising range was a
particularly advantageous characteristic.
Sincerely yours,
(Signed) A. B. Cook,
Captain U.S.N. , Acting Chief of Bureau.
Mr. BuRDETTB S. Wright,
Vice-President, Curtiss-Wrif/ht Corporation, Southern Building,
Washington, D.C.
Exhibit No. 437
[Copy]
Curtiss-Weight Export Corporation,
Washington, B.C., May 5, 1933.
Mr. Burdette S. Weight.
A7-gentine.
Dear Burdie : With further reference to the letter from the Navy Depart-
ment, (Capt. Cook) would it be possible to go back at the Bureau with the
explanation that the letter requested was for the purpose of assisting us in com-
peting against foreign aircraft manufacturers, especially the British, who are
making a very definite effort to crash into the Argentine territory.
We have the inside track on this business and Captain Zar, Chief of Naval
Aviation, who was trained at Pensacola and who is anxious to see the Falcon
installed in the Argentine Navy, is requesting us to supply him with something
to back up his action should he be able to place this business with us. This
particular information regarding Zar, of course, is confidential and is intended
for you, and should not be passed along to the Navy, but if the Bureau could
reword their letter eliminating the objectionable features, it would serve our
purpose.
Using their present letter as a basis, the following suggestion taken from'
Capt. Cook's own letter would help us a great deal. Please bear in mind and
impress upon the Bureau that it has been the policy of the Argentine Navy tO'
use only such ships as are standard or have been used by the navies of the
countries from which they purchase,
"The Secretary of the Navy has referred to this oflice your letter of April
6th, and accordingly the following information is furnished : Curtiss Falcons
have been used since 1928 in Nicaragua and China on observation, ground
attack, and light bombing missions and in the United States for ground attack
and observation training and aerial photography. After a few changes made in
the early types, overhaul and maintenance conditions were excellent, many of
the planes having flown 700 hours between overhauls."
It is highly important that we get such a letter and it seems to us that the
Navy would be perfectly justified in writing such a letter to assist us in over-
MUNITIONS INDUSTRY 997
t'oming foreign competition and establishing American aircraft in Argentine
naval service.
At the present time we are building a Cyclone-Falcon observation plane in
the Buffalo factory which is to be sent to Argentina and possibly Brazil within
the next 6 or 7 weeks for demonstration purposes. Also, for your information,
United Aircraft, we are convinced, are sending one of the latest type Corsair
observation planes on a similar mission. Our purpose in the Argentine is to
close about 6 planes with the Navy, and also a contract with the Army involv-
ing the license to manufacture the Falcon in the government factory at Cordoba,
together with the necessary material for building these planes. We are now
concluding a contract with Argentina for the license to manufacture the Hawk,
which involves the purchase of material for at least 15 planes this year, includ-
ing the complete engines and also another contract for the license to manufac-
ture our single-blade metal propellers, together with material for 100 propellers
and the necessary tools, dies, etc.
Your usual efficient cooperation will be greatly appreciated.
(Sgd.) C. W. Webster.
CWW/w.
(" Exhibit No. 438 " appears in text on p. 844)
(" Exhibit No. 439 " appears in text on p. 845)
Exhibit No. 440
[Copied from carbon copy]
Washington Office, February 5, 1932.
BiTEDEiTTEi S. Wkight, Washington, D.C.
Mr. J. S. AiXARD, New York City.
02C-l's for Dominican Republic.
I am attaching hereto a letter signed by Admiral Moffett replying to my
letter in which I requested information on the 02C-1 airplanes in connection
with our interest in selling to the Dominican Republic.
This is not a very elaborate statement, but represents what was finally
decided upon after they had written two or three different samples. This can
be used as an official letter in connection with the Export Company's efforts to
sell to the Dominican Republic.
It would be well if you could suggest to the Dominican Republic that they
send an inquiry to the Navy, through diplomatic channels, asking for informa-
tion on the 02C-1 type in use by the Naval Reserve at its bases in this country
and the Marine Corps in its operations in Nicaragua.
Very truly yours.
RLE/mb-350.
cc-W. F. Goulding.
Washington file : Santo Domingo.
(" Exhibit No. 441 " appears in text on p. 845)
Exhibit No. 442
[Copy]
Sales,
Washington, July 19, 1933.
(Mexican air officer.)
Mr. R. L. Eable: At the present time there is stationed at Consolidated
Aircraft inspecting some trainers which are being built for Mexico, a Captain
David Chagoya Rodriguy of the Mexican Air Corps, who has requested per-
998 MUNITIONS INDUSTRY
mission to visit our plaut at tlie earliest possible opportunity. Captain
Chagoya is not particularly interested in anything outside of training activi-
ties, however, in view of the fact that the Mexican Government at this time
has under consideration the purchase of a number of pursuit airplanes, on
which the Export Company has been negotiating and the further fact that
he is interested in our Hawks I believe a special effort should be made to
secure permission for this visit.
In the above connection, you will recall that we were turned down by the
Naval Intelligence Division and the U.S. Air Corps some time ago due to a
letter which we had written, reflecting upon the fact that we had on our
production floor, certain Army and Navy experimental jobs, which we did not
consider it desirable for foreigners to view. However, since that time these
experimental jobs have all been removed within the experimental depart-
ment, with the exception of the A-12 production job and this has not pro-
ceeded to the point that, within the next 15 days, there should be any objec-
tion by the Air Corps for anyone to see same, as practically all the parts
built up are in detail and are located in our feeder shops and in reality do
one could see anything worth while or of such interest to allow them to copy.
At the time we wrote this letter, you recall, that same was considered
desirable inasmuch as certain Japanese officers desired to visit the plant and
we were building numerous planes for the Chinese. Really, at the present
time we do not wish to open up the plant, due to the condition of our having
on order ten additional Chinese Hawks for construction and also will have,
"Without doubt, shortly a quantity of spare parts to build for that country.
However, recently we have secured permission from our Government allow-
ing General Chang Hung Wan of the Chinese Army to visit our plant which
permission was signed by Lt. Col. Nulsen and we therefore feel that by
regulated contact you can, without doubt, secure permission for this Mexican.
In view of the condition that he is interested in making an immediate trip
to the plant it would be appreciated if you will advise me by wire as to the
results of your contact with the Intelligence Bureau.
With kindest regards, I am
Sincerely,
P. A. Hewlett.
PAH : EV— 7980.
CO : W. F. Goulding.
Exhibit No. 443
[Copied from original]
Curtis s- Wright Corporation,
InTER-OFFIOB MBMORANDtrtM:,
Date : Januarii 29, 1932.
From : J. A. B. Smith, Place : New York, N.Y.
To : Mr. B. S. Wright, Place : Washington, D.C.
Subject :
I understand from Mr. Webster, that two Argentine Navy officers are being
sent to this country to look over aviation materials and that we were named
by the Navy intelligence to have a Navy officer designated to accompany
them to this country.
If you will look into this and let me know the name of some Navy flyer who
is friendly to our equipment and who would be acceptable to the Bureau of
Aeronautics, I think I can get Captain Ellis, who is head of the Navy intelli-
gence, to ask for the particular officer whom you might pick out.
(Sgd.) J. A. B. Smith.
J. A. Smith.
H.
s.h.
Washington file: "Argentine."
MUNITIONS INDUSTEY 999
Exhibit No. 444
[Copy]
Curtiss-Weight Corporation,
Washington Office,
New York City, May 2^, 1934.
Mr. J. S. Allard,
Cy : Mr. P. A. Hewlett,
Export General.
When talking to Capt. Kenney, the working Air Corps representative on the
Joint Aeronautical Board, today he said that, while we do not have to do it,
he thought as a matter of courtesy we should submit copies of all contracts and
agreements with foreign governments to the Joint Aeronautical Board in order
that they might know that the interests of the United States Government were
being safeguarded, insofar as concerned military secrets. He said that this
would help a lot when they were considering whether or not they should permit
foreigners to visit our plants, in that if they knew we had a contract or agree-
ment with the government represented it would expedite and possibly insure
favorable action.
We told Capt. Kenney we knew nothing about our practice in matters of this
kind but would be glad to forward his suggestions to you. The matter was
called to Capt. Kenney's mind when talking about a couple of Rumanian in-
spectors and he would also like to know if we have a contract or an agreement
with that country.
Yours very truly,
BoBEST L. Eakle.
CC-712
Exhibit No. 445
Ex. 168.
Cubtiss-Wright Export Corporation, New York,
Washington, D.C, Jmie 25, 193.'/.
Mr. Robert L. Earle,
Export General.
I have delayed answering your letter of May 24th on the subject above men-
tioned— CC-712 — as I wanted to check into the matter very carefully. It is
my opinion that our business does not permit of our furnishing copies of con-
tracts and agreements with foreign governments. As a matter of fact, many
times our business is done without any written contract or agreement. How-
ever, as you know, the interests of the U.S. Government are very well safe-
guarded, as we do not sell at export any equipment not released by the U.S.
Government services.
I shall be very happy to show the Joint Aeronautical Board, at any time,
just what business we have done in the past, which will bear this out, but it
must be borne in mind that our business with foreign governments is strictly
confidential, as it is obvious that one government is not interested in having
other governments know all of the details of the business.
The Black committee has a complete analysis of the type of aircraft and en-
gines that we have exported in the past five or six years and, as previously
stated, we have never, nor do we ever, intend to export any equipment not
released for export by the U.S. Government.
J, S. Aixard.
BMN
1000 MUNITIONS INDUSTRY
Exhibit No. 446
[Copied from carbon copy]
Washington Office, March Uf, 1931
(Personal and confidential)
Mr. Robert P. Fanisworth. Washington, D.C.
Mr. G. W. Webster, New York City.
Army maneuvers — Chile.
Dear We:b : I have been able to secure for you G-1, G— 2, G-3, and G-4 plans
for the Air Corps exercises of 1931. This information is definitely not for
publication, was secured by me in the face of a definite order prohibiting its
issuance, and I beg you to be very careful in the manner in which you give
tins information to Merino. There are no particular military secrets contained
therein, and I know that if there were the War Department would not object
to Chile's knowing them, but the point is, they would prefer to give this to
Chile themselves rather than through another agency such as us. Please keep
tight hold on these four pamphlets and bring them back with you when you
return. If they do get in other hands in Chile, it won't take much of a master
intellect to discover their source, which would eventually be our Washington
oflBce, and this discovery might put us in considerable hot water.
I am also enclosing a copy of a cable which the Aeronautics Trade Division
sent to their ofiice at Santiago. This cable is not much good and errs in speak-
ing of expense, but you can probably correct this when you are in Chile.
Again best wishes for a successful trip.
Sincerely,
rpf-mb-1118.
Enclosures.
Washington File : " Chile."
Exhibit No. 447
Cubtiss-Wright Corporation
NEW YORK
ISTANBITL, TURKETT, AugUSt 2'/, I'JSJf.
Mb. Bruce G. Leighton.
Deiab Bruce: I am enclosing copies of two self-explanatory letters to one
W. A. Hansley. All I need to tell you in addition to these letters is a brief
report of who Hansley and Blankman are and what they are doing in Rou-
mania. L. V. Blankman has been interested in aviation ever since 1912. He
was at one time with the Curtiss Company. He is basically a promoter and has
been quite successful from all I can find out in the past. Hansley was formerly
associated with Detroit Aircraft and the Lockheed Company as a test pilot
and sales engineer. I don't know how he and Blankman got together, but
they did, and made some Roumanian connections, with the result that Hansley
went to Roumauia a year and a half ago and has been there almost continuously
ever since. He was successful in getting from the Roumanian Government an
air-line concession, on the basis that he and his associates would finance the
purchase of equipment and furnish the operating personnel, and the Govern-
ment would furnish suitable airports, hangar facilities, etc., etc. He and
Blankman personally raised sufficient money to purchase six Lockheed Orions
formerly used by Varney Air Lines. These ships are being entirely recon-
ditioned in the Lockheed plant at Los Angeles and will be shipped to Rouniania
around he first of the year. They get a guarantee of 754 Dfi" mile, which
is really the Government subsidy. They think they can make some money, as
they have some Roumanian interests in the company, and their tie-in with the
Government officials is apparently very good.
Mr. Hansley returned from Roumania about three months ago, and I had a
meeting with him and Mr. Blankman in Los Angeles about one month ago.
The Roumanian Government asked Hansley to contact various manufacturers
in America to see what, if any, plan could be worked out whereby the Rou-
MUNITIONS INDUSTRY 1001
manian Government could build American aircraft, both military and commer-
cial, in their airplane factory. The Roumanian Government liad asked that
some manufacturer go over there and finance the entire operation and control
it, on a guaranteed volume of business from the Government, and on a cost-plus
basis. Obviously, the idea didn't strike me with any favor, and I spent four
hours selling Blaukman and Hansley on the plan that I have briefly outlined in
one of the attached letters — whicli you will readily note does not involve us in
any cash investment or outlay. They have fallen for it one hundred percent,
and Hansley sailed today at noon, and as I have stated in the closing paragraph
of one of the letters, he expects to be in Bucharest around the loth of Septem-
ber. He will wire you when as and if conditions warrant either you or Bob
getting up there to work out the final details of the technical cooperation
contract.
You will note that I have agreed to give them a ten percent commission on
the purchase price, when as and if we receive payment for the technical
cooperation contract and ten percent on the purchase price when as and if
received by us for the various airplane licenses. With reference to a sales
agreement, you will note that I have purposely refrained from making any
comniittments^ — because I think they have a problem in finding out how the
Government wants to purchase raw materials, finished products, etc., etc. They
may want to set up a Roumanian agency or they may let Blankman and
Hansley personally handle the purchases, and until we know the details of the
plan I thought it best not to make any commitments. However, whatever
arrangement is satisfactory to the Roumanian Government would be agreeable
to us, and we can then make arrangements for commissions, which should be
flexible enough so that the commissions could be reduced, should price competi-
tion enter into the picture.
The following is obviously very confldential, but I thought it might prove
of some value to you as an example to the Turks of how lousy their business
procedure is, and how the so-called " heathen Chinee " lives up to contracts and
agreements and is really progressing so much more rapidly in aviation develop-
ment than the supposedly cultured Turk.
This is an extract from a letter from Jim Doolittle written from Shanghai
on June 23 : " Jack Jouett's original flve-year plan for the development of mili-
tary aviation in China has been rigidly adhered to up to the present time.
Funds, ships, and personnel have been provided him and he is now right up to
the minute as regards his original plan. This original plan called for the train-
ing of about 500 pilots and the purchase of between 400 and 500 airplanes
during the flve-year period. For your own confldential information the military
powers here and now considering making aviation their flrst line of defense
and Jack has already presented his formal proposal along these lines. This new
plan calls for 42 additional primary trainers at about $4,000 apiece, 26 additional
basic trainers at $18,000 each, 13 advance trainers at bout $30,000 (11 of these
are bombers and 2 pursuit) and 3 tri-motors for ambulance and transport planes
at $40,000 each. This is a total of around $1,180,000 gold.
" In 1934 his plans call for the purchase of six and a quarter million dollars
worth of additional airplanes and in 1935 thirteen and a half million dollars
are to be spent for airplanes. In 1936 something over fourteen millions more.
From then on the purchases will be only enough to keep up the 1936 strength.
Jack Jouett flgures about 15% a year attrition, so even this amount is not to
be lightly sneezed at."
Obviously the foregoing was given to me in strictest confldence by Jim, and
I don't want to do anything to violate his confldence or our very friendly rela-
tions with Jack Jouett. Anyway, if I were a Turk I would feel very much
ashamed of my Government's development of this important arm of national
defense, as compared to the Chinese program.
This letter may run on for days and days. I am going to try to answer
those portions of your many letters which have not already been taken care of
by someone in the organization, and will dictate from time to time as time is
available.
First, yours of July 17th, with reference to Child. Your action in this matter
was, of course, absolutely correct. You hit the nail on the head when you
said that I saw him at work when I was out there. That is why I know you
have done the right thing. I have been wondering if he hasn't possibly tried
to get in touch with Marguerite Brill. Perhaps mother has noticed a change
in her son. I wonder.
1002 MUNITIONS INDUSTRY
Yours of July 22ncl — certainly your conference with the Chief of Staff pro-
duced action, and nobody knows better than I do what you were up against
to get action. These Turks certainly make promises and then forget all about
them. It is hard to believe that they intentionally break their promises, but I
am of the firm opinion now that I wouldn't take a promise from anyone over
there, and the only language I understand is dollars. No doubt you are in the
same frame of mind.
In paragraph five of your letter of the 22nd you state that a letter from the
Ministry says that a decision has been reached to purchase the Kingbirds
outright. This is one month and two days later, and still no payment. I am
delighted to know that the attitude of everyone you have come in contact with
recently has materially changed toward CW. The job is difficult enough
under ideal conditions, without having to fight against people who feel that
we have been wrong and that they have always been right.
The Turkey-Russia situation, just as you say, doesn't look so dumb, and the
gift of the first Fledgling from Kayseri to the Shah of Persia by the Chazi
is certainly a nice strategic move. I agree with you that it is a big jigsaw
puzzle, but I never saw one yet that couldn't be solved. I quite thoroughly
agree with .your program relative to the length of your stay in Turkey as a
result of Tom's cable, and also that Bob Farnsworth is thoroughly competent
to keep things moving, and that you play the role of important director from
New York. However, this Turkish situation is about the most important and
messed up one that we have at the present time in the whole Curtiss-Wright
group, and that is why our most important director from New York is there
to straighten it out. There isn't any job that I know of that you can do with
as much advantage to the company and yourself as this job of cleaning up that
lousy Turkish situation.
As far as the demonstrator Hawk is concerned, I don't want to say now
that we will or will not send a Hawk to Turkey for demonstration purposes.
However, unless future business is handled in a more businesslike manner by
the Turkish Government, and unless there is some margin of profit in it, I
can't see how this company is justified in spending any more money or as a
matter of fact taking any more Tui'kish business at a loss. I don't mean by
that at all that we don't want Turkish business, but we do want it on a fair
businesslike basis, and I think the results of your present negotiations and
the conditions under which this present business is wound up will control a
great deal the position we will take relative to future Turkish business. You
alone can give us the answer, and I think that until the answer is received we
had better leave in abeyance the matter of sending anything more to Turkey.
I can't conceive of the necessity for cable decision of the sending of a demon-
strator over there, and when you write us a picture of the situation and at
the same time recommend a demonstrator being sent over, then we can give
better judgment to our decision than we can now because our judgment is
biased by the most unsatisfactory arrangements on Turkish business that we
have ever had in our export experience.
In answer to your question as to how the economic furor now going on in
the United States is going to affect our export prices — my guess is that prices
are going to be slightly increased not only on our products but on every
American product. The dollar has gone down in foreign countries, and that fact
together with the new N.R.A. code which means shorter hours for present
personnel and the consequent employment of more persons, can result in nothing
but increased prices. Right now our raw materials have advanced in a great
many instances from five to as much as fifty percent.
With reference to the dollar depreciation in connection with Bob Farns-
worth pay and per diem allowance — Bob is being paid now $300 per month or
$3,600 per year, and his per diem allowance figures $3,650 per year, or a total
of $7,250 per year, which is considerably more than some of the officers and
minor executives of the Export Company are receiving. When the dollar was
high Bob and the other foreign personnel reaped the benefits and I think;
under present circumstances the fact that the dollar has depreciated is not
sufficient reason for any increase in pay or allowance. I know you will handle
this delicately with Bob. There isn't anybody in the whole outfit who doesn't
appreciate the job he is doing. On the other hand, Turkey is practically Bob's
home and has been for some time, and he is a lot better off to have the
$10 per day allowance and to still be considered on a travelling basis. There
Avill be. as rapidly as possible, adjustment on the up side of pay roll, but there
are still being reductions made in salaries at home, and my advice to Bob
MUNITIONS INDUSTRY 1003
is to sit tight — knowing that his work is appreciated and that his job is as
nearly permanent witli the organization as any job can be, and that he will be
taken care of to the best of our ability. Bob's base pay is less than an air
line pilot's, but his gross income is considerably more when you figure in his
per diem allowance.
I am terribly sorry to learn that " old man sciatica " had thrown you for a
temporary loss. I know how difficult it is to get appropriate sleep and exer-
cise, and probably my caution to you to get it won't do much good, but we do
want you to take good care of yourself.
Your next letter is July 28th. It is a very interesting letter as all of yours
are, and I couldn't help but smile at the request that Bob run some additional
tests using both tanks after he had finished the final endurance trials and the
papers had been forwarded to the Ministry. You certainly can't beat those
birds. I think you are absolutely right in not submitting any proposals on air
lines or additional Hawk orders until this gang settles up its long overdue
accounts and obligations.
I am delighted at the excellent reports you make on Hunter, and it certainly
must be a relief to you, because all of the three months that I was there in
addition to all the other annoying situations I had Coon and the Kayseri mess
hung around my neck all the time. I am glad that you are at least spared
that unpleasantness.
I can't understand how the mix-up occurred on the salaries of the new boys
that went out with Hunter, as compared with Garrold's and Purdy's salaries,
because Bob's cables and letters to me on the subject of additional personnel
were on the basis of the same salary as Garrold's and Purdy's, which Bob stated
was $250 per month. I think you handled the matter in the only possible way.
Be sure to add the additional $34 per month for Garrold and Purdy to the
Fledgling spare-parts order coming through, or to any other order that will
reimburse us. You did not state in your letter when you wanted to start
Garrold and Purdy on this New York account to their order for the extra $34
per month. I have arbitrarily started it as of July 1st and hope this is
satisfactory.
Everything that could possibly be of interest to the Wright Company or
C. A. & M. in your letters is sent to them. I have asked them to give you the
answers through Expqrt, as obviously we can't do it here in most instances.
If you don't get the answer you want, let me know and I'll follow them up.
I am thoroughly in accord with all of your statements in this letter about
what we are up against in the way of competition and what we have got to
do to meet it, and it has all Ijeen passed on to Ted Wright, Mait Bleecker, and
Arthur Nutt, and their combined thinking ought to give you the answer.
On my way back from the west coast, I stopped at Buffalo and spent about
three hours with Burdette Wright. Ted was out. We discussed how to get
the information to you in view of the American Government's present very
rigid attitude on the release of information on new and experimental aircraft.
There is a new espionage act in the United States which has caused the Army
and Navy to become all the more definite and determined in preventing informa-
tion from getting out on these planes. We can't give out any information on
the YO-40, the A-12, the Fll-C-3, or the Fll-C-1. I know how important it
is to you that you have information on the results of tests on these ships so
that you can quote on a Turkish plane of high performance. Our position with
both the Army and Navy is such that we are not justified in pushing them
any further. It is downright dangerous, and I don't think it would do any
good, and it might do some harm, for you to go direct to Admiral King or
anybody else.
As I said in a previous letter to you, I believe you can read through ambig-
uous remarks, so here goes. Jane's All the Worlds Aircraft has published
some data on the YO-40. Information already published on the A-8 is pretty
good, and you know what a different motor installation might do. I have
already told you how much retractible undercarriage adds to airplane per-
formance. A 14-cylinder motor for small planes of around 200 mph. can be
expected to improve performance from three to six miles per hour, as com-
pared with equivalent horsepower from a Cyclone. When you get back from
this trip you will have a better idea of what you will require in the future
under similar circumstances, and I think we can load up your mind and your
inside vest pocket with enough dope so that the situations can be handled.
They are doing everything possible in Buffalo to complete flight tests on the
Demonstrator Hawk with four-barrel carburetor, but there was a hitch in the
1004 MUNITIONS INDUSTRY
program clue to the Navy's borrowing the only four-barrel we had, and we
are just receiving from Wright a replacement. On the Douglas transport the
use of the four-barrel carburetor as compared to the two-barrel added about
30 horsepower per motor. Every new single-motored or bi-motored transport
I have seen recently has rectractible landing gear and controllable pitch pro-
pellers, which, I am told, add from three to ten miles per hour to the top
speed.
Do you get it? It's almost like a code.
The subject of a Coudor demonstrator for Europe might possible be worked
out, but I think the determining factors will better be known after you proceed
tlirough Europe when, as, and if. Incidentally, a letter has just come in from
Sabena asking for quotation and delivery on a Condor, but they state on a
trial basis. George Page is planning on spending his vacation in Europe and
as long as he is going to be over there we have asked him to go see Sabena
and find out just what their problems are and what their proposition is. We
are obviously not interested in sending out a Condor on a trial basis, but we
may find it possible to sell one to them on guaranteed performance. George
Page can do an awful lot to survey their problems and tell them definitely
whether or not the Condor will do what they want it to do. If we got one
Condor in on Sabena or any other European air line, the necessity for a demon-
strator in Europe would pass away.
With reference to your trip to Russia, when, as, and if you get out of Turkey,
I suggest that before making any plans to visit Russia you await further
instructions from this office. The Russian situation varies from day to day as
you well know, and in our judgment there is no need of your going there at the
present time. Confidentially, there is a possibility that Tom may run over
there for a week or two in the near future, but anyway cut it out of your
itinei'ary or plans, subject to dope from this office at the time you are ready
to go on your trip through Europe.
I hope this long drool brings its up to date, and pending another long trip
on my part I will promise to answer your letters as soon as they are received.
Under the new Export set-up in the office here, as per the memorandum
recently sent you, Morrie Caldwell is going to be responsible for the proper
handling of cables and correspondence, and taking care of requests for litera-
ture, follow-up letters, etc., so if you or Bob have any ideas on what this
office can do to assist you to keep customers better posted, both present and
potential, or any suggestions on how this office can function better for the
field personnel, shoot your belly aches and suggestions into Morrie.
My very best to you and Bob and Kiki and the rest of the gang. You know
that I know .better than anyone else here what you fellows are up against,
and we are trying to make your jobs as easy as possible. If we are not doing
it we are open to kicks and complaints. If we are doing it you don't need to
say anything — results will speak for themselves.
Sincerely yours,
Exhibit No. 448
[Copied from carbon copy]
Washington Office, October 8, 1932.
Robert L. Earle, Washington, D.C.
Mr. A. B. Carrington, New York City.
Bomb sights ref : Your letter of Oct. 5th, 1932 :
I do not believe that determination of whether or not horizontal bomb sights
are available in either the Army or Navy will be a logical answer to your
problem. If we inform our prospective customers that such are not available,
what then will we tell them if they ask us at some future date for quotations
on airplanes which are employed for horizontal bombing? On the other hand,
if we find that such sights are available, then we will only have to seek some
other answer anyway for the present instance.
It will not be possible to offer any dissertation in detail on the method
employed by the Navy in dive bombing, for as we have advised the Export Co.
before, the Navy considers this information as confidential and will not permit
it to be passed out. The following statement, however, may serve your
purposes :
MUNITIONS INDUSTRY 1005
" Single-seater and two-seater airplanes in use by the U.S. Army and Navy
are not constructed to enable bomb sights to be used for the dropping of bombs
while in horizontal flight. It is impossible to locate such a sight where a
pilot or his gunner could effectively employ this instrument with the needed
degree of accuracy. For this reason such sights are used only in large slower
airplanes especially constructed for this type of bombing.
" Both branches of the American service have found that greater accuracy
can be obtained in the placing of bombs of comparatively small size such as
used with single-seater and two-seater airplanes, by the releasing of these
bombs while in a dive. In the dropping of bombs in this method the pilot
uses the same sight which he employs in connection with fixed guns. He simply
aims the airplane itself at the target, drops his bomb or bombs while the air-
plane is in a dive, then pulls out and resumes normal flying. It is for this
reason that airplanes constructed for the U.S. Army and Navy are built to
withstand considerable diving but do not make provision for the installation
of bomb sights of the type used in horizontal bombing."
The above is simply my own statement of the bombing methods employed,
but I hope it will suit your purposes. Please note attached copy of a letter
I have written to Owen Shannon on the above subject.
Very truly yours,
Robert L. Earle.
IlLE/lh-2576.
cc — Mr. Owen A. Shannon.
Washington file : General.
Exhibit No. 449
[Copy]
#77. American Embassy,
Ankara, Turkey, Jan:uary IS, 1934.
Mr. Bruce G. Leighton.
Dear Bruce : This will acknowledge receipt of your letters of December 12th,
23rd, and 28th from Ankara. I am answering them in rotation.
LETTER OF DECEMBER 12TH
With reference to your remarks on the Hawk and Fledgling prices, Eddie
Cramer, I think, has already written you on these matters, and if he has not, he
will do so within a few days.
As to the agency arrangement, I am sure that we understand each other
thoroughly, and I am delighted to know that Emin is cleaning up his indebted-
ness so readily. As far as the Sperry account is concerned, I am taking that
up also with Eddie Cramer and Jack Sanderson, and we will give you an answer
on that.
By now, you probably know Morrie Caldwell's itinerary. He has been stick-
ing pretty close to K. L. M. and the Persian situation in the Hawker plant,
and I just cabled him today asking him how much longer he thought he would
have to stay there, and what his plans were for covering the other places we
sent him over to cover, namely, Spain, Portugal, Norway, Sweden, and Finland.
With reference to your remarks about the establishment of agents who are
competent to handle this aircraft business through the negotiation stage and to
final conclusion alone, I think you are absolutely correct that, with practically
no exception, none of the agents that are available are technically smart enough
to do it, and, of course, that is one of our reasons for having you and Bob and
Caldwell and everybody else travelling over there — to assist in the preliminary
negotiations, and when you get up against a stiff technical problem to be able
to call on an engineer. And, of course, that is what I call doing real selling,
just as you undoubtedly do. You are also absolutely right about the necessity
for you and Bob getting home fairly frequently in order to keep up to date
with developments, and we have all been hoping for a long time that Bob would
be heading for the States. However, in handling this business, it seems to be
impossible to make definite plans in advance due to the very nature of the
business we are doing, and the people with whom we are doing it, and we all
know that you will see that Bob gets back here as soon as it is possible.
As far as the length of time it takes to close deals in Europe or, as a matter
of fact, in any place in the world except America, you may rest assured
1006 MUNITIONS INDUSTRY
that we all appreciate it. It has so happened that I have spent a long time in
this Export Co., dating back to before the merger of Curtiss and Wright,
and we have worked as long as three and four years at a time on one cus-
tomer before we have been able to pull through any business. So do not
think that we do not all appreciate the slowness with which these people act.
I quite agree with your statement that it is best to concentrate your
efforts on customers who look the most promising, always, however, keeping
as close a contact with the others as is possible, either direct or by mail,
and, as you know, from our policy here, which we have instituted under the
able guidance of Parm Hewlett, we are trying to keep the name " Curtiss-
Wright " and its products before all of the important people in each country
in the world. It ought to help some, plus what you and your able assistants
can do in Europe.
On the subject of dive bombing which you refer to in your letter of Decem-
ber 12th, and which is apparent in copies of your proposals to the Government
on new business, this is a matter that is most delicate by nature. You
refer specifically in your protocol to the Ministry of Defense on the Kayseri
factory project, under the heading " Test Flights of the Planes ", page 6,
as follows : " Diving bomb tests will be included this time in the oflScial
tests." We have been nosing around in the Bureau in Washington, discreetly,
and find that they hold as most strictly confidential their dive-bombing tactics
and procedure, and they frown upon our even mentioning dive bombing in
connection with the Hawks or any other airplane to any foreign powers. It
is absolutely unwise and unethical at this time, and probably for some time
to come, for us to indicate in any way that we know anything about the
technique and tactics of dive bombing and to include such tests in official
tests, or to have any pilot demonstrate or instruct in dive bombing, would be
just about the worst thing that could be done at this time. I can see no
objection to your referring to dive bombing in conversation, but you should
plead absolute ignorance as to the technique employed or why or how we
use dive bombing in our services here. If any Navy officials, or any of the
Navy officers now located in Turkey, or who might visit there, or replace the
present officers, should get hold of any proposal from us in which we refer
to dive bombing, it would snap right back to Washington and I am afraid
it would seriously react against our Navy relations, which are too good now
here to upset in any way. I know you can appreciate this and I also know
that you will take the necessary steps to remove from present negotiations any
reference to dive bombing, and keep the mention of them out of any formal
contracts or even proposals. I cannot stress the importance of this too much.
I realize that you are fighting against European competition that seems to
have airplanes that are a little faster than ours. However, I know that you
also know of all the sales arguments against the extra high speed and, par-
ticularly, how they obtain It in foreign equipment.
It is done at a definite sacrifice on the life of the engine and, probably, the
airplane ; it is done at a sacrifice of maneuveribility and military load ; and
if those features in the Hawk do not offset a few kilometers' difference in
speed, plus the fact that the ship will withstand power dives of high velocity
and stand a punishing to which this type has been subject for years in our
services at home, I do not know how you can compete.
It may be all right for Bob to put on a dive-bombing show to show the
strength of the airplanes, but to refer in contract to dive bombing, or endeavor
to teach dive bombing, is what I am cautioning you against doing.
While we are on the subject of speed, the situation regarding retractable
landing gears looks as though it might change. That is, it looks as though
we might get a release of this gear for Hawks. I am merely giving you this
now as a bit of encouragement, although I cannot guarantee that we will get
the release. But you may rest assured that we are doing everything possible
to get it. The preliminary discussions on this subject rather indicate that
the Navy might release the retractable gear, but not the metal wings, there-
fore, it might be a case of retractable gear with the present wooden wings;
and if so, there is a question of what the terminal velocity of the ship might
be with the wooden wings and retractable gear, and a lot of details like that
which we are working out in Buffalo. If we do get the retractable gear with
the wooden wings, you will get your high speed, but you will probably have
to lower the terminal velocity in a dive over what it is now, for the ship
with retractable gear and metal wings. I am not technical enough to give
you all of these points in detail. You will get them further from Parm Hew-
MUNITIONS INDUSTEY 1007
lett, if you have not already done so by the time you receive tliis letter. And
again I "state that my hopes are not founded on anything except hope that we
can get a release of the retractable gear. My own personal feeling is that
we will get it and when is the question. I know that if I were sitting in your
place combatting this speed mania, I would like to know, at least, that it
looked a little bit favorable, and you may rest assured we will give you the
go-ahead by cable the minute we get it.
Now about the airline and in confirmation of my cable to you of January
10th. As I told you in that cable, we agree in general principle with your
remarks about the air lines and your preliminary proposals to the ministry.
Obviously, as I state in the cable, a detailed contract will require very care-
ful consideration in New York before it could be signed. There are so many
bugs in a deal of this sort that we would want, for your own protection, as
well as ours, to have the contract sent to us to study, with your comments,
because in a contract of this kind, you can get your tail feathers badly burned
if you do not follow such procedure.
Referring specifically again to page 9. item 2 : As I said in the cable, wo
are agreeable to a percentage fee, but must have a minimum guarantee to
cover our cost of this supervisory work. You know perfectly well that in
Turkey materials can be purchased at a pretty low price as can construction
and installation, or in other words, general labor can be gotten for a song;
and we can visualize that a 15% fee of the actual costs involved of materials,
labor installation, etc., might not anywhere near cover our supervisory expenses,
particularly if the time element lags as long as it apparently is bound to lag,
in this business in Turkey. That is why we specify a minimum guarantee must
be given.
On page 10, item 3-B. The period of the various 25% payments after the
initial cash payment of 25% covers a period of entirely too long a time. We
just cannot finance our sales to the Turkish Government on that basis and if
you include in your outside purchases, as referred to in this paragraph, any-
thing not manufactured by us, it is just out of the question. I assume that
you do not include items not manufactured by us, but rather refer to items
purchased outside of Turkey ; and that such financial terms as are necessary for
Items not manufactured by us, would be subject to the acceptance of the specific
manufacturer, and we, of course, cannot guarantee on what terms he will accept
business. More frequent payments of lesser amounts than 25%, but with the
total paid for eighteen months after delivery, would certainly seem to me to be
about the maximum that we could consider.
I also stated that we must be assured of our ability to discount immediately
all drafts that we receive into dollars promptly in New York. It is vaai'
enough for the Turkish Government to say that we can discount their drafts,
but so far we have not been able to find anybody who would discouiit them;
and the Turks may have in mind that you can discount them in Turkey, but
there, again, comes the question of how we are going to get dollars in New York.
That will have to be worked out and I feel sure it can be worked out satis-
factorily. Also, what would it cost us to discount these drafts, including
conversion, into dollars, etc., etc.
Referring to item 5 on page 10, I state we cannot agi'ee to Curtiss-Wright
Corporation becoming general contractors. Our participation in this con-
nection would be supervisors of constructions and managers of operations.
Your item 5 states that if the Turkish Government desires that we should act
in the capacity of general contractors, etc. We cannot possibly do this in any
way that I can see. We are not in the general contracting business and do not
want to be. We will supply personnel under suitable arrangements, to supei'vise
general contracting work that might require the supervision of an aviation
expert because laying out hangars and flying fields is somewhat different from
building a village or an office building. As general contractors, I can well
visualize our employing crews of several hundred people and I do not think
that any fee could be given us sufficiently large to make this interesting in any
way. So, for heaven's sake, keep away from even indicating that we would
be interested in becoming general contractors and that all we will do is
supervise construction and manage operations b,v supply proper personnel.
I then referred to item 6 on thisi page as having the same objections as item
3-B on the same page, and item 7 and item 8 on this page, having the same
objection as item 2 on page 9.
83876 — 34— PT 4 21
1008 MUNITIONS INDUSTRY
As I said at the beginning of this topic, in general principle your proposal
is very interesting and goodness knows we want to do a good job for the
Turkish Government, and I do not think anyone can question our endeavor
to assist them. In connection with our requiring a detail S'tudy of any con-
tract or committing proposal to them, before it is submitted or signed, if they
object to the delays entailed in this procedure, you can just recall to their
mind that we have spent over two years in awaiting their pleasures in acting
on a lot of things that have cost us money and, of course, have cost them
money, and that they cannot expect to come out of their trance suddenly and
expect us to snap right back with the answer. The work you have done with
the big shots in Turkey in showing them the fallacy of their ways and the
needless delays that they have instituted and what it has cost them in i-esults
and money, has been a most excellent job. I know what you have been up
against in selling it, but it is a job that requires, as you well know, a con-
slant following up, because you are trying to change their entire method of
doing things which has been inborn into them for centuries. However, our
one hope in working out a reasonably rapid, business procedure in Turkey
is the fact that they have shown the woi'ld not only a desire to progress and
live and act in a modern, up-to-date manner, but that they have actually
shown astounding results in this regard in the last ten years. I cannot help
but feel that they must realize, as you do, that they are just on the threshhold
of making one of their biggest advancements, both commercially and from a
military standpoint by the manner in which they get in line on this negotiation
with us. We can help them more at this time — a help that will have the in-
fluence and effect that will last for a number of years — and I think they do
realize it. Nevertheless, it is a fact that if they will really take us into
their confidence and let us guide them, through your good offices, we can put
them ahead of the rest of the parade in most of Europe and the Near East,
and at a much lower cost than anybody else in the world. This brings me
right to the point on page 12 in your letter where you say " in looking this
proposal over don't forget that this set-up will have a very definite influence
on prospective dealings in Greece, Roumania, Bulgaria, and Persia." My
answer to that is, substantially, what I have just said. I know that it will
help us in our negotiations in these other countries but, by the same token,
it will show these other countries how progressive, and businesslike, and de-
cided the Turkish Government is if they go after and conclude the plans you
are discussing with them, in an eflicient businesslike manner.
Now, just a bit personal. I am most sincerely sorry that you could not
get up to Switzerland for the holidays, and don't think that we all do not
appreciate your foregoing not only the pleasure but the rest and change you so
well earned, to stick on the job.
The postscript on your letter of the 12th in which you state that Ferdie
Hulse had just come in with a letter from the Ministry saying he was fired,
is hard to understand, because in my time in Turkey I foimd Ferdie about as
hard-working and conscientious as anyone could be, and particularly anxious
to do a job for the Turkish Government. I haven't heard anything more from
you on this subject since your letter of the 12th, and Ferdie has not shown
up here, so I am hoping your conference with the Ministry has gotten him
reinstated and iron out his troubles. My slant on Americans, particularly
those who are in Turkey in more or less what we would call minor capacities,
as compared to yours and mine, have a particularly diflicult row to hoe, because
in doing their jobs efliciently, they are bound to create hard feeling and step
on somebody's toes, and it is an easy thing for the higher-ups to discharge
these people without completely understanding the case. And then, too, when
you are dealing with the class of people that you must deal with who will
occupy such positions in a foreign country, you have got to realize that they
have not the capacity to handle all situations diplomatically. However, I hon-
estly feel that with two exceptions and both those have been removed, all of
the American personnel that we have supplied to the Turkish Government are
conscientious, capable, and devoted to the job of making a good showing for
Turkey in Turkey. And if the higher-ups can only overlook some of their
minor shortcomings and give them the backing and help that they must have,
they will be better oft in the long run.
Letter of Decemher 23rd. — With this letter you enclose the English version
of your letter and report to Ismet Pasha and Fevzi Pasha with copy to Zekai
Bey. Needless to say, I think your letter and report are excellent. My par-
MUNITIONS INDUSTRY 1009
ticular attention is focused on the proposed services that you have offered
without increased cost, as follows :
(fl) Deliver the materials for the first airplane in the form of a com-
pletely fabricated demonstrator. First, let me ask you if that means that we
cannot expect now any order for Buffalo-built Hawks? If it only means that
you want a demonstrator there and this is your way of getting it, and we
can well expect an order for some Buffalo-built Hawks I think we could
arrange to do as you suggest. I quite thoroughly agree with your remarks
on the necessity for a demonstrator and its value to you, and I think, under
proper conditions, which means obviously sufficiently attractive potential busi-
ness practically assured, that I can put this demonstrator idea across.
Of course, your remarks as to the criticism of the Hawk as a type, such
as poor idling, inefficient gas tank, minor troubles with with gas gauges, etc.,
are all ridiculous if taken in the aggregate, and I know you fully appreciate
this. There is not an airplane built, and I do not care who builds it, which
does not have its minor difficulties and those they are experiencing with the
Hawks certainly are not any worse than they have experienced in the past
with other manufactui-ers' types, or that they will experience in the future
on auy airplanes they buy. They are difficulties that we hasten to straighten
out when we know they occur and while our competitors, both foreign and
domestic, may use them in an endeavor to sell their equipment, the best
argument that I can think of to counteract this is the fact that every airplane
manufactured has its certain number of minor bugs. They always have had
and they always will have, and Curtiss-Wright equipment does not have any
more than anyone else, and from what I can gather, in this country, we have
considerably less.
I can fully appreciate how a sample ship will help Chuck Hunter in his
work. It will probably reduce the length of time required to do the job at
Kayseri, but that, in itself, is not sufficient to warrant building up the first
ship here. The airplanes can be built without a sample ship but if the Turkish
Government want to speed up their production which is of vital importance
to their national defense program, and a completely built ship is essential,
they ought to be willing to pay for it, and if you could get them to pay for it
and use it as a demonstrator before shipping it to Kayseri, it would be a
grand piece of business ; because while in itself the added cost of building
the ship here and sending it over complete is not an item that will break us,
we have learned from experience that all of this business has unforeseen things
cropping up that cost a few dollars here and there, and in the aggregate, help
swell an already sizeable red figTire.
(&) Supply a motor man. I am rather inclined to agree with your ideas
except that I do not like the permanency of your suggestion. A good motor
man ought to be able to thoroughly instruct Turkish personnel on the main-
tenance and upkeep of the motors in, let us say, a year's time, plus what he
could do with the American personnel who are bound to be in the plant and
on the airline. And he should be able to leave at the end of this time, and
then service contacts by Naidment or whoever else is in Europe at regular
intervals should carry on the job efficiently. However, if we operate the air-
line, we will have to have motor experts working as chief mechanics and they
should be available to service the military equipment when it becomes necessary.
I quite agree with you that we ought to have the American personnel on
our pay roll so that we can control them providing the allowance you have
made in your price is ample to cover them. It looks ample at the present time,
but again, we do not know the details involved, so we cannot tell definitely
whether they are ample or not. Time alone will tell that as we get more
detailed information from you. Just as you yourself say, the longer they
delay the more our costs rise and that is one of the factors that makes it diffi-
cult to tell whether allowances have been ample or not. I fully appreciate that
you are not going to write any contract out there that will lose us money.
I will be interested in knowing whether United's man Gould has given you
any real dirty competition.
Letter of December 28th.— This is your further thought on Bill Smyth's
letter of December 17th, i think the matters of speed and competition I have
already covered in this letter, providing we can get the release on the retracta-
ble gear, and like yourself, I do not like the idea of a super super Conqueror
Hawk if we can get away with the speed on a standard Cyclone Hawk with
retractable gear. And as to the demonstrator, I think I have answered that,
although I will say that it will be a lot easier for me to sell the demonstrator
idea to our Board if we have further indication of definite and prompt and
1010 MUNITIONS INDUSTRY
profital)le action on the part of the Turkish Government in completing the
present negotiations and in cleaning up bonds, etc., on the last order.
Referring to your P.P.S., there has been a lot of talk about the Government
making it practicable to extend foreign credits. It is a policy that is getting
a lot of attention at the White House at the present moment. Tom Morgan,
Cheever Cowdin. Jab Smith, and I have all had sessions both here and in
AVashington on this subject, and will continue to follow it up. I cannot say
that it looks particularly hopeful. On the other hand it has not been flatly
turned down. How it will be worked out and whether it will mean that the
Government will help us finance, as manufacturers, a part of our ))usiness
without recourse, is still an unknown quantity. If it is with recourse, we are
not interested, because we can bori'ow money from the banks with recoui'se.
There are a lot of laws and rules governing the use of govei-nmental funds at
the present time, which must be changed or modified in order to permit the
extension of any credit for financing foreign business with or without recourse,
and it is all going to take time. All I can say is that work is being done on
the subject, Washington is lending a more or less attentive ear, but it is too
early to tell what the outcome will be. I will keep you posted, however, as
soon as we have anything definite.
This more or less answers your three letters without going into details that
require information from the factories on matters that do not involve general
principles. I am working on the basis of my leplying to your letters more or
less on a personal basis and giving you our reactions to major suggestions that
you make. Farm Hewlett and Bill Goukling take your letters and digest them
and an.swer detailed and technical questions and follow your suggestions for
the sending out of literature, etc., etc. I will be interested in knowing what
your reactions to this plan are and whether you are getting complete answers
to your specific queries, and in general, if everything is going all right from this
end. AVe have what I consider an excellent set-up here now with Parm
Hewlett down here from Buffalo as a permanent addition to the Export Com-
pany. He is the expert on airplanes and our liason with airplane manufactur-
ing units. Phil Shepley is the liasion with Wright, as you know, and in
addition, Parm Hewlett is handling the promotional sales work and distribution
of information, catalogues, etc., etc. The only way that we can be sure that our
work is being done efficiently is by receiving your reactions from a long range,
but in the field. We are all trying our best to do a good job and help to make
your job easier, so do not hesitate to tell us if we are falling down any place
and how we can be of more service.
We all send our best to you and the rest of the American personnel in
Turkey and, more particularly, Helen joins me in our best to Ethel and you
and Kiki and Bob. Here's hoping we will see you all real soon.
Sincerely yours,
JSA.
MBN.
Exhibit No. 449A
WAC — FILE : Releases of Engines for Foreign Sale — Misc. Army.
Mat. Div. A. C. 304— Wright Field 5-4-33-20M
War Dep.vrtment, Air Corps,
MATEauAL Division, Office of the Chief of Division,
Wright Field, Daifton, Ohio, Novonher 2, 1933.
AJL : Imf
Subject : Release of aircraft engines for domestic, commercial, and/or foreign
sale.
To : Wright Aeronautical Corporation, Paterson, N.J.
1. You are informed that the practice of obtaining release for a type of
engine by trade name and interpreting that release as a blanket release for
the particular type of engine through all the stages of its development and
improvement will not meet the sanction of the Air Corps. The Material Divi-
sion will release engines by Air Corps type designation only, and approval will
be given only to release of specific models upon the merits of each specific case
as presented to the Air Corps. Formal requests for release of current models
will include a detailed list of all engine accessories.
MUNITIONS INDUSTRY 1011
2. In this connection you are advised that tlie Material Division will approve
release of the R 1S20-F series which bear the following Air Corps designations :
R-1820-13, R-1820-17, R-1830-19, R-1830-20-21, and R-1820-23. It is desired
that a formal request for the release of these engines be forwarded to the Chief
of the Air Corps in order that the matter may be referred to the Bureau of
Aeronautics in accordance with the existing policies.
For the Chief of the Material Division :
(Sgd.) C. W. Howard,
Major, Air Corps, Chief, Engineering Section.
Cv. to Inspector in Charge, Air Corps. U. S. Army.
(Penciled notations: Comp. blower; R. 1830 13 Fl 6.4/1 5.95/1; 17 8/5 6.4/1
7/1 ; 19 8/5 6.4/1 7/1 ; 21 Fl 6.4/1 5.95/1 ; 23 8/5 6.4/1 5.95/1.)
Not included : 4 bbl. carb. 16/11 gears.
Exhibit No. 449B
WAC — FILE : Releases of Engines for Foreign Sale — Misc. — Army.
(Penciled Memorandum on Yellow Paper.) Not dated — but filed between let-
ters of 11/2/33, 10/31/33.)
C. W. Howard— Letter of Nov. 2, 1933.
Release in future to be Air Corps type designation only — requests to include
detailed list of all engine accessories.
Will approve release of R-1820 F series, 13, 17, 19, 21, which include 64/1 com-
pression and blower ratios 5.95 & 7/1.
Excluded are: 4 bbl. Carburetor 16/11 gears, 10/1 blower Hydro control (?),
1. This subject first brought up in May (?) 1933 during negotiation for
approval of U.S.S.R. agreement.
2. At that time sales and deliveries had already been made of advanced Cy-
clone Models as follows: China, 52; U.S.S.R., 2, also license; Bolivia, 8; Udet
Germany. 1 (?) ; Adler, 10 (?).
3. Gov't business at low ebb. Engineering program (WAC) greatly reduced
early in year.
4. However, by great effort commercial sales secured totalling more than
either Army or Navy total.
5. Manufacturing overhead absorbed 500,000.
6. Were all set as result to reduce Gov't prices — NRA upset plan.
7. Engineering program boosted again.
8. New procedure set up during summer following conversations at Dayton
and Washington.
9. Now all set to function properly.
10. U.S.S.R. already turned down on many items.
Exhibit No. 449C
WAS — FILE : Releases of Engines for Foreign Sale — Misc. — Army.
(Pencilled memorandum on yellow paper. Not dated — but filed between letters
of 11/2/33 and 10/31/33.)
Mr. Gordon.
First F3 Cyclones (8.3: Imp.) were shipped abroad as follows:
Country
Engine
no.
Date shipped
Bolivia
Russia
China (Shanghai) ,
" (Canton)...
21029
21020
17936
17927
Dee. 7, 1932
Feb. 9, 1933
Feb. 18, 1933
Feb. 27, 1933
(Pencilled mark here looks like— " NNL " Might be " T. M, L.") 11/9/33
P.S. Total shipments are shown on attached report.
P.P.S. No. 4 bbl. carbs. or 16/11 gears have as yet been shipped abroad
altho complete data has been given. Hispano U.S.S.R. and KIM,
etc, and Car. & engines are scheduled for shipment soon.
T. M. L.
1012 MUNITIONS INDUSTRY
Exhibit No. 449D
WAC — FILE : Releases of Engines for Foreign Sale — Misc. — Navy.
(Penciled Notations:
"CC:
Material Division.
Mr. Nutt.
Mr. Taylor.
R. L. Earle.")
De^paetment of the Navy,
Office of the Sbckbtary,
WasMngton {stamped dates): April 25, 193 Jf.
April 24, 1934.
VV/lll-3(22) (340419-1)
Dear Sirs: Your letter of 16 March 1934 with enclosure has been referred
to me for action. By this letter you request approval of certain changes to
be incorporated in engines for foreign and domestic commercial sale.
In reply, I am pleased to inform you that, insofar as concerns military
secrets, which is their sole cognizance in the matter, the War and Navy De-
partments have no ob.iection to the release of the changes outlined in the
enclosure to your letter in your engines for domestic and foreign commercial
sale. It is desired that this release and future releases of a similar nature
be restricted to engines manufactured in this country, and that separate re-
leases be requested not more frequently than semiannually for changes to be
incorporated in engines manufactured abroad under license. It shall further
be understood that this release does not extend to provision for four-barreled
carburetor or two-speed supercharger, upon which items the views of the
Departments have been previously expressed.
Sincerely yours,
(Sgd.) H. L. RoosE\'Ei.T.
Acting Secretary of the Nanj.
Weight Aeronautioal Corporation,
Paterson, N.J.
(Penciled notation : " The six-month restriction relates only to engines manu-
factured abroad not to those made in this country." — M. B. G.)
Exhibit No. 449E
WAC — FILE: Releases of Engines for Foreign Sale — Misc. — Navy.
May 4, 1934.
To: Chief of the Bureau of Aeronautics, Navy Department. Washington, D.C.
Via : Inspector of Naval Aircraft, U.S.N., at Wright Aeronautical Corporation,
Paterson, N.J.
Subject: Release of Wright Aeronautical Engines for Export.
Reference: Letter from Office of the Secretary of the Navy VV/Lll-3 (22)
(340419-1) dated April 24, 1934.
1. Referenced letter advises that the War and Navy Departments have no
objection to the release for foreign and commercial sale of engines incorporat-
ing the changes outlined in this company's letter of March 16, but states that
it is the desire of the Government that this release and future releases of a
similar nature be restricted to engines manufactured in this country, and that
separate releases be requested not more frequently than semiannually for
changes to be incorporated in engines manufactured abroad under license.
2. Attention is invited to the fact that due to the extensive flight operation
of Wright engines during the past few months, a number of minor engineering
changes have been made to increase the reliability of the engines or to facilitate
the manufacturing and maintenance of the engines. None of these changes are
so novel as to constitute new inventions but some of them are desirable to
overcome the possibility of engine failure under certain flight conditions. It
is believed that all of the essential improvements have been incorporated in
Wright engines built as of April 15 and, therefore, it is respectfully requested
that this date be taken as the starting point for the semiannual Government
releases for engines to be manufactured under foreign license. Upon the
MUNITIONS INDUSTRY 1013
assumption that this request will receive favorable action we are attaching
hereto a list of the engineering changes made by this company from March 1
to April 15, 1934. Lists of all other changes made by this company since the
adoption of the new Government policy have been previously forwarded to the
Government and have all been approved except as mentioned below.
3. Referenced letter advises that the Government has not released the four-
barrel carburetor or the two-speed supercharger for use in engines to be exported
or manufactured under foreign license. In the list of detail changes previously
submitted to the Government this company mentioned a modification of the
crankcase rear section to adapt it for a two-speed supercharger. This modifica-
tion consists only of additional bosses cast into the crankcase rear section.
The pattern which permitted the additional bosses was made to enable this
company to obtain castings for experimental Government projects and the
bosses can in no way be identified with a two-speed supercharger by anyone not
thoroughly familiar with the supercharger developments project. It is not the
intention of this company at this time to request the release of the two-speed
supercharger or any of its parts either for domestic or for foreign use.
4. In connection with the release of the four-barrel Stromberg carburetor,
attention is invited to the fact that this carburetor was exported before this
company was advised of the Government's new policy applying to foreign re-
leases. It contains no novel features but is merely a larger size of the obso-
lescent two-barrel carburetor, and most of its parts are interchangeable with
the obsolescent two-barrel carburetor.
5. It is the desire of this company to fully cooperate with the Government in
connection with experimental projects and all confidential projects are jealously
guarded by this company. In view of the fact that the Stromberg four-barrel
carburetor has now become a standard commercial article, since it is the only
type of carburetor used by this company and since it was exported prior to this
company's knowledge that such export would not be approved by the Govern-
ment, it is respectfully requested that the decision given in referenced letter be
reconsidered and that approval be given for the foreign shipment of engines
equipped with four-barrel carburetor and for the manufacturing under foreign
license of engines equipped with the four-barrel carburetor.
6. Change B-1312 covering provisions for gun synchronizer gears and support
of "Adco " gun synchronizer has not been approved for export. This change
has always been considered a confidential project by this company and will be
so considered until released by the Government.
7. Change B-1224-b covers provision for oil-heated instead of exhaust-heated
four-barrel carburetion. This change was made at the specific request of the
Transcontinental & Western Air Express Company for engines to be installed
in the Douglas transport and will be confined to engines sold in this country
until released for export use by the Government.
Wright Aeronautical Corporation,
T. M. Lucas,
Manager Order and Contract Division.
TML : SS
CC : INA. USN at WAC
G. W. Vftughan
M. B. Gordon
George Chapline
Arthur Nutt
P. B. Taylor
R. L. Earle
R. K. Brown
The list printed below was requested by the committee and fur-
nished by Mr. Allard on November 2, 1934. (See text, p. 855.)
FoEMEB Navy, Army, and Reserve Corps Officers now Connected with
Curtiss-Weight
cuktiss-wright corporation
President, Thomas A. Morgan, United States Navy, 1908-12, chief elec-
trician ; major, United States Army, 1926-33, Resei-ve ; major, United States
Air Corps (S. R.), 1926-33.
1014 MUNITIONS INDUSTRY
Senior vice president, J. A. B. Smitli, ensign, United States Navy, 1902;
resigned commander, 1920.
Vice president, J. S. Allard, aviation section, Signal Corps, 1917-19; Air
Service Officers' Reserve Corps, 1920-31.
Vice president, B. S. Wright, Reserve Officers' Training Corps, Aug. 27, 1917-
Nov. 27, 1917; commissioned first lieutenant Coast Artillery Reserve Corps
with active duty Nov. 27, 1917 ; commissioned captain Air Service, Feb. 18,
1919; resigned, January 1928.
Treasurer, J. A. B. Smith. (See above.)
Secretary, R. R. Reger, entered United States Army Signal Corps December
1917 ; discharged June 1919.
Assistant secretary and assistant treasurer, E. S. Cramer, February 1906-10,
United States Navy ; May 1918-July 1919, United States Army.
CURTISS AEKOPLAN'E & MOTOR CO.
President, J. A. B. Smith. (See above.)
Vice president, T. P. Wright, lieutenant United States Naval Reserve, No-
vember 1918 to October 1921.
Vice president, B. S. Wright. (See above.)
Vice president, B. G. Leighton, Naval Academy July 1909-June 1913 ; com-
missioned in turn lieutenant and lieutenant commander. United States Navy ;
resigned United States Naval Service November 1928; appointed lieutenant
commander United States Naval Reserve, 1928.
Treasurer, George S. Lapp. No service.
Secretary, R. R. Regex'. (See above.)
Assistant treasurer and assistant secretary, Joseph P. Healey, first lieutenant,
Infantry Reserve, February 1925.
WRIGHT AERONAUTICAL CORPORATION
President, Guy W. Vaughan, lieutenant commander. United States Naval
Reserve, October 3. 1927.
Vice president, B. G. Leighton. (See above.)
Vice president, Arthur Nutt. No service.
Vice president and assistant general manager, M. B. Gordon, second lieuten-
ant, aviation section. Signal Reserve Corps ; enlisted, February 1918 ; dis-
charged, December 1918.
Treasurer. J. J. Donahue. No service.
Secretary, R. R. Reger. (See above.)
Assistant secretary and comptroller, C. C. King. No service.
CURTISS WRIGHT AIRPLANE CO. (MISSOURI) (DELAWARE)
President, Ralph S. Damon, enlisted Signal Corps Reserve, February 5, 1918;
commissioned in the Air Corps Reserve, December 1918 : discharged, active duty,
May 14, 1919; resigned Reserve commission, December 1923.
Vice president, G. J. Brandeweide, United States Army, November 1918-July
1919.
Treasurer, G. M. Ebert. No service.
Secretary, R. R. Reger. (See above.)
Assistant secretary, G. M. Ebert. (See above.)
CURTISS WRIGHT EXPORT CORPORATION
President, J. S. Allard. (See above.)
Vice president, W. F. Goulding, aviation section. Signal Corps, September
1917; conniiissioned first lieutenant; discharged, February 1919.
Vice president, W. P. Pawley. Information not available.
Vice president, B. G. Leighton. (See above.)
Treasurer, E. S. Cramer. (See above.)
Secretary, R. R. Reger. (See above.)
MUNITIONS INDUSTRY
HEARINGS
BEFORE THE
SPECIAL COMMITTEE
INVESTIGATING 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 5
SEPTEMBER 12, 13, 14, 1934
E. I. DU PONT DE NEMOURS & CO.
Printed for the use of the
Special Committee Investigating the Munitions Industry
UNITED STATES
GOVERNMENT PRINTING OFFICE
83876 WASHINGTON : 1934
MUNITIONS INDUSTRY
HEARINGS
BEFORE THE
SPECIAL COMMITTEE
INVESTIGATING THE MUNITIONS INDUSTRY
UNITED STATES SENATE
SEVENTY-THIED CONGRESS
PURSUANT TO
S. Res. 206
A RESOLUTION TO MAKE CERTAIN INVESTIGATIONS
CONCERNING THE MANUFACTURE AND SALE
OF ARMS AND OTHER WAR MUNITIONS
PART 5
SEPTEMBER 12, 13, 14, 1934
E. I. DU PONT DE NEMOURS & CO.
Printed for the use of the
Special Committee Investigating the Munitions Industry
UNITED STATES
GOVERNMENT PRINTING OFFICE
83876 WASHINGTON : 1934
AU^ 18 1935
SPECIAL COMMITTEE INVESTIGATING THE MUNITIONS INDUSTRY:
GERALD P. NYE, North Dakota, Chairman
WALTER F. GEORGE, Georgia ARTHUR H. VANDENBERG, MichlgaP
BENNETT CHAMP CLARK, Missouri W. WARREN BARBOUR, New Jersey
HOMER T. BONE, Washington
JAMES P. POPE, Idaho
Stephen Raushenbush, Secretary
II
Otaraad to credit acct
of Documents
CONTENTS
Testimony of: Pige
Bates, N. E., Jr., foreign sales agent ' 1176, 1184
Carpenter, W. S., Jr., vice president 1034, 1062. 1077, 1085, 1261
Casey, K. K. V., director of sales, smokeless powder department 1073,
1123, 1143, 1228, 1246, 1252
Eliason, J. Bayard, treasurer 3063
du Pont, A. Felix, vice president 1152, 1191, 1214, 1230, 1245
du Pont, Ir^nee, vice chairman of board of directors 1045,
1059, 1120, 1137, 1226, 1257, 1262
du Pont, Lammot, president 1070,
1076, 1111, 1143, 1155, 1176, 1188, 1227, 1242, 1263
du Pont, Pierre S., chairman of board of directors 1016,
1037, 1053, 1065, 1079, 1212, 1262
Sparre, Dr. Fin. director 1100, 1161, 1225
Corporate organization of E. I. du Pont de Nemours & Co 1016—
War profits of E. I. du Pont de Nemours & Co 1029'-
du Pont investments in other companies 1058
Interest shown by du Ponts in legislative activities 1071
Relations with Imperial Chemical Industries, Ltd 1081-
Attitude of du Pont toward embargoes and legislation regarding em-
bargoes 1111
Nature of du Pont foreign relations 1148--
Relations with Mitsui & Co., Ltd. — Japan ^_^ 1160—
Argentine Powder Factory : 1173
Contraband of arms in Germany 1197
Relations with Dynamit-Actien-Gesellschaft, Germany 1201-
Contracts for German sales 1227-
ni
INVESTIGATION OF THE MUNITIONS INDUSTKY
WEDNESDAY, SEPTEMBER 12, 1934
United States Senate,
Special Committee to In\T!:stigate
THE Munitions Industry,
Washington, D. C.
The hearing was resumed at 2 : 15 p. m. in the caucus room. Senate
Office Building, pursuant to taking of recess, Senator Gerald P. Nye,
presiding.
Present: Senators Nye (chairman), George, Clark, Bone, Pope
and Vandenberg.
Present also: Stephen Kaushenbush, secretar}^
afternoon session
The Chairman. The committee -will be in order. It will be
recalled that during a recent day of these hearings the assistant
to the Secretary of State had assured us that certain information
that was requested concerning a treaty of 1858 with Bolivia and
another of 1859 with Paraguay might be sent for incorporation in
the record, at the point where Mr. Green's testimony left off. Such
information, accompanied by a letter from the Secretary of State
under date of September 11, is here offered for the record.
(The letter and memorandum above referred to are included in
the record following the testimony of Joseph C. Green, given on
Sept. 11, 1934, see part III, p. 628.)
The Chairman. I also offer for the record a letter by Mr. L. du
Pont, president of the E. I. du Pont de Nemours & Co., presented
to the committee this morning revealing the presence of those of the
corporation who can speak authoritatively upon the various phases
which are under investigation, which I think ought to be made a
part of the record.
(The letter referred to is as follows:)
E. I. DU Po^'T DE Nemours & Co.,
Wilmington, Del., September 11, 193 'f.
Hon. Geraij> P. Nye,
Chairman Special Committee Investigating the Munitions Industry,
408 Senate Office Building, Washington, D. C.
My Dear Senator Nye: In accordance with the request contained in your
letter of September 4, 1934, I shall appear tomorrow, September 12, 1934,
before your committee.
As suggested in your letter I shall bring with me such officers, advisors,
and consultants as may be of assistance to your committee in the presentation
of such information and data as the committee desires.
More specifically, we shall be pleased to make available for your examination
the following gentlemen :
1015
]016 MUNITIONS INDUSTRY
Mr. P. S. flu Pont, president of this company from 1915 to 1919, inclusive,
and now cliairman of tbe board. Mr. P. S. du Pont is specifically informed
U'itli regard to the operation of this company and its contacts with the U.S
'Government during the war. He is especially familiar with the construction ol
the Old Hickory Powder Plant for the U.S. Government. Mr. du Pont's long
experience with the company has given him a thorough knowledge of the ad-
vantages of peace-time operation as compared with war-time operation.
Mr. Irenee du Pont, vice President and vice chairman of the board of direc-
tor.s, and former president of tlie company from 1919 to 1926. Mr. du Pont
Was particularly active during the difficult period of transition following the
conclusion of the war.
I succeeded Mr. Irenee du Pont and am now the president o fthe company.
I am, of course, familiar with the current affairs of the company.
Dr. Fin Sparre, member of the board of directors and director of the develop-
ment department of the company, has been actively concerned with the negotia-
tion and operations of the agreements with Imperial Chemical Industries, Ltd.,
including other foreign companies, and will be present. He has intimate knowl-
edge concerning the licenses and patents and the interchange of information
specified in your letter.
Mr. J. Bayard Eliason, treasurer, and Mr. A. C. Nielson, comptroller, will
be prepared to assist the committee in an examination of the war-time profits
of the company.
Both Mr. A. Felix du Pont, vice president and general manager of the
smokeless powder department, and myself will be prepared to testify concerii-
ing the relations of the comitany with the United States Government. Mr.
Felix du Pont will be assisted by Mr. F. W. Bradway, assistant general man-
ager and by Maj. K. K. V. Casey, director of sales of the smokeless-powder
department.
Very truly yours,
L. DU Pont, President.
The Chairman. Mr. Pierre du Pont, are you president of the
company, or chairman of the board ?
Mr. Pierre S. du Pont. I am chairman of the board.
The Chairman. You were president of the company during the
period of the war ?
Mr. Pierre S. du Pont. During the war period ; yes.
The Chairman. So that we shall be examining you primarily to
start with, Mr. Pierre S. du Pont.
CORPORATE ORGANIZATION OF E. I. DU PONT DE NEMOURS & CO.
TESTIMONY OF PIERRE S. DU PONT
(The witness was duly sworn by the chairman.)
The Chairman. For the record, I am offering as " Exhibit No.
450 ", a history of and certain data concerning the E. I. du Pont de
Nemours & Co. as taken from Moody's Manual of Industrials, 1933.
(The statement referred to was marked " Exhibit No. 450," and is
included in the app^^ndix on p. 1269.)
The CiiAiitM.^N. Also, I shall offer for the record as " Exhibit No.
451 '', a statement compiled from Poor's industrial volume and from
other sources, as noted, concerning the directors and the directorates
of E. I. du Pont de Nemours & Co. and subsidiary corporations, re-
vealing the subsidiary companies wholly owned and those not wholly
owned, but showing their percentage of ownership by the E. I. du
Pout de Nemours & Co.
(The statement referred to was marked " Exhibit No. 451," and is
included in the appendix on p. 1270.)
MUNITIONS INDUSTRY 1017
The Chairman. Senator Bone, will you proceed?
Senator Bone, Mr. du Pont, the form of this inquiry is of such
a character that it will probably not be necessary to introduce ex-
hibits. I think perhaps we might expedite the inquiry of this par-
ticular bracket of it and hurry through without the necessity of the
introduction of a lot of papers if your answers will cover the ques-
tions that I shall ask on the data that I have before me.
Mr. Pierre S. du Pont. Before we start, Senator, may I explain
that I have been out of active business for quite a number of years
and am not acquainted with any of the details of the business as it
stands today and naturally with regard to the past, I am probably
a little hazy. But I have endeavored to post myself and I may be
able to answer quite readily on some things and have reference to
my associates on others. I shall try to do my best to give to you
the information that you wish.
Senator Bone. I may suggest that these questions are of such a
general character as affecting your business that you can give us
the information verj^ readily. This is going to be a very short
inquiry.
Will 3^ou give us the full name of your present corporate organi-
zation?
Mr, Pierre S. du Pont. E. I. du Pont de Nemours & Co.
Senator Bone. In what State is that incorporated?
Mr. Pierre S. du Pont. In Delaware.
Senator Boke. Can you give us the date of the incorporation?
Mr, Pierre S. du Pont, It was in 1915.
Senator Boj^e. Let me suggest September 4, 1915, as the date of
the incorporation.
Mr. Pierre S. du Pont. I believe that is correct.
Senator Bone. I have some of this data before me and I will use
it and if I make an error, please correct me.
The record that I have before me indicates that your stock set-up
consists of the following items :
Preferred or nonvoting debenture stock, $150,000,000.
Voting debenture stock, $10,000,000,
Voting common stock, $80,000,000.
Your corporate structure consists altogether of $240,000,000 of
stock. Is that correct?
Mr. Pierre S. du Pont. That sounds correct.
Senator Bone. This is taken from your own records,
Mr. Pierre S. du Pont. That is authorized stock, not the issued
stock.
Senator Bone. The newly organized corporation, that is the one
to which we have just referred, took over all of the assets of the
E. I. du Pont de Nemours Powder Co, of New Jersey ?
Mr. Pierre S, du Pont. Right,
Senator Bone, That other organization, the E. I. du Pont de
Nemours Powder Co. of New Jersey, was shown to have assets of
$90,847 883 ; munitions contracts of $29,152,116 ; or a total of assets
of $120,000,000.
Mr. Pierre S. du Pont. That sounds about right.
Senator Bone, When your new corporate organization was formed,
how did you allocate this stock in the new company to the stock-
holders of the old organization?
1018 MUNITIONS INDUSTRY
Mr, Pierre S. du Pont. That was allotted to the stockholders of
the old corporation in proportion to their stockholdings.
Senator Bone. It appears on the face of this record that the new
company had a capital set-up of approximately twice the size of the
old corporation?
Mr. Pierre S. du Pont. Yes.
Senator Bone. So that for one share of stock in the old company,
two shares of stock in the new organization were given in exchange ;
that is the way the change was effected? Is that correct?
Mr. Pierre S. du Pont. My brotlier suggests that that was a divi-
dend paid out from the old company to the new company.
Senator Bone. Was that in the nature of a stock dividend?
Mr. Pierre S. du Pont. I imagine it was a liquidating dividend.
I am not sure that I can differentiate.
Senator Bone. It had the practical aspect of a stock dividend.
Am I correct in that?
Mr. Pierre S. du Pont. I think so, yes.
Mr. Irenee du Pont. The Government took the stand that that
was a sale.
Mr. Pierre S. du Pont. My brother on my right says that the
Government took the position that that was a sale of assets, and that
was brought out on a question of taxation. That decision stood, I
believe.
Senator Bone. What I am trying to get at now is that the practi-
cal situation Avas that it amounted literally to an exchange of stock.
That was the practical effect of it, was it not ?
Mr. Pierre S. du Pont. I think so, yes. Technically, possibly not,
but practically, yes.
Senator Bone. I mean in practical effect ?
Mr. Pierre S. du Pont. Yes.
Senator Bone. Your business, I gather from this statement be-
fore me, was founded originally in 1802?
Mr. Pierre S. du Pont. Right.
Senator Bone. Its original purpose was to manufacture powder?
Mr. Pierre S. du Pont. Yes. That was the black powder, the
only poAvder known in those days for sporting and commercial pur-
poses; but then largely sporting and military purposes.
Senator Bone. I shall be stating some cOiiciusions on facts, as I
proceed, so that you may agree with them or disagree with them as
we go along. That will save us a lot of time.
Thje E. I. du Pont de Nemours & Co., the present company, was
organized as a holding corporation and acquired the ownership of
about 100 different corporations through an exchange of their capital
stocks with the preferred and common stocks of the du Pont Co.?
Mr. Pierre S. du Pont. That was the E. I. du Pont de Nemours
Powder Co., the predecessor of the present one. The transfer
was made in 1915.
Senator Bone. I was in error then. The present compau}/ took
over the assets of the powder company, and when it did so it took
over these other companies that had been brought into this powder
company, is that right?
Mr. Pierre S. du Pont. But they had been merged into the powder
compaii}^ and they no longer existed.
MUNITIONS INDUSTRY 1019
Senator Bone. They had lost corporate identity, is that right?
Mr. Pierre S. du Pont. Yes.
Senator Bone. These older corporations, were dissolved when they
were taken over; this powder company was dissolved, as I under-
stand, b}^ a decision in the Federal courts, is that right?
Mr. Pierre S. du Pont. Yes.
Senator Bone. As a result of that decree of the Federal courts,
which was brought, I believe, under the Sherman Act, at least two of
these companies which now exist as your affiliates, were separated
from the parent company, one being the Hercules Powder Co. and
the other the Atlas Powder Co. ?
Mr. Pierre S. du Pont. Yes.
Mr. Irenee du Pont. Not affiliates, but separate corporations over
which we have no control at all.
Senator Bone. Let me digress for a moment and ask what control
the du Pont Co. holds over the Hercules Powder Co. and the Atlas
Powder Co. ?
Mr. Pierre S. du Pont. None whatever.
Senator Bone. Have you any stock ownership in them ?
Mr. Pierre S. du Pont. Not the company ; no.
Senator Bone. Do the individual officers of your corporation ; that
is, the heavy stockholders in your company, do they have an interest
in those companies?
Mr. Pierre S. du Pont. Formerly. At the time of the dissolution,
the stockholders received the stock of the Hercules and Atlas Powder
companies as a dividend, the theory being that that stock would soon
be dissipated and the companies would cease to have any common
ownership. That has actually occurred, I believe that the large
stockholders, practically all, parted with their stock, but I have no
information in regard to the Hercules and Atlas. But I believe that
that is the case.
Senator Bone. Do j^ou and your brothers, Mr. du Pont, have an
ownership of any size in the two powder companies that I have
named, the Atlas and the Hercules?
Mr. Pierre S. du Pont. I think I. have a very few shares of both
of them. But it is a very small interest.
Senator Bone. Can you advise us?
Mr. Pierre S. du Pont. I could find out for you.
Senator Bone. Of the extent of the holdings in either or both of
those companies by your brothers? ^
Mr. Irenee du Pont. I can answer for myself. I have no Atlas
Co. stock.
Senator Bone. Mr. Chairman, I think it would be well to have all
these gentlemen sworn and then they may answer questions for the
record as they come up.
The Chairman. I will call on Mr. Irenee du Pont, Mr. Lammot
du Pont, Mr. A. Felix du Pont, Mr. Fin Sparre, and Mr. J. Bayard
Eliason to rise and be sworn.
Irenee du Pont. Lammot du Pont, A. Felix du Pont, Fin Sparre,
and J. Bayard Eliason were thereupon duly sworn by the chairman.
1 The holdings of the du Fonts in Atlas and Hercules Powder Co.'s stock were later
submitted to the committee and appear in the appendix on p. 1397.
1020 MUNITIONS INDUSTRY
Senator Bone, I will repeat that question. Will you advise me,
after this dissolution was effected and these companies split off
from the parent company, whether you retained stock ownership
of any consequence in either of these powder companies I That
question <>:oes to each of you gentlemen.
Mr. Irenee du Pont. I can answer for myself with certainty. I
have no Atlas stock whatever. I disposed of it long since. I have
exactly — the shares of Hercules I believe that we got as dividends
originally — if I remember correctly 13,000 shares. I can give it
to you correctly by referring to a memorandum.
Senator Bone. You can supply that later, if you wish. Will each
of you gentlemen indicate your answer to that question?
Mr. Lammot du Pont. I have some Hercules stock and some
Atlas stock.
Senator Bone. Can you advise us the extent of it?
Mr. Lammot du Pont. I cannot give you the exact figures. But
it is less than I held at the time of the dissolution.
Senator Bone. Will you just approximate it?
Mr. Lammot du Pont. I would say it was two or three thousand
shares of each.
Senator Bone. And you, Mr. Felix du Pont?
Mr. A. Felix du Pont. I have some Hercules and I think I have
some Atlas. But it is a rather small amount. I cannot remember
the amount.
Senator Bone. Would you approximate it?
Mr. A. Felix du Pont. I am afraid not.
Senator Bone. The record will, of course, indicate that you are
not answering in categorical fashion. You are just giving your
best recollection.
Mr. Irenee du Pont. My proper amount is 12,264 shares.
Senator Bone. The record indicates that both of these companies
that is to say the Hercules Powder Co. and the Atlas Powder Co.
began active business January 1, 1913. In connection with an in-
come tax statement of the du Pont Co. — I am now referring to the
present du Pont Co. — ^the information submitted by the company
inrlir'nfec t^:at the invested capital for the three years immediately
preceding the outbreak of the World War was as follows :
1911: $50,067,155.23.
Let me say parenthetically that these figures I think have been
supplied to us by your auditors.
Mr. Raushenbush. Thej'' were supplied by the Bureau of Internal
Revenue, Senator.
Senator Bone. By the Bureau of Internal Revenue ?
Mr. Raushenbush. Taken from tax returns.
Senator Bone. In 1912 $51,854,515.53.
In 1913 $36,106,128.01.
Are those figures correct?
Mr. Pierre S. du Pont. It does not correspond with my recollec-
tion of the statement.
Senator Bone. Would you kindly look at that exhibit, which is a
photostat. I think you will observe that Mr. John J. Raskob signs
that return.
Mr. Pierre S. du Pont. I was mystified by the 1913 account of
$36,000,000. That was after the transfer of assets, was it not?
MUNITIONS INDUSTRY 1021
Senator Bone. I was about to suggest that that was after the trans-
fer or the separation of the Hercules Powder and the Atlas Powder
Companies from the parent compan}^, which accounted for this loss
in invested capital as shown on this record.
Who was Mr. John J. Kaskob ?
Mr. Pierre S. du Pont, I believe he was the treasurer of the com-
pany at the time.
Senator Bone. He is the one who signs this report. If there
is any question about this, we can put it in the record. Otherwise,
if those figures are agreed upon, it will not be necessary for us to
do that. Do you desire to have it in the record ?
Mr. Raushenbush. I do not.
Mr. Pierre S. du Pont. It is immaterial to us.
Senator Bone. Is there any question in your mind about the
accuracy of the figures?
Mr. Pierre S. du Pont. I have no question about it.
Senator Bone. Then we will not put it in the record. The taxable
income reported by your company — and when I say your company
from now on I am referring to the present company — the taxable
income reported by the company for the years 1911 to 1913 is as
follows :
1911, $5,132,470.30.
1912, $6,012,632.94.
1913, $4,642,534.68.
It is evident here at this particular showing that the separation
of the two powder companies from the du Pont Powder Co. resulted
in a lowering of the taxable income of the companies as recorded.
Mr. Pierre S. du Pont. I should like to differentiate between the
taxable income and the income as stated in our annual report. It is
not surprising that the figures are different. But that is a fact. They
are calculated on different basis.
Senator Bone. What is that Exhibit, Mr. Raushenbush i
Mr. Raushenbush. This is Bureau of Internal Revenue Exhibit
No. 2.
Senator Bone. Does that bear the signature of the company, also ?
Mr. Raushenbush. Yes; it does. The point is well made there.
There are different ways of computing incomes and this is the net
taxable income as computed for purposes of taxation.
Senator Bone. Would you kindly examine that, Mr. du Pont ^
Mr. Pierre S. du Pont. I am perfectly willing to accept this as
the proper statement of amount for taxation purposes, yes.
Senator Bone. In that event I will not go further into the matter.
Based on these figures, the returns on invested capital for the three-
year war period were — and this computation was made from these
figures— 1911, 10.25 percent; 1912, 11.59 percent; and 1913, 12.86
percent.
Those are the computations of taxable income as against the
invested capital.
Is that correct?
Mr. Pierre S. du Pont. If that is shown by the figures, I will
accept it, surely.
Senator Bone. Can you tell us when you made your first important
foreign contracts, for smokeless powder?
1022 MUNITIONS INDUSTRY
Mr. Pierre S. du Pont. The first negotiation started, as I remem-
ber right, in Sei:)tember of 1914 and the first contract, which was
with the French Government, was closed in October of that year
and the second part of the same contract in December.
Senator Bone. Of course, you are speaking from memory and you
cannot be expected to give the exact dates. But the record before
me indicates that October 12, 1914, was the date when the first
contract Avas signed.
Mr. Pierre S. du Pont. That is substantially correct. May I
add there, Mr. Felix du Pont prompts me in saying that the first
actual contract signed was one with Mitsui Co. which was for
some powder for Russia.
Senator Bone. We are somewhere in the correct neighborhood of
the date. There may be an error of a day or two. The record
indicates that other orders aggregating $20,000,000 were received
from September to December in the year 1914. That is indicated
on page 9, section A of exhibit 1. AVill you read that language,
Mr. Raushenbush?
Mr. Raushenbush. Do you wish to identify it?
Senator Bone. I want that exhibit identified, because I shall have
to refer to it briefly in passing.
Mr. Raushenbush. This is an exhibit labeled " Specific protests
of E. I. du Pont de Nemonrs & Co. and subsidiaries against addi-
tional assessments proposed in Treasury Dej)artment letters dated
October 30, 1924 ", and bears the stamp of E. I. du Pont de Nemours
& Co., auditing department. In section A on page 12, paragraph 4,
it states :
War orders in 1914 and 1915. The Du Pout Co. Was probably the first
American corporation to receive war orders of any magnitude, the only
possible exception being the Bethlehem Steel Co. The value of the war orders
received was in round figures as follows :
September to December, inclusive. 1914, .$20,000,000.
January to .Tune, inclusive, 1915. $108,000,000.
July to September, inclusive, 1915, $137,000,000.
Total. September 1914 to September 1915, inclusive, $265,000,000.
October to December 1915, inclusive, $78,000,000.
Total, September 1914 to December 1915, inclusive, $343,000,000.
Senator Bone. Now, Mr. du Pont, I would like to have you and
your brothers take a glance at that so that you may recognize it.
That is the record which your company filed, I believe, with the
Bureau of Internal Revenue in connection with some tax questions.
Mr. Pierre S. du Pont. Yes.
Senator Bone. I merely desired to have it identified by your com-
pany because there will be one or two more references to matters
in the volume itself.
Mr. Pierre S. du Pont. The figures sound correct to me, but I
have no way of checking them. Undoubtedly if it was a signed
statement of the company', the figures are correct.
Senator Bone. I understand that that is your statement filed with
the Bureau of Internal Revenue in connection with a tax case that
was pending.
Mr. Pierre S. du Pont. Yes.
Senator Bone. The year of 1915 appears to have been really the
turning point in your company's business. The record indicates
that during that year war contracts aggregating $323,000,000 were
MUNITIONS INDUSTRY 1023
received by the company. That appears in this book which we will
now identify as exhibit 1, section A. page 12. Mr. Raushenbnsh,
wall you kindly read that and show that statement to the witness?
Mr. Raushenbush. That has been read. Mr. Chairman.
Senator Bone. This exhibit 1, which w^e are referring to now,.
Mr. du Pont, is a record prepared by your company and filed in
the Bureau of Internal Revenue of the United States.
Mr. Pierre S. du Pont. Then it is undoubtedly correct and I
accept it.
Senator Bone. AVell, that is a fact. I wanted to set at rest any
question about that.
Mr. Pierre S. du Pont. My figures, drawn from the books are
$319,000,000 in 1915. This says $323,000,000. That is an insignifi-
cant difference.
Senator Bone. Would there be any explanation on that? While
you indicate this is a very slight difference, what explanation would
there be for the figures that you have as against the figures of this
book, that book being your own statements sworn to.
Mr. Pierre S. du Pont. It is possible that there was a difference
in the division of contracts as to the dates when they were taken
or executed, or something of that kind. But I accept this as being
correct.
Senator Bone. That is to say, the exhibit 1 to which I luive
referred.
Mr. Pierre S. du Pont. Yes.
Senator Bone. Have you anything in the figures before you indi-
cating your gross military sales on the du Pont Co. and affiliated
companies for the years 1915 to 1918 inclusive?
Mr. Pierre S. du Pont. I have for 1915 a gross value of $319,-
700,000; 1916, $182,300,000; 1917, $313,700,000; 1918, $410,200,000
(corrected).
Senator Bone. What would be the total of those sales?
Mr. Pierre S. du Pont. I did not name 1914, which was $19,-
000,000. The total would be $1,245,000,000.
Senator Bone. That would indicate the total sales of the du Pont
Co. and its affiliates?
Mr. Pierre S. du Pont. Of the du Pont Co. I think there were
no affiliates. It was all together.
Senator Bone. Those companies wdiich it directly controlled ?
Mr. Pierre S. du Pont. Yes. That takes in everything.
Senator Bone. That indicates the gross business that they did in
that period?
Mr. Pierre S. du Pont. That is the military end only. That
takes no account of the commercial end. That might account for
the difference there which I had not thought of until my brother
mentioned it to me.
Senator Bone. I call your attention to a document which will be
marked for introduction in evidence as " Exhibit No. 452 " which is
the annual report of the E. I. du Pont de Nemours & Co. for the
year 1916.
(The document referred to was marked " Exhibit No. 452 " and is
on file with the committee.)
Senator Bone. You recognize this?
Mr. Pierre S. du Pont. Yes, I do.
1024 MUNITIONS INDUSTRY
Senator Bone. I direct your attention to a statement on page 5
of that report which I desire to read into the record as follows :
The reduction in prices doubtless enormously increased our volume of sales
which in the year 1016 aggregated .$318,845,685, which amount is better ap-
preciated when compared witli the average sales of the years 1913 and 1914,
which amounted to $25,927,478, an increase of 1130 percent.
Senator Bone. If j'^ou have copies of your annual reports, I will
refer to them as we go along and I suggest that you might have
them before you.
Mr. PiEREE S. Du Pont. I know these figures are correct. That
figure for 1913 and 1914 I know to be correct.
Senator Bone. The figures I am going to use now will be taken
from a number of exhibits, and I think it w^ell to have them intro-
duced unless we can be in agreement on these amounts. During
these years 1915 and 1918, inclusive, the amount of invested capital
in the du Pont Co. was as follows :
In 1915, $128,596,450.40; in 1916, $202,346,832.64; in 1917, $222,-
613,553.34; in 1918, $199,543,168.66.
Mr. Pierre S. du Pont. I coidd not accept those figures to explain
the total assets of the company. Its gross assets employed in the
business exceeded those figures by quite a great deal.
Senator Bone. I am using this comparison with respect to in-
vested capital. In order that we might clarify that, will you get
exhibit 3, and refer to page 14 ?
Mr. Eaushenbush. That is the report for 1919 to the stockholders.
Senator Bone. The reference to the invested capital in the business
^-hould be shown on page 14.
Mr. PiEERE S. DU Pont. May I explain the total assets in 1915.
That included not only the stock put in by the stockholders and the
>urplus, but it also included $116,000,000 of money that had been
advanced by our customers, and that capital actuall}^ was in the
business, used in buying materials and in erecting plants, and was
a necessary part of the capital. There was no surplus corresponding
to that $116,000,000, but it was actual capital, and the actual capital
invested in our company was $258,000,000, and not the smaller sum
you mentioned in 1915 to 1918. It was the larger capital, including
the moneys loaned by our customers actually invested in the plants
(;f the comi^any. In addition to that there was written off from our
books the value of the plants which were built and in actual opera-
tion, and actually necessar}^ for producing the results in 1918. In
1918 we had as much capital invested in plants as at any other
time, although we had written off those plants against the contracts
as they were filled. The actual capital used in 1918 was $308,000,000
and not the small siun which you read.
Senator Bone. Will you let me see that exhibit?
Mr. Pierre S. du Pont. Yes. That all comes about from having
written down the plants, although they were in active use, and also
having in use a large amount of capital which our customers had
supplied.
Senator Bone. Will you indicate what your invested capital was
in the year 1916?
Mr. Pierre S. du Pont. May I pass you this tabulation which I
think sets it forth, and you can follow it down, if you please. That
MUNITION'S INDUSTRY 1025
is the gross capital involved in the business actually at work at the
time the profits were made.
Senator Bone, I am not concerned now with what your assets
were, but I am concerned in this inquiry in the matter of the invested
capital.
Mr. Pierre S. du Pont. That was the invested capital.
Senator Bone. I am taking your own statement for the year 1919,
your own statement to your stockholders, and I am wondering where
this difference comes.
Mr. Pierre S. du Pont. If you will take that statement, you will
see the gross assets which is the capital employed in this case is
stated as you have it on that sheet.
Senator Bone. Do you offer this now to the committee for its use?
Mr. Pierre S. du Pont. Yes ; gladly.
Senator Bone. Can you tell us from this statement then what your
invested capital was?
Mr. Pierre S. du Pont. I do not know whether I made clear my
point that the total assets of the company during these war years was
active in the production of powder and producing profits to the
company, that capital came from several sources; first, from the
stockholders, paid into the company; second, the surplus that had
been accumulated during the years ; and, third, a very large amount
of money which the customers had loaned to us to build plants and
provide materials for their contracts.
Senator Bone. You proceeded during the period of the war just
as rapidly as possible to amortize a large amount of that investment?
Mr. Pierre S. du Pont. Yes; but it was only amortized in the
books.
Senator Bone. You wrote those plants off, a large number of
them ?
Mr. Pierre S. du Pont. Not during the war.
Senator Bone. Did you not liquidate a number of them imme-
diately after the war?
Mr. Pierre S. du Pont. After the war ; yes.
Senator Bone. The process of writing them down, liquidating them
and getting them out of your financial picture was accomplished
during the period of the war. That is to say, did you not amortize
that investment which I presume you took to be a temporary capital ?
Mr. Pierre S. du Pont. Yes.
Senator Bone. Will you now state what your invested capital was
in 1917?
Mr. Pierre S. du Pont. $263,393,000.
Senator Bone. And in 1918 ?
Mr. Pierre S. du Pont. $308,846,000.
Senator Pope. Were these loans you referred to as being customers'
loans later repaid?
Mr. Pierre S. du Pont. May I explain how that came about?
When the war first started and the French Government approached
us on the subject of contracts w^e told them we had nothing but a
small plant, and in order to produce the powder we would have
to erect new factories, and if we undertook the contract it would be
with the understanding that the amount paid for the powder would
■cover the erection of these plants and enough money to secure
1026 MUNITIONS INDUSTKY
all or part of the raw materials. As a result of that we engaged to
deliver powder to them at $1 per pound, although the price to the
United States Government, or possibly I should say to foreigners
at that time was 80 cents per pound, so that we advanced the price
25 percent of our original foreign price. That was to take care of the
necessary plants which we desired to erect. That French contract
took up all of the capacity we had, and there was nothing left for
our own Government, and we immediately started to erect new fac-
tories. That proceeded very rapidly as new contracts came in, and
it was not until well on during the beginning of 1916 that we had
factories sufficient for the prospective business. At that time we
reduced the price from an average of about 90 cents to about 53
or 54 cents. As soon as the amortization was accomplished we im-
mediately reduced the price.
Senator Pope. This really amounted to advance payments on ma-
terials furnished?
Mr. Pierre S. du Pont. Yes; it amounted to advance pajnnents,
but it was all invested in factories and raw materials which we
had to supply ahead of time because of the tremendous advance
in prices. All of our nitrate of soda was imported from Chile and
there was great danger of embargo on that or enemy interference,^
so immediately when we made a contract we imported the nitrate of
soda. We were so successful in that, that every pound of nitrate
of soda amounting to over a million tons came into this country on
time in the face of threatened accidents on the Panama Canal,
in one case necessitating the bringing of the nitrate of soda across
the continent in order to arrive at the plant in time.
Senator Boxe. The figures before me indicate that the net tax-
able income of the new du Pont Co. during the four years of the Avar
period — that is to say, 1915, 1916, 1917. and 1918 — are as follows:
In 1915, 3 months, $29.429.391.81— and if I am in error in this, will
vou correct me— in 1916, $127,574,725.75; in 1917, $78,296,541.20; in
1918, $13,345,294. That would be spread over the 4-year period at
approximately $64,000,000 a year taxable income. 1915 and 1916-
were the very high years, tapering off in 1917, and then this
$13,345,294 (corrected) in 1918.
Mr. Pierre S. du Pont. The total is substantially w^hat appears
on this sheet of mine.
Senator Bone. The total is $248,645,953.32 (corrected).
jSIr. Raushenbusii. Senator Bone, may I interject a comment?'
From observation of the figures discussed by Mv. Pierre S. du Pont
a moment ago, on that basis of assets the return on invested capital
would be that, but on the basis of assets, or earnings on the assets
they are larger by a considerable sum than those listed here.
Mr. Pierre S. du Pont. The total of earnings I have on this sheet
is $265.00(),0()0 as against $255,000,000, but that might well come
about through the difference in figuring for taxation and other
purposes.
Senator Bone. Some of the published statements of the company
indicate someAvhat larger figures than even the committee figures?
Mr. Pierre S. du Pont. If those were taken from the tax sheets,
they are undoubtedly correct for the pur]:)ose. May I state, Mr.
Senator, these earnings appearing on the sheet are after the taxes;
MUNITIONS INDUSTRY 1027
are taken from our annual report, which would be the difference j^ou
have mentioned there.
Senator Bone. The earning statements I have called your atten-
tion to are from the files of the Internal Revenue Department.
Mr. Pierre S. du Pont. They are undoubtedly correct. May I
suggest the complication of this change from one company to an-
other brought up a great question as to the taxation. We figured our
idea of how the taxes should be drawn, and before those reports
were made, a suit was brought by one of our stockholders in connec-
tion with the taxes and resulted in a Supreme Court decision de-
ciding how this taxation problem was to be settled, which was ad-
verse to the stockholder and adverse to our idea. We refigured our
taxes afterwards and that may be part of the reason why these fig-
ures on this sheet which were drawn from the company's annual
report do not agree with the taxes as formerly drawn.
Mr. Raushenbush. Senator Bone, since this matter has come into
discussion, may I point out that what you have was the invested
capital taken from the Internal Revenue figures, consisting roughly
of stock plus bonds, plus surplus, and you can, if you care to go
into it, get the exact number of the Revenue Bureau documents
where each of these capitals can be secured, and it Avill be found
that it differs a great deal from the earnings on assets as given in the
statement Mr. Pierre S. du Pont has offered to tlie committee. The
committee exhibit figures you are discussing show unclertaxation
income in 1915 of $29,429,000, and the earnings on assets under
these figures are $86,992,874. The committee figures are lower by
the difference between $86,000,000 and $29,000,000. We are discuss-
ing two different bases, and there is no attempt to make any com-
parison between them. I think you will find on these revenue fig-
ures based on taxable income that the percentages that follow are
correct. Is that a fair statement, Mr. du Pont?
Mr. Pierre S. du Pont, As far as income is concerned, T believe
they will be correct, but there is quite a discrepancy, according to
our belief, because these advances by customers were in the nature
of bonds — that is, were returnable as a part of the capital invested
in the shape of notes or bonds for financing purposes, as we could
not have done the business without that capital. That point of view
is not taken in figuring for taxation in your reports at all.
Senator Bone. The Government does not accept that theory as a
basis for taxation.
ISIr. Pierre S. du Pont. I am not sure that figure would be taken
for taxation.
Senator Bone. Mr, du Pont, can you give the committee any idea,
just briefly, as to what major uses the profits of the corporation were
put? The profits arising out of the war transactions; were thej'-
distributed as dividends or invested by the company?
Mr. Pierre S. du Pont. Some were distributed as dividends to the
stockholders and the balance invested for corporate purposes.
Senator Bone. What were those corporate purposes?
Mr. Pierre S. du Pont. One of chief investments was the invest-
ment in the dj^e industry, which had been very small in this country
before the war, all dyes being made in Germany. It was the general
belief that the dye business should be started in this country and
83876— 34— PT 5 2
1028 MUNITIONS INDUSTRY
increased, in order that the importance of dyes in militar}^ affairs
should be availed of.
Senator Bone. Did you acquire existing plants, or did you extend
your own plants?
Mr. Pierre S. du Pont. We had to start new; it had nothing to
do with our military plants, and we had to acquire entirely new^
land and build the plants, and that investment amounted to about
$50,000,000 in new properties at least, and it was a big development.
I think it was about 10 years before we made any money out of it.
Senator Bone. When did you actually get launched off into this
chemical work in a major way?
Mr. Pierre S. du Pont. Just after the war.
Senator Bone. Did you immediately acquire the German chemical
patents seized by the Alien Custodian?
Mr. Pierre S. du Pont. No; we did not acquire them, we took
licenses from the Chemical Foundation.
Senator Bone. The Chemical Foundation was the organization
that took over the German patents?
Mr. Pierre S. du Pont. Yes, sir.
Senator Bone. Is that an independent organization, or is it af-
filiated with your organization?
Mr. Irenee du Pont. It is not affiliated in any way with our or-
ganization, but we subscribed to a certain amount of the preferred
stock in it when it was started as did all others in the chemical
industry. We have never made anything out of it, but we considered
that it IS a great help to the chemical industry.
Senator Bone. I call your attention to a report of 1917, and will
you direct your attention to page 2, at the top of the page. This
merely amplifies what we have been discussing here, and it says:
A large part of the profits arising from the military business of recent years
has been reinvested in the expansion of the company's affairs, so that today's
profits must be measured in com'parison to capital employed exclusive of good-
will, of $240,000,000 as against a total of $51,000,000 prior to 1914.
That statement is along the lines we have been discussing.
Mr. Pierre S. du Pont. Yes, sir.
Senator Bone. On page 5 appears some further observations by
the company to its stockliolders, as follows :
Announcement was recently made of the acquisition of a large interest in
the General Motors Corporation and Chevrolet Motor Company.
Can you tell us the nature and extent of that acquisition ?
Mr. Pierre S. du Pont. That acquisition, if I remember right, was
originally $17,000,000. We added to it afterwards, but that addi-
tional investment was resold in the course of a few years and the
principal amount in the General Motors as our investment, remained
at practically $17,000,000.
Senator Bone. Was this investment in the General Motors and
Chevrolet Motor Car Co. an investment of the du Pont de Nemours
Company or an investment of your own and your brothers ?
Mr. Pierre S. du Pont. It was entirely the company's.
Senator Bone. There was no ownership of stock in that company
by you and your brothers?
Mr. Pierre S. du Pont. No.
Senator Bone. How does that stock which your company still
retains in General Motors stand as to percentage of control ?
MUNITIONS INDUSTRY 1029
Mr. Pierre S. du Pont. It is about a 25 percent interest.
Senator Bone. Of the common?
Mr. Pierre S. du Pont. Of the common, yes, and no preferred.
Senator Bone. What is your control in the Chevrolet?
Mr. Pierre S. du Pont. The Chevrolet Co, was afterwards dis-
solved and it was all merged into General Motors.
Senator Bone. Was it dissolved after your acquisition of the stock?
Mr. Pierre S. du Pont. Quite shortly afterwards ; yes.
Senator Bone. What happened to your stock ?
Mr. Pierre S. du Pont. It was converted into General Motors
stock.
Senator Bone. After that conversion did your holdings in General
Motors then remain at 25 percent — was that the total holding after
this conversion?
Mr. Pierre S. du Pont. Yes.
Senator Bone. So that the total original investment in Chevrolet
and General Motors is now reflected in your stock in General Motors,
and that is about 25 percent of the common of General Motors — that
is, about 25 percent of the total issue of common stock ?
Mr. Pierre S. du Pont. Yes. May I explain I was a stockholder
in General Motors at the time of this du Pont acquisition but my
brothers I think were not. I have held that stock since then, and
acquired more.
Senator Bone. Can you tell us the amount of investment that the
company made in General Motors and Chevrolet?
Mr. Pierre S. du Pont. $47,000,000.
Senator Bone. That is somewhere near the figure, and I assume
you are speaking from memory, but I call your attention to your
report of 1926, where it shows that the investment is $48,758,253?
Mr. Pierre S. du Pont. That covers the additional stock we ac-
quired and then resold it. I think the total, $47,000,000. is sub-
stantially what we have held on to. But that has been increased
by the increased value, but the shares are held on our books at their
book value in General Motors.
Senator Bone. Since 1919 and the issuance of the report, have
you acquired some stock in General Motors?
Mr. Pierre S. du Pont. Only as I explained, what we have resold,
and I think there has been nothing since then. I would like to
refer to an assistant, if I may. I find Ave have about 200,000 shares
additional.
Senator Bone. What would be the normal value of that, does
it have a par value or is it nonpar stock ?
Mr. Pierre S. du Pont. I think it has been both, but I am not sure
what it is now.
Senator Bone. What did the 200,000 shares cost you ?
Mr. Pierre S. du Pont. It cost about $24 a share; about $4,800,-
000, is my recollection.
WAB PROFITS OF E. I. DU PONT DE NEMOURS & CO.
Senator Bone. On the picture of the capital set-up as it is re-
vealed in the documents I have discussed here, these governmental
documents filed with the Internal Revenue Department, it would
appear your 1916 profits were in excess of 60 percent of your in-
vested capital?
1030 MUNITIONS INDUSTRY
Mr. Pierre S. du Pont. I would not accept that from my point
of view. The}^ figure that out in their way of figuring capital
invested.
Senator Bone. It would appear from these figures that 1915 was
22.89 i>ercent, 1916, 63.05 percent; 1917, 35.17 percent; 1918, 6.35.
jjercent (corrected).
Mr. Pierre S. du Pont. ISIy figures should be about the same with
respect to earnings. It is 37.6 for 1916 and 18.7 for 1917 and 15.3
for 1918. The 1917-18 figures reflect a great reduction in price,
and the large profits of 1915 and 1916 resulted entirely from this
high price charged for the powder covering amortization on the
theory those plants would never be used more than 1 year and
the investment would have to be amortized through that 1 year
and the expectation was the war would end before the year was up.
As a matter of fact the war was prolonged 4 years, so the amor-
tization covered over four times as much as we had figured origin-
ally, and that accounts for the figures you have here for 1915
and 1916, which you have rightly attributed to those years.
Senator Bone. Going back to the 3 years preceding the war,.
1911, 1912, and 1913, showing a total taxable income in those 3
years of $15,097,000, we find that in any one of the years from
1915 to 1917 your net taxable income during that period exceeded
the entire 3 years' net taxable income of the preceding period I
have menfoned, 1911, 1912, and 1913.
Mr. Pierre S. du Pont. That is so ; yes.
Senator Bone. In this document. Bureau of Internal Revenue-
Document No. 1, which is the protest of the du Pont Co. against
additional assessments which was filed with the Bureau of Internal
Revenue, section "A ", page 8, the company has this to say to the-
Government :
As a matter of traditional pride, the du P(int Company lias for generations
kept itself in readiness to act as the right arm of the Government in the-
production of militarj- explosives during the time of war ; to do this when the-
United States was at war without regard to profit. * * *
These matters are referred to, in part to dispel any illusions as to the effect
that the generous increase in the earnings and the profits of the du Pont
Company during the World War were derived in any part from profiteering at
the expense of the United States Government or its people.
Now the tax protest goes on further to say:
The du Pont Company's own experience in the manufacture and sale of
trinitrotoluol prior to and during the war affords another striking illusti'ation
of the same character.
Perhaps you may care to follow this. I am reading my type-
written copy, but it is taken out of here [indicating report]
(reading) :
At the outbreak of the war in August 1914 the manufacture of TNT, in
this country was practically in its infancy. The du Pout Company was, it is
believed, a pioneer in the manufacture of this product, and started the erection
of a small plant about 1912, gradually increasing it until at the outbreak of
the war the total depreciated investment amounted to $360,000 with a maxi-
mum capacity of 300,000 lbs. per month, of which up to that time less than
10 percent has been used.
My reason for directing your attention to this, Mr. du Pont, is
because of our reference here to the amortization feature, which of
course exists in any financial picture. [Continuing reading :]
MUNITIONS INDUSTRY 1031
Uuring 1912, 1013, and the first seven months of 1914, the selling price was
.-approximately 25^ per lb. and the manufacturing costs per pound were 31i/40,
27^, and 24(}, respectively, indicating losses of 6M.>0 and 20 per lb., respectively,
for 1912 and 1913, and a profit of less than 3^ for the first seven months
of 1914. An urgent demand for this commodity in practically unlimited
quantities came with the outbreak of the war, enabling the company to operate
at full capacity with a resultant lowered manufacturing cost and a greatly
increased selling price. The net result was that the profit of less than 30^
per lb. in the first seven months of 1914 was increased to 52y2t per lb. in the
last five months, so that the total profits in the short latter period were
sufficient to retii-e the entire investment and leave a net profit equal to 100%
■on the investment, in addition to retaining possession of the plants for future
use. The actual total net profits during the war from this original TNT p^ant
amounted to $6,889,500.
That plant represented depreciated investment of $360,000. This
statement of the company goes on to say:
The selling prices obviously were fixed by urgent demand and the plants
enhanced enormously in physical value for the sole reason of immediate
;availability.
^ Mr. du Pont, do you still have that TNT plant?
Mr. Pierre S. du Pont. No ; I think the large plant is entirely
■gone. As you know, trinitrotoluol is a highly explosive material and
the original factory was built for commercial purposes.
Mr. Ieenee DU Pont. Do you recall that, Mr. Swint?
Mr. Swint. That original plant at Repaunno was destroyed by an
explosion.
Mr. Pieree S. du Pont. I think that is a fact. Maj^be one of the
others can answer it, but I think that we added to that capacity
■during the war.
Mr. Lammont du Pont. Very largely.
Mr. Pierre S. du Pont. It was not all the original plant wdiich
'produced this war profit.
Senator BoNi:. Of course, this plant must have been some sizable
plant, sizable in a financial way at least, to have produced total net
profits during the w^ar from the original plant, referring now to the
net total of the original TNT plant, amounting to $6,889,500.
Now I am coming to the post-war period
Mr. Pierre S. du Pont. Just a moment. Senator ; I think the origi-
nal plant must refer to the total investment, because if we added to
the plant, the profit surely related to the plants which produced it. I
am not trying to fight the figures, because no matter what the figures
are, the profit was very large.
I would like to explain at this time that the risk of taking those
contracts was something enormous. Toluol, as a commercial article^
was selling at 30 cents a gallon before the war and during the war
the high w^as $4.50 a gallon, and we had to buy against that rise in
price, Avithout any knowledge on our part of what the price might
be eventually. We had to buy an enormous quantity, with no control
of the market and no means of getting toluol in anv way. The price
declined in 1918 to $1.50 and finally in the fall of 1919 to 26 cents.
It -svent from 30 cents a gallon to $1.50 a gallon and back again to
26 cents. You can see the enormous risk of buying against a market
•of that kind, in the largest quantities ever known, and that accounts
very largely for the high price charged, and the profits were due
to the fact that we were able to take on our orders at the lower
])rices and hold the materials and actually resell them later, but had
1032 MUNITIONS INDUSTRY
we been left with the toluol at the price we had to pay, it would
liave been a very certain loss.
Senator Bone. I am going to see, Mr. du Pont, if I can more
particularly identify this plant and for that purpose I will take the
report you filed with the Bureau of Internal Revenue. [Reading :]
At the outbreak of the war in August, 1914, the manufacture of TNT in thi&
country was practically in its infancy. The du Pont Company ^as, it is.
believed, a pioneer in the manufacture of this product- —
That is to say, TNT—
and started the erection of a small plant about 1912. * * *
You will remember that.
Mr. Pierre S. du Pont. That was a commercial plant.
Senator Bone (continuing reading) :
gradually increasing it until at the outbreak of the war the total depreclate(>
investment amounted to $360,000 * * *
Mr. Pierre S. dtj Pont. Yes, sir.
Senator Bone. You are identifying that plant very completely m
this statement to the Government.
Mr. Pierre S. du Pont. Yes, sir.
Senator Bone (continuing reading) :
with a maximum capacity of 300,000 lbs. per month * * *.
Do you have any particular difficulty in identifying the plant
or factory?
Mr. Pierre S. du Pont. That must have been the plant.
Senator Bone (continuing reading) :
of which up to that time less than 10% has been used.
Then you go on with the recitation about increasing prices and
add:
Tlie actual total net profits during the war from this original TNT plant
amounted to $6,889,500.
Mr. Pierre S. du Pont. Is the capacity of that plant given?
Senator Bone. Three hundred thousand pounds.
Mr. Pierre S. du Pont. We sold during the war 226,000,000
pounds, which could not possibly have been produced at that plant.
Senator Bone. I imagine 300,000 pounds during a certain time.
Mr. Raushenbush. Three hundred thousand pounds per month.
Senator Bone. Three hundred thousand pounds per month.
Mr. Pierre S. du Pont. That is roughly 20,000,000 pounds per
month which we sold. We added to it, maybe not to that plant, but
the TNT plants.
Mr. Lammot du Pont. May I offer a word of explanation? I
think the text of that report means profits that grew out of the orig-
inal venture in the TNT plant. It does not mean that that TNT
plant originally constructed manufactured all the TNT during the
war.
Senator Bone. I have no way of interpreting the statement except
to accept the words as they appear in the report itself, indicating the
depreciated value there of $300,000 plus, with profits which of course
were some times nonexistent in the early days, I take it, but which,
barged into the picture when the war began and there was demand
for TNT.
MUNITIONS INDUSTRY 1033
Mr. Lammot du Pont. Those additional profits came from addi-
tional investments beyond $360,000 which existed at the beginning
of the war.
Senator Bone. This report does not indicate that.
Mr. Raushenbush, May I clarify that by pointing out the pur-
pose of the tax protest, which was to claim at that time, in 1915,
that the valuation which should be put upon the plant for tax pur-
poses was very considerably larger than the valuation which the com-
pany originally put upon it at that time when it changed hands.
If I may be allowed to summarize the whole tax protest, I will do so.
Senator Bone. Go ahead.
Mr. Raushenbush. That was the purpose of it. It was not started
by the company until after a case had been brought, and then the
company raised the question and tried to prove all through here
(which is of interest to the constructive purposes of the committee,
so far as the possibility of taxing profits), it describes military con-
tracts in hand and great emergency demand and other factors, cov-
ered in these various sections, which gave the plant at that time a
value far greater than it had on the books, and this one illustration
fits into a long pattern — I think I am interpreting this correctly —
fits into a long pattern of proof that the expected profits were, as the
phrase is used here at various times, shown to be very generous, to say
the least. And, giving that significance to the whole thing, does it not
seem sound on the face of it that they were talking about this one
plant as a part of the case for making out that the whole investment
should be valued on a different basis for tax purposes than the
Bureau had up to that point done ?
Mr. Pierre S. du Pont. The reference there to the original plant,
it does not seem to me could have been restricted to that plant,
because the sales of TNT in 1918 were 3,318,000 pounds a month,
or over 10 times the capacity of that plant.
Mr. Irenee du Pont. I think the explanation there is very clear ;
the amount of profits which could be applicable to that plant repre-
sented $6,000,000 in the period in question.
Senator Bone. That may be the case.
Mr. Irenee du Pont. That would be one and one-half million
dollars a year, and if it produced three and a half million, that meant
something over 45 cents per pound profit.
Senator Bone. At the end of the war, that is to say, the post-war
period, there was brought about considerable change in your busi-
ness, was there not?
Mr. Pierre S. du Pont. Yes, sir ; a great change.
Senator Bone. How many war contracts were canceled?
Mr. Pierre S. du Pont. I believe the canceled contracts were
$260,000,000.
Senator Bone. The figures I have before me indicate a cancela
tion of $260,000,000 in contracts. I am going to read the figures
covering your gross sales for 1919 and 1920, and if I am in error in
any respect, I wish you would please correct me. In 1919 they were
$121,391,912.24. which appears in Exhibit No. 12 there in our exhibits,
if you care to check it, and in case any question is raised.
In 1920 your gross sales were somewhat larger, amounting to
$129,766,522.87. That appears in exhibit 18.
1034 MUNITIONS INDUSTRY
Mr. Pierre S. du Pont. If those were taken off the tax records,
I am sure they are correct.
Senator Bone. We have used the tax records wherever possible
because they give us not only something we could work on but give
us statements.
Mr. Pierre S. du Pont. Yes, sir.
Senator Bone, Let us come back again to the question of invested
capital, Mr. du Pont, and the record before us shows an invested
capital in 1919 of $201,763,745.37. That is made up from your own
balance sheets.
Mr. Pierre S. du Pont. In the same way as before?
Senator Bone. It is possible we disagree again as to the proper
interpretation of those figures. Our figures indicate that in 1920
there was an invested capital in the du Pont Co. of $215,248,364.90,
probably also subject to the same suggestion we made before.
Mr. Pierre S. du Pont. To a very much less degree than before.
Senator Bone. Does that more nearly approach your under-
standing?
Mr. Pierre S. du Pont. That was gradually changed.
Senator Bone. In other words, there have been withdrawals from
the funds which we have discussed?
Mr. Pierre S. du Pont. Yes, sir.
Senator Bone. Your compan}^ reported net losses in 1919 of
$2,255,359.52 (corrected). Can you tell us how you came to claim
that loss ?
Mr. Pierre S. du Pont. May I ask Mr. Walter Carpenter, our vice
president, to reply to that. He had charge of the taxation matters
and I would not be able to explain it in detail.
Senator Bone. Will you hold up j^our right hand and be sworn,
Mr. Carpenter?
TESTIMONY OF W. S. CAKPENTER, JR.
(The witness was duly sworn by Senator Bone.)
Senator Bone. What is your official connection with the du Pont
Co.?
Mr, Carpenter, I am vice president.
Senator Bone. Vice president?
Mr. Carpenter. Yes, sir.
Senator Bone. How long have you been with them ?
Mr. Carpenter. About 24 years.
Senator Bone. What is your particular work with the company?
Mr. Carpenter. In the finance department.
Senator Bone. You say in the finance department?
Mr, Carpenter, Yes, sir.
Senator Bone. Do you have charge of their auditing and their
books ?
Mr. Carpenter. I am chairman of the finance committee at the
present time.
Senator Bone. You are fully apprised of what is in the books and
you know the records of the company thoroughly?
Mr. Carpenter. Yes, sir.
Senator Bone. You have indicated here a loss, shown b}^ your
company, I presume, in the income-tax statements to the Govern-
MUNITIONS INDUSTRY 1035
ment of $2,255,359.52 (corrected) in 1919. Against what factor was
the loss charged?
Mr. Carpenter. There are a great many items which enter into
the reconciliation of those tax hgures with our published figures.
We have all of them here.
Senator Bone. Give us the major items. We do not want to go
into detail, because it is probably a lengthy statement. What were
the chief items constituting that statement of loss?
jNIr. Carpenter. The principal items in connection with that seem
to be the loss in value in connection with plants abandoned in 1919.
Some of our plants carried over to 1918 were still in use at that
time, and abandoned in 1919.
Senator Bone. Then we might suggest that that was a drastic
write-down in value which was claimed and charged off as a loss to
the company?
Mr. Carpenter. Yes, sir.
Senator Bone, That property not being destroyed but being prop-
erty which lost its value so far as your company is concerned?
Mr. Carpenter. At the end of 1918 some of our war properties
were sold to a company which was set up for that purpose, and the
stock of that company was distributed to the stockholders of the
du Pont Co.
Senator Pope. AVliat was that company?
Mr. Carpenter. That company was the du Pont Chemical Co.
All properties were sold as to clear up the du Pont Co. and its
balance sheets. Then that company was liquidated and the plants
were sold and later on in connection with the final tax adjustment,
the department required that we consider those properties disposed
of at the price at which they were eventually disposed of by the
Chemical Co., and in that way we have those elements of amor-
tization entering into 1919.
Senator Bone. These plants that were no longer used and useful
in the service of making TNT and purely military powders being
shipped abroad, were they dismantled?
Mr. Carpenter. Yes, sir; they were dismantled and sold.
Senator Bone. I believe Mr. du Pont stated in the early part of
his statement that you had amortized that investment out of the
original prices charged during the war?
Mr. Carpenter. Yes, sir.
Senator Bone. Did you succeed in that?
Mr. Carpenter. Yes.
Senator Bone. You evidently were very successful in amortizing
the TNT plant, for as to the small plant, to which there were
allocated earnings of over $6,000,000, you certainly had amortized
that plant completely out of the picture. That is correct, is it not?
Mr. Carpenter. Yes, sir; when you asked the very first question,
you are considering the company profits as reported to our stockhold-
ers. They are quite different from the profits which are allowed by
the Government. For instance, in 191G we might have charged off
$30,000,000 or $40,000,000 amortization against our earnings, whereas
the Government might not have allowed any of that. In fact, I think
they did not allow amortization at all until 1918.
Senator Bone. But the practical side of this problem — I am not
concerned with the technique of the Government or your method of
1036 MUNITIONS INDUSTRY
accounting or anything — but the practical thing is that the Du Pont
people wrote off all the loss by the time the war contracts endied in
profits. That is right?
Mr. Carpenter. That is right.
Senator Bone. Do we understand, then, from your statement, that
it is your position that under the existing revenue laws of the country,
you could not have had it written off in any other way than at the
end of the war?
Mr. Carpenter. I think that was the position of the Government.
Senator Bone. That meant the charging it off again as against
profits, did it not?
Mr. Carpenter. No ; you have two entirely different sets of figures.
One is that of the company, which through its conservatism writes
it off from the earnings of the company-. They charged off large
amounts for plant investment in 1915, 1916, and 1917, and when the
returns were made, the Government in the figures which you have
there apparently, the Government would not allow a charge off, but
merely depreciation over a period, and made us withhold any amorti-
zation until 1918. I think that is the confusion in endeavoring to
reconcile some of the figures you are using ; you are using our taxable
earnings, whereas Mr. du Pont is using our commercial earnings.
Senator Bone. As a matter of fact, the policy of the company was
such — and, of course, we cannot blame you any in that — as far as
possible in this business, which is recognized as being somewhat
hazardous, to literally, as far as possible, amortize the whole plant
in war profits, if you could, not knowing when the war was coming
to an end. Is not that correct?
Mr. Carpenter. Surely.
Senator Bone. That is what made me ask about the other matter.
You showed net losses to the Government of $2,255,359.52 in 1919
(corrected).
Mr. Carpenter. I do not reconcile the figure. I have $2,000,000.
Senator Bone. Will you look at our " Exhibit No. 13 "?
Mr. Raushenbush. Mr. Carpenter has that.
Mr. Pierre S. du Pont. We cannot identify that.
Mr. Raushenbush. There is the final report of the Solicitor of
Internal Revenue in that. [Handing paper to Senator Bone.]
Senator Bone. These figures, I may say, are taken from a report
of the Solicitor of Internal Revenue, directed to the attention of
Mr. Alexander. Is he one of your staff?
Mr. Carpenter. I think he was in the unit.
Senator Bone. This, I take it, was brought to your attention,
probably. This, I ma}- say, is from the records of the Internal
Revenue Department. Under the caption of " Net Profits ", as dis-
closed by Bureau letter dated October 30, 1924, you are showing a
loss of $2,255,359.52. If that is not correct, will you indicate the
correct figure ?
Mr. Carpenter. Yes; the correct figure I have here is $2,275,369.
Senator Bone. Will you kindly indicate the figure of net loss
which was reported to the Government for taxation purposes in
1920, for the year 19201
Mr. Carpenter. Yes, sir.
Senator Bone. AYe want to distinguish between the year the re-
port was made and the year covered by the report. I take it this
MUNITIONS INDUSTRY 1037
was for the year 1919. Will you indicate what the tax situation
was for the year 1920 ? I do not mean the report made in 1920, but
for the year 1920.
Mr. Carpenter. The income was for the jfinal report, 1920, the
taxable income was a loss of $2,953,376.
Senator Bone. I have almost the identical item. I have $2,951,-
376.68. Where would come this great discrepancy in the 1919 figure?
Mr. Carpenter. I do not know, I am sure. The figures were made
up the same way for each year.
Senator Bone. Would you say that that loss was occasioned prac-
tically in whole by the elimination of these plants which were per-
haps not obsolete, but no longer useful in the business in which they
were eiio-agecl?
Mr. Carpenter. Are you talking about 1920?
Senator Bone. The thing that occasioned these showings of loss
on the part of the company.
Mr. Carpenter. As you get away from 1918 that evidence of loss
in the use of or value of the old war plants becomes less and less.
There are a great many other adjustments, of course.
Mr. Kaushenbush. Just to come back to that TNT plant, Mr.
Carpenter. Mr. Pierre S. du Pont testified a little while ano that that
was originally started as a commercial plant and it says in this
statement, that has been read several times now, that the total
profits in the period of 5 months of 1914 were sufficient to retire
the entire investments and leave a net profit equal to 100 percent
on the investment.
A plant like that, a TNT plant, built for commercial purposes
■originally, would that be written off as a war plant?
Mr. Carpenter. Yes. If you are talking about that particular
plant, that was blown up, and of course, if a plant was a commercial
plant and merely used temporarily in production of goods to be sent
abroad, that was maintained and there was no write-off in connection
with that. I am talking about a taxable write-off.
Senator Bone. What dividends, if any, were declared by the com-
pany in the years 1919 and 1920? What Avere the amounts?
Mr. Pierre S. du Pont. We have our statements now.
Senator Bone. Your own yearly reports which show the amount
of dividends, would they not?
Mr. Pierre S. du Pont. In 1920, the preferred stock dividend is
$3,800,000 and the common stock is $6,267,000 or a total of practi-
cally $10,000,000.
Senator Bone. Will you take the figures from 1919?
Mr. Pierre S. du Pont. In 1919, the amount is $14,242,578.
Senator Bone. I call you,r attention to your report of 1918.
page 4. I should like to read a brief extract from that report.
From 1915 to 1918 the gross capital employed by the company has inci-eased
from $83,432,000, to $308,846,000, or 270 percent.
Did you include in that gross capital the money that you sug-
gested was extended to the company in these war operations?
Mr. Pierre S. du Pont. Yes, and also the plants that were still in
operation.
Senator Bone. You were carrying them on your books at 100
percent value, or were you carrying this amortization figure through
vour books during the war operations ?
1038 MUNITIONS INDUSTRY
Mr. Pierre S. du Pont, My recollection of the amortization was
this ; that we started in at a very full amortization, maybe 25 or 30^
cents a pound on powder produced, but as soon as the war de-
veloped sufficiently so that we were sure that we could average over
a larger amount of powder, we proceeded to average and reduced
the amortization to about 14 cents a pound. So that it was a com-
posite of several changes.
Senator Bone. Did you during the war operations beginning in
1914 and 1915, when you were dubious about the course of this war,
in your own accounting system begin to write these plants off ?
Mr. Pierre S. du Pont, I understand so, until about 1916.
Senator Bone, Were they constantly depreciated and written olf ^
Mr. Pierre S. du Pont. Yes.
Senator Bone. That was reflected in the higher cost of powder-
made necessary by this amortization process, was it not. In other
words, the higher cost of powder was made necessary, in your judg-
ment and from your viewpoint in order to write these plants off?
Mr. Pierre S. du Pont. Yes.
Senator Bone. I was wondering if, as a financial operation and
bookkeeping transaction you actually wrote the plants off on your
books,
Mr, Irenee du Pont, I do not think we did, I think we simply
set up a reserve in 1915 and 1916 and thereafter charged off military
expenditures against the amortization fund currently,
Mr. Carpenter. The effect would be the same?
Mr. Irenee du Pont. The effect would be the same, but the actual
transaction was that we set up a reserve.
Senator Bone. You were accomplishing by that method the same
thing as though you had written it off.
Mr. Irenee du Pont. Yes.
Senator Bone. Continuing with this quotation from your report
of 1918, on page 4 :
lu addition there bas been distributed to stockholders $140,983,000, malting
a total increase during the war period of $366,397,000.
That total increase to which you referred of something over a
third of a billion dollars during the war period was the result of
war activities on the part of the company.
Mr, Pierre S. du Pont. Yes.
Senator Bone. Reading further :
The resulting gross business has amounted to $1,049,000,000 including tlie-
cost of construction woi'k.
On page 8 there are some further observations as follows:
The operation of the factories of this company above mentioned has resulted
in production of 1,466,761,219 pounds of military explosives of all kinds fur-
nished to the United States and the allied nations. The importance of this
work is better realized from the fact that this output is estimated at 40 per-
cent of the amount of the explosives made throughout the world for the Allies-
during the war.
Mr. Pierre S. du Pont. May I correct that statement; it is not
quite accurate? That is, 40 percent of the total propellant powder
used. The word propellant should appear. It is not 40 percent of
all the explosives including TNT. The report is correct.
I understand that it is 40 percent of the powder used to project
the projectile from the gun.
MUNITIONS INDUSTRY 1039
Senator Bone. I am going to read for you a statement of the
•dividends paid on the common stock of the dii Pont Co. during
the years 1916 to 1918. These seem to indicate the huge profits of
your company from the war contracts that we have referred to.
What was the regular dividend on your common?
Mr. Pierre S. du Pont. Before the war ?
Senator Bone. Was it 2l^ percent ?
Mr. Pierre S. du Pont. I should not wonder.
Mr. Irenee du Pont. That, of course, would vary.
Senator Bone. You had a number of special dividends, did you
not ?
Mr. Pierre S. du Pont. Special dividends
Senator Bone. Prior to the war.
Mr. Pierre S. du Pont. I think that the I14 percent was the regu-
lar dividend prior to the war.
Senator Bone. ApjDarently the records indicate that on September
30, 1917, the company paid the largest dividend in its history.
That amounted to 32 percent, did it not ?
Mr. Pierre S. du Pont. If you have the record there, I imagine
that is correct.
Senator Bone. I am going to read these dates and the dividends
according to the dates when they were payable.
February 29, 1916, the regular dividend of li/^ percent, together
with a special dividend of 221/2 percent, payable March 15, 1916.
May 31, 1916, a regular dividend of II/2 percent and a special divi-
dend of 231/2 percent, payable June 15, 1916.
A dividend voted on August 31, 1916, regular of li/o percent and
si^ecial of 231/^ percent, payable September 15, 1916.
December 1, 1916, a regular diviclend of II/2 and a special dividend
■of 24I/2 percent payable December 15, 1916.
February 28, 1917, a dividend of 414 percent was directed to be
paid and the date of payment was March 15, 1917.
On May 31, 1917 a dividend of 4^ percent was directed to be
paid on June 15, 1917.
On June 13, 1917, there was a 1 percent Red Cross dividend pav-
able on June 23, 1917.
What was that 1 percent dividend ?
Mr. Pierre S. du Pont. One percent dividend in connection with
which the stockholders were advised to contribute to the Red
Cross. I think there was no compulsion, but it was a dividend which
was offered to them suggesting that it be paid into the Red Cross.
Senator Bone. A 1-percent dividend?
Mr. Pierre S. du Pont. Yes.
The Chairman. That was a request ?
Mr. Pierre S. du Pont. Or advice ; yes.
Senator Bone. On August 31, 1917, a dividend of 41/2 percent, to
be payable September 15, 1917.
On November 30, 1917, a dividend of 4i/^ percent, to be pavable
December 15, 1917.
On November 30, 1917, a special dividend of 32 percent, to be
payable December 22, 1917.
On February 28, 1918, a dividend of 4I/2 percent, payable on March
15, 1918.
1040 MUNITIONS INDUSTRY
On May 31, 1918, a dividend of 41/2 percent, payable on June 15^
1918.
On August 31, 1918, a dividend of 4i/^ percent, payable September
16, 1918.
On October 30, 1918, a 1 percent United War Work Campaign
dividend, payable on November 11, 1918.
What was that 1-percent dividend?
The Chairman. Was that at the time when they combined the
Red Cross and the Y.M.C.A. and the other units that were at work
in one drive?
]SIr. Irenee du Pont. There was a list of about eight different
organizations of that kind including the Y.M.C.A.
The Chairman. It was work of that character.
Mr. Irenee du Pont. Yes.
Senator Bone. We need not go into that now. We may pass
this.
On November 30, 1918, there was a payment of 4% percent, ordered!
payable December 16, 1918.
Now, going back to tliis 1-percent Red Cross dividend which was.
declared on June 13, 1917, was there any compulsion on the part
of stockholders to turn that over to the Red Cross?
Mr. Pierre S. du Pont. No.
Senator Bone. There is a note somewhere in the files that the stock-
holders were not compelled to turn this dividend over to the Red
Cross ; is that correct ?
Mr. Pierre S. du Pont. That is correct.
Senator Bone. We will now proceed with this dividend record.
On December 23, 1918, a dividend was declared of 5 percent, pay-
able in 6-percent preferred stock of the du Pont Chemical Co., and
payable on December 26, 1918. Is that correct ?
Mr. Pierre S. du Pont. That sounds right; yes, sir.
Senator Bone. In 1918 there was again a 2-percent dividend to
the Red Cross.
On February 27, 1919, there was directed a dividend of 41/2 per-
cent, payable March 14, 1919.
On May 31, 1919. there was voted a 4i/2-percent dividend, payable
on June 14, 1919.
On August 30, 1919, there was voted a 4i/^-percent dividend, pay-
able September 15, 1919.
On November 29, 1919, there was voted a 4i^-percent dividend,
payable December 15, 1919.
The records that I have show a total of dividends paid on the
common stock for each year 1916 to 1919 as follows :
In 1916 there was paid 100 percent in dividends on the common.
In 1917 there was 51 percent in dividends on the common stock
of the Du Pont Co.; in 1918, 26 percent; and in 1919, 18 percent.
Mr. Pierre S. du Pont. That is correct, according to our state-
ments.
Senator Bone. What stock do you have in your set-up which is
known as " debenture stock " ? What is the nature or character
of it?
Mr. Pierre S. du Pont. It is in the nature of a preferred stock.
The contract is slightly different from the preferred stock, but that
is what it is essentially.
MUNITIONS INDUSTRY 1041
Senator Bone. It contains something of the usual contract rela-
tionship of the company with the stockholders.
Mr. Pierre S. du Pont. It has no maturity.
Senator Bone. It receives a quarterly dividend of li/o percent,
or a total of 6 percent.
Mr. Pierre S. du Pont. Yes.
Senator Bone. That was paid regularly in every year from 1916
to 1919, I take it.
Mr. Pierre S. du Pont. Yes.
Senator Bone. This record indicates that. Now, I want to in-
dicate some of the market quotations on the stock
The Chairman. Senator Bone, with your consent, I would like
to offer the suggestion that the average profit on the common stock,
the average dividend on the common stock running from 1916 to
1919 was not quite 49 percent.
Senator Bone. That would be averaged over the 4 years.
The Chairman. The 4-year average is 49 percent on the common
stock.
Senator Bone. Forty-nine percent per annum.
Mr. Lammot du Pont. Forty-nine percent on the par value.
The Chairman. That is correct.
Senator Bone. What is your par, Mr. du Pont — a hundred
dollars?
Mr. Lammot du Pont. I do not recall.
Senator Bone. You know the par value of the stock of the com-
pany, do you not?
Mr. Irenee du Pont. It was originally $100 but it has been
changed since. It went to no par at one time.
Mr. Carpenter. During that period it was $100.
The Chairman, During that 4-year period the par value was
$100.
Senator Bone. I do not know that all of this is material to the
inquiry, but it is nevertheless a part of the picture.
The high quotation of the stock in 1916 was $376.50 and the low
was $258.25.
In 1917 the high was $285 and the low was $221.
In 1918 the high was $303 and the low was $250.50.
In 1919 the high was $380 and the low was $259. It would appear
from this that the high in 1919, after the war ended, was higher
than it was during the war period. Is there any rational explana-
tion of that?
Mr. Pierre S. du Pont. If that is correct, it was because the
profits then were sufficiently realized to warrant a valuation of
that kind.
Senator Bone. Of course, your company had had a very beautiful
record of earnings over this period and naturally it kited your
stock. But is there any explanation other than what we have sug-
gested for this extremely high figure in 1919 when apparently your
profits had dropped? What was the condition of your reserves?
Mr. Pierre S. du Pont. The balance sheets will show that. I
think, as a matter of fact, the cause of that rise in the stock was
that it was a continuation of an upward rise. The public perhaps
overestimated the value of the stock at the time or underestimated —
I do not know which. The realized profits were very much better
1042 MUNITIONS INDUSTRY
than those that were not realized. It is very difficult to account for
market operations, Senator.
Senator Bone. I have before me your annual report for 1918 which
perhaps otfers some explanation of this situation. Your company,
in its report to its stockholders, has this to say :
The stock of E. I. du Pont de Nemoars Powder Company, the predecessor
of E. I. du Pont de Nemours and Company, sold during the early months of
the war at $125 per share. The share of the debenture stocli and two shares
of common stock of E. I. du Pont de Nemours and Company which were
exchanged for the former security are worth in today's market (December
31, 1918) $§93.00 or an increase in value of 374 percent.
That terrific enhancement in value could only have been accom-
plished by a very fine showing of earnings, is that correct?
Mr. PiEREE S. DU Pont. Yes, sir; surely.
Senator Bone. Extraordinary earnings. Continuing with this
report :
In the meantime (1915-1918) the total dividends on the common stock of
E. I. du Pont de Nemours Po^yder Company and on the exchange securities of
E. I. du Pont de Nemours and Company have amounted to 458 percent on the
par value of the oi-iginal stock. It is difficult to imagine a more satisfactory
financial result, especially in view of that fact that the liquidation of the
balance of the military powder investment as it stands today cannot materially
alter the conditions above recited.
You were being somewhat modest even in that statement, were
you not, about these extraordinary earnings?
]\Ir. Pierre S. du Pont. I doubt if any other company made such
a record.
Senator Bone. It is doubtful if any other company in this coun-
try ever showed a better balance sheet or a record of earnings than
that.
Now, the so-called " amortization " or liquidation of these plants,
the writing off of these plants, did not reflect itself in any real finan-
cial injury to your company. You had fortified yourself so that
when you wrote that stuff off. it was no longer used or useful and
your company and your stockholders sustained no loss.
Mr. Pierre S. du Pont. I would not go that far. Senator, because
if the loss had not been there, the profits would have been that much
greater.
Senator Bone. But you took care of the loss in the high prices
charged the people that jou did business with in the early part of the
war. You reallv dealt at arm's length with the Allies before we
got into the war, did you not?
Mr. Pierre S. du Pont. Surely, yes.
Senator Boxe. In other words, it was a cold straight out business
proposition of charging enough to write all of this stuff off, because
of your doubt of the length of time that the war was going to
continue. Of course, that was a perfectly normal thing to do. But
ift is what you did.
Mr. Pierre S. du Pont. There is no question about it. There was
no question about any of the contracts between us and the Allies.
But I do not want you to think. Senator, that there was anything in
the nature of writing these plants off twice. Our profits were figured
after w^riting off the plants because we could carry them as assets
no longer. The net profit which I have spoken of in that annual
MUNITIONS INDUSTRY 1043
report is the net result after that was done. But we did not turn
around then and write them off a second time for taxation purposes.
Senator Bone. I am going to read into the record a short state-
ment of the taxes paid by the company and if you have any similar
figures before you, I w^ish you w^ould follow them, and if there is
any difference between our figures, please call them to our attention.
The income and excess profits paid by the du Pont Co. for the
years 1911 to 1920 are as follows : In 1911 the amount is $49,569.95.
As I proceed, Mr. du Pont, if there is any question about these
figures, let us refer to our exhibits here, which is your report to
the Government. These figures are for the earlier years when
the smaller amounts were paid.
1912, $50,178.35; 1913, $59,209.88; 1914 is missing— perhaps that
can be supplied some other time; 1915, the figure is $294,293.92;
1916, $2,551,494.51 (corrected).
Mr. Carpenter. Did I understand you to say that this would
include all taxes?
Mr. Kaushenbush. Income and excess-profit tax.
Mr. Carpenter. That does not include munitions tax, which is
a very large item. Whereas the income and excess-profits tax was
$2,551,000, the munitions taxes were $13,157,000.
The Chairman. That was in addition to this.
Mr. Carpenter. In addition to this figure that you have.
Senator Bone. Was that paid through the Bureau of Internal
Ke venue ?
Mr. Carpenter. Yes. That was a special munitions tax. I think
it was 121/) percent.
Senator Bone. The figure I have for 1917 is $21,925,144.50; 1918,
$1,384,163.41; in 1919, no taxes were paid; is that correct?
Mr. Carpenter. Yes, sir.
Senator Bone. In 1920 no taxes were paid; is that correct?
INIr. Carpenter. I think that is correct, but I will check it.
Senator Bone. In order that we may have the figures on the
munitions taxes, the items that you mentioned, will you indicate
what those are for the record?
Mr. Carpenter. In 1916 the munitions tax was $13,157,055.
Senator Bone. Was that in addition to what I have already
indicated ?
Mr. Carpenter. That is correct. In 1917 the munitions tax Avas
$3,943,927.
Senator Bone. Why is it that? It was $13,000,000 in 1 year and
only $3,000,000 the next year?
Mr. Carpenter. The higher profits in 1916 and also there was a
higher rate, I think. I think it was 12^^ percent in 1916 and only
10 percent in 1917. Also, I think that after the United States came
into the war, the munitions tax was stopped.
Senator Bone. It was stopped?
Mr. Carpenter. I am not sure of it, but I think that accounts
for the difference.
Mr. Raushenbush. Were those the only 2 years when a munitions
tax was paid, or does that go back further?
Mr. Carpenter. That is all.
8aS76— :M— PT 5 3
1044 MUNITIONS INDUSTRY
Mr. Raushenbush. Those two should be added in all fairness, to
the total of the taxes paid. The total, therefore, of income, excess
profits, and munitions taxes for these years outside of 1914, for which
we have not been able to secure any figures from the Bureau of
Internal Revenue, is $43,395,080.
Senator Bone. After those taxes were paid, the company's annual
report for 1918 was issued — and I take it that was issued in 1918?
Is that correct?
]\Ir. Carpenter. Yes.
Senator Bone. The statement that I have just read concerning
which I inquired of Mr. Pierre du Pont — that is to say, this state-
ment showing this very flattering financial condition and the total
of dividends of the company amounting to 458 percent of the par
value of the stock between the years 1915 and 1918 inclusive,
remains unchanged; that is to say, that is still a fact. In other
words, the burden of taxes which is shown by these figures that we
have quoted still enabled your company to pay 458 percent in divi-
dends in the years 1915 to 1918 inclusive on the par value of its
original stock.
Now, in your 1916 report, which came out in 1917, your company
seems to have been somewhat critical of the fact that it paid out as
much as it did in taxes on these profits. There were numerous
adjustments, were there not, in the form of refunds, in connection
with your taxes?
Mr. Pierre S. du Pont. In what period-^at the end of what
period ?
Senator Bone. During the period we have been discussing.
Mr. Carpenter. It eventually developed, about 6 or 8 years after
that.
Senator Bone. Were these refunds based largely on the decreased
valuation of your property?
Mr. Carpenter. On the amortization of the property ?
Senator Bone. Yes.
Mr. Carpenter. Oh, yes.
Senator Bone. Despite the large profits that have been shown
here, the income taxes imposed on the company constituted a matter
that was complained of rather bitterly in your 1916 report, where
you say to your stockholders:
It is regrettable that the United States Government has made our stock-
holders victims of excessive taxation.
Did you think it was excessive for the Government to take what
it did in view of these numerous dividends that were being paid
to the stackholders?
Mr. Pierre S. du Pont. We thought it was excessive under the
law.
Senator Bone. But you do not draw that distinction in this report.
You merely say that it is excessive.
Mr. Irenee du Pont. Senator, I think I can enlighten you a little
on that. During this first 3^ear, we got a munitions tax slapped on
after the contracts had been made, so that we coidd not change them.
It just came on us without warning, and it was retroactive. I came
to Washington and had an interview with Senator Saulsbury and
com2:)lained bitterly — he was the Senator from Delaware — saying
MUNITIONS INDUSTRY 1C45
that it did not seem to me that a retroactive tax of that kind was
proper. He smiled good humoredly and said, "Mr. cki Pont, you
ought to be thankful that it was not double as much. We need the
mone}"."
That is one reason that I felt a little bit upset about it.
Senator Bone. The poor old Government did need the money,
didn't it?
Mr. Irenee du Pont. I do not know. That was before we got to
spending it so fast.
Senator Bone. I imagine you will agree now that we needed it,
will you not?
Mr. Ieenee du Pont. We had not gotten to spending it quite so
fast in those days.
Senator Bone. The tax was on your net income and not on your
gross income?
Mr. Irenee du Pont. Yes; it was on the net. It was quite a high
percentage.
Senator Bone. But even so, this tax concerning which you com-
plained rather bitterly, did not prevent your company from making
a very good showing?
Mr, Irenee du Pont. But we were singled out as a munitions
company to be taxed retroactively in amount of some $12,000,000
that 3^ear. I do not think that that was a very fair thing.
Senator Bone. Were there not other powder companies or any
other companies manufacturing powder that had to pay such a tax ?
Mr. Irenee du Pont. Practically none of them liad large profits
except the Hercules and the Atlas companies, and they were very
small as compared to ours. I undertake to gTiess that we paid 90
percent of the total of the munitions tax — our company did — and
it was retroactive, put on after we had made our contracts.
We might have been a little rough, Senator, in that criticism, on
that account. That may account for this little squib in the report.
Senator Bone. Your report says [reading] :
Under the corporation tax and ammunition tax laws, the tax levied against
our company for the 1916, under these laws will aggregate an amount equal to
370 percent of our entire net earnings for the year 1912 —
That is going back pretty far —
in which year we had the largest earnings in the history of the company.
That was prior to the war. But the point that I am making now
is that even with this tax, the du Pont Co. showed surprisingly large
earnings and were very generous with its stockholders.
Mr. Irenee du Pont. There is no doubt about that.
Mr. Lammot du Pont. You have in mind the figures that include
the dividends after the year 1916.
Senator Bone. Yes. That is this dividend statement that I have
read.
Mr. Lammot du Pont. Of course, we do not know what those
dividends were in 1916 when that report was written.
Senator Bone. I think that is all I have, Mr. Chairman.
Mr. Irenee du Pont. May I add a little to the quotation that
5^ou read, Senator? This says that —
Under the corporation tax and ammunition-tax laws, the tax levied against
our company for the year 1916 alone will result in our paying to the United
1046 MUNITIONS INDUSTRY
States Goveninioiit an amount equal to the entire profit made on sales of
military powders to the United States Government by this company and its
predecessors since the inception of the industry about 20 years ago.
Senator Bone. The United States Government itself has operated
some of its own powder ])lants, has it not 'i
Mr. Irenee du Pont. Yes.
Senator Bone. In other words, it has made a lot of powder for
its own use?
Mr. Irenee du Pont. Yes, sir.
Senator Bone. You did not sell the United States Government
all the powder that it used, so that your sales to the United States
Government to which you are referring do not represent all of the
powder that the Government was using. How much would it rep-
resent, would 5^ou say 50 percent?
Mr. Irenee du Pont. I could not guess, but I should say some-
thing of that order, in the latter years. The Government did not
manufacture powder, if I remember correctly, in the earlier years
of the industry. It is something of the order of 50 percent.
Mr. A. Felix du Pont. You do not mean during the war?
Mr. Irenee du Pont. This was before the Government entered the
war that I am speaking of.
Senator Bone. We understand that. The Government, however,
had not been buying a tremendous quantity of powder; they had
been buying small amounts of powder, so that your profits, in any
event, on that powder, would not be very great.
Mr. Irenee du Pont. Substantially all the powder that we made
in the years prior to the war had been sold to the United States
Government and the entire profits on that, during the whole period,
were wiped out by a tax in a single year during which the Gov-
ernment did not contribute anything to us, except protect us from
invasion.
Senator Bone. Did you feel that the Government was wronging
you in taking this tax?
Mr. Irenee du Pont. If it had given notice to us in advance so
that we could have protected ourselves on contracts, I do not think
we would have said anything about it. But being retroactive, it did
not seem fair to us and I do not think you would think it was
fair, either.
Senator Bone. In the light of our experience during the Avar-
Mr. Irenee du Pont. We had not had that experience at this time.
This was before the United States entered the war.
Senator Bone. But in looking on it now, we are convinced our-
selves, are we not, that no harm was done in levying this tax, be-
cause the amount of your j)rofits would indicate that very clearly.
Mr. Irenee du Pont. I would not say that no harm was done.
But I do not think that we would have put it in the report, if we
were writing it today.
Senator Bone. You could not feel that your stockholders were in-
jured in the face of this dividend record, could you?
Mr. Irenee du Pont. It came out of their jwckets. But I do not
think we would have Avritten it, if we were writing the report today.
Senator Bone. Well, let us go over this again. Let us just refresh
our memories on this. Here are 12 to 15 dividends in one year,
1917. There is one dividend of 32 percent. There is a stock dividend
MUNITIONS INDUSTRY 1047
here and several large dividends. Of course, you do not want us
to feel that you think that your stockholders were hurt by what the
Government did^
Mr. Irenee du Pont. Well, it did not seem to be fair at the time.
If you will take that amount of taxes paid to the Government up
to i91G and divide it by our capital stock, I think that they got about
100-percent dividend on the stock, something of that order.
Senator Bone. In 1916 your stockholders got a 100-percent divi-
dend on their stock; 100 percent on the par value of the stock. No
stockholder of any corporation can complain of that.
Mr. Irenee du Pont. They usually do not.
i^enator Bone. Do you think that any stockholder in this country
ought to complain if during war time, when we were assured
that tlie Republic was in danger, and during which time he gets a
hundred-percent dividend on his stock — do you think he should
complain if the Government levies this kind of tax ?
Mr. Irenee du Pont. Senator, the country at that time was only
in danger of a possible future German invasion. We were not
engaged in the war.
Senator Bone, But if we were threatened with a German invasion,
even in the face of that threat, do you think that a stockholder
ought not to be satisfied
Mr. Irp:nee du Pont (interposing). I think you are anticipating
just a little bit, are you not, Senator?
Senator Bone. Everybody was anticipating. We were assured that
preparedness was necessary and the whole countrj^ was getting ready
for it. That is right, is it not?
Mr. Irenee du Pont. That was not right; no, sir.
Senator Bone. We were assured that there was a threat of a
German invasion.
Mr. Irenee du Pont. Mr. Wilson gave it out that we were too
proud to fight, and we were not going to fight, in those days.
Senator Bone. Nevertheless, we were getting ready for it, were
we not?
Mr. Irenee du Pont. No, sir.
Senator Bone, We were not?
Mr. Irenee du Pont. No, sir.
Senator Bone. Then most of us do not read the daily papers
with an understanding mind, because while we were told that we did
not want to fight, we were preparing for it.
Mr. Irenee du Pont. No — maybe we are talking at cross purposes,
Senator— but the greatest preparation that was going on in the
United States was in the activity of the du Pont Co.
Senator Bone. You were preparing for it, then?
Mr. Irenee du Pont. By reason of our foreign orders. That
enabled us to prepare, to be able to fill in the niche when we were
caught.
The CHAiR:\rAN. JNIr. du Pont, this is 1917 j^ou are talking about?
Mr. Irenee du Pont. 1916.
The Chairman. Then perhaps you are talking at cross purposes.
]Mr. Irenee du Pont. That is what I was afraid of.
The Chairman. You were talking of 1916 and the Senator was
talkincf of 1917.
1048 MUisriTioisrs industry
Mr. Irenee du Pont. I thought that we were discussing the year
1916.
Senator Bone. In 1917 your common stockholders received divi-
dends of 51 percent. Everybody in this country was being told
that they must give until it hurt.
Mr. Irenee du Pont. Yes, sir.
Senator Bone. And that the Republic was in danger, that our
verj^ civilization was in danger?
Mr. Irenee du Pont. Yes, sir.
Senator Bone. Did you believe it?
Mr. Irenee du Pont. I believed it.
Senator Bone. You did believe it?
Mr. Irenee du Pont. Yes, sir.
Senator Bone. Do you believe it now?
Mr. Irenee du Pont. I do.
Senator Bone. Do you think that 51 percent of profits is a fair
amount of profit for a stockholder in a private corporation in time
of war?
Mr. Irenee du Pont. Those profits were all made out of foreign
contracts. The amount of taxes that we paid that year offset en-
tirely all of the profit that we had made from the United States
Government since the inception of the industry.
Senator Bone. We were helping our Allies; we went into the war
in 1917.
Mr. Irenee du Pont. Yes, sir.
Senator Bone. And our civilization was threatened ; that is what
the world was told, was it not?
Mr. Irenee du Pont. Yes, sir.
Senator Bone. What I am trying to get at here by my questions
is whether or not you as a business man think that a 51 percent
profit to your stockholders, which is permitted by the Government
in time of war, is treating stockholders unfairly?
Mr. Pierre du Pont. Certainly not. The only complaint regis-
tered was because this was practically a special tax on one company.
Naturally, if a man is singled out and they say that he shall be the
only one subject to a tax, he feels a bit sore, even if the tax may be
a just one; in other words, if applied to everybody, it would be
different. But this was practically a one-company affair.
But that is neither hore nor there. There was no great complaint.
That item in the annual report was the only thing that has been
said or done about it. The stockholders naturally were not very
much concerned about it. They made extremely good profits.
Senator. I am afraid you have the wrong point of view on this
matter. When the du Pont Co. went into this military preparation
there Avas no obligation to do so. I was a party to the first contract
and I was extremely doubtful and reluctant whether we should do
it or not, but we were ready to do it because of the assurance the
Allies were perfectly willing to put up the money in advance and that
was a thorough understanding. We took all of the risk of pur-
chasing under those contracts, and if you will examine the 1918
report you will see that risk was not a small one because we made
these investments Avi'Jiout a guarantee that the profits would come
MuisriTioisrs industry 1049
out. If the war had ended we would have been in a bad condition,
because I know there was one case in which we owed $100,000,000.
We were oblifrated to return a hundred million dollars to the Allies
who furnished the money to eo ahead with our contract. We had
spent that $100,000,000 and about $60,000,000 more in plants and
furnishino- money for materials, and our company w^ould have gone
broke if we had been compelled to return that money.
The Chairman. Mr. du Pont, let us assume that the war had come
to an end in March 1917, before the United States entered, what
would have been the result enjoyed or suffered by your company ?
Mr. Pierre S. du Pont. I never figured that out, but at that time
we had very large advances which were returnable to the Allies.
Mr. Irenee du Pont. What date was that ?
The Chairman. The month before the United States entered the
war?
Mr. Irenee du Pont. I do not believe it would have been as disas-
trous as a year earlier. That would be my guess.
The Chairman. It would not have been what?
Mr. Irenee du Pont. Not as bad in 1917 as it would have been
in 1916 — that is, the financial effect on the company would probably
not have been as bad.
The Chairman. If the end had come a vear earlier than March
1917?
Mr, Irenee du Pont. It would have been worse in 1916 than 1917.
That is my estimate.
The Chairman. How do you account for that?
Mr. Irenee du Pont. Because we had not got that much profit
back in. You see we had another year's operation at March 1917.
The Chairman. Through late 19i6 and early 1917 were you not
engaged in plans that looked to our possibly entering into the war?
Mr. Irenee du Pont. To a certain extent we were looking at it.
We were looking for possible sites in connection with the United
States Government, trying to find them powder sites and plants,
but I do not think we had taken any active steps.
Mr. Pierre du Pont. It was in the summer of 1917 that we were
looking for those plants?
Mr. Lammot du Pont. We made no preparations for the United
States until after the United States went into the war.
Mr. Irenee du Pont. Didn't we have someone going around look-
ing for plant sites before that? Is Major Casey here? _When we
went out aiding the Government in looking for plant sites, when
was that?
Major Casey. I think it was in early 1917 we were looking for
them, because of the possibility of our being involved in the war
and not knowing what the outcome would be at that time. Our
plants were poorly located from a strategic standpoint, subject to
ocean raids and from the air. I went to Mr. Pierre du Pont and
took a map and drew two circles on it and said, " If we have to do
any further expansion we should put these two powder plants
within these two circles, one of those being west of the Alleghenies,
east of the Mississippi and south of the Ohio and the other east of
the Rockies, west of the Mississippi, and south of the Missouri.
The Chairman. When did you establish your plant at Washburn,
Wis.?
1050 MUISriTIONS INDUSTRY
Mr. Irenee du Pont. That was lono- before this. That was pure!
a dynamite plant.
The Chairman. It became a powder plant during the war?
Mr. Irenee du Pont. We made TNT there and TNX for the
Navy.
Mr. Kaushenbush. In talking about the TNT plant, we will not
refer to TNT for commercial purposes, but in the examination of
Senator Bone it was stated when the company went into the manu-
facture of powder for military purposes, and Mr. Pierre du Pont
has testified the company made that decision reluctantl3%
Mr. Pierre S. du Pont. I made it reluctantl3^
Mr. Rausiienbush, In this Internal Revenue Exhibit No. 1, pre-
pared by the auditing department of j^our company, they speak about
various transactions between the company, and one particular item
of $4,644,818, which consisted, we are informed, of an agreement
between the International Co. and the du Pont Powder Co., whereby
the International Co. undertook not to solicit military business, in
consideration of the du Pont Powder Co.'s turning over to them
a certain percent of the military business that the du Pont Co. ob-
tained. The value, I take it — and I want to be fair about it — of
getting the International Co. out of the soliciting of military busi-
ness was $4,644,818. Now, I would like to ask for the date of the
transaction referred to which is reported in the report dated 1924
and involved the Avhole tax question of what the basis should be for
the transfer of the old company into the new one.
Mr, Pierre S. du Pont. Tlie International Co. was a company
that was absorbed into the du Pont Co. before 1913, because we
owned that company at the time of the dissolution suit. That In-
ternational Smokeless Powder & Chemical Co. was a corporation
that was started to manufacture and sell smokeless powder and other
chemicals. It was absorbed into the du Pont Co., and apparently
it was kept alive up to that date, but it was in the Government's dis-
solution suit, at which time it was decided the du Pont Co. should
retain all of the powder plants, notwithstanding they were the only
militaiy powder plants at that time.
Senator Bone. Can you advise us whether or not the Government
junked its powder plants after the war?
Mr. Pierre S. du Pont. No; it has them yet.
Senator Bone. Has it discarded any of them?
Mr. Pierre S. du Pont. I believe the plant in West Virginia has
been scrapped and also the plant we built at Nashville, for them.
Mr. Eaushenbush. According to what you have said, that the
company was involved in the dissolution suit back in 1912 and 1913,
then the contract whereby the $4,000,000 plus was paid by it to the
International Co. not to solicit military business was entered into
before your preparation for war purposes ?
Mr. Pierre S. du Pont. I cannot explain that, I will have to look
it up. I thought that company had been dissolved long since, because
we owned it substantially in its entirety in 1913 at the time of the
dissolution suit. I know it did have outstanding an issue of bonds,
and possibly the company remained alive, and this had some connec-
tion with the bond issue, but that is a mere guess.
MUNITIONS INDUSTKY 1051
The Chairman, Just one question, Mr. du Pont. In addition to
the dividends that were paid, were there any bonuses paid to the
officials of the corporation?
Mr. Pierre S. du Pont. Yes.
The Chairman. Will you come tomorrow morning prepared to
reveal what bonuses were paid during the years 1916, 1917, 1918,
and 1919?
Mr. Pierre S. du Pont. I can give you the totals now.
The Chairman. Let us leave that until morning; then you can
have it accurately and ready for presentation.
Mr. Pierre S. du Pont. Would 3'ou like an explanation of this
International Smokeless Powder matter?
Mr. Raushenbush. Very much.
Mr. Carpenter. I have a record of that one figure. We were
unable to reconcile that $10,000,000 loss and $2,000,000 loss, and, if
it is agreeable, I will be glad to give it to the secretaiy.
Senator Bone. Give that to Mr. Raushenbush.
Mr, Pierre S. du Pont. You would like an explanation of this
International Powder matter, and while I don't think it is material,
I think I can explain it.
The Chairman. This would be as good a time as any to clear it up,
Mr. Pierre S. du Pont. We will bring an explanation in the
morning.
The Chairman. The committee will be in recess until 10 o'clock
tomorrow morning, when we will resume with the same witnesses.
(Thereupon the committee recessed until 10 a.m., Thursday, Sept.
13, 1934.)
INVESTIGATION OF MUNITIONS INDUSTRY
THURSDAY, SEPTEMBER 13, 1934
United States Senate,
Special Committee to In\t:stigate,
the Munitions Industry,
Washington^ B.C.
The hearing was resumed at 10 a. m. in the caucus room. Senate
Office Building, pursuant to the taking of recess, Senator Gerald P.
Nye presiding.
Present: Senators Nye (chairman), George, Clark, Bone, Pope,
and Vandenberg.
Present also : Stephen Raushenbush, secretary.
The Chairman. The committee will be in order.
TESTIMONY OF PIERRE S. DTJ PONT, IRENEE DU PONT, LAMMOT DTJ
PONT, A. FELIX DTJ PONT, FIN SPARRE, J. BAYARD ELIASON,
AND W. S. CARPENTER, JR.— Resumed
The Chairman. Mr. du Pont, upon recessing last night v^^e were
contemplating the availabilitj^ this morning of some tangible reports
concerning the- bonuses that were paid. Do I understand that
bonuses were paid employees and executives as well ?
Mr. Pierre S. du Pont. Yes,
The Chairman. What are you prepared to advise us concerning
that this morning?
Mr. Pierre S. du Pont. Might I interject, Senator, last night I
felt that there was an entirely wrong impression in regard to this
whole situation, largely from the fact that it seemed that informa-
tion was being brought out that had never been brought out before,
and was read from the annual reports of the company, which it was
not made clear were public property. All of those reports were
published at the time in full in the newspapers, given out to 100,000
stockholders, and were all well known to our customers and every-
body concerned. There was nothing brought out yesterday that
has not been public property for 10 years or more.
We do not want the generation that has grown up in that 10
years to think that this is a revelation kept secret by the company
all of these years and finally dragged out against our wishes.
Our records are open in every way to everybody that has any con-
cern in it, and you have concern ; and there is no record of the com-
pany that is not always open.
The Chairman. I think, Mr. du Pont, there has been no misim-
pression on the part of the committee. They have understood those
reports were public property, public knowledge, but sometimes a
1053
1054 MUNITIONS INDUSTRY
thing that is made public today may not have the meaning, or may
not bear the import that it will 10 years from now in the light of
other developments.
Mr. Pierre S. du Pont. That is what I am leading up to, that
everything brought out yesterday related to the very large profits
of the company as if it was something quite extraordinary and
something reprehensible to have taken during the time of waV, and
nothing was said or tried to be brought out on the other side as to
what we have accomplished.
We went into this war business at the solicitation of the Allies,
not at our solicitation. They w^anted powder, and the reason they
wanted it was they could not manufacture it themselves. It required
anywhere from 4 to 9 pounds of raw materials to be taken across
the water to produce a pound of powder on the other side. We
know what the shortage of vessels was at that time. The Allies did
not want to take four times as much material over there to make
the powder in the plants that they were obliged to build at a greater
cost than we could build them on this side.
They came to us because we could serve them, because nobody
else could serve them, and nobody else would serve them. They were
glad to pay the prices, they knew what powder could be made for
at their own factories, and they knew what it cost. We were obliged
in making this powder for them to substitute materials, we made
powder for 60 different guns used over there, guns that we had never
seen before, and it was entirely done by calculations made by ex-
perts, and there is not a pound of powder that went to the Allies
that failed of its purpose, and there was not a single pound of
powder returned.
That was an accomplishment that nobody else on earth could
have made. The Allies were glad to pay the price for it, and we
savetl them as much money as they paid us by our efforts.
I think it is unbecoming to have in the record anything to indicate
that these prices Avere Avrung out of the Allies, who were at our
mercy. There was nothing of that kind ever contemplated, and
nothing of that kind desired. They were glad to pay it, and they
all thanked us at the end for what we had done.
As to the United States, the United States had no facilities for
the manufacture of powder, larger than ours. We came into this war
with plants capable of making 400,000,000 pounds annually in our
own country. The United States could have seized these plants if
they wished to, but they did not, because the Allies needed them.
Our Government had nothing, they did not have a situation in which
a plant could be furnished. When they came to realize the amount
needed, which was in the fall after the declaration of war, in the
fall of 1917, we were able to offer them two sites which we had
selected as being the best in the United States and that we knew
we could get.
Those two sites were taken by the Government, and I think taken
gladly, but ground was not broken for either of those plants until the
spring of 1918, 9 months after war was declared.
Our Government had not means of getting a pound of powder in
all of that time, and no preparation for it, excepting what the du
Pont Co. had made for them. We had anticipated the necessities
MUNITIONS INDUSTRY 1055
of the Government. Our plans were taken by the Government at
the time, one factory was built by themselves, using every bit of the
experience we had and the other plant we built for them at a cost
of $85,000,000, and the record in 1918 is in our annual report of
what was accomplished there.
I have here a check that was written to the du Pont Engineering
Co., the branch of the company in charge, for its commission for
doing that work, and I would like to read into the record, with
your permission, what was said of that work in the report of 1918,
if I may.
The Chairman. Mr. du Pont, just what is the general nature of
the report?
Mr. Pierre S. du Poxt. It is all taken from our 1918 report, but
in a very much more condensed and readable form. I do not wish
to burden you with the reading of it, and if j^ou have no objection
I will offer it.
Mr. Raushenbush. If that deals with the Old Hickoiy Powder
Plant, we would very much prefer to have the evidence on that
brought out at a later time in the hearing.
The Chairman. Is that what it does deal with, Mr. du Pont?
Mr. Pierre S. du Pont. That is part of it, but not the entire report
altogether.
The Chairman. Since a phase of this stud}'' has been in that direc-
tion, I suggest you hold that until that point is reached in the
hearing.
]Mr. Pierre S. du Pont. May I further state what the commission
was for the $85,000,000 plant erected at Old Hickory? I have a
photostatic cojDy of the check for $1 that was the agreed commission.
Tlie Chairman. Now, Mr. du Pont, what of the bonuses that
were paid?
Mr. Pierre S. du Pont. The total bonuses paid — can I read by
years ?
The Chairman. Yes; please do. Can j-ou divic'e it as to bonuses
to executives and bonuses paid to employees ?
Mr. Pierre S. du Pont. The division I have here is the total
bonuses. The officers and principal salaried men, which I thmk
covers it, and may I read the total bonuses to give you an idea.
For the year 1914, $171,000, or 3.43 percent of the earnings of the
company.
For the year 1915, $3,775,000 or 4.37 percent of the earnings of
the companv.
For the year 1916, $6,514,000 or 7.93 percent.
For the year 1917, $2,927,000, or 5.94 percent of the earnings of
the company.
For the year 1918, $3,170,000, or 7.36 percent of the earnings of
the company.
For the year 1919, $857,000, or 4.85 percent of the earnings of
the companv.
I have not that totaled, but it is about $17,000,000 altogether.
The Chairman. That is not inclusive of the bonuses paid to the
employees ?
Mr." Pierre S. du Pont. That is everything. Now, I find that I
have only sample years here that are divided. I will give yon them,
1056 MUNITIONS INDUSTRY
if you desire, and I think the others will correspond and give you
5:ome rough idea at any rate. Will you read them, Mr. Eliason?*
Mr. Eliason. These are typical years, as we did not have time to
get the information on each year. The year before the war, 1913,
the published earnings were $4,533,000 and total bonuses are $143,000
or 3.18 percent. The bonuses paid principal men other than officers
amounted to only $15,272, or 0.34 percent.
Senator Clai;k. That Avas the year before the war?
Mr. Eliason. Yes; the year before the war.
In 1917 the total bonus was $2,927,000, of which the officers' bonus
was $530,000, and the principal men, other than officers, $184,000.
The officers' bonus in 1917 amounted to 1.08 percent of the earnings,
and the bonuses to principal men other than officers was thirtj^-seven
one-hundredths of 1 percent of the earnings.
The Chairman. Now, I take it your statement is a very carefully
prepared one, and so far as the Chair is concerned it is quite content
to leave that subject now if you would offer the statement as an ex-
hibit for the record.
Mr. Eliason. We will be glad to.
(The statement referred to was marked '' Exhibit No. 454 "', and
is included in the appendix on p. 1278.)^
The Chairman. Do these years for which you have reported con-
stitute the inauguration of the bonus system, or had that been in
vogue for some time prior to this ?
Mr. Irenee du Pont. I can tell you from my own experience, I
received a bonus in 1905, and know it was in vogue then, because I
was very much surprised to get $2,500,
The Chairman. Now, for the purpose of clarifying the record of
yesterday I want to inquire as to the increase in capitalization from
1914 to 1915. How was that increased capital provided? I have a
note here that your 1913 capital was at $51,000,000, 1914, at $36,-
000,000, or am I mistaken in that figure?
Mr. Irenee du Pont. That was due to splitting off the Hercules
and that was called attention to yesterday.
The Chairman. Then from 1914 to 1915 it was jumped to
$128,000,000.
Mr. Pierre S. du Pont. That was in the recapitalization of the
company when the name was changed to the present company. That
capitalization was earnings that had been made in previous years
and also that capitalization included certain contracts on hand.
The Chairman. Your earnings then were converted into capital?
Mr. Pierre 8'. du Pont. Yes, sir.
The Chairman. No new stock or bond issues floated at that time
to create capital?
Mr. Pierre S. du Pont, Not at that time; no. That was a sale
of property from one company to another and practically is a new
valuation, but there was no new money put in at that time.
If you will pardon me. Senator, before we go further, I made
yesterday a statement in regard to the capital employed and in
regard to the contracts, in which I said if the war had terminated
that money that we had on the contracts was returnable. Now, that
is not strictly true, as has been pointed out to me. And the contract
1 There was no Exhibit laarlccil "No. 453."
MUNITIONS INDUSTRY
1057
did not provide for that. The contract provided that if the powder
was not delivered to the Allies according to contract that we could
pay back the money and be relieved of any claim for damages. We
then had the alternative of continuing to make the powder after
the cessation of war or to pay the money back. Now, my personal
feeling is, and I think others w^ould agree with me, it would be
impossible to force the Allies to take that amount of powder after
the cessation of hostilities. Therefore, our obligation was the return
of the money, but it was not the strict obligation of the contract.
The Chairman. I have before me the financial statement of the
E. I. du Pont de Nemours Co., successors in 1914 to the E. I. du Pont
de Nemours Powder Co., 1910 to 1913, compiled by the Federal Trade
Commission from published sources, and which you are acquainted
with. This report shows company assets from the years 1910 to and
including 1927.
I am going to ask that this statement be incorporated in the
record.
(The document referred to was marked " Exhibit No. 455 ", and
is included in the appendix on p. 1280.)
The Chairman. This statement, " Exhibit No. 455 ", shows the
total assets 1910, $81,000,000, and then shows the following assets
for the following years :
1!)11 $83, 000, 000
1912 86, 000, 000
1913 74, 000, 000
1914 83, OOO, 000
1915 258, 000, 000
1916 217. 000, 000
1917 263, 000, 000
1918 .308, OUO, 000
1919 240, 000, 000
From this statement, Mr. du Pont, it is very evident that your
assets were considerably larger after the war than they were during
the war.
What is the conclusion to be drawn ?
Mr. Pierre S. du Pont. It is increased by the profits made as set
forth yesterday, of about $260,000,000.
The Chairman. Your profits had been greater in the years fol-
lowing the war than they were during the war ?
Mr. Pierre S. du Pont. Yes.
The Chairman. Your assets have grown larger during this time
than during the war.
Mr. Irenee du Pont. I think you are wrong there. The profits
after the cessation of the war went down very much.
The Chairman. I am speaking now of the assets of the company.
Your assets increased after the war to a point greater than that
which was reached during the war.
Mr. Pip:rre S. du Pont. Yes. That was largely through the intro-
duction of new capital. Do you have that statement, Mr. Carpenter?
Mr. Carpenter. I do not have the full details of that, but of
course we had increases in stock, we had a bond issue, and sold
additional common stock and also the accumulation of earnings
and the consolidation of certain other companies.
1920 $253, 000, 000
1921 252, 000, 000
1922 259,000,000
1923 279, 000, 000
1924 275, 000, 000
1925 305, 000, OOO
1926 322, 000, 000
1927 351, 000, 000
1058 MUNITIONS INDUSTRY
DU PONT INVESTME>'TS IN OTHER COMPANIES
The Chairman. I take it, Mr. du Pont, that after the war, start-
ing in 1919, your problem, in addition to others, was that of finding
an outlet and i^laces for proper investment of the profits that had
been won during the war?
Mr. Pierre S. du Pont. The large problem then was this question of
the dye industry, which the war had proven absolutely necessary as a
matter of preparedness of eveiy countr}^ for its future wars, and
Ave endeavored to go into the dye business not only as an investment,
but also to supplement the assets of the United States in that re-
spect, and $50,000,000 was invested in that industry and is still in-
vested in it. In addition to that we went into other things to help use
the facilities, largely the men, engaged in producing things allied
to our own industry. For instance, we went into the manufacture
of the so-called '" pyralin ", which is practically the same thing
as celluloid, made from nitrocellulose, which is the basis of smoke-
less powder also.
The Chairman. All of that we will come to later on, but we will
pursue this line now\
. Eeally it was a problem 5'ou were forced to a decision on in 1919
as to what you would invest this accumulated capital in, that had
become yours during the war.
Mr. Pierre S. du Pont. I rather look at it the other way ; it was a
question of how to take care of the property left over from the war,
consisting not only in physical tangible property, but also in the
great number of men, experts and otherwise, who would have to
leave the company's employ otherwise.
The Chairman. Very well; but in addition to dividends which
were declared from earnings during the war, bonuses paid, taxes
paid, you had an accumulation of profits from earnings?
Mr. Pierre S. du Pont. Yes, sir.
The Chahuian. Certainly you were not going to want them to lie
idle, but wanted the field for that capital to operate in, and you were
looking for fields in which to invest it?
Mr. Pierre S. du Pont. We were hardly looking, but choosing
them.
The Chairman. Put it that way. Now in the 1919 report to stock-
holders, in a paragraph starting at the bottom of page 6, this lan-
guage appears :
It is opportune here to call your attention to the origin of this investment.
Meaning by that your investment in General Motors.
Your vice president, Mr. J. J. Raskob, with extraordinary foresight, in-
terested liimself as early as 1915 in the General Motors Corporation to the
extent of becoming a large stockholder and director in that company, and by
exercising great perseverance was able to convince the directors of your company
that the very unusual step of making a huge investment in an industry largely
foreign to its business was warranted by the opportunities afforded thereby.
Then the report goes on with an explanation of how eifective that
investment has been. I think I shall read it [reading] :
The earnings on General Motors Corporation stock for the year 1919. after
getting aside a suitable amount for excess-protits tax, will be about .$37
a share, and the value of your company's investment as measured by the
MUNITIONS INDUSTRY 1059
present market quotations has more than doubled since its acquisition. This
statement is perhaps stronger than any recommendation of Mr. Raskob's work
whicli would be made in this recort.
So that that investment was a very successful one?
Mr, PiEEKE S. Du Pont. Very successful; yes. Might I at this time
contrast that investment, because I think it would be interesting in
the result of it. It won't take but a few minutes.
The Chaikman. I would suggest that you make a note of that,
and if we do not cover it in the order which is followed, then you
are at liberty to call our attention to it and exercise the contrast.
Mr, du Pont, on September 8, 1927, you addressed a letter to
Col. William Donovan, Department of Justice. Was that the Col.
William Donovan who was an Assistant Attorney General at that
time ?
Mr. PiEBRE S. DU Pont, I do not remember. I think that was from
my brother Irenee. I have no recollection of the letter.
The Chairman. That w^as Mr. Irenee du Pont. Do you recol-
lect that letter, Mr. du Pont?
Mr. Irenee du Pont. Frankly I do not recall it at this time but
it looks like it might have been written by me, judging from the
signature. I do not know\ If I read it through, maybe it will
bring it back to me.
The Chairman. Were you having difficulties at that time in con-
nection with determining what the law would permit you to do re-
garding your acquisition of interests in other companies ?
Mr. Irenee du Pont. We were under, you might say, the guidance
or at least the okay o^ the court with respect to the monopoly on ex-
plosives under the decree of 1913. I am quite clear that I was on my
guard on that phase of it. I had forgotten that General Motors
might have been in it.
The Chairman, The Federal Trade Commission was interesting
itself in those questions; was it not?
Mr. Irenee du Pont. I do not know ; apparently so.
The Chairman. The concluding paragraph of your letter to Mr.
Donovan might serve as a reminder. In that paragraph you stat«:
On July 29, 1927, the du Pont Co. received a notice from the Federal
Trade Commission stating that they had directed their chief economist to
investigate relations, directly and indirectly, between the United States Steel
Corporation, the General Motors Corporation, and the E. I. du Pont de
Xemours & Co. We are sending you a copy of this letter and shall be glad to
supply both you and them with any additional information pertinent to this
inquiry upon request.
Mr. Irenee du Pont. That refreshes my memory. I had forgotten
the incident. Newspaper cartoons came out, one a rhinoceros and
another a hippopotamus, marked " General Motors ", and an ele-
phant marked " U, S. Steel" , each swallowing the other one, be-
ginning at the rear end. I think the common public was looking on
and saying, " What is going to be done when they get done
swallowing each other? "
We thought United States Steel was a good iuA^estment and bought
something equivalent to 1 percent of the stock of the Steel Corpora-
tion. At that time I went abroad on a trip, I believe, and when I
came back I discovered what a furore happened on account of that
purchase. I think this was the outgrowth of that situation. If I
83S76 — 34— PT 5 4
1060 MUNITIONS INDUSTRY
wrote a long letter, somebody probably wrote it for me and I signed
it, but it was entirely an incidental thing and had nothing to do
with this particularly, that I could find out.
The Chairman. In this letter from you to Colonel Donovan I
find this language [reading] :
As previously stated, the du Pout Co.'s investment iu the General Motors
common stock was an investment of capital funds and in general an obligation
on the part of the du Font's Co.'s part to assume responsibility in part for the
management of the affairs of the General Motors Corporation.
Just what was the meaning of that particular language?
Mr. Irenee du Pont. As I recall it, Durant was the head of
General Motors when we made the acquisition, and he was an operat-
ing man and a salesman, a very high grade man in both those things.
His ability from a financial point of view I think he recognized was
not all it might be. He was very anxious to get us in, on the theory
that we were clever financiers — and just what that is I do not know,
but it worked out beautifully. We were put on the finance committee,
and I think the handling of the financial phase of General Motors
has been a wonderful thing — not that I had anything to do \yith it.
I think John Kaskob did the heavy work, but it was eminently
successful and brought General Motors into the line of being one of
the most properly organized companies from the point of finance
in the country, and its record has demonstrated that in the years
since.
The Chairman. Do you recall offhand what was paid for that
stock in General Motors at the time?
Mr. Irenee du Pont. My recollection is that we bought both
Chevrolet and General Motors at about the time they were conso-
lidated. We put in $47,000,000, if I remember right on that. It was
quoted yesterday. Our interest in that, I think, represented 23l^
percent, but it was represented as about 25 percent yesterday. It
was substantially 25 percent, but a little bit under that.
The Chairman. The point I am trying to raise is this : The price
which you paid for the stock was this — there was a difference be-
tween the price as actually paid of $37 per share, by reason of a
dividend which was declared at about the time you bought it.
Mr. Irenee du Pont. I think the price per share on General
Motors is almost meaningless, because once it was $100 par and then
$20 par and then something else, at different times, and price per
share is absolutely meaningless.
The Chairman. Eight after you did buy, Mr. du Pont, a dividend
was declared on General Motors?
Mr. Irenee du Pont. It has paid dividends right along.
The Chairman, About $37 a share that year.
Mr. Irenee du Pont. I do not follow what that $37 a share is. It
certainly has nothing to do with present shares of General Motors.
The Chairman. Very well.
Mr. Pierre S. du Poxt. Mav I interject to clarifv the situation?
We have today 10.000.000 shares of General Motors and paid $47,-
000,000 for substantially that investment. That would be at the rate
of $4.70 a share, but the number of shares at that time, I think, was
very much smaller; but I think that will give you the picture, that
today's shares cost us about $4.70 per share.
MUNITIONS INDUSTRY 1061
The Chairman. In the report of 1919 to the stockholders you said
that the earnings of the General Motors Corporation stock for the
year 1919 would be about $37 a share. Did Mr. Raskob advise you
before the purchase of that great block of stock that there would be
so sizable a dividend declared^
Mr. Carpenter. That is not a dividend. It is an earning.
The Chairman. Very well.
Mr. Pierre S. du Pont. I think he advised us so far as he knew.
Whether it was fairly well known at the time, I am doubtful.
The Chairman. You were aware of the fact that General Motors,
as a corporation, was earning splendidly ?
Mr. Pierre S. du Pont. I think we knew everything that was to be
known at the time; yes.
The Chairman. How many corporations did you create or invest
in after the war?
Mr. Pierre S. du Pont. I can name the principal ones wdiich are
cited in the annual report. The General Motors and Pyraline in-
dustries .
The Chairman. For the purpose of the record — just giving it
roughly now — what percentage of your entire holdings in other
corporations became your possessions after the war?
Mr. Pierre S. du Pont. I cannot answer that.
The Chairman. You were shown with investments in 30 or 40
corporations, at least according to your own statement. Wliat part
of those became your possessions after the war?
Mr. Pierre S. du Pont. May I ask Mr. Carpenter to answer that ?
I am familiar enough to explain the results.
The Chairman. All right.
Mr. Carpenter. This gives a list of the various industries in which
we are interested, if that is what you mean, entirely apart from
whether or not they are separate corporations.
The Chairman. Those corporations in which you have interests
or which you own?
Mr. Carpenter. I can name those, if you choose, and let us note
which ones we had at the time of the end of the Avar.
The Chairman. Very well; do that.
Mr. Carpenter. This organic chemicals industry, which includes
the dye industry, which was started in the later years of the war;
this fabrics and finishes industry, which we had in part even at the
beginning of the war; the Grasselli Chemical Co. we acquired since
the war. Is this what you want?
The Chairman. Let us take this from another point of view. I
offer for the record " Exhibit No. 456 ", that being a statement fur-
nished by the E. I. du Pont de Nemours & Co. to the committee of its
investment in other companies, other companies involving an invest-
ment by you of more than $200,000,000. Have you that before you ?
Mr. Pierre S. du Pont. Yes, sir.
The Chairman. Let us take the time now and w^U you tell us the
number of those that you came into possession of during or after
the war?
Mr. Lammot du Pont. During or after ?
The Chairman. During or after. Or will you just go through it
and read the names of those that you did possess during or after the
war?
1062 MUNITIONS INDUSTRY
Mr, Pittjrt: S. du Pont. That we acquired during or after the war?
The Grasselh Chemical Co., the Krebs Pigment & Color Corpora-
tion; du Pont Eayon Co.; du Pont Cellophane Co., Inc.; Perth
Amboy Chemical Works; Niacet Chemicals Corporation; du Pont
Viscoloid Co., which was purchased first during the war; then the
Italian Celluloid Co. — I do not think I can pronounce the name ; and
also the Italian Coloid Co. (Societa Anonima INIazzucchelli). We
have a small interest in the Italian Celluloid Co. Then the Na-
tional Ammonia Co.
The Chairman. According to your statement you are shown in
possession of 100 percent.
Mr. PiEERE S. DU Pont. There are two companies. In one we had
a small interest.
The Chairman. In one you have TO percent of the stock and in
the other 100 percent.
Mr. Pierre S. du Pont. Mr. Carpenter corrects me. I think maybe
Mr. Lammot du Pont and Mr. Carpenter better answer this. It is
a little too modern for me.
The Chairman. Very well.
Mr. Carpenter. These are the ones which have been acquired dur-
ing and since the war: The National Ammonia Co., Inc.; the Pacific
R. & H. Chemicals Corporation; International Freighting Corpora-
tion, Inc. ; the Mexican Explosive Co., du Pont Film Manufactur-
ing Corporation, which was acquired during the war; Acetol Prod-
ucts, Inc., acquired after the war ; Remington Arms Co., Inc. ; the
Peters Cartridge Co. ; Remington Cutlery Works, Inc. ; Bakelite
Corporation
The Chairman. How about the Remington Cash Register Co.,
Inc.?
Mr. Carpenter. We did not acquire it. I do not know why
that is on this statement. That was just the shell of a company
which was left after they left entirely the cash-register business.
The Chairman. But this statement show^s that you have 96.7
percent of the outstanding stock.
Mr. Carpenter. I think that company had no assets at all, but was
just a shell left of the former activity of the Remington Arms Co.
The statement shows no investment.
Nobel Chemical Finishes, Ltd., French Duco Co., the German
Duco Co., South American Explosives, and this Argentine company
is brand new. There was small holdings in the German I.G and the
D.A.G.. also the Scheideanstalt.
The Chairman. That is a Dutch corporation?
Mr. Carpenter. German; and, as we pointed out, these General
Motors securities were acquired at different times in 1917 and 1918.
The Chairman. Very well. Then it would be. fair to say that
three-quarters of these investments were acquired during or after
the war by the E. I. du Pont de Nemours & Co. ?
Mr. Carpenter. In number. I should think that is certainly correct.
Mr. Pierre du Pont. Senator, may I ask Mr. Carpenter some-
thing? I think many of those corporations were organized by our-
selves for developing our own business.
The Chairman. That is quite aside from the question.
This statement of your investments, involving $200,000 or more
in other companies
MUNITIONS INDUSTKY 1063
Mr. Carpenter. $200,000,000?
The Chairjian. In companies of over $"200,000. is that it ?
Mr. Raushenbush. In which the du Pont Co. has an investment
of $200,000 or more.
The Chairman. That was my previous remark. This shows an
investment in capital stock in other companies than the E. I. du Pont
de Nemours & Co. totaling $202,765,782.55.
I do not know whether the exhibit which is before you is totaled
or not.
The advances by the du Pont Co. to these companies as of July
25, 1934, amount to $65,084,205.80. The advances by the holding com-
pany as of Julv 31, 1934, amount to $3,564,444.88, showing a total
investment of $164,445,641.91.
Now we have totalecl these figures, your own figures, and how are
we to account for the difference between that total investment that
is shown and the investment in capital stock that is shown?
]\Ir. Eliason. The investments shown on this statement are the
investments, of the Delaware Corporation, E. I. du Pont de Nemours
& Co. Now you will observe, if you look at that statement, that
many of those companies, such as the du Pont Rayon, du Pont
Cellophane, and Grasselli are 100 percent owned by the company.
Our published statement to which you refer, this published statement,
is a consolidated statement in which the subsidiary companies 100
percent owned are consolidated with the ])arent company, and these
investments in the stock of those subsidiaries naturally cancel out in
making a consolidated statement. It is all shown as one consolidated
statement. Does that explain it ?
The Chairman. I am afraid I am not following jou on that. I
wonder if you have gotten the question which is in my mind. The
total of investments in capital stock shown in these companies is
$202,0(!0.000, in round figures.
Mr. Eliason. Yes, sir.
The Chairman. Then the totals in the final column of that exhibit
are only $164,000,000 in round figures.
Mr. Eliason. The final column there?
The Chairman. Yes, sir.
Mr. Eliason. There is an error in the total which you have given
me, Senator, because there is one item of General Motors of $157,-
000.000, and there are a number up there which are large.
The Chairman. It may be that in our totals we have evaded or
avoided including that General Motors total.
Mr. Eliason. I think that is wdiere your trouble is, perhaps, if
General IMotors is not included in the other column.
The Chairman. If that is the case, if w^e have missed the Gen-
eral Motors total, then the total investment would be shown to be
about $315,000,000.
Mr. Lammot du Pont. Senator, that total investment column is
the sum of the preceding three columns.
The Chairman. Yes, sir ; it should be.
Mr. Lammot du Pont. If it does not add up, the arithmetic is
wrong.
The Chairman. I think perhaps the clerk who had this in hand
must have missed that $157,000,000 item which is the total invest-
ment in the General Motors Securities Co.
1064 MUNITIONS INDUSTRY
Mr. Lammot du Pont. It does not look that simple.
Mr PiERiJE 8. DU Pont. I think I will come to the rescue of the ac-
countants, Senator. It is $157,000,000, whereas it is $154,000,000
on the other side, and probably was not included in here as an in
vestment and was left out and it is somewhat separate.
I have a question which I have asked our people, and maybe I am
not so dumb after all. We have, first, the capital investment of
$202,000,000, and then an account of the money advanced to the com-
panies by the du Pont Co. The natural inference is that the sum of
the two should be greater than the original investment, but some com-
panies may have declared dividends in the meantime, and that would
reduce the investment again.
The Chairman. That is your investment as of this date?
Mr. Eliason. Yes, sir; on the books of the parent company. I
might point out this : That there are subsidiaries of subsidiaries here,
that is, for instance, the du Pont Co. owns a subsidiary. That sub-
sidiary may own a subsidiary of its own 100 percent. So you see,
when you add together the capital of two or three of those com-
panies, you do not get the correct picture, because, after all, it is all
ownership which belongs to the parent company, and in the consoli-
dated statement those capital investments clear out and become prop-
erty or assets and liabilities, as the case might be.
The Chairman. If the total of the first column of investment in
capital stock is correctly stated as $202,000,000, and if tlie advances
by the du Pont Co. as of July 25 and the advances by holding
company as of July 31 are to be added together to show the total
investment of the E. I. du Pont de Nemours & Co. in these other
companies, that total investment should be in the neighborhood of
$270,000,000.
Mr. Pierre S. du Pont. I would think so ; yes, sir.
Mr. Lammot du Pont. Senator, I do not think your arithmetic
is right either. Just adding up the first column roughlv. it comes
to more than $202,000,000.
The Chairman. I am inclined to believe now that the clerk who
had this in hand excluded all of the (ireneral Motors figures.
Mr. Lambiot du Pont. That won't bring the answer either. Who-
ever put these blue-pencil figures on there must have had something
else in mind than adding up the columns.
Mr. Pierre S. du Pont. I have added up the million figures, which
add up to 278.
Mr. Carpenter. Senator, I wonder if these brief figures will give
you the point which you are striving at, which I do not know yet:
In 1933 the total capital and surplus of the du Pont Co. was about
$500,000,000. In 1918 it was $187,000,000. That show^s a change
in capital and surplus of about $313,000,000 over that period. That
money has gone into a very great variety of things; to old industries
and new industries as well, but that does show the increase in the
capital funds of the company compared in that way over the course
of that period. Maybe that will be of some help.
The CiiAiKMAN. Perhaps it is.
Mr. Lammot du Pont. Are you interested to know where the
hicreased capital came from?
The Chairman. No; I am interested now in knowing what the
total investment is, in companies in which you have investment. I do
MUNITIONS INDUSTRY 1065'
not siijopose you are prepared to say off-hand what they are. You
have given us this showing, this Exhibit, which we are offering, but it
was not totaled.
(The statement referred to was marked " Exhibit No. 456 " and is
inchided in the appendix on p. 1282.)
Mr. Carpenter. I am afraid that Exhibit won't help you very
much. You have these figures which I have given you, showing an
increase in the capital funds of the company, an increase from 1918-
to 1933 of about $313,000,000. Those funds are all employed in one
form or another in the companies. The difference shows the increase,,
of course, over that period.
The Chairman. Very well. How were your investments carried
on the books ? At book or market value ?
Mr. Carpenter. They are carried on our books at their book value ;;
generally speaking, if we acquired a small interest, for instance a
stock-holding in this German I.G., we would just carry that on our
books at the purchase price. If we acquired a manufacturing operat-
ing company, that would go on to our books at the value of the assets
of that company, as of the time we took them over.
Now, General Motors is a striking departure from that. We
acquired General Motors and paid out about $47,000,000. From time
to time we felt our position there was best represented by reflecting^
in that value, as shown by our books, the book value as shown on the
books of the General Motors Corporation. That stands today
between $15 and $16 a share, so that our General Motors holdings on
our books today stand something around $154,000,000, which for
10,000.000 shares is about $15.45 a share.
The Chairman. Are we to assume, then, that what you have con-
veyed to us as your investments is a rather conservative statement of
the investment, or have you gone and taken the high mark of the
market ?
Mr. Carpenter. I think we have tried to show the correct figures.
The accountants differ as to the proper way of showing an item, such
as that General Motors item. We have tried to disclose what we have
done and put in our best judgment.
The Chairman. So that the market value has not persuaded you
necessarily to use that as a basis in determining that investment?
Mr. Carpenter. No.
Mr. Pierre S. du Pont. That is quite clear in the General Motors
case. Senator. We hold the General Motors stock at $15 a share,
which is the book value of the assets of the corporation. The stock
on the market is twenty-eight or twenty-nine dollars.
The Chairman. I notice your investment of $154,546,875 in the-
General Motors Security Co., and your statement also reveals that
your voting rights in connection with that holding of stock are 94.3-
percent. That means just this : that the E. I. du Pont de Nemours &
Co. control 94 percent of this General Motors Securities Co. stock
and votes it?
Mr. Pierre S. du Pont. Yes ; the General Motors Securities Co. is a
holding company, for all our shares in General Motors.
The Chairman. You own 100 percent of it?
Mr. Pierre S. du Pont. No ; 94 per cent. Am I right in that ?
The Chairman. The percentage of the total outstanding stock
owned of the General Motors Securities Co. is 100 percent.
1066 MUNITIONS INDUSTRY
Mr. Pierre S. du Pont. The General Motors Securities Co. is
marked here 84 percent ownership.
Mr. Irenee du Pont. That is voting rights.
The Chairman. That is voting rights. You own 100 percent.
Why do you not possess 100 percent voting riglit in that stock?
Mr. Carpenter. The General Motors Securities Co. owns all of
our holdings, all of what we call our 10,000.000 shares of General
Motors stock. In addition to that we have several million shares
more. That company is owned in part by the du Pont Co. and in
part by the important employees in tlie General INIotors Corporation.
Originally, when the sale of that stock to the General Motors em-
ployees Avas made, we had a 70 percent interest in there. That has
been somewhat increased, because of the fact that the holdings of
the General Motors employees has been somewhat lessened ; in other
^vords, their 30 percent has been somewhat lessened by liquidation of
part of their holdings.
Mr. Pierre S. du Pont. Do you understand that, Mr. Chairman?
The Chairman. I think I understand that.
Mr. Pierre S. du Pont. I am afraid I do not understand it.
The Chairman. Behind your purchase of General Motors stock
was an understanding of certain employees' rights in General
Motors ?
Mr. Pierre S. du Pont. May I make this statement. Senator?
The Chairman. So that possession of 100 shares of stock would
not necessarily give you right to vote the full 100 shares; is that
<;orrect ?
INIr. Pierre S. du Pont. May I ask this question? We want to
be sure that we are clear on this. My understanding is that origi-
nally we owned a certain number of General Motors shares, which
were held in this General Motors Securties Co. We sold a part
interest in that to the chief men in the General Motors Corporation.
That reduced our voting interest, of course.
The Chairman. But you were still owning that stock?
Mr. Pierre S. du Pont. Is that right?
Mr. Carpenter. We still lield control of that company, yes; and
always haA'e had control of tliat company.
Mr. Pierre S. du Pont. The stock we sold, then, is General
Motors Securities Co. stock?
Mr. Carpenter. Yes, sir.
Mr. Pierre S. du Pont. And therefore being 91 percent owners
of General Motors Securities Co., we can vote that whole block of
stock, which is a larger block than we show on our books ?
Mr. Carpenter. Yes; we can.
Mr. Pierre S. du Pont. As we have a 6 percent greater voting
right than would appear in our own stock ownership.
Senator Clark. Was this stock to which you have been referring
held by your employees or General Motors employees or employees
•of both companies?
Mr. Pierre S. du Pont. No; the General Motors employees en-
tirely.
Senator Clark. Some executives of General Motors simply put
their money in your holding companj^, is that right?
MUNITIONS INDUSTRY 1067
Mr. Pierre S. du Pont. I think that is just the way of it; yes^
But it came out a little different way. The General Motors Corpora-
tion wanted stock to sell to its employees in a considerable amount
and it was perfectly impossible to buy that stock in the market at
any reasonable figure. The du Pont Co. sold this interest.
Senator Clark. You simply sold stock in your holding company?
Mr. Pierre S. du Pont. Yes.
• The Chairman. In addition to these holdings by the General
Motors Securities Co, of which the E. I. du Pont de Xemours & Co.
owns 100 percent, your company holds shares of the General Motors
Corporation to the extent of an investment of $2,453,125.00 ; is that
correct ?
Mr. Pierre S. du Pont. Yes. "VVe count the 10,000,000 share in-
terest as our permanent holding in General Motors. These 200,000
shares were the excess over the 10,000,000 that we held and we do
not feel that we are in any way obligated to hold those. The
10,000,000 shares we announce as tlie firm's investment and the public
and the stockholders have a riirht to believe that that will not be
thrown on the market; and as far as I know and as far as anybody
else knows, it will not.
The Chairman. In that particular block of stock, you show a
total voting right of 23.45 percent. AVhat is the explanation there?
Mr. Carpenter. That figure of 23.45 percent is tlie percentage of
the total outstanding General Motors stock that our entire interest
in General Motors bears. That is figured in this way. We have 10
million shares actually in General Motors which are held almost en-
tirely through the General Motors Securities Co. In addition to that,
we liave 200,000 shares. The sum of the 10,000,000 plus the 200,000
shares makes 23.45 percent of the entire outstanding stock of General
Motors, which is about 43,000,000 shares.
The Chairman. What percentage of the total of General Motors
stock issued does your company and the General Motors Securities Co.
control ?
Mr. Irenee du Pont. 23.45 percent.
Mr. Carpenter. That is not correct ; that is not the answer.
Mr. Pierre S. du Pont. That does not include the voting rights of
the stock of the General Motors Securities Co. that we have sold.
Mr. Irenee du Pont. They are not talking about the voting stock.
You are talking about ownership, are you not, Mr. Chairman?
The Chairman. Yes.
Mr. Irenee du Pont. It was referred to yesterday as about 25
percent. I computed it last night roughly and it is about 23^/2^
percent. This seems to be practically the same figure, 23.45 percent.
The Chairman. What influence now does your company through
its holdings of General Motors stock and the holdings of the General
Motors Securities Co. have?
What part of the total do you control?
Mr. Carpenter. About 281/4 percent.
The Chairman. Of the total issue of General Motors Corporation?
Mr. Carpenter. That is right.
The Chairman. What are your individual personal holdings of
General Motors stock? I should like each of you gentlemen to-
answer that. Mr. Pierre du Pont?
1068 MUNITIONS INDUSTRY
Mr. Pierre S. du Pont. I cannot state that. I think it is 150,000
shares.
The Chairman. Yours?
Mr. Pierre S. nu Pont. Yes. I am making a good deal of a guess
on that. I believe that is about it.
The Chairman. And as for the others, what are j^our holdings?
Mr. Lammot du Pont. My holdings are approximately 30,000
shares.
Mr. Irenee du Pont. I think about 16,000, as far as I know.
Mr. A. Felix du Pont. I have not that figure at all. I think it
is less than 10,000 shares.
The Chairman. Assuredly you must know, you must have given
consideration to the percentage of the total of General Motors
Corporation stock that you controlled in your family and in your
corporation?
Mr. Pierre S. du Pont. I have never figured it at all. I have
looked at it as al)out a 25 percent investmeut, which is practically
what the company owns.
The Chairman. But you have much more in addition to that?
Mr. Lammot du Pokt. Not a great deal.
Mr. Pierre S. du Pont. Just what we have said, which does not
change the percentage very materially.
The Chairman. You speak of your holdings as being about 150,000
shares, Mr. Pierre du Pont ?
Mr. Pierre S. du Pont. Yes.
The Chairman. You sold a considerable amount of General
Motors stock in 1929; did you not?
Mr. Pierre S. du Pont. I had about 600,000 shares, I think, at
one time.
The Chairman. Was that sold in the open market ?
Mr. Pierre S. du Pont. In the open market ; yes.
The Chairman. Is it true that your receipt from the sale in 1929
of General Motors stock, was in the neighborhood of $36,000,000?
Mr. Pierre S. du Pont. I should say it was about that; yes.
The Chairman. Mr. Pierre du Pont, does General Motors Securi-
ties Co. control the voting stock of the General Motors Corporation?
Mr. Pierre S. du Pont. No. It has this 25 percent interest only.
That percentage is of all the voting stock of the General Motors
Corporation.
The Chairinian. We all understand that it is not necessarj^ to
ow^n 50 percent or 51 percent of stock to declare that you control ; do
you feel that the General Motors Securities Co. does control the
General Motors Corporation?
Mr. Pierre S. du Pont. No; I would think quite differently. I
believe the leading men in the General Motors Corporation and their
following are quite as powerful, if not more powerful, than the
General Motors Securities Co.
The Chairman. But you have a very powerful control not only
through dire 't investment, but through your interlocking directo-
rates; do you not?
Mr. Pierre S. du Pont. No; I would not think so. The inter-
locking directors are Mr. Sloan, president of the General Motors
•Corporation ; Mr. F. D. Brown, who is vice president of the General
Motors Corporation. 1 think they are the only two. Of course,
MUNITIONS INDUSTRY 1069
Mr. Irenee clu Pont and Mr. Lammot dii Pont and I are directors oi
the General Motors Corpoiation.
The Chairman. I offer now for the record as " Exhibit No. 457 " a
list of directors of the General Motors Corporation, with a compila-
tion prepared for the committee of the additional connections of those
directors in other corporations.
(The document referred to was marked " Exhibit No. 457 " and is
included in the appendix on p. 1285.)
The Chairman. I would like to make the point now that the
Poor's Manual for 1933 shows that in 11J32 General Motors' assets
were $1,115,228,641.
Mr. du Pont, on this list of directors of the General Motors Corpo-
ration, the number totalin<r 33, I find the name of Sir Harry
]McGowan. Who is Mr. McGowan?
Mr. PiERRK S. DU PoxT. He is president or chairman of the
board — I do not know which — of the British Chemical Industries.
The Chairman. The Imperial Chemical Industries?
Mr. Pierre S. du Pont. The Imperial Chemical Industries; yes,
sir.
The Chairman. I notice also the name of Arthur B. Purvis, of
Montreal. Canada. Who is he?
Mr. Pierre S. du Pont. I think he is president of Canadian Ex-
plosives. Ltd.; Canadian Industries, Ltd.
The Chairman. The correct name is Canadian Industries, Ltd.?
Mr. Pierre S. du Pont. Yes.
The Chairman. Who owns Canadian Industries, Ltd.?
iMr. Pierre S. du Pont. It is owned jointly by the Imperial Chemi-
cal Industries and the du Pont Co.
The Chairman. Does the Canadian Industries control the Do-
minion Cartridge Co.?
My. L A:\iMf )T du Pont. Yes.
The Chaiiiman. How largely? It is a complete control, is it not?
]Mr. Lammot du Pont. In capital, you mean ?
The Chairman. Yes.
Mr. Lammot du Pont. I have not that figure in mind.
Mr. Carpenter. It owns it entirely.
Mr. Lam:\iot du Pont. It is 100 percent owned. It is a compara-
tively small part of the Canadian Industries, Ltd., total investment.
The Chairman. Before me is information that Canadian Indus-
tries, Ltd., had assets in 1932 of $47,807,243. Poor's Manual for 1933
is the authority for that statement.
I notice also upon this list of directors the name of R. S. McLaugh-
lin, of Oshawa, Ontario. Who is he?
Mr. Pierre S. du Pont. He is a resident of Osiiawa and was for-
merly manager of the General Motors Canadian plant. But I believe
he is retired now, although he is a director of the General Motors
Corporation still.
The Chairman. I notice also the name, among the directors of
General ]Motors Corporation, of Fritz Opel, Russelsheim, Germany.
Who is he and vrhat are his connections?
Mr. Pierre vS. du Pont. He is the former owner of the German
Opel Co., manufacturers of automobiles. But I think he is not con-
nected with the industry except possibly as a stock ow^ner in that
company still.
1070 MUNITIONS INDUSTRY
Mr. Lammot du Pont. Senator, you referred to a list of directors^
interlocking directors ?
The Chairman. Yes.
Mr. Lammot du Pont. I would like to have a copy of it.
The Chairman. A copy is being supplied to you right now by Mr.
Raushenbush.
I notice also among these directors the name of O. D. Young. Is
that Owen D. Young?
Mr. Pierre du Pont. Y^'es.
The Chairman. Is Owen D. Young associated with you in your
company or in any companies in which you are interested?
Mr. Pierre du Pont. No; only in the General Motors Corpora-
tion.
The Chairman, Mr. Young is a director of the Radio Corpora-
tion of America, is he not?
Mr. Pierre du Pont. I do not know.
The Chairman. He is also listed as a director of the National
Broadcasting Co.; of R.C.A. ; Photophone, Radio Keith Orpheum
Corporation; R.C.A. Victor Corporation; and R.C.A. Communica-
tions, Inc.
Mr. Pierre du Pont. I was not aware of that. It is undoubtedly
true.
The Chairman. Mr. du Pont, in last week's hearings
Mr. Lammot du Pont. Senator, may I interject for just a moment?
Your secretaiy has just handed me a document which I presume is
the one you have been referring to, which is quite antiquated. It
is dated 1927.
The Chairman. This information was compiled from Moody's
Manual of Investments, American and Foreign, 1934.
]\Ir. Lammot du Pont. The secretary handed me a document dated
1927 which purports to show the interlocking directors.
Mr. Raushenbush. The document handed to IMr. Lammot du Pont
was by way of explanation of interlocking directoi'ates and is com-
piled by the Federal Trade Commission. The document already
introduced showing the interlocking directors has not been indicated
clearly on the exhibit that you have just entered, Mr. Chairman, but
it is simply a matter of tracing through the names of the various
people. ^
Mr. Lammot du Pont. But the names have changed.
The Chairman. This takes the names of all the directors of Gen-
eral Motors Corporation and then traces the holdings and the di-
rectorates occupied by the same individuals in other corporations.
I have no objection to your studying it, if it is the only copy we
have here.
Mr. Lammot du Pont. That old document is of no value?
The Chairman. No; not in this connection, except that it reveals
what the nature of this up-to-date document is.
In last weeks' hearings, a letter was brought into evidence written
by Henry R. Sutphen, vice president of the Electric Boat Co., to
Basil Zaharoff and was offered as " Exhibit No. 50." It was dated
November 22, 1930. I shall read a single paragrapli from that letter
[reading] :
I had a very interesting trip.
MUNITIONS INDUSTRY 1071
This is Mr. Sutphen writing, remember. [Reading :]
Messrs. Kettering and Codrinston accompanying me, stopping first at the
Sulzer plant in Winterthur, where they were very busy, but found a falling ofE
of new orders. As you know, they liave a company in France which builds
engines for French submarine boats.
What is the meaning there? Does that mean that this Sulzer
plant have a company in France, or does it mean that Messrs. Ketter-
ing and Codrington or their company, General Motors, have a plant
there? Do you know?
Mr. Pierre du Pont. I do not know.
Mr. Lammot du Pont. I do not know at all. I never heard of
any of those gentlemen excepting Mr. Kettering.
The Chairman. The plain implication of the letter is that Gen-
eral Motors have a company in France which builds engines for
submarines.
Mr. Pierre du Pont. That certainly is not true.
Mr. Lammot du Pont. Certainly not General Motors.
The Chairman. You know that to be not true ?
Mr. Lammot du Pont. I am quite sure it is not. I would have
heard of it if they had. What is the German plant that they
visited ?
The Chairman. The Sulzer plant at Winterthur.
Mr. Lammot du Pont. I never heard of it.
Mr. Pierre du Pont. Mr. Kettering has always been greatly in-
terested in aviation. He used to fly a great deal himself at one
time. He has always followed it very much.
The Chairman. Both Kettering and Codrington, I think the
testimony reveals, are officers or directors of the General Motors
Corporation.
Mr. Pierre du Pont. Not Codrington; he is neither an officer nor
a director. He may be in the employ of General Motors, I do not
know.
Mr. Carpenter thinks that he is in the Winton Engine Co., which
is a subsidiary of General Motors.
The Chairman. Then, if that is not true, the alternative is that
a German company, the Sulzer Co., has a plant in France. Do you
suppose that could be true ?
Mr. Pierre du Pont. For all I know, it may be true.
The Chairman. Well, in the light of the testimony we have had,
it would not be altogether surprising if that did develop, would it?
Mr. Pierre du Pont. No; I would not be surprised in the least
by anything, any more.
interest shown by du fonts in legislative activities
The Chairman. Mr. du Pont, there is one more matter that I want
to take up. On March 2, 1933, your company or yourself, someone
for the company, received a memorandum from the legal department
of the General Motors Corporation which I will offer as " Exhibit
No. 458."
(The letter referred to was marked " Exhibit No. 458 ", and is
included in the appendix on p. 1296.)
1072 MUNITIONS INDUSTRY
The Chairman. This letter is by Denton Jolly, of the legal de-
partment, and is addressd to the E. I. du Pont de Nemours Co.,
Wilmington, Del., attention Mr. W. W. Rhodes. [Reading:]
Pleased be advised that the following bill has been introduced in the Cali-
fornia Legislature :
California Assv>mbly joint resolution 9 memorializes and petitions Congress
to enact legislation to end all patent rights for arms, ammunition, and other
eciuipment used for war and that the same sliould be acquired by the Govern-
ment and manufactured by governmental establishments.
How large an interest does your company take in legislative
matters ?
Mr. Pierre du Pont. You can answer that better than I can,
Lammot,
Mr. Lammot du Pont. We take a very large interest in legislative
matters that pertain to our business.
The Chairman. Whoever received this memorandum from Mr,
Jolly addressed it to Col. Aiken Simons, of the Smokeless Powder
Department, wdiich I will offer as " Exhibit No. 459."
(The memorandum referred to was marked " Exhibit No. 459 ",
and is included in the appendix on p. 1296.)
The Chairman. That memorandum reads :
I am attaching letter received from Mr. Denton Jolly, of the leg^il department
of the General Motors Corporation, Detroit, and have suggested to Mr. Jolly
that all matters pertaining to arms, munitions, etc., be taken up with you.
I presume that this is a complimentary service they are offering us as they
are constantly watching legislative bills.
Do you have a department that devotes itself to a study of legisla-
tive activities?
JNIr, Lammot du Pont. No.
The Chairman. Do you exercise any active influence in legislative
halls by reason of lobbies?
Mr. Lammot du Pont. Certainly not by lobbies ; no.
The Chairman. You have representatives who do wait upon legis-
lative committees?
Mv. Lammot du Pont. When called. I think we also attempt ta
set before Members of Congress a correct view of situations of which
we have knowledge.
The Chairman. I asked you if you had an organization looking
after legislative matters. That question, of course, referred to your
own company. Does the General Motors Corporation maintain a
legislative service?
i\fr. Lammot du Pont. I think not. Perhaps I answered your
question too literally, Senator. You asked if Ave had a department
which devoted itself to that matter — following legislation?
The Chairman. Yes.
Mr. Lammot du Pont. I said we have not. Our legal department,
among a great many other things, does look
The Chairman. That is left to the legal department ?
Mr. Lammot du Pont. They do accumulate information as to
legislation that is pending.
The Chairman. Finally. Mr. du Pont, I have a letter from one
Ernest B. Benger, general assistant director, to INIr. E. A, Taylor,
director of the chemical department, Grasselli, Cleveland.
MUNITIONS INDUSTRY 1073
I will offer this letter as " Exhibit J^o. 4G0.'-
(The letter referred to was marked " Exhibit No. 460 ", and is
included in the appendix on p. 1296.)
The Chairman. This letter says that a large production of war
materials has been tentatively allocated to the du Pont Co. but that
no prices have been fixed. The letter is dated March 5, 1934, and
it is titled " War Department Inquiry for Supply of Chemicals."
The letter reads :
I talked with Maj. K. K. V. Casey about your letter of March 28 and the
War Department inquiry attached. Major Casey tells me that this is a part
of a general program of industrial preparedness for the war and that the War
Department has been making tentative allocations of production of the various-
materials required in volume in time of war. Major Casey also indicated that
the du Pont Co. has worked closely with the War Department in this matter
and that a very large production of war materials has been tentatively allocated
to the du Pont Co. I understand from him that the company's policy is to
go rather far in cooperating with the War Department in this matter, both in
the way of giving information and in assisting them in planning. Of course,
no promises in connection with prices are made.
The majof' indicated that he wduld be interested in receiving copies of
correspondence between you and the AVar Department on this subject.
Now, we are not wanting to go into any details regarding these
plans. We are all more or less conversant with their general nature.
But, as we would have every right to expect, there would be a plan
looking to such an emergency as might confront us some day in the
way of another war, and this letter refers to that, does it not ?
Mr. Lammot du Pont. Senator, would you mind reading the
note at the foot of that letter ?
The Chairman. That note is in the form of a stamp which appears
upon a great many communications which have been taken from your
files and that stamp declares just this [reading] :
Upon instructions of the War and/or Navy Department, this document is
entrusted to Mr. Donald Y. Wemple, for use by United States Government agents
only.
E. I. DU Pont de Nemours & Co.
By K. Iv. V. Gase\.
By whose authority was that stamp placed upon this particular
communication ?
Mr. Pierre S. du Pont. May I call Mr. Casey to testify ?
The Chairman. Yes; if Mr. Casey is present.
TESTIMONY OF K. K. V. CASEY
(The witness was duly sworn by the chairman.)
The Chairman. Mr. Casey, give the reporter your full name and
address.
Mr. Casey. K. K. V. Casey, Wilmington, Del.
The Chairman. What are your official connections?
Mr. Casey. Director of sales, smokeless-powder department
The Chairman. Mr. Casey, the question has been asked, bj svhose
authority was this stamp placed upon this communication of March
5, 1934?'
Mr. Casey. We received from the Acting Secretary of War a com-
munication to which was attached a copy of a letter directed to
1074 MUNITIONS INDUSTRY
you from the same source. Under that letter we were practically
given the responsibility of seeing that nothing in connection with the
Government war plans was made public. It was very difficult to
determine exactly what came in that category. So, in order to play
the safe way on my instructions, this label was put on any com-
munication that might come in that category.
The Chairman. Mr. Casey, is there a single thing in that letter
that the entire public of America and of the world might not well
know?
Mr. Casey. Not in this particular letter, but it might
The Chairman. Not a thing. Let us get this clear. Who was
Acting Secretary?
Mr. Casey. General MacArthur.
The Chairman. Was acting Secretary of War?
Mr. Casey. At that time. I think Secretary Dern was on the west
coast and I am not sure wdiere the Assistant Secretary might have
been at the time.
Senator Vandenberg. What was the date of those instructions?
Mr. Casey. August 8.
The Chairman. 1934?
Mr. Casey. 1934.
Mr. Pierre du Pont. May we have that letter read, because we are
acting on what we consider instructions.
The Chairman. Let it be read.
Mr. Raushenbush. This is a copy of a document written on War
Department stationery, addressed to the president, du Pont de Ne-
mours and Co., the du Pont Building, Wilmington, Del., and reads
as follows :
Dear Sir: The War Department has just learned that investigators from
the Special Senate Committee Investigating the Munitions Industry are now
engaged in examining the files of your company in connection with munitions
production.
Your attention is invited to the fact that there are in your files secret data
pertaining to War Department procurement plans for munitions in the event
of a national emergency. It is desired to call your attention to the necessity
of safeguarding these secret data from being made public.
A letter [copy enclosed hei'ewith] has been forwarded, this date, to the
chairman of the Senate committee informing him of the presence in your files
of War Department secret data pertaining to munitions procurement and
requesting his committee to take necessary steps to safeguard this information.
The chairman of the Senate committee lias been informed that the procure-
ment plans in question may be made known to the committee in executive
session at such time as he may desire.
A copy of this letter is being furnished to the Chairman of the Senate
committee.
Very truly yours,
Douglas MaoArthur.
Acting Secretary of War.
The document is dated August 8, 1934.
Mr. Pierre S. du Pont. I should like to object to any information
that bears the stamp of Mr. Casey being revealed to the public. We
are not the proper judge of what is private information of the War
Department.
The Chairman. Mr. Case}', as to these copies of correspondence
where they bear these stamps to which we have just been referring,
are we to conclude that the War Department has passed upon that
MUITITIONS INDUSTRY 1075
before you placed the stamp upon them ?
Mr. Casey. They have not.
The Chairman. They have not necessarily.
Mr. Casey. No; I made the interpretation, to be on the safe side.
It might readily have been that some letter which for the moment
might have been an innocent letter by itself, but it might have lead to
something else than the first one, and before you know it, you would
be over the borderline.
The Chairman, Are we to conclude you did not submit this par-
ticular letter I have read, to anyone in an official capacity in the
Army before placing the stamp upon it ?
Mr. Casey. No one whatsoever.
Mr. Raushenbush. Mr. Chairman, to clarify the record on that
point, somewhat later in the proceedings Colonel Slaughter of the
War Department, Bureau of Intelligence called upon this committee
and stated that he knew that the War Department had not au-
thorized that stamp, and he was informed that the Navy Department
had not authorized it, either.
Mr. Pierre S. du Pont. If the conclusion is that all of this cor-
respondence is proper, we have no objection to its being put in, but
I should like the stamp we have referred to, authorized to be placed
on the letter recorded, because it may be of material interest to us
later.
The Chairman. You mean if any of those that have been so
stamped are offered in evidence you would like to have the record
know that they were so stamped ?
Mr. Pierre S. du Pont. Yes, sir.
The Chairman. The stamp referred to is as follows :
Upon instructions of the War and/or Navy Department, this document is
entrusted to Mr. Donald Y. Wemple, for use by U.S. Government agents
only.
E. I. DU Pont db Nemoxjes & Co.
By K. K. V. Casey.
The Chairman. In concluding the testimony of this morning, Mr.
du Pont, you came through the 4 years of war with large profits
which you were taking credit to yourselves as having accrued through
ability and necessary services performed during the country's emer-
gency. A part of those profits, a large part, went to the stock-
holders of the corporation, you paid taxes to the Federal Govern-
ment, and it still left a large sum which, after the war you were
investing in other companies. By reason of those investments in
American industrials and industrials elsewhere your assets since the
war have increased over what they were during the war.
Mr. Pierre S. du Pont. Exactly.
The Chairman. But your success, your increase in assets, your
increase in the general business you have done is traceable very
directly to the war, is it not?
Mr. Pierre S. du Pont. To the profits made during the war,
exactly.
The Chairman. If you had not had the profits made during the
war you could not have made your Genei'al Motors investment,
could you?
s:{S76 — 34 — VT 5 5
1076 MUNITIONS INDUSTRY
Mr. Pierre S. du Pont. I am not sure we could not ; we had bor-
rowing power.
The Chairman. Certainly if you had not had that money that
came to you as profits during the war you could not have made the
last investments you did in the industrial field after the war.
Mr. Pierre S. du Pont. I think w^e could have. I think we had
financial power to do it, exclusive of the war profits.
Mr. Lammot du Pont. Senator, may I interpose here ?
The Chairman. You think you had a credit you might have
resorted to?
Mr. Pierre S. du Pont. Yes ; that was of very material assistance.
The Chairman. You would not have had the money if it had not
been for the war profits.
Mr. Pierre S. du Pont. Certainly not.
Mr. Lammot du Pont. Senator, you have an entirely wrong im-
pression of this matter, and I think Mr. P. S. du Pont has allowed
you to continue with that impression.
The Chairman. Wherein can there be any misunderstanding?
Mr. Lammot du Pont. For this reason, that the vast bulk of those
investments occurring since the close of the war have been paid for,
not with anything earned during the war, but very largely by the
issue of the company's common stock. When we purchased going
companies we did not always pay for them in cash, we paid for them
in many cases with the company's stock, and that obviously had
nothing to do with the profits made during the war and should
have no connection with it.
The Chairman. Would you say that of your investment in the
General Motors ?
Mr. La^emot du Pont. Xo; but you lumped together the invest-
ments of the company made during the 15 years or more since the
war.
The Chairman. Now, Mr. Lammot du Pont, what was back of
these issues of stock which you sold and used to raise the capital
that was needed?
Mr. Lammot du Pont. After it was issued the purchased property
was back of it. We acquired the Grasselli Chemical Co., and we
paid the former owners with a block of common stock. Those
people now own the common stock, and the du Pont Co. owns the
company.
The Chairman. Yes; but you own a very large percent of the
stock in all those companies, and what did you purchase them with ?
Mr. Lammot du Pont. With common stock of the du Pont Co.
The Chairman. With earnings of the du Pont de Nemours Co.?
Mr. Lammot du Pont. With new capital. It is just the same
effect as though we sold a block of the common stock to the public
for cash, and then took the cash and paid it to the Chemical Co. for
its purchase.
The Chairman. Then you sold a part of this stock to yourselves ?
Mr. Lammot du Pont. No; we sold it to the former owners of
the Grasselli Chemical Co. For instance, here is the Grasselli Chem-
ical Co. composed of a large number of stockholders and the du
Pont Co. buys that comj^any and gives the owners of its stock shares
of stock in the du Pont Co.
MUNITIONS INDUSTRY 1077
The Chairman. Here you are holding TO percent of the stock of
the Krebs Pioment & Color Co. and you own 100 percent of the
stock in the Grasselli Chemical Co.
Mr. Lammot du Pont. That is not the same companj^' that we
purchased the assets of, although it is almost the same name.
The Chaiioian. What has become of that corporation?
Mr. Lammot du Pont. I do not know ; it may be dissolved as far
as I know.
The Chairman. You own their properties now?
Mr. Lammot du Pont. We bought the properties and own tliem
now.
The Chairman. You own 100 percent of that company ?
Mr. Lammot du Pont. Of the properties ; yes.
The Chairman. And in paying for that companj^ you issued your
stock in the E. I. du Pont de Nemours Co.?
Mr. Lammot du Pont. When we bought the stock of the Grasselli
Chemical Co. ; yes.
The Chairman. Then why did you say it w^as not the earnings of
the E. I. du Pont de Nemours Co. that was invested in this company?
Mr. Lammot du Pont. Because we gave them new stock.
Mr. Raushenbush. At this point it might be well to have the
company place in the record a list of acquisitions made during and
after the war out of the profits, and out of new stock and bond
issues.^
The Chairman. I think that would be very much worth having
and would clarify this whole question.
Mr. Carpentp:r. It is difficult to identify any particular money
put in one place and any particular money put in another place.
The Chairman. Why difficult?
Mr. Carpenter. Because all of your cash 3'ou may have is in a
bank account, and how can we say this part of the money paid for
this c(mipany and this part of the money came from any other par-
ticular source, and some other money came from another source.
The Chairman. Did you pay for the General Motors stock with
du Pont's stock ?
Mr. Carpenter. No.
The Chairman. How many cases like that were there ?
Mr. Carpenter. I can give you a detail of all of them.
The Chairman. Then let us have that, please.
INIr. Carpenter. I can give it to the Secretary.
The Chairman. That is what the Secretary w^as suggesting we
should have from you primarily.
Mr. Lammot du Pont. Senator, I would like to point out that this
Grasselli Chemical Co. w^as as large, or nearly as large as the invest-
ment in the General Motors.
The Chairman. It showed a total investment on vour part of
$41,000,000.
Mr. Lammot du Pont. Yes; as against $47,000,000 in General
Motors. Now, that Grasselli w^as paid for entirely with common stock.
Senator George. Was that paid for after or before the issue of the
stock?
^ The list of nf qnisitrons made duriiitr and aftfr the war out of profits and out of new
stock and bond issues was later furnished to the committee and will be found in the
appendix on p. I088.
1078 MUNITIONS INDUSTRY
Mr. Lammot du Pont. It was paid by stock issued for that
purpose.
Senator Vandenbeeg. It is new stock out of your new stock issue?
Mr. Lammot du Pont. Yes.
Mr. Pierre S. du Pont. I wonder if I could say this, that at the end
of 1915. the first year of the existence of this company, the balance
sheet of the company showed a surplus of $8,900,000 over its stock
issued.
Senator George. What date is that?
Mr. Pierre S. du Pont. That is December 31, 1915. At the end of
1918, which was the last year of the war, that had increased to
$68,300,000 and the capital stock outstanding was the same, so that
shows that all that was left of the war profits at the end of 1918 was
$60,000,000.
Senator Clark. In other words, it shows the rest of the war profits
had gone into surplus or dividends?
Mr. Pierre S. du Pont. The rest was declared in dividends or
given elsewhere.
The Chairman. What do you mean by " given elsewhere " ?
Mr. Pierre S. du Pont. For taxes and such. But, we say all that
was left of the war profits is this increase of $60,000,000, that is all
with which w^e could invest in the new plant at the beginning of 1919.
The rest of the investment came in sales of common stock and the
proceeds of common stock invested.
Senator Vandenberg. The Grasselli Co. Avas a merger rather than
an investment.
Senator Clark. You simply bought the stock of that company and
paid them in common stock in the du Pont Co. Wasn't that what
was done?
Mr. Carpenter. That is what was done; that is the effect of it.
The Chairman. Were there large earnings accruing through the
Grasselli Co., was that a very profitable company?
Mr. Lammot du Pont. That purchase was made in 1928, and I
think Mr. Pierre du Pont is not very familiar with it. It was a
going concern, a profitable concern and had paid dividends before
we acquired the property. After we acquired the property we, of
course, owned that 100 percent and their earnings accrued to the
du Pont Co.
The Chairman. The fact remains, however, that in a very large
measure your war profits have entered into the creation of your
holdings and your returns in large industrial holdings today?
Mr. Lammot du Pont. Senator, that is absolutely incorrect.
The Chairman. M'liy is it incorrect?
Mr. Lammot du Pont. I just stated one reason was the large pur-
chases were largely paid for by new du Pont stock. I have here
a memorandum on new issues I could submit.
The Chairman. What did you do with the war profits?
Mr. Lammot du Pont. The $60,000,000 ?
The Chairman. Yes.
Mr. Lammot du Pont. Part of it went into new investment.
The Chairman. All right, in some part the war profits have en-
tered into the creation of this great dominion of industry that is I
yours today?
Mr. Lammot du Pont. In some part, but not a large part.
A
MUNITIONS INDUSTKY 1079
The Chairman. Having created the dominion, as I put it, you are
now in possession of agreements and understandings that in event
of another emergency you are going to have a Large slice of the
business the Government is going to do in the next war ?
Mr. Lammot du Pont. There are no such agreements in existence,
Senator.
The Chairman. We will not go into that.
Mr. Pierre S. du Pont. Senator, apart from that, if we should
have another war, if that misfortune should come on the country, we
have no means of imposing on the Government. If the Government
can make a deal with us to its advantage well and good.
The Chairman. All right, we will not argue about that.
How much of your work during the war was on a cost-plus
basis?
Mr. Pierre S. du Pont. The only deal we had with the Govern-
ment on the cost-plus basis was the operation of the Nashville plant,
but that was not altogether cost-plus for us.
Mr. Casey. We can give you a statement on that.
Mr. Pierre S. du Pont. Yes; we could give a statement of that,
and it is a comparatively small amount.
The Chairman. I think we should have it.
Mr. Irenee du Pont. Would you consider cost-plus an operation
such as the Nashville plant which we built at a profit on a cost-
plus basis, of $1.
The Chairman. Was that the consideration?
Mr. Irenee du Pont. It was more than that, because there were
some bills submitted afterwards that they would not pay.
The Chairman. In that connection were any of your organization
associated with the Government in the classification of those known
as dollar-a-year men?
Mr. Irenee du Pont. I think Colonel Spruance, one of our organ-
ization, was called in, but he afterwards entered the Army and re-
signed from our organization.
Senator Clark. Did you say, or did I understand your statement
to be, that your actual investment of the du Pont Co. in this
General Motors stock was about $40,000,000?
Mr. Pierre S. du Pont. It was $47,000,000.
Senator Clark. That was 10,000,000 shares that you owned ?
Mr. Pierre S. du Pont. That is correct, and we afterwards had a
substantial amount more of that stock after the first purchase, and
that was the stock we sold to the General Motors chief employees.
Senator Clark. But $47,000,000 of stock being 10,000,000 shares
was your permanent investment.
Mr. Pierre S. du Pont. That was our permanent investment; yes.
Senator Clark. In 1918 vou had on hand a surplus of roughly
$68,000,000 of which approximately $60,000,000 had been earned
during the war?
Mr. Pierre S. du Pont. Yes, sir ; that is right.
Senator Clark. So that of your present assets the amount properly
allocable to war profits would be the $60,000,000 you had in 1918 plus
whatever has been earned on that $60,000,000 since?
Mr. Pierre S. du Pont. Surely.
Senator Clark. So that, if I understand you correctly, of your
present assets you count the General Motors stock at $157,000,000?
1080 MUNITIONS INDUSTRY
Mr. Pierre S. du Pont. Yes.
Senator Clark. It has been testified here that is less than the
market value, the book value being about $15, and I understood you
to say the market was about $28?
Mr. Pierre S. du Pont, Yes.
Senator Clark. So that of your present assets at least $157,000,000
would be allocable to your war profits, because they represent an
investment of your $60,000,000.
Mr. Pierre S. du Pont. No; that is not quite right, because even
though we invested some money from war profits, the war profits are
not responsible for the growth of the money.
Senator Clark. I understand, but that is allocable to the
$60,000,000.
Mr. Pierre S. du Pont. You might say the war profits, $60,000,000
were used to go into tlie dye industry to the extent of $50,000,000,
which has not produced anything.
The Chairman. Now, that 65 or 68 million dollars; is that all of
the profits from the war that entered into this business and industrial
structure that 3'ou so largely control today?
Mr. Pierre S. du Pont. Let us be clear on that question. I under-
stood we were dealing with the investment of profits after the war.
The Chairman. That is right.
Mr. Pierre S. du Pont. I said there was $60,000,000 left. Prior to
the termination of the war we had made some investments, and I
think the General Motors stock was in that.
The Chairman. I think that is clear, but was that all of the profits
that came to the du Pont de Nemours Co., that entered into this busi-
ness structure following the war?
]Mr. Pierre S. du Pont. All that came in following the war.
The Chairman. That is not the case, because one year you declared
a hundred percent dividend, and during the period of 4 years you
declared dividends of something like 200 percent, and you got some
of that and your brothers got some of it, as well as the others asso-
ciated with you. By any chance, was any of the dividends you col'
lected invested in this industrial structure you created since the war?
Mr. Pierre S. du Pont. I just said I invested some of my surplus in
General Motors stock.
The Chairman. You all did.
Mr. Pierre S. du Pont. I do not know what the others did ; I only
know my own. We did not invest collectively. What we invested
was perfectly free to be re-sold; and as I testified, I re-sold a great
deal of my General Motors stock. Whether the others did or not
I do not know anything about it, but it has nothing to do with the
company, of course.
Senator George. Mr. du Pont, I believe you have referred to the
Imperial Chemical Industries, Ltd., in the course of the prior exami-
nation?
Mr. Pierre S. du Pont. Yes.
The Chairman. I beg pardon, Senator George, there is a matter
that has come for the attention of the committee within the last half
hour, being a letter from General MacArthur, which should be made
a part of the record at once. This letter is dated September 13, 1934,
MUNITIONS INDUSTRY 1081
addressed to Hon. Gerald P. Nye, United States Senate, and reads as
follows :
My Dear Senator Nye: The Washington Post in this morning's edition, re-
porting your committee's hearings of yesterdaj', quotes a letter from a Mr.
W. F. Goulding with reference to my visit to Turkey in 1932 in which he says
that the American Chief of Staff " apparently talked up American military
equipment to the skies in discussions he had with the Turkish General
Staff. * * * Rather gather that your equipment and ours did not suffer
from lack of praise." I wish to state that there is absolutely no foundation for
the conjecture made by Mr. Goulding. I never discussed American military
equipment with the Turkish General Staff or with any other Turkish authori-
ties. Neither directly nor indirectly did I liave anything whatsoever to do
with any attempt to influence American sales in Turkey. Your inference, as
quoted in the Post, that " It looks to me like General MacArthur was pretty
much of a salesman " has no foundation of fact.
May I ask that this letter be made a part of the hearings of your committee.
Very sincerely,
Douglas MacAethur.
Senator Clark. Senator George, may I ask one further question?
Senator George. Yes.
Senator Clark. Somethitig was said a while ago about a letter
from General Motors Co. which was referred to Colonel Simons.
Who is Colonel Simons?
Mr. Lammot du Poxt. It is Colonel Simons, and he is a member
or our smokeless powder company.
Senator Clark. Where is he located ?
Mr. Pierre S. du Pont. Wilmington, Del.
Senator Clark. Is he contact man for legislative matters in
AVashington ?
Mr. Pierre S. du Pont. No ; that is purely relating to matters re-
ferring to smokeless powder, I think.
Senator Pope. You mean to say he did not make contacts with
officials in Washington or with Members of Congress?
Mr. Lammot du Pont. I think not.
Mr. A. Felix du Pont. Not on legislative matters.
Senator Clark. You are sure of that?
Mr. A. Felix du Pont. Yes; I am sure.
RELATIONS WITH IMPERIAL CHEMICAL INDUSTRIES, LTD.
Senator George. Mr. du Pont, in your testimony, reference has
been made to the Imperial Chemical Industries, Ltd., and I shall
ask you particularly about the munitions end of the du Pont
Co., and if there are any other of your associates here who have not
been sworn, and whom you would like to have with you in connection
with this phase of the investigation, you may call them around at
this time.
Mr. Pierre S. du Pont. I know of none just now. but I could call
upon them if it is necessary for any information.
Senator George. You may, and I make that suggestion at this time.
I believe the Imperial Chemical Industries, Ltd., is a British
corporation ?
Mr. Pierre S. du Pont. Yes.
Senator George. Its business is general in character?
1082 MUNITIONS INDUSTRY
Mr. Pierre S. du Pont. It is in the chemical industry, but I do not
know whethers its business is exclusively so or partly so.
Senator George. Is it somewhat like the du Pont organization,
or is it confined strictly to production and distribution of chemicals?
Mr. Pierre S. du Pont. Yes, sir.
Mr. Lammot du Pont. I do not know this certainly, but my im-
pression is they are broadly spread through the chemical industry
and some other industries, but we have no definite information on
that, and I do not follow their investments or their activities.
Senator George. In this industry of yours, you have divisions, as
I understand it; for instance, for the manufacture and sale and
distribution of particular products?
Mr. Pierre S. du Pont. Yes.
Senator George. And in this field of munitions you have the divi-
sion that has in hand both the production and distribution, if only
one division is involved, of let us say explosives?
Mr. Pierre S. du Pont. Yes.
Senator George. Now, let use get out of the field of technical
language. You also stated that production and distribution by
you of what we may call the military explosives, distinguished from
the sporting or ordinary commercial and nonmilitary classes, was
in one division?
Mr. Pierre S. du Pont. That is correct.
Mr, Lammot du Pont. I think perhaps if I give you a little
statement you will get the picture of our activities. These activities
are mostly divided into 10 branches, explosives, rayon, cellophane,
dyestuff, heavy chemicals, organic chemicals, artificial leather, and I
cannot remember the names of the other 3, but there are 10 of
them. One of those is the commercial explosives department, an-
other of the 10 is the smokeless powder department, and that depart-
ment, by the way, is the smallest of the 10, and includes the smoke-
less sporting powder and the smokeless military powder; and the
other department, the smokeless, together with the explosive, are
both manufacturing for the United States Government and for the
foreign governments.
Senator George. In that department as you call it, do you both
manufacture and distribute your powder?
Mr. Lammot du Pont. Manufacture and sell ; yes.
Senator Geporge. Now, with particular reference to the Imperial
Chemical Industries, Ltd., which we may call the I.C.I., as it has
been denominated, the relations between that organization and the
du Pont Co. have been close and cordial over a long number of
years ?
Mr. Lammot du Pont. Yes, sir.
Senator George. At this point I would like to put in the record
the directors of the Imperial Chemical Co. as furnished to the com-
mittee, and note for the record that the chairman and managing-
director of the Imperial Co. is Sir Harry McGowan, and the presi-
dent is the Marquis of Reading, and the other names of the directors
are as follows [reading] :
The Rt. Hon. I>(.rd Ashfiekl of Southwell, P.C. ; Sir Cliristopher Clayton,
C.B.E., M.P. ; W. H. Coates, LL.B., B. Sc, Ph. D. ; The Rt. Hon. Lord Colwyn,
P.C, D. L. ; The Rt. Hon. Lord Melchett ; H. J. Mitchell ; Sir Max Muspratt,
Bart; J. G. Nicholson; Lt. Col. G. P. Pollitt. D.S.O. ; J. Rogers; E. J. Solvav ;
B. E. Todhunter ; H. H. Wadsworth ; The Rt. Hon. Lord Weir, P.C, G.C.B., D.L.
Mi:]SriTION"S INDUSTRY 1083
Senator George. The chairman and managing director of the
Imperial is the same Harry McGowan, who is connected with the
General Motors. I believe it was testified he is a director of that
board also?
Mr. Pierre S. dtj Pont. Yes, sir.
Senator George. I would like to offer for the record, to be properly
numbered, a statement of the list of the subsidiary companies and
the investment and contractual interest in them of the Imperial,
furnished under date of March 7, 1928.
(The document referred to was marked " Exhibit No. 461 ", and is
included in the appendix on p. 1297.)
Senator George. If that list is compiled upon the basis of fact
as of 1928, of course it may be subject to certain corrections and addi-
tions, but so far as certain purposes are concerned, I would like for
it to be noted that the properties in which the Imperial has a direct
interest or which are counted as the Imperial companies in Great
Britain are 11 in number.
These companies, that is, Nobel Industries, Ltd., Brunner Mond &
Co., Ltd., United Alkali Co., Ltd., and British DyestufFs Corporation,
Ltd., really entered into a merger out of which came the present
I.C.I. ?
Mr. Pierre S. du Pont. I have no knowledge of that.
Mr. Lammot du Pont. I think that is correct.
Senator George. That seems to be indicated, and it is not
■controverted.
At the time the I.C.I, owned, or the interests back of the I.C.I.
owned substantially all the stock of these four companies named.
The companies in which the I.C.I, is mentioned as having an indirect
interest in Great Britain number 45, and cover substantially the
whole chemical field and the foreign companies outside of Great
Britain in which the I.C.I, is listed as having some kind of direct
interest number 55. Of course, I am not asking you gentlemen but
I am simply maldng those statements as a part of the record.
The statements of these holdings of the I.C.I, also indicate the
fair percentage of interest and the character of the interest of the
I.C.I, in these companies, whether they be subsidiaries, mere
investments, or otherwise.
Now may I ask if the du Pont Co. — and I am calling your
company by that shortened name — has any stock interest, any
shareholding interest in the I.C.I. ?
Mr. Lammot du Pont. No.
Senator George. May I ask if the I.C.I, has any interest in the
du Pont Co. other than that which appears here from a document?
Mr. Lammot du Pont. What appears here?
Senator George. A very minor interest of some 17,000 shares,
which your records would indicate was acquired more by accident
or inheritance than otherwise.
Mr. Lammot du Pont. I did not think they had any interest in
the stock. I did not think they owned any shares in the du Pont Co.
Mr. Pierre S. du Pont. Thirty-seven one-hundredths percent
holding.
Mr. Irenee du Pont. It does not appear on our stock list, does it?
Mr. Pierre S. du Pont. This is a statement in 1928, it appears.
1084 MUNITIONS INDUSTRY
Senator George. That does appear to ])e a statement in 1928.
Mr. Lammot du Pont. I do not think they hold any shares now.
Senator George. Could yon verify that?
Mr. Lammot du Pont. Certainly.
Mr. Irenee du Pont. It might be in somebody else's name, you
know. There is nothing in our stock listing indicating that. I made
inquiry about it before I left Wilmington, and that is what they
told me.
Mr. Lammot du Pont. That is all the information we can get,
then. Senator. If their name does not appear on the stock list, we
do not know whether they own anything, and thej^ say it does not
appear on the stock list.
Mr. Irenee du Pont. I did not examine that stock list personally
and it might be better to examine it.
Senator George. I will direct your attention to another document
appearing here. For the present, and in 1928, a very negibible inter-
est in du Pont was acquired by the I.C.I.
Mr. Pierre S. du Pont. Pardon me. Senator; I believe the I.C.I., or
its predecessor corporation, did have a number of our shares at one
time, and it might be of record. The}^ had some General Motors.
Mr. Irenee du Pont. They had a very large block of General
Motors. That was the time that Sir Harry was nominated to the
board.
Senator George. I will ask you about that next. The Imperial
does have an interest in General Motors, and that interest I believe
continues to date, so far as you know?
Mr. Pierre S. du Pont. I am not sure what the records show. Do
you know?
Mr, Lammot du Pont. I do not know, either.
Senator George. Sir Harry JMcGowan is still on the board of
directors ?
Mr. Pierre S. du Pont. Yes, sir; he is still on the board of di-
rectors.
Senator George. Is he active?
Mr. Pierre S. du Pont. I doubt if he attends any meetings.
Mr. Lammot du Pont. He very rarely attends.
Senator George. But he is still a member of the board, so far as
your knowledge does?
Mr. Lammot du Pont. I think so.
Senator George. I believe also that the Imperial in 1928 at least
was sliown to have an interest in the Allied Chemical. Was j^our
company also interested in that company?
Mr. Lammot du Pont. No, sir.
Senator George. And the North American Chemical Company.
Were you interested in the North American Chemical Company?
Mr. Lammot du Pont. I do not think so. I do not recall ever
having heard the name.
Mr. Pierre S. du Pont. They have a 100 percent holding in that,
according to this list; do they not?
Senator George. I beg your pardon ; that is true. You have also
referred to the Canadian Industries, Ltd., here. That company I
believe is owned bj^ the Imperial and du Pont?
Mr. Lammot du Pont. Approximately 90 percent.
MUNITIONS INDUSTRY 1085
Senator George. Approximately 90 percent is owned by the two
companies?
]Mr. Lammot du Pont. Yes, sir.
Senator George. And the holding of the du Pont Co. is about 44
percent ?
Mr. Lammot du Pont. Yes.
Senator George. And the Imperial has substantially the same
interest ?
Mr. Lammot du Pont. About the same, but I think not identical.
Senator George. Are there other joint companies, companies
jointl}^ owned by the Imperial and the du Pont Co. ?
Mr. Lammot du Pont. Yes, there are.
Senator George. I mean without going into details.
Mr. Lammot du Pont. I should say there is, because I can think
of only one. Mr. Carpenter has a better memory than I have and he
mentions two.
Senator George. Mr. Carpenter, is one the Chilean company ?
Mr. Carpenter. Yes, sir; the Chilean Explosives Co. we both are
interested in.
Senator George. Is that owned practically by the two companies
named, the Imperial and the du Pont?
Mr. Carpenter. There is a minority interest there, I think, of
about 15 percent, if I remember correctly.
Senator Clark. You mean a minority interest not owned by these
two companies?
Mr. Carpenter. That is correct. I am not sure of those figures,
Senator.
Senator George. What other company have you in mind in which
the two companies have a joint interest?
Mr. Carpenter. There is a trading company in the Argentine, a
very new set-up.
Senator George. Is it a producing company ?
Mr. Carpenter. I think they produce some chemicals.
Senator George. Is the Chilean company a producing company?
Mr, Carpenter. Yes, sir.
Senator George. I believe it is engaged in in-oducino- explosives, is
it not? ^ to 1 to 1
Mr. Carpenter. Manufacturing dynamite.
Senator George. Manufacturing clynamite?
Mv. Carpenter. Industrial explosives.
Senator George. Exclusively?
Mr. Carpenter. I think exclusively.
Senator George. Do you recall to mind any other company?
Mr. Carpenter. There is the Naylor Bros.' Co., which is the name
of the other company I can think of, which manufactures paints and
varnishes, an English company, and the Nobel Chemical Finishes I
think IS the other name. Thev are all involved in manufacturmg
paint and varnishes in England.
Senator George. The du Pont Co. is interested in the Naylor
Bros. Co. ?
Mr. Carpenter. We have an interest in it.
Senator George. And so has the Imperial?
Mr. Carpenter. I. CI.
1086 MUNITIONS INDUSTRY
Senator George. But I was referring specifically and particularly
to those companies like the Canadian Industries, Ltd., in which the
greater portion, 90 percent or some large percentage, of the stock
was owned by the Imperial and the du Pont companies, where those
companies own stock. I merely wished that to be indicated.
Can you say briefly when j-our association with the Imperial be-
gan? I must embrace in that question both the predecessor com-
panies of the Imperial as well as the present du Pont Co. In other
words, how long have you maintained a close and friendly relation
in a business way with the Imperial?
Mr. Pierre S. du Pont. It is beyond my connection with the du
Pont Co., or the connection of any one here. I have been with the
du Pont Co. since 1890, and there were relations between the British
Explosives at that time and the du Pont Co., but I do not know the
nature of them. I was not in the administration part then, and I
do not know what the relations were, but I Imow there was a rela-
tionship. The first agreement that I know of any kind that would
be a stamp of relationship was I think in 1907.
Senator George. That particular agreement embraced what, Mr.
du Pont?
Mr. Pierre S. du Pont. That was an agreement concerning the sale
of explosives and I think— I would like to refer to a memorandum
in that connection, if I may, because I do not want to have to go
back to it.
Senator George. I have no purpose to go into it in detail.
Mr. Pierre S. du Pont. I have a memorandum of those agree-
ments. I think there are two or three of them.
Senator George. Did the 1907 agreement cover exchange of in-
ventions, methods of manufacture, and so forth ?
Mr. Pierre S. du Pont. ISIay I refer to it? I have the abstract here
which will show that [referring to paper]. This is an abstract of
the agreement. It is between the E. I. du Pont Powder Co., our
predecessor, Nobel Dynamite Trust Co.. the predecessor of I.C.I. , and
the Vereinigte Koln-Rottweiler Pulverfabriken, which was the Ger-
man organization at that time. It was a territorial agreement on use
of patents and secret processes. Under that agreement the du Pont
Co. was to pay to the German and European companies collectively
361/^ percent on excess manufacturing profits above 6 percent on new
capital employed ; and the European companies paid into the du
Pont Co. 631/^ percent on the profits on their new capital em-
ployed. That was outlined as a measure of patents and secret proc-
esses, but the Europeans were not to pay in excess of $175,000 per
annum and the du Pont Co. was not to pay in excess of $300,000 per
annum. The agreement was effective January 1, 1907, and to run
until December 31, 1921.
After December 31, 1911, the agreemetit might be terminated on
12 months' notice by payment of the maximum payment due for the
uncompleted j^ears. Government objections or prohibitions shall
be a valid plea for failure to disclose or reveal an invention.
An amendment was made on June 30, 1911, under which it was
agreed that the ingredients of a military propellent shall not stamp
that propellent as an invention unless the chemical and ballistic
qualities are affected. That was, of course, a modification. The
MUNITIONS INDUSTRY 1087
agreement was terminated January 1, 1913, and the invention re-
turned to the original owners.
Senator George. May I ask if that agreement did not m fact pro-
vide for exclusive and" nonexclusive sales territories and, of course,
did include military powders?
Mr. Pierre S. du'Pgnt. I have not a memorandum on that, but my
impression is that the du Pont Co. granted its rights for anything
they had outside the United States, Mexico, and Central America,
and that the Europeans granted us rights for the United States,
Mexico, and Central America.
Senator George. Mr. du Pont, may I ask you if you know ISIr.
T. J. Hanley ?
Mr. Lammot du Pont. Yes, sir.
Senator George. What is his connection with your company ?
Mr. Lammot du Pont. He is connected with our legal department.
Senator George. With your legal department?
Mr. Lammot du Pont. Yes, sir.
A Voice. It is T. R. Hanley.
Mr. Lammot du Pont. Maybe I had the wrong name.
Senator George. Do you also know Mr. J. K. Jenney?
Mr. Lammot du Pont. Yes, sir.
Senator George. Is he connected with your legal department?
Mr. Lammot du Pont. No; he is connected with our foreign-
relations department.
Senator George. If I may read from a memorandum prepared by
him, Mr. Jenney, to Mr. Hanley, under date of August 31, 1934,
perhaps it will refresh your recollection, because I did not want to
go into great detail in this matter [reading] :
This agreement was later canceled —
speaking of an agreement made in 1897 with some subsequent modi-
fication—
as the price provisions were deemed to be contrary to the Sherman law. An
agreement was drawn up and signed in 1907 covering exchange of inventions
and methods of manufacture. This agreement had provided for exclusive and
nonexclusive sales territories, and military powders were included. It is ray
recollection that a provision was inserted providing that governmental objec-
tion should be an adequate reason for withliolding any information, although
I presume this had always been understood.
That is the memorandum from Mr. Jennev to Mr. Hanley as of
August 31, 1934.
Mr. Pierre S. du Pont. Does that provision relate to the agreement
of 1907 or the 1890 agreement, or whenever it was ?
Senator George. The memorandum states that that related to the
1907 agreement.
Mr. Pierre S. du Pont. As I have said, there was an agreement
before that, but I do not know the nature of it, and I have not been
able to find out anything about it. It was referred to in the case
of United States Govermnent against the du Pont Co., but, as
far as I can find, it was not spread on the record.
Senator George. This memorandum also states that the " 1907
agreement was abrogated as of December 31, 1912."
Mr. Pierre S. du Pont. January 1, 1913, was it not?
1088 MUNITIONS INDUSTRY
Senator George. And a patents and secret-processes agreement
was prepared, " but I think never signed due to the advent of
the war."
Mr. Pierre S. du Pont. Yes; that was prepared in 1913 or 1914, but
was never signed, but a similar agreement was signed in 1920 and
dated 1919.
Senator George. That memorandum also states [reading] :
111 1919 a patents and processes agreement covering explosives, including
military explosives, was negotiated (signed 1&20) with Explosive Trades, Ltd.
(later Nobel Industries, Ltd.). Tliere was a provision excluding passing of
information contrary to governmental objection.
This is substantially a correct statement, in a general way, and
without going into detail?
Mr. Pierre S. du Pont. Yes, sir.
Senator George. Now, under this agreement of 1919 or 1920,
Nobels were licensed under what you call your I.M.R. patents?
That is in 1923?
Mr. Lammot du Pont. That is correct.
(The first page of the document referred to was marked " Exhibit
No. 463 '' and is included in the appendix on p. 1299).^
Senator George. Coming further into the postwar period
Mr. Lam3iot du Pont. Senator, I do not know whether it is im-
portant to you, but the fact that those I.M.R. patents were licensed
under this agreement is not the whole story. Before that license
was granted I believe the I.C.I, had all the information regarding
those patents and processes and had used them.
Senator George. During the war period?
Mr. Lammot du Pont. Correct, but the licensing was done under
this agreement.
Senator George. I think that would be accepted as true, but well
within the war period you entered into an agreement dated at least
the 1st day of July 1928. That agreement
Mr. Pierre S. du Pont. Is not that 1929 ? I do not know whether
it is A^ery material.
Senator George. 1928 seems to be the date. The agreement pro-
vides that [reading] :
This agreement shall take the place of and supersede the agreement made
on November 10, 1926, between the parties hereto with respect to naval and
military powders and explosives, and shall remain in full force and effect for
a period of ten years beginning on the 1st day of July 1928.
I would like to offer for the record, to be appropriately numbered
as an exhibit, copy of the agreement dated July 1, 1928, iDetween the
Imperial and du Pont Co.
(The document referred to was marked " Exhibit No. 464 " and is
included in the appendix on p. 1300.)
Senator George. The 1928 agreement, in the first numbered para-
graph, that is, the paragraph following the " whereases " specifies
the products, or at least some of the products, which were covered
by this agreement. It states :
The terms and conditions of this agreement shall apply solely to the fol-
lowing products for naval and military purposes only, to wit:
Nitrocellulose powders
1 There was no Exhibit markecl " No. 462."
MUNITIONS INDUSTRY 1089
I believe those are the du Pont Co.'s powders?
Mr. Pierre S. du Pont. Yes, sir.
Senator George (reading) :
Nitroglycerine powders.
Are those the du Font's ?
Mr. Pierre S. du Pont. No ; those are the British powders.
Senator George (reading) :
Trinitrotoluol and tetryl.
Mr. Pierre S. du Pont. They are common to both companies.
Senator George. And '' nitrocellulose for propellent powders."
That is the du Pont product?
Mr. Pierre S. du Pont. That is the ingredient of the du Pont
nitrocellulose.
Mr. Lammot du Pont. That was common to both.
Senator George. That was common to both. But the nitrocellu-
lose powder is peculiarly your own powder, is it not?
Mr. Pierre S. du Pont. Yes, sir.
Mr. Irenee du Pont. Nitrocellulose itself enters into the nitro-
glycerine powder also.
Senator George. Yes; this agreement provided for a division of
sales territory, both exclusive and nonexclusive, and provided also
for the method of adjusting the sales made within the territory of
these particular products.
Mr. Lammot du Pont. I do not think you are quite right on that
statement. Senator, that this provided for a division of territory.
Senator George. I direct your attention to the second paragraph,
or perhaps I may have spoken a little broadly, which states :
From and after the date hereon all sales of the foregoing products made on
behalf of either du Pont or Imperial in France, Belgium, Holland, Denmark,
Sweden, Finland, Esthonia, Latvia, Lithuania, and Poland shall be under the
supervision of the manager of du Pout's otiice, the expenses of which office shall
be exclusively borne by du Pont * * *.
Mr. Lammot du Pont. It sold for both. There was no division of
the territory between du Pont and I.C.I, on that.
Senator George. It did provide for the continuation of the Paris
office?
Mr. Lammot du Pont. Yes.
Senator George. As a mutual agency of the two companies?
Mr. Lammot du Pont. Correct.
Senator George. It also provided for the creation of a like agency
at Vienna in Austria?
Mr. Lammot du Pont. Yes, sir ; and that was under the direction
of the I.C.I.
Senator George. That was under the direction of the I.C.I. And
then the third paragraph of this agreement reads :
The aforesaid offices of du Pout and Imperial shall use their best efforts
to apportion the total annual sales of the above products
covered by the agreement in accordance with the terms specified
in that particular paragraph. In other words, it undertook to
regulate them?
1090 MUNITIONS INDUSTRY
Mr. Lammot du Pont. That is correct. You will observe that that
distribution was in conformity with the characters of powders made
by the respective companies.
Senator George. That is quite correct.
Mr. Lammot du Pont. Also the territorial arrangement had a bear-
ing on that, the territory which was assigned to the Vienna office
being that which normally used an I.C.I, powder, and that which
was assigned to the Paris office was that which normally used the
nitrocellulose powder.
Senator George. Roughly speaking, you were attempting to pre-
serve what 3'ou used, that is, the status quo, or at least you wanted
a fair and equitable apportionment?
Mr. Pierre S. du Pont. I do not think that is quite right. Senator.
Countries have different guns and use certain powders for those guns.
Nitrocellulose powder is not interchangeable for a gun made for
cordite, for the British powder. During the war we succeeded in
fitting notrocellulose powder to any gun. It had to be done and we
did it. Normally some have to buy the British powder. Contrari-
wise, those using nitrocellulose cannot buy it from the British be-
cause they do not make it, and we do not make cordite. The wishes
of the customer governs it.
Senator George. The powder must be made for the gun?
Mr. Pierre S. du Pont. Yes, sir.
Senator George. The agreement will speak for itself and will go
in the record.
Mr. Pierre S. du Pont. It is the customer's choice as to the kind of
powder. We made one kind and they made another.
Mr. Lammot du Pont. They recognized the status quo of the
customer but not the status quo of the business.
Senator George. The percentage is indicated in the agreement.
Mr. Lammot du Pont. Yes, sir ; in two cases to 100 percent, they
being the particular products which are only made by 1 of the 2
companies.
Senator George. In the case of nitrocellulose powder, the du
Pont's, it was recognized at 70 percent for that product.
Mr. Lammot du Pont. Yes, sir; both the nitrocellulose and the
TNT and the tetryl were divided between the two.
Senator George. Did this agreement continue down to the present
year, or was it affected by a subsequent agreement ?
Mr. Lammot du Pont. I think that is still in effect.
Mr, A. Felix du Pont. That was superseded in 1932.
Senator George. The memorandum would indicate it was modified
or superseded in certain important respects in 1932. Did you experi-
ence any difficulties under this agreement? Did any objection arise
upon the part of your Paris office ?
Mr. Lammot du Pont. I think Major Casey could answer that
question better.
Mr. Casey. I did not get the question, Senator.
Senator George. I say, did the du Pont Co. experience difficulties
under the 1928 agreement?
Mr. Casey. The principal difficulty we found was one of expense.
The volume of business was so small that neither company found that
they were really justified in continuing their sales effort, and we
MUNITIONS INDUSTRY 1091
therefore considered that we perhaps should make an attempt and
try it for a couple of years to see if all sales in Europe could be
handled by one company for both, realizing the fact that the indi-
vidual country determined the type of powder that went into it,
and they would elect whose powder they would take, and in that
way we might be able, without too much loss, to continue our etforts.
It was really a consolidation, you might say, of sales effort to save
expense in selling.
Senator George. Now, Major, do you refer to the G. W. White
memorandum agreement?
Mr. Casey. Yes.
Senator George. Which purports to have been executed or com-
pleted I believe in October 1932.
Mr. Casey. That is right.
Senator George. It was not actually completed at that time, was
it? .
Mr. Casey. I do not believe so.
Senator George. There were some subsequent amendments and
interpretations at least added ?
Mr. Casey. Yes, sir.
Senator George. In this G. W. White memorandum, as we may
denominate it, and in the statement of general princples, it is
provided :
The party securing an order shall pay a commission to the other party for
assistance rendered.
among other things.
The products are also enumerated. I believe it is true that this
memorandum does not cover military powders, broadly designating
powders and explosives as such, and distinguishing them from com-
mercial or nonmilitary usages.
Mr. Casey. This is strictly military.
Senator George. The White agreement?
Mr. Casey. Yes, sir.
Senator George. That agreement may be entered in the record
appropriately numbered as an exhibit.
(The document referred to was marked " Exhibit No. 465 " and
is included in the appendix on p. 1302.)
Senator George. In connection with that agreement I would also
like to offer for the record a memorandum from Major Casey, as a
director, to the general manager of the du Pont Co., dated April 6,
1932, which particularly states some of the inconveniences or at least
objections which have been found to exist under prior agreements,
among other things.
(The memorandum referred to was marked " Exhibit No. 466 "
and is included in the appendix on p. 1305.)
Senator George. In the G. W. White agreement of 1932 there is
contained a definition of sales areas. The first is [reading] :
South America will comprise all countries in tlae South American Continent
including Cuba, Haiti, Santo Domingo, Mexico, and Central America.
2. Europe will include all countries currently known as Europe with addition
of Turkey and Persia.
3. Asia will cover all countries concurrently known as Asia except Turkey
and Persia.
83876— 34— PT 5 6
1092 MUNITIONS INDUSTRY
4. It is undei-stood that the United States, its possessions and dependencies,
as well as the British Empire, its possessions and dependencies are specifically
excluded from the scope of this agreement.
Mr. Lammot du Pont. You are readino; from the agreement?
Senator Geokge. I am reading from the agreement, the second page
of the agreement. General subdivision D deals with organizations
and reads :
Both companies wish to adojit the most eflicient method of promoting sales
that can be devised.
It is believed that this will be accomplished by having sales handled as much
as possible by persons entirely devoted to and experienced in military sales.
Therefore, it is proposed to :
Divide the sales area as shown In section C
Which I have just read.
Have available for each territory a salesman, assisted if necessary, entirely
devoted to the sales of these products.
Then the duties of these salesmen are set out and on page 3 of this
agreement there is a paragraph 6 which says :
To decide as to which company's products to offer in a certain case, bear-
ing in mind the chances of sales, and the customer's desire for the products of
one or the other company. In each territory, the salesman in charge must
make this decision in view of his close knowledge of the field.
This continued a dual agency between the Imperial and the du
Pont companies. I believe on that point there is substantially no
change from the older agreement, although it did differ in minor
particulars.
Attached to this are certain explanatory notes, and these explana-
tory notes indicate, or at least give the basis of the answer to the
question which I asked before, that the agreement was not actually
completed in October, but was completed at a later date in 1932.
A provision is made for the continuance of the Paris office and
offices as under previous agreements and provision is also made for
the expense of these offices.
There is a further interpretation of explanatory note 1, to the
effect that I.C.I, will be the source of supply for cordite and du
Pont for the particular products peculiar to it or in which it played
an important part, more important than the I.C.I. I read from this
explanatory note :
Bearing in mind the desire of both parties to discourage as much as possible
the erection of factories, it is understood that no project of this kind will bo
undertaken in South America and China without prior consultation and mutual
agreement depending upon circumstances.
In Europe there will also be collaboration between the parties before any
factory scheme is proceeded with by either party, and it is understood that due
to their various commitments in Europe no factory scheme shall be carried
out without the express agreement of I.C.I.
That reference there is, of course, to the interest of the I.C.I, in
subsidiary and other companies in which it had some interest.
Mr. PiEKRE S. DU Pont. Senator, when you make a statement con-
cerning that, it is your statement, not ours. I cannot say whether
that is true or not. What you are reading is entirely foreign to me.
Do not think that I am assenting to its being true, because I know
nothing of it.
Senator George. You are not assenting to that statement?
Mr. PiEBRE S. DU Pont. I do not object to it.
MUNITIONS INDUSTRY 1093
Senator George. I thought that was a rather obvious reason, that
it appeared upon the face of the paper. May I ask if this is correct
and was this observed? [Reading:]
As I'egards Spain, Portugal, and Czechoslovakia it is clearly understood that
there is to be no sales activity without prior consent of I.C.I, so as to take
into consideration their relations with the Union Espanolo de Explosives and
the Czechoslovak Explosives Co.
Perhaps that statement would indicate the reason for the general
understanding preceding that.
Mr- Lammot du Pont. I think that is correct.
Senator George, I read from the next to the last page of this
agreement the following:
The salesmen for Europe and South America should report any information
and particulars of enquiries for military small arms anununition and com-
ponents to I.C.I, without being concerned directly in that business.
In order to avoid any possibility of their disturbing the general policy of
either of the parties, the salesmen will consult fully with the authorized repre-
sentatives of the parties in their respective territories.
That agreement has been introduced in evidence as " Exhibit No.
465."
Mr. Lammot du Pont. Senator, at an appropriate time, would you
care to have a statement as to the reasons and objects for this whole
set-up between du Pont and I.C.I. ?
Senator George. I have no objection.
Mr. Lammot du Pont. When you are through with these agree-
ments that referred to those joint efforts.
Senator George. You may do so, of course.
I offer as " Exhibit No. 467 " a letter from Mr. William N. Taylor
to A. C. Major, Esquire, Imperial Chemical Industries, Imperial
Chemical House, Millbank, London.
(The letter referred to was marked " Exhibit No. 467 " and is in-
cluded in the appendix on p. 1308.)
Senator George. Mr. Taylor was in charge of the Paris office,
I believe?
Mr. Lammot du Pont. Yes.
Senator George. As the agent of the du Pont Co ?
Mr. Lammot du Pont. Yes.
Senator George. But acting, of course, in his joint capacity or as
joint agent under this general arrangement and agreement with the
Imperial Co.?
Mr. Lammot du Pont. Yes.
Senator George. In his letter, this is to be noted [reading] :
The salesman should, without taking direct part in the sales of military
cartridges, report to the manager of the Paris office of Imperial Chemical
Industries any information he may obtain along these lines and assist the
<?artridge salesman in every way in his power.
That letter is dated November 30, 1932.
May I ask if at that time the du Pont Co. had acquired the
Remington Arms? Was the Remington Arms Co. acquired
subsequently ?
Mr. Lammot du Pont. I think it was acquired subsequently.
Senator George. At this date the Remington Arms was not owned
hy the du Pont Co.
Mr. Lammot du Pont. No.
1094 MUNITIONS INDUSTRY
Senator George. This further statement appears, and I wish to
have confirmation of it [reading] :
The salesman for South America will be Mr. N. E. Bates, jr. The Du Pont
Co. shall pay all expenses covering his work in South America.
Mr. Bates is the salesman in the South American territory ?
Mr. Lammot du Pont. Yes, sir.
Senator George. He is the agent of the du Pont Co.?
Mr. Lammot du Pont. Yes, sir.
Senator George. But acting, of course, in his joint capacity under
this agreement?
Mr. Lammot du Pont. I believe so.
Senator George. There is no question concerning the joint agency
in these respective territories indicated in this agreement; the agent
of both the Imperial and the du Pont companies acting in accord-
ance with this agreement does act for both companies ?
Mr. Lammot du Pont. I think the agreement speaks for itself on
that point.
Senator George. I meant, as a matter of fact ; I am now inquiring,
as a matter of fact, the agent does act as the joint agent of the two
companies ?
Mr. Lammot du Pont. Yes, sir.
Senator George. I would now like to read and oifer as an exhibit,
to be numbered " Exhibit No. 468 ", a cablegram.
(The cablegram referred to was marked " Exhibit No. 468 " and is
included in the appendix on p. 1310.)
Senator George. It reads :
Send the following to Col. W. N. Taylor by telephone. Replying to your
letter no. 2511 if 50/50 arrangement on all sales decided upon for Europe there
is no occasion for setting up a clause providing how profits are to be deter-
mined. In the meeting with H. J. Mitchell it was agreed that we would do
as we had in the past in South America. We accept each other's figures with-
out question. Payments are called commissions, and no mention should be
made of profits in agreement. Any chance setting up methods of determination
of commissions extremely dangerous both of us. This agreement based on
mutual confidence and should be so regarded.
The Mr. Mitchell referred to in the cablegram, H. J. Mitchell —
will you please identify him ?
Mr. Lammot du Pont. He is an important official of Imperial
Chemicals. I do not remember just what his title is.
Senator George. He is an official of Imperial and is an important
executive.
Mr. Lammot du Pont. Yes.
Senator George. Now may I ask if it is not a fair inference that
all of the agreement between the two companies is not necessarily
in writing? From this cable, is not that inference justified, that
some of it may lie outside of the written memoranda or statements ?
Mr. Lammot du Pont. No ; I do not think so.
Senator George. Do you interpret this statement in the cable-
gram [reading] :
There is no occasion for setting up a clause providing how profits are to
be determined. In the meeting with H. J. Mitchell it was agreed that we
would do as we had in the past in South America. We accept each other's
figures without question. Payments are called commissions * * *,
MUNITIONS INDUSTEY 1095
Mr. Lammot du Pont. That sort of agreement is subject to change
Avithoiit any notice. If it was written in the agreement, it would not
be subject to that change.
Senator George. No inference whatever is to be taken from my
question that it was anything but a legitimate arrangement as be-
tween the companies, so far as that goes. But your relationship
with the Imperial Co. has been very long and as you have testified
it has been a close business relationship.
Mr. Lammot du Pont. Yes, sir.
Senator George. There is a very close understanding between the
two organizations, the two companies?
Mr. Lammot du Pont. Yes.
Senator George. I ask that there be made a part of the record,
as " Exhibit No. 469 " — which, before being marked, I should like to
exhibit to Mr. du Pont, because I am not sure whether it would come
within the class of communications which Mr. du Pont had in mind
as being of such a confidential nature as not to be made public.
There is something in this document that does indicate that there is
something private and confidential about it.
Mr. Pierre S. du Pont. I have no objections, of course, to the
committee having it. but if it is confidential I would ask that it be
not spread in the public record.
]Mr. Lammot du Pont. This is a letter from one of our own men
to one of our own departments and I do not think there is anything
confidential with respect to a third party.
Senator George. I do not think so and I was not offering it on
any point that I think you had in mind.
Mr. Lammot du Pont. Unless the text of the letter so states, which
I doubt.
Senator George. I do not think there is anything disclosed in it,
but inasmuch as it is marked in the fashion in which it is. " private
and confidential ", I thought I would direct your attention to it.
Then if there is no objection to it, that letter will be received as
"Exhibit No. 469."
(The letter referred to was marked " Exhibit No. 469 " and is in-
cluded in the appendix on p. 1310.)
Senator George. I direct attention at this time merely to the
recitation in this letter, the reference in the letter to a report covering
the operations of the Imperial and the du Pont Co. in military
explosives in China. That refers, of course, to the territorial agree-
ment as contained in the agreement of October or November or
December 1932.
Mr. Lammot du Pont. It refers to the joint selling arrangement.
Senator George. Yes; of 1932.
I would like to offer for the record a letter addressed to Major
Casey, dated January 12, 1933, by William N. Taylor of the Paris
office, both of whom are agents for the du Pont Co. according to
the testimony.
(The letter referred to was marked " Exhibit No. 470 " and is in-
cluded in the appendix on p. 1313.)
Senator George. If there be any confidential information in that
letter
1096 MUNITIONS INDUSTRY
Mr. Lammot du Pont. I do not think there is anything confidential
in that, unless it is so stated in the text.
Senator George. I do not recall any reference to anj'thin*^- confi-
dential in that letter. This letter is offered merely for the purpose
of showing the course of dealing under the agreement about which
there really has arisen no controversy, anywa}^
Mr, Pierre S. du Pont. There is no objection.
Senator George. The letter which I now ask to be inserted in the
record as " Exhibit No. 471 " is a letter dated the 4th of July 1933 to
Mr. G. W. White, signed by Mr. J. Laing.
(The letter referred to was marked " Exhibit No. 471 " and is in-
cluded in the appendix on p. 1316.)
Senator George. The general purpose of putting that letter in
the record is precisely stated with reference to the foregoing letter
and I presume there is no objection to that.
Mr. Lammot du Pont. There is no objection to it.
Senator George. If there is anything in it that appears confi-
dential. I would be glad if you would direct my attention to it.
A subsequent letter of September 25, 1933, to Mr. N. E. Bates, Jr.,
from Mr. Casey is offered as " Exhibit No. 472."
(The letter referred to was marked '' Exhibit No. 472 " and is in-
cluded in the appendix on p. 1316.)
Senator George. Special reference is made here to the acquisition
of the Remington Arms and with the acquisition of the Remington
Arms by the du Pont, w^hich may have some bearing on the re-
lationship with the Imperial Co.
I would like to say, speaking for myself and I am sure for the
committee, that it is not the purpose of the committee to spread
any confidential information on the record here that would be
harmful ; nor is there an assumption that the du Pont business
in munitions is other than that of any other manufacturer of char-
acter and standing.
The committee's obligation is, of course, to inquire into the sub-
jects committed to us for the purpose of making such recommenda-
tions to the Congress as we may feel impelled to make.
Mr. Pierre S. du Pont. I am satisfied of that, Senator.
Senator George. On the basis of facts.
Mr. Pierre S. du Pont. We are in a very delicate position. Sena-
tor, in this respect; we have dealings with the Departments here
in Washington and with Europeans with whom we have connections,
because of their obligations to their governments, which make all
these matters very delicate.
Senator George. Mr. du Pont, speaking for myself again. I ap-
preciate that fact and certainly the object of the investigation would
not be to straiii the relations between your company or any other
American producer or distributor, and his government or with other
companies abroad.
Mr. Pierre S. du Pont. Certainly ; I appreciate that.
Senator George. Now may I direct your particular attention to
the agreement between the two companies, that is the Imperial Co.
and the du Pont Co., dated January 1, 1926, which I will offer as
"Exhibit No. 473."
(The agreement referred to was marked " Exhibit No. 473 " and is
included in the appendix on p. 1317.)
MUNITIONS INDUSTRY 1097
Senator George. Also this agreement relates particular!}^, accord-
ing to the memorandum which I have before me, to patents and
secret processes. And in connection with that agreement, I should
like to offer the agreement between the two companies as of the 1st
day of July 1929 relating also to patents and processes.
"(The agreement referred to was marked " Exhibit No. 474 " and is
included in the appendix on p. 1322.)
Senator George. These agreements are lengthy and the committee
would like to have them in the record, if there is no objection.
Mr. Pierre S. du Pont. May I not© that this agreement does not
relate to military powders.
Senator George. Mr. du Pont, I would be very glad if you did,
because that is a very pertinent matter of the inquiry.
Mr. Pierre S. du Pont. It covers all explosives other than military
powders.
Senator George. Are you reading from the agreement of January
1, 1926?
Mr. Pierre S. du Pont. 1929 agreement.
Senator George. May I ask that the clerk to the committee read
both clauses that deal with the products that are covered by these
patents and processes?
Mr. Raushenbush. On page 5 of the Exhibit marked " No. 474 ",
being an agreement of the 1st of July 1929 [reading] :
III. PRODUCTS
The exchange of information provided in section I, and the rights to acquire
licenses granted in section II, shall apply to all inventions relating to the
following products and industries, subject to the exceptions set forth below :
(a) Explosives, other than military powders.
(b) Compounds of cellulose and its derivatives, including nitrocellulose com-
pounds such as plastics and film, but excluding rayon, cellophane, explosives,
and products covered under subparagraph (c) below; provided, however, that
the activities of Societa Italia Celluloid and Societa Anomina Mazzuccbelli
(in which Du Pont has substantial stock interests), in this industry within
the exclusive license territory of I.C.I., will continue until such time as may
be mutually agreed upon between the parties hereto.
Mr. Lammot du Pont. That shows that military powders were
excluded.
Senator George. Acids are covered, I believe, in this agreement.
You will note paragraph (/) on page 5 says [reading] :
Acids, both organic and inorganic, for both the heavy-chemical industry and
special industries.
Then on the next page, page 6, mention is made of synthetic am-
monia and fertilizers. Those are covered in subparagraphs (l) and
(j). Now, in reference to the earlier agreement, that of January 1,
1926, the language pertinent to this particular point is as follows
[reading] :
* * * for the manufacture, production, transportation, handling, selling,
or use of one or more of the following products, viz : black powder in all varie-
ties, smokeless propellants for sporting purposes, disruptive explosives of all
kinds for industrial purposes, detonators, electric detonators, safety fuses,
powder fuses, detonating fuses, electric igniters, and generally all devices for
initial detonation or ignition, the components which form the ignition and pro-
pellant charges of sporting ammunition, and the ingredient and component parts
of the above insofar as they are applicable to explosives, and * * *.
1098 MUNITIONS INDUSTRY
By terms, of course, these two agreements dealing with the patents
and secret processes undertake to refer not to military products.
Mr. Lammot du Pont. I believe so.
Senator George. I believe that is a fair statement that on the face
of these contracts you are attempting to exclude the military product.
I may ask you, as practical men, however, if many of these prod-
ucts are not for practical purposes and under conditions easily con-
verted into military uses?
Mr. Lammot du Pont. Some of them are, but not the ones that are
important commercially.
Senator George. The transition from the nonmilitary to the mili-
tary use of them, however, is both swift and easy; is it not?
Mr. Lammot du Pont. In some cases it is. But those cases are
items of minor importance in commercial business.
Mr. Pierre S. du Pont. Is it not true, however — correct me if I
am wrong in this — that the prime ingredients of military propel-
lants are the same as used in sporting powders and in some dis-
ruptive explosives? For instance, gun cotton and nitroglycerin are
both used in military propellants and are used very largely in
sporting powders. So that the fundamentals bear direct relation
to both branches of the industry, military and industrial.
Mr. Irenee du Pont. Senator, I think your point is well taken
and I think its weight is greater than has been stressed.
Industrial manufacture in the chemical industry will tie into the
production in a large way and economically, of military explosives.
I think that information of this kind may cheapen the costs and
make available more military supplies by reason of having it.
I have been in on the research end a great deal more than I have
on the selling end, in the du Pont Co. I am just a little bit enthu-
siastic about research. I think that the great advantage to this
country of having the private manufacturers of munitions is very
largely the fact that progress in that and the ability to produce
can be made much greater by a great chemical organization.
I think that has been recognized by a number of the previous
administrations and recognized too, by this administration.
I do not know that it would be in order here, but I would like
to read you a clause from one of the codes, the Chemical Industry
Code, which I think is quite pertinent to this affair. It is article
II of the Code of Fair Competition for the Chemical Manufacturing
Industry, which has the approval of President Eoosevelt.
At this point I would like to read article IX of the Code of Fair
Competition for the Chemical Industry wdiich has the approval of
President Roosevelt, if I may.
The Chairman. You may proceed.
Mr. Irenee du Pont. This article of the code reads :
In all activities under this code, the peculiar relation of the chemical in-
dustry to national defense, national health, national industry, and national
agriculture must be constantly borne in mind by its employers, stockholders,
directors, executives, and employees. The present products of this industry
should be regarded as only by-products ; its main product and purpose the
extension of chemical knowledge in the public interest.
That hits the nail right on the head. Progress has been made
in the chemical industry at a most prodigious rate in the last
seven years. Thirty years ago a chemical engineer was almost un-
MUNITIONS INDUSTRY 1099
known, and when I went with the company 30 years ago I was one
of the best equipped chemical engineers, having a college education
and the whole thing has grown up since that time, and the whole
progress made in the chemical industry meshes in with everj^thing,
including military preparedness, and that should be borne in mind
in any findings you gentlemen may make as a result of these hear-
ings.
Now, these agreements on patents and secret processes are an en-
deavor to obtain from abroad whatever progress they make in inven-
tion, and underlying this, their application to the industry, and I
have been very keen on that relationship of obtaining information
from abroad, although we spent enormous sums on research here.
The aggregate spent over there must be very great also.
Mr. E.AUSHENBUSH. Mr. Chairman, since the chemical code has been
mentioned, may we have that code now inserted in the record as a
part of the record.
The Chairman. I think that code should be included in the record
and it is so ordered.
(The code referred to was marked " Exhibit No. 527 " and is
included in the appendix on p. 1389.)
Mr. Casey. Our endeavor there was specifically to exempt military
propellant and explosives information from any interchange of in-
formation, realizing that ordinary black saltpeter powder or any
black powder becomes military material in time of war, and black
powder is the same today as it was 200 years ago.
Senator George. It can be used for military purposes, though ?
Mr. Casey. Yes; but this was to avoid any interchange of infor-
mation on military purposes.
The Chairman. If it is agreeable to Senator George, the commit-
tee will be at recess at this time until 2 : 15 p.m.
(Thereupon the committee took a recess until 2 : 15 p.m. this day.)
after recess
(The committee reconvened pursuant to the taking of recess, at
2:15 p.m.)
The Chairman. The committee will be in order.
Mr. Lammot du Pont. Senator, at the time we broke up this morn-
ing the question of these agreements with these other companies was
being discussed, and you probably got a rather confused idea of some
point, and I want to clear up your mind on that. The man who ac-
tually negotiated those agreements, and who is connected with our
experimental department, would give you a brief statement so that
we will have a clear statement of what they are all about if you would
permit us to have him do that. So, may I have Dr. Sparre, who is
thoroughly familiar with these agreements, explain them to you ?
The Chairman. Just before that is undertaken, we had consider-
able controversy this morning concerning the totals that entered into
the investment of the E. I. du Pont de Nemours Co. in other com-
panies. That has been very carefully checked, and the column " In-
vestment in capital stock " totals as announced this morning, $202,-
765,782.55 is correct. The total of advances of the du Pont Co. as
of July 25 is $59,115,414.48, if the items within parentheses in that
column are excluded, and totals $65,084,295.80, if all items are in-
1100 MUNITIONS INDUSTRY
eluded. The total of advances of holding company as of July 31 is
$3,564,444.88, and the total investments, again including figures of
advances stated in parentheses is $364,445,641.91, and if those items
are excluded the total is $365,445,641.91.
You may proceed now, Mr. du Pont.
Mr. Lam MOT du Pont. We would like to have Dr. Fin Sparre
make a statement at this time.
Dr. Sparre. I have been employed by the du Pont Co. for 31
years, and the agreement of Julj^ 1, 1929, which now governs the
relationship as to patents and processes between the du Pont Co.
and the Imperial Industries, I negotiated in that year. The pur-
pose of that agreement is to enable the two companies to acquire
from each other for a consideration, suitable licenses for patents and
processes in the chemical industry, which they may be able to use
to advantage in their business.
In order to have a correct understanding of that agreement it is
necessary to review previous agreements. There are important dif-
ferences, yet there is considerable similarity. The agreement of
1907, which is as far back as it is necessary to go, was between the
British company and a German company, the Vereinigte Koln-Kott-
weiler Pulverfabriken, and the du Pont Co. That agreement
included military explosives.
Senator Clark. That is the agreement of 1907?
Dr. Sparre. Yes. The patents and processes, or rather informa-
tion in regard to patents and processes, are exchanged between the
parties in order to enable the companies to determine which patents
and processes they could use in their business and would like to
acquire.
The du Pont Co. obtained both from the British and from the
German company very valuable information in regard to the manu-
facture of TNT. That was before the war. or in other words I
should judge about 1909 or 1910. something of that sort. That had
not been manufactured by the du Pont Co. before, but that informa-
tion enabled us to manufacture that important explosive of suitable
quality and at proper cost. The du Pont Co. also oljtained from
the German company very important information about the sta-
bilization of military smokeless powder, which they obtained through
tJie addition of some diphenylamine.
Senator Bone. When Avas that information obtained?
Dr. Sparre. I should say 1908 or 1909. Up to that time the matter
of stability of smokeless ],owder was a question of great anxiety on
the part of the United States Government and all other govern-
ments. The difficulty is that you cannot demonstrate whether you
have stabilized a powder except by many years of service. Now,
the Germans could place at our d'sposal valuable experience over a
great many years, of which we took advantage, and introduced
diphenylamine into smokeless powder for the United States Govern-
ment. All of that information and exi)erience we placed at the
disposal of the United States Government Avithout cost.
On a visit in 1909 I believe, to the German factories, I observed
there the manufacture of a new type of smokeless powder which is
usually known as " surface-coated powder." The purpose of that is
to satisfy the urge for great ballistic properties, especially in the
higher velocity of small arms ammunition.
MUNITIONS INDUSTRY 1101
That is accomplished by that type of powder, which makes it pos-
sible to obtain this higher velocity without excessive pressure and
without other disadvantages.
On my return to the United States I directed experimental work
along the same lines to be undertaken by ourselves, and after several
years' work we developed the powder which fulfilled our require-
inents, as well as the requirements of the United States Government,
to which powder we gave the name I.M.R., and which, essentially in
the same form, has become one of the standard powders of the United
States Government. Complete information in regard to that powder
has been given to the United States Government without cost.
On our side we had very little to give to either the British or to
the Germans.
The British use nitroglycerin powder, and our information was of
no value to them. The Germans use a similar type of powder, but
we have very little of interest to give them. Our development had
been to a large extent along mechanical lines, such, for instance, as
the i)hysical form of powder leading to multiple perforation of the
powder grains. That was not accepted by the Germans, and I do not
know that they used any information we gave them. The result
of that relationship on the military explosives was that we obtained
most valuable information from both the British and the Germans
and it w^as conveyed to the United States Government without cost
and of which the Government has made extensive use for many years
and still uses it. On the other hand, I think our company gave
very little of value under this contract to the German and Britlsli
companies.
In regard to sporting powder, we purchased the business in Amer-
ica and information as to manufacture of the well-knoAvn sporting-
powder, Ballistite, and for that we paid cash.
With regard to the commercial explosives, I think the most
important information in that connection is with regard to
safety explosives for coal mines. During the same years I am here
discussing, there had been a great number of very disastrous explo-
sions in coal mines in this country leading to a loss of thousands of
lives for the reason of the coal mines becoming filled with dangerous
gases, due to the type of explosives used, the high temperature
igniting the gases. The same problem had been met in Europe
many years before, because their coal mines were already of
great depth and the gaseous condition had been wath them for some
time. We obtained from the British companies very valuable infor-
mation about everything they had obtained in that time, and many
other things we obtained from experience and information about one
of their explosives, monobel, which we made up in similar form.
From the German company we obtained even more valuable infor-
mation, because they had developed the most complete set of testing
conditions and testing apparatus to show the degree of danger and
the relative safety of explosives. We purchased from them this
apparatus which could not be acquired anywhere else, and with the
use of that apparatus as well as their experience, especially their
knowledge and information Avhich they gave us about the manufac-
ture of their safety explosives, the so-called '"'■ Carbonites '', we
developed some explosives of quite similar types.
1102 MUNITIONS INDUSTRY
That was a most valuable contribution to this country; it saved
thousands of lives and by which we were able to serve our customers.
That was paid for by the du Pont Co. in cash, and no charge to
anybody except insofar as the cost had to be absorbed in the cost
of the explosives.
With regard to what we contributed to the British and German
companies, the situation was peculiar in this sense, that the market
for explosives in this country was so much larger so that a great
deal of the du Pont efforts had been given to the development of
safe manufacturing methods, applicable to very large scale opera-
tions. We were relatively new as a chemical concern, and our re-
search was not to any extent along chemical lines, but we did develop
a great many mechanical improvements.
However, the British and German markets are very small as com-
pared to the American standard, and they either would not or could
not use the machines and manufacturing methods which we have
developed. We had, for instance, a dynamite packing machine,
which, as I remember right, was a machine by which one man could
in one day pack as much dynamite in its containers as something
like 60 girls or thereabouts can do in the European countries. In
other words, we would expose one operator to the danger whereas
in the European factories they would expose 50 or 60 to that danger.
For instance, if we had an explosion, we might possibly kill one man
while if they had an explosion they might possibly kill 50 or 60.
But, for government reasons or other reasons they used very
little of our information.
The result was we had comparatively little to convey to the Euro-
pean companies, and therefore during this early relationship up
to the beginning of the war we obtained a great deal of valuable
information for which we paid large sums of money in cash, but we
had comparatively little to give, or rather to sell to our associated
companies. Perhaps I should not say associate, but say, to our
friends.
The war, of course, upset everything, their patents were forgotten,
everybody was too busy doing other things. When the war was
over, as has been explained here, the du Pont Co. launched into a
large expansion in order to get into the chemical industry in a large
way, in which it has been ever since then.
One of our reasons for success was the employment of a larger
force of professionally educated chemical engineers and the liberality
of the management in placing large sums of money available for
development.
Senator Bone. That was a sort of a brain trust you were organiz-
ing?
Dr. Sparre. Well, they were college-educated men.
Senator Bone. That is what we refer to as a brain trust.
Dr. Sparre. We have to have, Senator, a trained chemist to handle
chemicals and to do research work.
Senator Bone. It is a very good idea to have trained men in all
walks of life.
Dr. Sparre. Yes. sir; these college men were working in labora-
tories ; we did not put them in other positions.
MUNITIONS INDUSTRY 1103
The liberality of the management could be measured in dollars in
this way, that the du Pont Co. has spent as much as $5,000,000 yearly
upon research.
Now, the result can be measured in two ways. One is that until
around 1925 the du Pont Co. was paj'^ing large sums of money in
cash to the European companies for patents and processes we had
acquired. Since sometime in the 1920's — I have forgotten the year — I
do not think we have paid anything to the British or German
companies. On the other hand in 1925, I think it was, we sold
our manufacturing patents and processes for the well known Duco
to the British company. They organized a new company, the Nobel
Chemical Finishes, to handle their business and it has been very
profitable to them and also to us because we got a large interest in
that company for our contribution of patents and processes.
That is the first time, I believe, the du Pont Co. was on the
receiving end as far as money is concerned for patents and processes.
In 1930 or thereabouts we made another settlement with regard
to a number of patents and processes. The money involved was
comparatively small, but the du Pont Co. again receiA'ed money
and paid out nothing. That was the second time in the history
that the du Pont Co. received money and had nothing to pa}^
That was the result of the management's liberality in research in
our company, in developing chemical processes.
You understand, Senator, that the importance of these chemical
developments is not merely in developing a new product like Duco
which may yield direct profits but it is improving what already is
being done.
I can give you a typical example. You take nitroglycerin, when
in the old days 100 pounds of glycerin would give 200 pounds of
nitroglycerin, with a great deal of research the yield of nitro-
glycerin was brought up to about 230 pounds and the advance of
30 pounds of nitroglycerin represents profits. A manufacturer who
in these days could make only 200 pounds of nitroglycerin would
not make any profit on that basis, and the profit is in the saving.
It is important in bringing up the yields which means conserva-
tion. We would call it saving, and the Treasury Department would
call it profit. That is only one of the ways we can show you what
the research department can do, and that is just as important as
the development of new products.
There is a third factor, and that is the cost which has been men-
tioned as before here. If we spend $5,000,000 a year in research,
half of that is what you might call waste. I am sure over
half of research leads to negative results, which leads to noth-
ing except possibly some little education to the young chemist. I
am sure we are spending several millions a year with no result
whatever, unless you count the educational value. In this patent
and process arrangement which we have with the British company,
it is obvious that we are saving large sums of money annually tell-
ing each other of the result of the experiments, and where one
company has learned in a certain type of experiment, there is a
negative result, the other company is saved that work, and there-
fore I think the actual money payments between the two companies
1104 MUNITIONS INDUSTRY
is not necessarily the biggest factor. I think the advantage of
lesearch may be eA^en more important.
Now, there are important differences between the agreement of
1929. which now governs our relationship, and the old agreements.
The first difference of course is that previously we had an agree-
ment with the German company as well as the British. Our
agreement under which we now work is only with the Imperial
Industries, and the German company is not included.
The second important difference is that military explosives are
entirely excluded.
The third difference is that the old agreements covered practi-
cally speaking only explosives and the present agreement covers
practically speaking all of the chemical industries with a couple
of exceptions in which we are engaged.
In other words the agreement covers industries of maybe five
times the value of the agreement which we used to have.
Another difference is that on account of the much greater impor-
tance of the du Pont Co. and the development work we have done,
the exclusive territories which we have, and in which we can oper-
ate under the present processes, is very much larger than was the
case under the old agreement.
There is still another difference which is of some importance and
that is on the advice of counsel we were told that the old agreements
with our somewhat imperfect knowledge of some of the newest
statutes might be open to objection from a legal point of view. We
therefore have corrected that in the agreement of 1929. '
In the older agreements, for instance, there would be licenses
granted for all processes and patents at the commencement or on the
execution of the agreement. Under the agreement of 1929 no
licenses are given until after receipt of information about the subject
and when one of the companies signifies its desire to operate under
such a patent and process, then for a consideration licenses may
be given. If no license is requested or granted, then there is no
change in the ownership or operation of the patents and processes.
I have differentiated in my remarlis about military explosives
and commercial explosives. There is, of course, not a very sharp
line there, but there are certain distinctive differences that can be
draAvn. Certainly commercial explosives dynamite should need no
explanation, it is an explosive used in everyday life, and its war
use is no more than that of its peace use. TNT, which is an explo-
sive of shattering effect, is ]5ractically of no importance for commer-
cial purposes except to a minor extent which need not be mentioned
while on the other hand it is a very important military explosive.
As far as smokeless powder is concerned there is quite a difference
between the two types, and yet there must be some overlapping as far
as small arms are concerned. But, to the men who are familiar
with the art it is not difficult to draw the line between the two.
There is a similarity, of course, in the raw materials such as cotton,
nitric acid, and sulphuric acid, which are the same, and a man skilled
in the art of manufacturing one would not have a great deal of
difficulty about manufacturing the other, but the specification, the
compositions, and the formula are totally different.
I have tried to make my speech rather short, but I will be happy
to answer any questions.
MUNITIONS INDUSTEY 1105
Senator George. Doctor, it is a fact, however, that the conversion
of man}^ of these nonmilitary products and military products, as
well, into military powders and explosives is quite an easy process,
is it not?
Dr. Sparke. No ; by no means easy. It is for this reason that the
mechanical apparatus which is used for the manufacture of cannon
powder, for instance, is totally different from the manufacture of
sporting powder.
Senator George. I was not speaking of that particular illustra-
tion. Take, for instance, your gases and acids. You can use them
for war purposes, of course.
Dr. Sparre. Acids, of course, are the same. Those raw materials
are the same ; yes.
Senator George. And chlorine can be used, of course, for war
purposes ?
Dr. Sparre. Yes, but not used in the manufacture of explosives.
Senator George. No, but it is used for war purposes, is it not,
doctor ?
Dr. Sparre. Yes, but it is not produced in the same plants.
Senator George. Then, of course, admittedly even so-called '' small
arms " do use what may be called the sporting powders or the non-
military powders?
Dr. Sparre. Yes.
Senator George. And becomes a military munition, a munition of
warfare, when conditions demand it, and does play some part in
every system of national defense, does it not?
Dr. Sparre. Sporting powders. Senator?
Senator George. The small arms.
Dr. Sparre. I do not believe so. You might have in mind, pos-
sibly, pistol powder or rifle powder.
Senator George. Yes.
Dr. Sparre. To some extent.
Senator George. It is not ordinarily classed as a military powder,
is it?
Dr. Sparre. No.
Senator George. But, nevertheless, it can be used for military pur-
poses. That is the point I was getting at. You have given us the
information about the advantages of these agreements for the inter-
change of patents and secret processes to the du Pont Co., and while
the du Pont Co. may not have had so many valuable patents and
secret processes to give to the British Government, confining this
inquiry now to that, nevertheless the thing is reciprocal, of course.
Whatever the du Pont Co. did have that the Imperial desired, why
it could acquire it under these same patent agreements?
Dr. Sparre. Under the earlier agreement.
Senator George. Yes, broadly speaking, I say, and for a long time
prior to the World War, and down to a period after the World War.
to about 1925, these agreements in actual practice at least for the
interchange of patents and secret processes were applied alike to
the military and to the nonmilitary products?
Dr. Sparre. Yes, sir.
Senator Geoige. About January 1925 or some time in 1925, when
the first agreement which we have been discussing here was made,
and subsequently in 1929 an effort was made by the du Pont and
1106 MUNITIOiSrS INDUSTRY
Imperial companies to separate their grants and agreements to
grant licenses for patents and secret processes and so forth, and
to confine the interchange of patents, both exclusive and nonex-
clusive uses, to the nonmilitary or what we may broadly refer to
as the peace-time products or products used primarily in peace
times and primarily for peaceful purposes. Is not that true?
Dr. Sparre. That is right.
Senator Geokge. Now, Doctor, we would not want to confuse still
another phase, an important phase of activity of the two companies,
that is, of the Imperial, with its world-wide, far-flung selling
and distributing agencies, with both producing, distributing, and
selling agencies, and du Font's. Their agreement with respect
to the product itself has generally, and up to now does, cover both
the military as well as the nonmilitary products. I am not speaking
of the inventions now and the processes but of the sales agreement.
Dr. Sparre. Sales only.
Senator George. Sales only. It does of course cover both the
military and nonmilitary?
Dr. Sparre. Yes, sir.
Senator George. Explosives and powders, all types of powders,
etcetera, used for military purposes?
Dr. Sparre. Yes, sir.
Senator George. One relates of course to the product and sale of
that product and the other, these two latter agreements which you
have explained, relate to the exchange of patents and patent rights
and processes.
Dr. Sparre. That is right.
Mr. Lammot du Pont. Senator, would it not be interesting to
you to hear a similar statement from Major Casey as to this joint-
agency agreement which we had up before lunch ?
Senator George. Mr. du Pont, we would be glad to cover that. I
am almost through and maybe some of the other Senators may have
a little questioning.
Mr. Lammot du Pont. I thought Dr. Sparre's statement was very
illuminating, and I thought Major Casey's statement would be
equally illuminating.
Senator George. There are some questions on this and he will
have an opportunity later.
Senator Bone. Doctor Sparre, there have been repeated statements
in your testimony and in the record as to patents and processes.
Will you tell the committee how you protect yourself on your patents
as they are developed, on these processes as they are developed?
Let me go a step further and ask j^ou when they are developed if
thej^ are protected by patents from the Patent Office of the United
States.
Dr. Sparre. We alw^ays protect ourselves as soon as practicable
by application for patents.
Senator Bone. I naturally presumed that your company, with
its world-wide experience, would be advised of the necessity of
protecting its patents elsewhere as well.
Dr. Sparre. That is right.
Senator Bone. Where there are recording statutes which permit
the recording of patents.
MUNITION'S INDUSTRY 1107
Dr. Sparre. You are ric:ht, Senator, but we have one year under
the international convention, so that we do not have to file appli-
cations right away.
Senator Bone. That field or avenue of protection is offered by
treaty arrangements between this Government and other govern-
ments?
Dr. Sparre. That is right.
Senator Bone. So that the right exists through treaty as well as
through filing in the different countries and you take advantage of
these in handling your products?
Dr. Sparre. That is right.
Senator Bone. That is to say, as soon as a process or combination
of elements is found which serves your purpose, and proves to be
something new and useful, you take steps to protect yourself and
your company by filing a patent?
Dr. Sparre. That is right.
Senator Bone. Claiming a patent right?
Dr. Sparre. That is right.
Senator Bone. You stated a moment ago in your statement that
during the war these patents were forgotten. What did you mean
by that ?
Dr. Sparre. Certain patents were suspended.
Senator Bone. What do you mean by " suspended " ?
Dr. Sparre. For instance, it was impossible for American com-
panies or American inventors to apply for patents in a large number
of countries.
Senator Bone. I understand that, but is that what you nieant
when 5^ou said they were forgotten? Did you mean that you did
not make an}^ effort to file them?
Dr. Sparre. We did in this country. In this country we could
file patents.
Senator Bone. You could have filed them in France, could vou
not?
Dr. Sparre. In certain countries.
Senator Bone. And in the Allied countries during the war j^ou
could, could you not?
Dr. Sparre. They urged the manufacture of explosives, and while
we would file applications for patents and would take out patents,
our chief effort during the war was to manufacture the quantities
required. Furthermore, there was a great deal of exchange of
information at the request of the United States Government.
Senator Bone. Of course when you allocated territory under one
of these agreements, which of course is dividing the territory of the
world for sales purposes under patents
Dr. Sparre. Oh, you are absolutely wrong there, Senator. There
was no allocation of territory at all. If you will read the agree-
ment, Senator, you will see that what it says is that each of the
companies is given the opportunity to examine information placed
before it in order to determine whether or not it desires to acquire,
for a consideration, a license to operate under certain patents and
processes offered. If the company does not take that license, then
there is no change in the situation. It has no effect on sales at all.
S.-JSTS— 34— PT 5 7
1108 MUNITIONS INDUSTRY
Senator Bone. Perhaps you misunderstood my question. Do we
understand, or are Ave to understand that if you make a sales arrange-
ment with some organization covering a certain territory, that j^ou
would go in there and sell also, or would you permit them to have
the exclusive right to sell in that territory under your patents ?
Dr. Sparre. That is right. For instance, when we sold the license
for Duco patents and processes to England, then of course the British
Duco Co. was given the license, and the du Pont Co. obtained as
consideration for such license a large interest in the company, in the
British comj^any, Nobel Finishes. That was an outright sale.
Senator Bone. Did that extend to them the exclusive privilege of
selling in that territory without competition from you?
Dr. Sparre. That is right.
Senator Bone. That is what I am getting at. I do not know
whether I made my question plain.
Dr. Sparre. They have the right on account of the license under
the patents. In other words, the statutes, as regards patents and
processes, are very definite.
Senator Bone. The statutes may be different
Dr. Sparre. I say very definite.
Senator Bone. Very definite?
Dr. Sparre. In other words, if a man acquires a separate license
under a patent, he has acquired property and his government guar-
antees him that nobody can infringe on that property. He is operat-
ing under government protection.
Senator Bone. In other words, he acquires a property right in that
patent?
Dr. Sparre. That is right.
Senator Bone. As long as nations protect property rights, he is
protected under it, if he paid valuable considerations for it?
Dr. Sparre. That is the universal patent law.
Senator Bone. We all know that.
Senator Clark. Of course as to patents you took out before the
war, you have no protection from a hostile country during the war?
Dr. Sparre. That is what I had reference to.
Sentor Clark. If you had patents in Germany and the United
States Government got into war with Germany, they had no effect?
Dr. Sparre. That is right.
Senator Clark. And the United States did the same thing?
Dr. Sparre. Yes, sir.
Senator Clark. And every country therefore was put in posses-
sion of the processes of the company that were known in the other
country ?
Dr. Sparre. That is right.
Senator Bone. Doctor, the very thing we have been discussing,
this very protection of property rights, places at the disposition, if
need be, of every foreign power every single patent filed in their
patent office. Is not that right?
Dr. Sparre. Yes, sir.
Senator Bone. We had evidence by a witness that the German
submarine which sunk the Lusitania during the war was built under
American patents. That was done pursuant to the common practice
of filing patents in foreign countries, including Germany among
other countries.
MUNITIONS INDUSTRY 1109
Dr. Sparre. Senator, I do not think you express that correctly.
You must consider that a patent is a contract between the Govern-
ment and the inventor.
Senator Bone. I am not losing- sight of the fact that the patent
is filed in a foreign country, open to inspection.
Dr. Sparre. That is not the point at all.
Senator Bone. That is the point I am making.
Dr. Sparre. I do not think it has any importance so far as patents
are concerned.
Mr. Irenee du Pont. It seems to me you are talking at cross-
purposes, Senator.
Senator Bone. I hope I am making it plain because I am endeavor-
ing to do so. If I were a German draftsman or chemist, I could
go to the German National Patent Office, where your patents on
powder are filed, examine such patent, and know exactly how that
patent was made.
Dr. Sparre. You are mistaken there, Senator.
Senator Bone. Then you correct me. I am trying to get some
light on this.
Dr. Sparre. In the first place, a patent is really a contract between
the government and the inventor who makes that contract.
Senator Bone. You are assuming that I am assuming that the
man can use that patent. I am not at all. I am asking you if I
may go there, as a German, for instance, and look at that record
and know what that thing is made of ?
Dr. Sparre. That is not the point I was going to make.
Senator Bone. That is the point I am going to bring out. I think
we can understand each other correctly. I am going to ask the ques-
tion again so that j^ou can get it. If the du Pont Powder Co.
files a patent or a process for making certain types of explosives
in the German Patent Office, your company is protected in the use of
that patent in Germany. Is not that correct?
Dr. Sparre. You are absolutely mistaken. Senator. If you will
permit me, I will tell you where you are mistaken.
Senator Bone. Let us take it a step at a time.
Dr. Sparre. The contract between the United States Government
and an American inventor is that if the inventor will disclose the
invention to the public, then the United States Government will give
the inventor a 17-year monopoly. Therefore, in order to obtain this
17-year monopoly, the American inventor is compelled by the Gov-
ernment to make a full and complete disclosure of his invention.
The moment that patent is issued by the Government, that becomes
published all over and it becomes public knowledge in Germany.
Senator Bone. That is right.
Dr. Sparre. Even if there is no patent applied for in Germany.
Senator Bone. That is right. I quite agree with that.
Dr. Sparre. The United States Government is the one which
publishes that, not for the benefit of the Germans.
Senator Bone. That is right. That had been made clear in all the
hearings. Perhaps the question was unnecessary and it is so much
surplusage to say that it would be known in Germany, because the
Germans could come over here and look at it.
Dr. Sparre. He does not have to come over here.
1110 MUNITIONS INDUSTRY
Senator Bone. Of course he does not have to come over here, but
anybody can look at it. Once a patent is issued it becomes public
knowledge to the world, as far as knowledge of it is concerned ?
Dr. Sparre. That is right.
Senator Bone. It is not necessary to go outside this country to
know it, because the whole world knows it the moment you file it.
Dr. Sparre. Not the moment you file it, but the moment it is issued.
Senator Bone. The moment it is issued and becomes public
property.
The Chairman. Thank you, Doctor.
Mr. Irenee du Pont. Senator, am I to understand that you are
objecting to patenting things?
Senator Bone. Not at all. I am seeking to get some information.
Mr. Irenee du Pont. I do not see where it comes in.
Senator Bone. The patent laws have been on the statute books for
many years and I do not know of any challenge to them. When
we talk about secret processes and hiding things, we might as well
try to hide the Capitol from some one going down Pennsylvania
Avenue ; and that applies to patents in the Patent Office.
Mr. Irenee du Pont. That is not the distinction. The point which
we make is that everybody learns of a subject when it is patented
but that is taken into consideration before we arrive at a conclu-
sion to patent it, whether it would be wiser to keep it a secret process.
A great deal of information which might be kept as a secret process
might not get to the Patent Office at all.
Senator Bone. That is true.
Mr. Irenee du Pont. I take it your argument refers to the advisa-
bility of making known a secret in general. That is taken into
consideration before we apply for a patent.
Senator George. Referring to the Canadian Industries, Ltd., I
offer for the record, to be appropriately numbered as an exhibit, the
contract between the Imperial Chemical Industries, Ltd., the E. I.
du Pont de Nemours & Co., and Canadian Industries, Ltd.
(The document referred to was marked " Exhibit No. 475 " and is
included in the appendix on p. 1331.)
Senator George. Among other things, the contract provides for
the furnishing upon request and the granting of [reading] —
the exclusive right to practice any and all inventions now or during the term
of this agreement owned or controlled by I.C.I., and to make, use, and sell any
and all products embodying such inventions, within the Dominions of Canada
and Newfoundland ; subject, however,
to certain exceptions.
A similar provision is inserted with respect to the du Pont Co.
The safeguarding provision is there, however, that grants by
the Imperial shall confer no right on du Pont, and grants by dii
Pont shall confer no right upon Imperial to practice said inven-
tions, or to make, use, or sell the products embodying the same.
The Canadian Industries, Ltd., is the Canadian producing and
selling company, as I understand it, in which 90 percent of the
stock is owned, in substantially equal proportions by the Imperial
and the du Pont Co. Is that not right?
Mr. Lammot du Pont. Yes, sir.
MUNITIONS INDUSTRY 1111
Senator George. As illustrating the manner in whicli the joint
sales agency operates on products, to which reference has already
been made, I offer for the record a report which seems to be ad-
dressed to Maj. Casey by William N. Taylor of the Paris office, and
particularly call attention to that portion of it which is marked,
and ask that it be inserted in the record and appropriately numbered
as an exhibit.
(The document referred to was marked " Exhibit No. 476 " and is
included in the appendix on p. 1335.)
Mr. Lammot du Pont. Would this be an appropriate time for
Major Casey to make a statement regarding the joint offices?
Senator George. I think we will get to that in just a moment,
Mr. du Pont.
Mr. Lammot du Pont. Very w^ell.
ATTITUDE OF DU PONT TOWARD EMBARGOES AND LEGISLATION REGARDING
EMBARGOES
Senator George. Also as bearing upon the same question of joint
agency within territories described in the 1932 agreement between
the Imperial and du Pont companies, I offer a copy of a letter
from Mr. N. E. Bates, Jr., the South American agent of du Pont,
but the joint agent of both the du Pont and the Imperial companies,
addressed to Imperial Chemical Industries, Ltd., under date of
June 11, 1934, and draw particular attention to the paragraph of
the letter which refers to the embargo or the restriction of sales
by American munition makers to certain South American countries,
Paraguay in this case.
(The letter referred to was marked " Exhibit No. 477 " and is
included in the appendix on p. 1337.)
Senator George. That letter states in part as follows :
Although the inquiry distinctly states —
referring to an inquiry for prices upon military powders and
explosives —
Although the inquiry distinctly states that prices are wanted c.i.f. Monte-
video, Ave suspect that the material is for Paraguay and since we wish to
cooperate with our Government in observing the embargo, we deemed it best
not to quote.
A subsequent report by Mr. Bates for the South American agency
confirms the same statement and discloses that the joint agency asks
that the Imperial quote directly on this material.
The cablegram here to the Imperial asks that it make quotations
upon this war material, this munitions, because of the embargo and
because of the desire of one of the principals represented by the
joint agent to meet the obligations of the Government and avoid
any breach of the embargo. That is also in the record.
(The table referred to was marked " Exhibit No. 478 " and is
included in the appendix on p. 1338.)
Senator Bone. It might be pertinent to inquire if the agent in
this case, living strictly up to the obligation which would be due to
his American principal, nevertheless finds himself in an embarrass-
ing position of having the spirit defeat the very purpose of the
1112 MUNITIONS INDUSTRY
embargo by having the other principal actually quote terms upon
the Avar material, military explosives, for one of the countries which
the United States desired to exclude shipments from, so far as this
country is concerned.
Mr. Lammot du Pont. That is the usual embarrassment, Senator,
of anyone who acts as an agent for two people.
Senator George. That is the usual embarrassment, and, of course,
we are familiar with the fact that many joint agents are found,
particularly in European practices, and in South American practices,
for that matter, but it is an embarrassment that is, I think, disclosed
by this particular transaction. While the agent is living strictly up
to the requirements
Mr. Pierre S. du Pont. Senator, on that very question as to the
intent of an embargo, if the intent is to prevent the United States
from interfering with the affairs of other countries — it is immaterial
whether the British will quote the South American countries or not.
Senator George. That is what I mean, Mr. du Pont.
Mr. Pierre S. du Pont. But if the endeavor is to interfere with
foreign nations, to prevent them getting supplies which they could
get from other people, the point of view is quite as vou have put it,
I think.
Senator George. I submit for the record, as the last exhibit which
I desire to offer, a letter from Sir Harry McGowan to Mr. Lammot
du Pont, I presume, because it is addressed " My Dear Lammot ",
showing the continued, long-continued and close relations between the
Imperial and the du Pont Co., and also making specific reference to
recent developments in the United States.
The letter referred to was marked " Exhibit No. 479 " and is as
follows :
Exhibit No. 479
[Copy : Mr. W. R. Swint]
Imperial Chemical House,
Luiidmi, S.W. 1. 29th May 1933.
My Del^r Lammot: I liave been following with interest and no little satisfac-
tion the improvement in industrial conditions obtaining in the States as a result
of the polic.v introduced by your new President. The improved stock markets
and the favorable developments in both business and political fields must en-
courage in you all that confidence which has, not unnaturally, been lacking
during past years.
Particularly am I interested in the press announcements of prospective legis-
lative action, which should give incentive to international industry and. notably,
the suggestions of lower tariffs and modifications of the Sherman antitrust
laws. In these I can see hope for real progression and, as an early outcome,
improved commodity prices and regained prosperity.
The growing realization of the necessity to modify that accunnilation of trade
restrictions and barriers which the countries of the world have built up — Gt,
Britain included — either on the pleas of self-preservation or in a mistaken
endeavor to mitigate the effects of the depression on themselves, should eventu-
ally bring about altered trading conditions and freedom from restrictions both
in Europe and in the States, where public utterances and announcements indi-
cate a readiness to take the initiative. Whatever the changes may be. and
however they may affect our individual concerns, on one thing you may rely,
they will not be allowed to disturb the harmony of the relations between our
two concerns, which have so long and so well withstood the passage of time and
its many fiscal variations, and I have warned my people that no fiscal altera-
tions in the U.S.A. nmst be allowed to affect the interpretation to be placed on
our patents and processes agreement and the working out of the cooperation for
MUNITIONS INDUSTRY 1113
which that agreement provides. I feel sure you will approve of what I have
done. With a large organization .sucli as we have, I find it is a good thing to
issue such warnings from time to time — one went out at the time of the Ottawa
conference — so that everything possible is done to ensure that no prospective
political or legislative action on tlie part of governments is permitted to in-
fluence between Du Pont and I.C.I.
I hope to be able to visit New York again towards the end of the year, by
which time further progress in economic stabilization may have been made. We
shall then have an opportunity of talking over the whole position to determine
whether any developments call for any alteration in the written document cov-
ering the relationship of our companies. I am sure no change will be needed to
the spirit in which our respective staffs regard the association.
With kind regards,
Yours sincerely,
(s) H. McGowAN'.
Senator George. I will quote that part of the letter which, in the
opinion of the committee, should be included in the record.
[Reading :]
The growing realization of the necessity to modify that accumulation of trade
restrictions and barriers which the countries of the world have built up — Gt.
Britain included — either on the pleas of self-preservation or in a mistaken
endeavor to mitigate the effects of the depression on themselves —
referring to general economic depression —
should eventually bring about altered ti-ading conditions and freedom from
restrictions both in Europe and in the States, where public utterances and
announcements indicate a readiness to take the initiative.
The further reference in the letter is to the relaxation of all trade
restrictions, such as the antitrust laws, Sherman antitrust laws, and
other trade restrictions, and further reference which has simply a
bearing upon the cordial and close relationship of the two companies.
[Reading :]
I feel sure you will approve of what I have done.
That is a letter to the agents and representatives of the Imperial.
With a large organization such as we have, I find it is a good thing to issue
puch warnings from time to time — one went out at the time of the Ottawa
Conference
That conference, we assume, relates to the so-called " Empire trade
agreement " between the various members of the British common-
wealths. [Continuing reading] :
So that everything possible is done to ensure that no prospective political or
legislative action on the part of the Governments is permitted to influence rela-
tions between du Pont and I.C.I.
Then this last sentence [reading] :
I am sure no change will be needed to the spirit in which our respective
staffs regard the association
referring to some possible additional agreements that might be found
advisable to reduce to writing.
Senator Vandenberg. Mr. Chairman, I would like to get just a
little bit more information about the situation in the Argentine with
respect to the apparent nullification of the embargo. Here is another
letter from Mr. N. E. Bates, Jr., signed for the du Pont Co. and
dated June 11, 1934, and addressed to the Imperial Chemical Indus-
tries. I will read one paragraph :
We replied to the above cablegram —
1114 MUNITIONS INDUSTRY
the cablegram being an inquiry apparently from Paraguay —
asking you —
that is, the I.C.I.—
to inform Ferriera —
evidently the spokesman for Paraguay —
that we could not quote because of tlie embargo on munitions and military
explosives promulgated by President Roosevelt on Paraguay and Bolivia.
Since there is no embargo obtaining in England, we telegraphed I.C.I. , Lon-
don, to quote to you direct, so that you in turn may quote Ferriera —
which I assume means Paraguay.
Is Mr. Bates or the du Pont Co. under any contractual obligation
to notify I.C.I, of an inquiry of that character ?
Mr. Lammot du Pont. I think Mr. Bates is, because he was one of
those joint agents.
Senator Vandeniberg. But Mr. Bates signs this letter with the
E. I. du Pont de Nemours & Co.'s signature. Is your company under
any obligation to do that?
Mr. Lammot du Pont. I think not. He signed that letter with
one of his official titles.
Senator Vandenberg. Does not that put your company in a very
equivocal position, to be faithfully observing the embargo so far as
its own shipments are concerned and yet immediately communicating
with I.C.I, so that it can achieve the same net results ?
Mr. Lammot du Pont. That, as I said before, is the embarrassment
of any joint agent. He must follow the rules of one of his principals
and also follow the rules of the other principal.
Senator Vandenberg. But this communication is signed by your
company, Mr. du Pont.
Mr. Lammot du Pont. Tliat is a very difficult proposition to de-
termine, as to how Mr. Bates should have signed that letter. He was
writing to one principal. The act he disclosed was the act of the
agent of another principal. Do you get the point?
Senator Vandenberg. I do; and at the same time the exhibit in-
dicates a pious observance of the embargo as a patriotic American
upon one hand and then an immediate nullification of that piety
on the other hand.
Mr. Lammot du Pont. But he did not nullify the thought of
the embargo, as an American agent.
Senator Vandenberg. He nullifies the effect of the embargo.
Mr. Lammot du Pont. But not as an American agent.
Mr. Casey. Senator Vandenberg, at the time that Bates took that
action, he suspected, he was not sure. Therefore, he really felt he
was leaning over backward to observe the provisions of the embargo,
because he suspected it might not be intended for Montevideo. Now,
he did not trace it down, because that would have taken time and
he was not in a position to do so. He was in this country. But he
merely suspected that it might have been intended for Montevideo,
although there was no restriction about shipping to Montevideo.
Mr. Raushenbush. Senator Vandenberg, the document you quote
from was June 11. I have a report of Mr. Bates of July 9, fully
MUNITIONS INDUSTRY 1115
a month after that, with a copy sent to the Imperial Chemical
Industries, Ltd., in which, under a head of Paraguay he says:
" Our agent asked for prices on 200 kilograms picric acid, 2,000 Ivilograms
TNT, 80 kilograms ballistite. I.C.I. London quoted direct to I.C.I. Buenos
Aires."
That is a month later.
Senator Bone. Mr. Lammot du Pont, who is McGowan? What
relation does he occupy to the Imperial Chemical Industries in
London ?
Mr. Lammot du Pont. I understand he is chairman of the Im-
perial Chemical Industries.
Senator Geokge. Chairman and managing director. That has
been put in the record. Senator.
Senator Bone. Can you advise us whether or not since this letter
was written in May 1933 there has been any legislative action either
in Great Britain or in this country that influenced the relations of
the du Pont Co. with the I.C.I. ?
Mr. Lammot du Pont. Not that I know of.
Senator Bone. Do you know what Mr. McGowan meant in using
this language?
* * * I find it is a good thing to issue such warnings from time to
time * * *
What sort of warnings did he have in mind? Did he have warn-
ings to legislative bodies?
Mr. Lammot du Pont. Well, I do not know what was in Sir
Harry's mind.
Senator Bone. You know him fairly well. How would you in-
terpret that statement ; warnings to whom ?
Mr. Lammot du Pont. To his employees.
Senator Bone. I know ; but he is referring to some legislative ac-
tion. Whom would he warn, the legislators?
Mr. Lammot du Pont. No: he would warp his employees not to
get too excited about any legislation that might be passed.
Senator Bone. He says here:
* * * one went out at the time of the Ottawa Conference * * *
What sort of warning was that?
Mr. Lammot du Pont. I presume that was a warning to employees
not to get excited about anything that they might do at the
conference.
Senator Bone. He continues in his letter :
* * ^' so that everything possible is done to insure that no prospective
political or legislative action on the part of governments is permitted to
influence relations between du Pont and I.C.I.
I was just wondering about this. It would not do any good to issue
p warning to employees. They would not have any influence on the
Ottawa Conference or the Washington Government, for instance.
Mr. Lammot du Pont. It would have an influence on what the
employees might do. I think that was whom he intended to warn.
Senator Bone. What do you think the employees could do to
influence legislation
Mr. Lammot du Pont. Nothing.
1116 MUNITIONS INDUSTRY
Senator Bone. Or to prevent legislation?
Mr. Lam MOT du Pont. Nothing.
Senator Bone. Or encourage legislation?
Mr. Lammot du Pont. Nothing. He was warning them as to the
effect of legislation.
Senator Bone. That does not seem to be the implication of the
letter.
Mr. Lammot du Pont. That was the way I read it. Of course,
as I say, I do not know what was in Sir Harry's mind when he
dictated the letter.
Senator, I would like to inquire whether the committee has read
my reply to that letter of Sir Harry's.
Senator Bone. I am not aware.
Mr. Lammot du Pont. They have a copy of it.
Senator Bone. Mr. McGowan seemed to be very anxious that the
antitrust laws should be modified or eliminated. Can you tell us why
he would be anxious to have that done? So that they could form a
trust or monopoly?
Mr. Lammot du Pont. I do not think that he was so anxious that
it should be done.
Senator Bone. He says in this letter :
The growing realization of tlie necessity to modify that accumulation of
trade restrictions and barriers * * *
The Chairman. Senator Bone, I suggest that you read the entire
letter from the beginning.
Senator Bone. The letter has been read.
The Chairman. I understand, but maybe we could gather a better
impression of what the purport of it is, if it was all read at one time.
Senator Bone. He also says in this letter:
Whatever the changes may be, and however they may affect our individual
concerns, on one thing you may rely, * * *
I believe Mr. Raushenbush has read this letter?
Mr. Lammot du Pont. Senator Nye, would it be appropriate to
ask that the reply to that letter of Sir Harry's be put into the record ?
The Chairman. Certainly, it may be entered into the record if you
wish. Do we have a copy of it, Mr. Raushenbush ?
Mr. Raushenbush. I have not got it here. We probably can get it.
The Chairman. Will you please make a note that we do get it and
insert that reply at this point in the record ?
Senator Bone. I think the reply might well be inserted right after
this colloquy.
Mr. Lammot du Pont. We can read it in right now, if you wish.
The Chairman. The letter was not read. If you want to insert
your reply in the record, well and good. We are behind our schedule
now, and let us proceed with the examination. Senator Vanden-
berg, had you finished?
(The reply of Lammot du Pont to Sir Harry McGowan, dated
June 17, 1933, was marked " Exhibit No. 480." A letter from Lam-
mot du Pont to heads of departments and presidents of subsidiary
companies in reference to same subject was marked " Exhibit No.
480A." Both exhibits follow:)
MUNITIONS INDUSTRY 1117
Exhibit No. 480
I. C. I. General 1-19^3
Copy : Foreign Relations Dept.
Mr. George W. White.
June 17 1933.
Sir Harry McGowan,
Imperial Chemical House, MiUbanh, Westminster,
London, *?. W. 1, England.
Dear Sir Harry : Your letter of May 29th, commenting on the improvement
in the industrial conditions in this country, and referring to the prospective
changes in international relations, was duly received.
I am much interested in what you say and heartily approve your attitude
toward our patents and processes agreement and the relations between the two
companies. I feel the same ; namely, that our relations have been so happy
and have produced such satisfactory results that we should let nothing in the
way of international agreements interfere in any way with the progress we
have made, or may make in future. If any legislation or international agree-
ments are brought about which affect these I. C. I. — du Pont relations, I am
sure we will be able to adjust ourselves so as to get the continued benefit of our
agreement.
It is difficult to say how much of our improved business activity has been due
to governmental action either prospective or accomplished. We have cer-
tainly had a wonderful improvement in business, but when I look at our chart
showing the course of our sales from 1929 up until to date, it is perfectly ap-
parent to me that something happened about a year ago which changed the
trend materially. Since July 1932. every month, after allowing for the normal
seasonal variations, has shown either an improvement or holding steady as to
volume of business, except February and March 1933, when our volume suf-
fered a terrific slump, due, of course, to the financial situation which ended
in our " bank holiday." Since the bank holiday, the improvement has been
very much more rapid, so that I think the public, generally attribute the im-
provement in business to something which the Administration has done.
I am enthusiastic about many of Mr. Roosevelt's policies, but cannot go along
with him as to others, but I think the facts and figures show that the putting
into effect of his policies was not what made business " turn the corner."
Yours sincerely,
Lammot du Pont, President.
LduP/MD
Exhibit No. 480 A
I.C.I. General 1-19-33
Copy
WENDBa^L R. SWINT,
Wilmington, Deluxcarc, June 11, 1933.
To : Heads of departments and presidents of subsidiary companies.
From : L. Du Pont, president.
I have received recently a letter from Sir Harry McGowan, chairman of
Imperial Chemical Industries, in which he refers to the changes in national
policies and in international relations, both accomplished and prospective, I
would like to call to your attention a quotation from his letter :
" Whatever the changes may be, and however they may affect our indi-
vidual concerns, on one tiling you may rely, they will not be allowed to
disturlj the harmony of the relations between our two concerns, which have
so long and so well withstood the passage of time and its many fiscal varia-
tions, and I have warned my people that no fiscal variation in the U. S. A.
must be allowed to affect the interpretation to be placed on our Patents and
Processes Agreement, and the working out of the cooperation for which that
agreement provides."
I have replied to Sir Harry that I highly approve his sentiments, and ask
that you do all in your power to further this principle of friendly cooperation
under the Patents and Processes Agreement between I. C. I. and du Pont.
L. DU Pont, President.
LduP/MD
1118 MUNITIONS INDUSTRY
Senator Vandenberg. I am not yet quite clear about this embargo
matter. A month after that other communication was sent by Mr.
Bates to I.C.I., namely on July 9, 1934, again signing the name of
the clu Pont Co., Mr. Bates says :
Prices asked by Ferreira, who is our agent in Paraguay, but be happened to
be in Buenos Aires whence he cabled the inquiry, were quoted direct by
I.C.I. London to I.C.I. Buenos Aires for tlie reason that it was our desire to
aid our Government in maintaining the emliargo declared against Bolivia and
Paraguay. Although the inquiry came from Buenos Aires, we imagined ulti-
mate destination of the merchandise would be Paraguay. Hence our refusal
to quote.
In other words, there was a very definite anxiety to observe the
American embargo, so far as any shipments from America were
.concerned; is that correct?
Mr. Lammot du Pont. That is evident.
Senator Vandenberg. That is evident; yes. But I fail to see how
it reflects any desire to aid our Government in maintaining the em-
bargo, except as you consult the letter rather than the spirit of the
situation if immediately a way is pointed out to Paraguay to evade
the embargo. It does not seem to me that that action is in good
faith an effort to aid our Government in maintaining an embargo.
Is it?
Mr. Lammot du Pont. It is not an effort to aid the American
embargo, but it is a sincere effort to carry out his contractual obliga-
tions with his principal LCI.
Senator Vandenberg. That is his personal obligation; that is
not the obligation of your company?
Mr. Lammot du Pont. Certainly not.
Senator Vandenberg. Your company's name is appended to all
of the exhibits and I draw the conclusion then, that this is improp-
erly signed?
Mr. Lammot du Pont. Senator, when he addressed I.C.L, he did
not sign himself as the du Pont agent. He signed himself as the
I.C.L agent, I presume.
Senator Vandenberg. No, I beg your pardon, he signs himself
" For E. I. du Pont de Nemours and Co., N. E. Bates, Jr." That
is the fact in both instances.
Mr. Lammot du Pont. Perhaps he made an error. I should not
think he would do that.
Senator Vandenberg. Your company is not interested — let me put
this affirmatively — your company is interested in good faith efforts
to maintain embargoes when the President declares them?
Mr. Lammot du Pont. I said so before. We are.
Senator Vandenberg. And you would not countenance any back-
door evasion of the embargo in the name of your company ?
Mr. Lammot du Pont. No.
Mr. Pierre S. du Pont. Senator, may I ask whether your con-
ception of an embargo is that our agents are obliged to interfere
with a friendly nation receiving supplies from abroad?
Senator Vandenberg. I do not think it is a question of inter-
ference with a friendly nation. I think it is a question of an Ameri-
can citizen using his information to defeat a provision of an Ameri-
can public policy.
MUNITIONS INDUSTEY 1119
Mr. Lammot du Pont. He did not do that, Senator. The Ameri-
can public policy was not to stop munitions going from Great Britain
to either belligerent.
Senator Vandenbeeg. Was not the purpose of the American
embargo to stop munitions going to Bolivia and Paraguay?
Mr. Lammot du Pont. American munitions.
Senator Vandenberg. Why? For the purpose of penalizing
American munitions makers or for the purpose of encouraging peace ?
Mr. Lammot du Pont. I hardly think the American Govermnent
intended to interfere with Great Britain.
Senator Vandexberg. But the American Government, so far as
it could, wanted to stop the shipment of munitions into Paraguay and
Bolivia, did it not ?
Mr. Lammot du Pont. Wanted to stop American shipments.
Senator Vandenberg. That is all it could stop, surely — that is,
American shipments.
Mr. Lammot du Pont. Yes.
Senator Vandenberg. The reason it wanted to stop them was not
to penalize American manufacturers. It was to keep such munitions
as the American Government controlled out of that belligerent zone,
was it not?
Mr. Lammot du Pont. Well, I would suspect that that was the
reason ; I do not know.
Senator Vandenberg. Obviously. Yet, Mr, Bates, writing in the
name of your company scrupulously observes that prescription ; but
while he does that with his right hand, his left hand is notifying
the LCI. that some munitions orders are awaiting in Bolivia and
Paraguay.
Mr. Lammot du Pont. I see your point, and it w^as due to his
double capacity.
Senator Vandenberg. Do you not think that that is a very dubious
sort of an arrangement ?
Mr. Lammot du Pont. It turned out to be dubious. But, of course,
ihat arrangement was made long before the embargo.
Mr. Pierre S. du Pont. Surely you do not take the position that
the intent of the embargo was to interfere with these countries
obtaining munitions ?
Senator Vandenberg. Yes; insofar as we could control the situa-
tion. Of course, we could not control the situation beyond our own
borders. I take the position that the very fine loyalty which your
company exercises in respect to embargoes— and I mean that sin-
cerely— is blemished by the appearance of the signature of your com-
pany upon a notification to I.C.I, as a means of avoiding the
American purpose.
Mr. Pierre S. du Pont. The American purpose, so far as we have
any conception of it was to see that America did not permit one side
of a contest to receive munitions against the other side. But it
was not to interfere with their rights to declare and pursue their-
war, surely. We have no rights there; at least I hope our Govern-
ment is not going that far.
Senator Vandenberg. Certainly, we are not going that far. Bui
the obvious desire of the President, when he promulgates an em-
bargo, is to immunize that area against war materials. He cannot
have any other purpose.
1120 MUNITIONS INDUSTEY
Mr. Pierre S. du Pont. I sincerely hope he has not that purpose.
Senator Vandenberg. I think that is precisely his purpose, inso-
far as it lies within his legitimate power. I am simply inquiring
whether it does not become highly equivocal for an American citizen^
to put your company in a position of very faithfully observing the
American embargo and yet pointing out a way to achieve the same
net result so far as the potential purchaser is concerned ?
Mr. Pierre S. du Pont. If the purpose of the embargo is the one
you represent, I hope that we will be instructed that no American
citizen should in any way assist either of the belligerents in ob-
taining supplies from anywhere.
Senator Vandenberg. Well, I think that was his obligation.
Mr. Irenee du Pont. It seems to me, if this letter had been signed
I.C.I. , N. E. Bates, you would have taken no exception to it. Here
is a man who, in his dual capacity, probably signs 99 percent of his
letters this way. I do not see how this can be taken as a reflection
on the du Pont Co. Here is a joint agent. In this case he is an
agent of the I.C.I, and is writing to his principal. He happens to
sign our name over his signature. Certainly it is not the desire of
anybody in Wilmington, Del., that this letter be written. It never
came here. I never saw it until this minute. It is pretty hard for
a man who signs a great many letters to be perfectly sure that he is
never making an error in just how he signs his name.
In other words, I think if this letter had been written and signed
" I.C.I.", you would not have criticized it.
Senator Vandenberg. I think that if this letter had been signed
" I.C.I." and had made no reference to the American embargo
Mr. Irenee du Pont. He would have had to mention the American
embargo. He would have written his principal and said '' The
Americans will not quote on this; here is your opportunity." He
would have done that, and you would have taken no exception to it.
Senator Vandenberg. I would have had no objection, except that
I think Mr. Bates, as an American citizen, ought not to be taking
upon himself this dual relationship in respect of matters of public
policy.
Mr. Irenee du Pont. If he had not been there, they would have
had another agent at liigher expense, who would have done the
same thing.
Senator Vandenberg. That is not our business. Patriotism is not
a matter of pay rolls. I object to the fact that he is insisting upon
his desire to aid our Government in maintaining an embargo against
Bolivia and Paraguay and at the same time is proceeding to
operate as indicated. If he had signed the letter " I.C.I. " I concede
that the situation would be far diiferent.
I agree with you, sir; that your company is not to be castigated
for the improper use of its signature by an agent 5,000 miles away.
Senator Clark. May I direct attention to the fact that the con-
text of this letter as well as the signature would indicate that he
was writing as an agent of the du Pont Co. In addition to being
signed " For E. I. du Pont de Nemours & Co.", the letter contains
this language :
We replied to tlu> above cablegram as per copy attached asking- you to inform
Ferreira that we could not quote because of the embargo on munitions and
military explosives promulgated by President Roosevelt on Paraguay and
MUNITIONS INDUSTRY 1121
Bolivia. Since there is no embargo obtaining in England, we telegraphed I.C.I.
London to quote to you direct so that you in turn may qviote Ferreira.
The use of the term " we " and the fact that the language is used,
" we could not quote because of the embargo ", clearly indicates that
the letter was written in his capacity as an agent of du Pont.
Mr. Irenee du Pont. Your point is very well taken, Senator.
There is no question that this man was a little bit muddled because
of his relationship in serving two masters.
Senator Clark. That may be. But that goes back to the point
made by Senator Vandenberg of the impropriety of such an
arrangement.
Mr. Irenee du Pont. He may have been overzealous in working
for the company.
Senator George. To say the least, he was not quite frank when he
says in one breath that he wished as an American to observe the
embargo, and at the same time he asks Imperial Chemical Industries
to make quotations on these materials. In other words, he was not
dealing quite frankly in the situation.
Mr. Irenee du Po>t. I think you are quite right. If he had as
much brains as you have he would not have retained a copy of the
letter at all.
Mr. Casey. Senator Vandenberg, after all is not the answer that
unless all nations agree to an embargo, the main object of the
embargo is not accomplished?
Senator Vandenberg. I entirely agree ; that is perfectly true. But
if the world is full of Mr. Bateses who care more about the letter than
the spirit of agreements, that is undoubtedly true.
Senator Bone. Might it not be considered another case of the voice
of Jacob but the hand of Esau ?
Mr. Irenee du Pont. I am not up on that part of the Bible.
You will have to go a little further.
Senator Bone. I do not know that the committee can qualify as
biblical scholars. I do not even know that I have the quotation
right.
I am going to ask one more question. This does not apply to your
company at all; I want you to understand that, in making your
answer. We have had a lot of testimony in this hearing thus far
indicating very clearly that munitions — not powder of your type par-
ticularly— but munitions of war have been shipped into South Amer-
ica and then transshipped into belligerent territory. That is quite
possible, is it not? In other words, it would be quite possible to ship
munitions of war of any kind into a South American country and
from there transship them into a belligerent territory ?
Mr. Lammot du Pont. I should see no reason why it could not be
done. I have not been there. I suppose it could be done.
Senator Bone. As a practical thing — this matter does not apply
to your company — but as far as the practical application of it is
concerned, that would be possible?
Mr. La ^t MOT du Pont. I presume so.
Mr. Irenee du Pont. Bootlegging is a well-known art.
Senator Bone. That is right. It might have been a sort of inter-
national bootlegging transaction.
Mr. Raushenbush. May I ask this question? Who pays Mr.
Bates' salary?
]122 MUNITIONS INDUSTKY
Mr. Lammot du Pont. The dii Pont Co. does.
Mr. Raushenbush. The du Pont Co. pays Mr. Bates' salary?
Mr. Lammot du Pont. Yes.
Mr. Raushenbush. I would like to ask one more question. I did
not quite understand earlier in the testimony about the commission
arrangement between I.C.I, and du Pont. Does du Pont get any
kind of commission from the business which the agent whose full
salary you pay, Mr. Bates, gets in South America and turns over
to I.C.L? Does du Pont get any commission on that?
Mr. Lammot du Pont. I think the contract will determine that
definitely. My impression is that du Pont does get a commission.
Mr. Raushenbush. The du Pont Co. would have gotten a com-
mission, then, or did get a commission, if this business went through
to Paraguay?
Mr. Lammot du Pont. I presume so.
Mr. Raushenbush. If that is the case, I want to ask you a ques-
tion about a letter that was addressed to President Roosevelt and
signed by the president of the company on June 6, 1934, in which
there is a guarded statement [reading] :
In view of the great amount of publicity recently given to the conflict in
the Grand Chaco and of congressional action just taken relative to sales of
arms and munitions of war to the countries engaged in this conflict, it is
perhaps well to give here a statement of sales made by the Remington Co.
to Bolivia fi'om the time du Pont acquired its interest in Remington to
date. These sales have amounted to 20,700,000 rounds of rifle cartridges with
a sales value of $373,100. During this same period Remington has made
no sales to Paraguay. The du Pont Co. has made no sales of propellant powder
or military explosives, or other muntions, to either Bolivia or Paraguay for a
number of years.
In view of the testimony just brought out, that is not quite the
fullest statement that would cover the situation, is it?
Mr. Irenee du Pont. What is the date of this letter?
Mr. Raushenbush. June 6, 1934. The letter is before Mr. du
Pont now.
Mr. Irenee du Pont. What is the date of Mr. Bates' letter ?
Mr. Raushenbush. There are several of those. The first of them
began on July 7, I think
Senator George. There is a cablegram dated June 7, 1934, and a
letter of the same date.
Senator Vandenberg. The first one I read was June 11, and the
second one was July 9.
Mr. Raushenbush. We have here a cablegram, which is " Exhibit
No. 478 ", dated June 7, 1934, which says [reading] :
Advise Ferreira cannot quote owing to embargo. I.C.I. London will quote
direct to you.
My only question was, that this was not quite as full and frank
a statement to the President of a country on such a situation, as could
have been made.
Mr. Lammot du Pont. I think it was as full as could be placed in
a letter of that kind, Mr. Raushenbush. There were a number of
other things that that letter does not touch upon that of necessity
had to be left out. It could not cover the whole history of the com-
pany.
MUNITIONS INDUSTEY 1123
Mr. Raushenbush. This may be just a personal interpretation,
but it seemed to me that you were trying — I do not want to read
words into your mind — but you were trying to give the impression
that the company was not really interested in the Bolivia-Paraguayan
situation at a time when you had an agent down there who was
actively interested, perhaps not as much for American companies as
for the British company in that case.
Mr, Lammot du Pont. No, sir; I think you have misinterpreted
the letter. We were trying to give the impression that we were living
up to the embargo.
Mr. Raushenbush. You were trying to give the impression that
you were living up to the embargo?
Mr. Lammot du Pont. Yes; and I think we did live up to it, as
far as we were able to.
Mr. Raushenbush. And yet you pay the salary of the man in
full, do you not?
Mr. Lammot du Pont. Yes.
Mr. Raushenbush. I.C.I, does not pay it?
Mr. Lammot du Pont. No. There are other agents that I.C.I.
pays in full whom we do not pay.
Mr. Raushenbush. You are not referring to Mr. Taylor in Paris ?
Mr. Lammot du Pont. No.
Mr. Raushenbush. That is a 50-50 arrangement?
Mr. Lammot du Pont. Yes.
Senator Vandenberg. May I ask any of these gentlemen whether
they have ever had the experience of declining an order because of
State Department policy and a faithful desire to cooperate and then
have discovered that some paraphrase of the order was filled from
other sources in the United States, notably from second-hand stocks ?
Have you ever had any information about the sale of second-hand
stocks in the United States upon orders which you had declined to
fill because of State Department policy?
Mr. Lammot du Pont. I do not know of any such case, Senator.
But this military business is a very small part of our total business.
I do not pay very much attention to it individually. May I ask
Major Casey to answer that?
Senator Vandenberg. Yes.
Mr. Casey. Perhaps I can answer it in this way. Senator : I can-
not give you any illustration of where another American manufac-
turer has supplied material against an embargo where we know about
it, for the reason that we do not supply finished rounds of ammuni-
tion. "We only supply a component. I can give you, though, an
illustration of how we handled one particular case. I would prefer
not to mention the name of the country. But it was a case which
was a rather delicate one, within the last year we will say, in which
an order was sent to us. It was to be a c.i.f . order ; that is, I mean,
delivered in the country. We promptly took it up with the Military
and Naval Intelligence. There was no embargo, no way of having
an embargo. It was unnecessary to take it up with the State Depart-
ment, because if there were an embargo, then they would act. This
was a question whether there was a desire or not; the people we
spoke to said, " Do everything you can to delay that." So we re-
83876— 34— PT 5 8
1124 MUNITIONS INDUSTRY
fused to quote c.i.f . They said, " Do not bring us into it." Now, if
you feel I should not bring this out, I will keep quiet.
Senator Vandenberg. No, go ahead, because I wanted to ask you
about it. I know what you are talking about.
Mr. Casey. They came back and said they could make their own
transportation arrangements from New York. "We said " We will
not quote New York. If you want this material you have got to
take it at our plant." We so delayed the thing that we were suc-
cessful in preventing their getting the material, without involving
anybody.
Senator Vandenberg. Were you advised in that connection that
equivalent material was or could be obtained from an island in the
Hudson River?
Mr. Casey. Were w^e advised?
Senator Vandenberg. Yes, sir.
Mr. Casey. No; I do not think the material could have been ob-
tained from an island in the Hudson River. They did not have
the material. I know the island you refer to.
Senator Vandenberg. Do the operators upon that island, as far as
you know, have any foreign trade?
Mr. Casey. That I could not tell you. They have been in busi-
ness for a great many years and I imagine they still continue to do
a certain amount of foreign trade when they have material available
that suits.
Senator Vandenberg. You do not know whether in the par-
ticular instance we are discussing your refusal to deal was followed
by a willingness to deal on the part of anybody else ?
Mr. Casey. I did not hear of anj^thing. The fact of the matter
was the material they were after was material that we at that time
were the only ones in the country that could supply it. So we felt
reasonably sure, if we cooperated with the request that we got, it
would serve the very purpose they were after.
Senator Vandenberg. You evidently did cooperate, and I was
wondering if the price you paid was to see the business go into this
particular outfit from a bootleg source?
Mr. Casey. Whether what?
Senator Vandenberg. Whether the price paid was to see whether
the order was filled from an American bootleg source?
Mr. Casey. How could they do it, they didn't have the materials
and they would have to come to us for the materials. If we had any
suspicion at all we would not furnish it. AVe would not sell to any
concern in this country unless we knew the ultimate destination of
the material.
Senator Vandenberg. That does not reflect on your company at all,
but it is a compliment to your company. I am trying to discover
whether after you lived up to your purpose of cooperating with the
Government you have ever found the Government circumventing
that by shipments from other sources in the United States ?
Mr. Casey. We have heard of it in an indirect way that sometimes
that material got through, but who it came from or how, I could not
tell you.
Senator Vandenberg. Are there sources in the United States which
are not considered to be, let us say, standard sources?
MUNITIONS INDUSTRY 1125
Mr. Casey, I presume there is a certain amount of scrap material
around in this country which some people might be able to pick up,
but where it is I do not know.
Senator Vandenberg. It is your impression that there is a certain
amount of that traffic out of the United States.
Mr. Casey. I think there is, but I have no way of being sure in
making that statement.
The Chairman. Senator Pope, you may proceed.
Senator Pope. Mr. du Pont, following this designation of your
attitude in 1934 with reference to the embargo act, what would you
say was the attitude of your companj^ as to previous bills or resolu-
tions introduced in Congress providing for embargoes on war
materials?
Mr. Pierre du Pont. I was not aware there were any such. I have
not been very active in that department of the business, and I do not
know of any.
Mr. Lammot du Pont. Senator, I do not know of any.
Senator Pope. You were not aware of any such resolutions intro-
duced in Congress, the Fish resolution, for instance, in 1932?
Mr. Lammot du Pont. I do not recall it.
Senator Pope. Mr. Casey, how about you?
Mr. Casey. What was it?
Senator Pope. The Fish resolution. No. 282.
Mr. Casey. Wasn't the Fish resolution in connection with the
endeavor to establish a world-wide embargo in which all of the coun-
tries would participate?
Senator Pope. Yes; exactly.
Mr. Casey. Yes ; I have heard of that.
Senator Pope. What Avas your attitude, if you had an attitude
towards the enactment of such a measure as that?
Mr. Casey. If all countries agree, we would have no objection.
Senator Pope. You would have no objection?
Mr. Casey. If all countries agreed, but if other countries are al-
lowed to ship, then we think it is discrimination.
Senator Pope. Let me ask you again exactly the position witli
your company of Mr. Aiken Simons ?
Mr. Casey. He is an assistant of mine.
Senator Pope. What are his duties?
Mr. Casey. His duties are primarily to relieve me of a lot of
things I cannot take care of.
Senator Pope. Now, what are some of those things you cannot
take care of?
Mr. Casey. There are some of these things that come very close
to that letter of General MacArthur,
Senator Pope. I will ask you, Mr. Casey, whether or not it is the
duty or business of Mr. Simons to contact officials in the War
Department with reference to legislative matters?
Mr. Casey. Absolutely not. We take no part whatever in legis-
lative matters.
Senator Pope. You are sure of that ?
Mr. Casey. I am talking for my department.
Senator Pope. What about the other departments?
Mr. Casey. I cannot speak for them.
1126 MUNITIONS INDUSTRY
Senator Pope. Were you about to say something, Mr. Felix clu
Pont?
Mr. A. Felix du Pont. No, sir.
Senator Pope. I refer you to a memorandum signed by Mr. Aiken
Simons under date of January 17, 1933, Wilmington, Del., and
dated Washington, D.C., January 16, 1933, it having these two dates
on it, and I will read the first paragraph of that memorandum as
follows :
The principal object of this visit was to discuss with the War Department
officials a bill now pending in the United States Senate authorizing the Presi-
dent to declare at his discretion an embargo on the shipment of munitions to
foreign countries. The details of this visit are covered in a separate
memorandum.
Did you ever see this memorandum?
Mr. Casey. This one, yes.
Senator Pope. Were you familiar with its contents ?
Mr. Casey. Yes.
Senator Pope. What would you say as to that first paragraph I
have read discussing the visit of Mr. Simons to the War Depart-
ment to discuss this matter of an embargo ?
Mr. Casey. It was perfectly natural we should discuss with the
War Department to find out what their attitude was as affecting
the national defense.
Senator Pope. Then I misunderstood you a minute ago when you
said Mr. Simons and no one else of your department discussed
with the War Department officials legislation of this kind ?
Mr. Casey. Anything attempting to influence legislation is what
I meant.
Senator Pope. You did not understand this embargo was passed.
Mr. Casey. We asked them what was their position. When the
War Department or the Navy Department say they have no objec-
tion, then we have none. But if they feel it would hurt national
defense, then our position might be entirely different.
Senator Pope. In that connection, I call your attention to the
memorandum which Mr. Simons referred to in that letter. It is
dated Wilmington, Del., January 17, 1933, and marked " Con-
fidential memorandum to Maj. K. K. V. Casey, director, proposed
embargo on shipment of munitions ", and it states :
Colonel Taylor in his T-2.544 of December 2Sth, which was his annual report
for the year, made some very interesting conunents on the effect of disarma-
ment in Europe. This was extracted in a memorandum dated January 16, ad-
dressed to you, and sufficient copies prepared so that they could be handed
to interested officials in Washington.
Did you know about the preparation of that memorandum by Mr.
Aiken Simons and its being handed to the officials of the War De-
partment ?
Mr. Casey. I believe that was an extract from Colonel Taylor's
letter. He was giving his report on the European reactions.
Senator Pope. What was the nature of those European reactions?
Mr. Casey. Regarding the effect of an embargo.
Senator Pope. Meaning an embargo already in force?
Mr. Casey. No; the effect of a possible embargo. We take no
action regarding whether legislation is passed or not, but we simply
want to know what the effect would be.
MUNITIONS INDUSTRY 1127
The Chairman. Senator Pope, would you develop who Colonel
Taylor is or was?
Senator Pope. Yes; who is Colonel Taylor?
Mr. Casey. He is our representative in the Paris office.
Senator Vandenberg. Is he the joint representative of I.C.I, and
du Pont?
Mr. Casey. Yes, sir.
Senator Pope. How long has he been in that capacity?
Mr. Casey, I think possibly since about 1921 or 1922.
Senator Pope. Do you know whether or not he attended the dis-
armament conference.
Mr. Casey. We saw a notice in the New York Times where some-
body spied him in the gallery one time. He was not under our in-
structions, but he was simply there because he thought he would
see what it looked like, and went in the gallery one time and a cou-
ple of New York reporters saw him in the gallery and reported it
to their paper.
Senator Pope. He was there long enough to make this report
on the disarmament conference?
Mr. Casey. 1933 was not the time he was present.
Senator Pope. When was he present?
Mr. Casey. I think it was maybe 1932, but that was one of the
other meetings.
Senator Pope. His report related to the disarmament conference
which he attended sometime before the date of this memorandum.
Is that correct?
Mr, Casey. I do not think it related to the conference then, but I
think it was relating to the effect of disarmament in Europe.
Senator Pope, I call your attention to this further statement in
the repoi't:
Ou the morning of Monday, January 16th, I called on Major R. D. Brown of
G-2 and handed him a copy of the memorandum and asked his opinion on the
situation.
Wlio was Ma j. R. D. Brown?
Mr. Casey. I believe he was an officer in the military intelligence.
That is what G-2 means.
Senator Pope. Do you know Major Brown?
Mr. Casey. I may have met him, because I have been over there.
Senator Pope. This report further states:
Major Brown was concerned, since the authority of the President to declare
an embargo on munitions had been presented to the Senate in the form of a
bill and this bill is already out of committee. Major Brown's concern is
justified. I rhen called on General Mosely, Deputy Chief of Staff.
By the way, did Mr. Simons tell you orally of his conference with
Major Brown?
JNIr. Casey. No ; all I got is in here, because this really covered the
situation.
Senator Pope. The report further states :
I then called on General Mosely, the Deputy Chief of Staff, waiting some-
time while General Mosely was in conference with General MacArthur, Chief
of Staff, and Mr. Frederick H. Payne, Assistant Secretary of War. General
Mosely receivetl me, and after glancing over the memorandum instructed me to
get a copy in the hands of Mr. Payne at once, since Mr. Payne had just been
discussing the matter.
1128 MUNITIONS INDUSTRY
Did you also see Mr. Payne or General MacArthur about that
time ?
Mr. Casey. Personally?
Senator Pope. Yes.
Mr. Casey. No.
The Chairman. You asked, " personally." Who did see him ?
INIr. Casey. What was that, Senator?
The Chairman. Who did see him, or do you knoAV who saw Mr.
Payne ?
Mr. Casey. This letter is signed by Aiken Simons.
The Chairman. Yes; but who did see Mr. Payne?
Mr. Casey. I do not see there is any reference in here that he
did see him. He says he then called on Colonel McFarland and
left the memorandum with him.
Senator Pope. Yes, it says :
I then called on Colonel McFarland.
Who is Colonel McFarland ?
Mr. Casey. Executive officer in the office of the Secretary of War.
Senator Pope. I read further as follows :
Who advised nio it would not be possible for me to see Mr. Payne at the
moment, but that the memorandum would be placed in his hands at the first
opportunity, that Mr. Payne was mucli interested in it. I then called on Captain
Ogan, naval otficer of intelligence and handed him a copy and asked him that it
be brought to the attention of the Secretary of the Navy. Captain Ogan in-
formed me that he had no method to get it to the Secretary of the Navy and
suggested that I call the Chief of Ordnance.
Do you know whether the matter was finally presented to the
Secretary of the Navy?
Mr. Casey. I do not. We felt that our obligation was fulfilled
as American citizens.
Senator Pope. Is Mr. Simons here ?
Mr. Casey. No; I understand he was excused on account of a
very severe physical condition.
Mr. Raushenbush. Mr. Chairman, I took the responsibility of
doing that. It seems he is rather old and a very ill man, and we
asked the company if somebody would stand examination on his
correspondence and they said they would do so. And in that case
I excused him.
Senator Pope. Now, do you know what particular embargo or
proposed legislation was up for consideration at that time ?
Mr. Casey. No; I could not tell you. I probably would remem-
ber the incident if I could see what the report of Colonel Taylor
was.
Senator Clark. It was the embargo recommended by the Presi-
dent of the United States, which was immediately after this fili-
bustered to death by the Senator from Connecticut, was it not?
Mr. Casey. I don't know, I didn't follow that.
Senator Pope. Are you familiar with the general resolution no.
282 introduced by Mr. Fish on February 9, 1932 and printed on
March 30, 1932, that was then pending ?
Mr. Casey. I could not say I was familiar with it. I probably
had read it, or I may have just read the preamble.
Senator Pope. This is the resolution and we will have this marked
" Exhibit No. 481."
MUNITIONS INDUSTRY 1129
(The resolution referred to was marked " Exhibit No. 481," and is
inchided in the appendix on p. 1338.)
Senator Pope. I hand you this printed copy of the resolution and
ask you if you are familiar with it?
Mr. Casey. I think I saw it.
Senator Pope. Was it discussed by you and Mr. Aiken Simons?
Mr. Casey. No ; other than this correspondence here. There was
another resolution.
Senator Pope. Another embargo resolution?
Mr. Casey. Yes.
Senator Pope. What was your talk with him about ?
Mr. Casey. There was nothing at all we could do about it, because
we have not attempted at any time, as I said before, to influence
legislation.
Senator Clark. Did Simons have authority from you, Mr. Casey,
to call on the various officers of the War and Navy Departments and
circulate this memorandum prepared by Colonel Taylor on the
effect of this disarmament in Europe?
Mr. Casey. I think that comes close to the national defense.
Senator Clark. That was connected with this resolution, because
the memorandum is headed " embargo resolution? "
Mr. Casey. No; there is something I would want to understand
in that connection.
Senator Clark. Did he have authority from you to circulate that
among the high Government officials, which he reported to you he
had done?
Mr. Casey. To give them something our representative over there
had learned which might affect the United States Government ; yes.
Senator Clark. This memorandum is a report to you froni Mr.
Simons, and is headed " Proposed embargo on munitions " (reading) :
Colonel Taylor in his T-2554 of December 2Sth, which was his annual report
for tlie year made some very interesting comments on the effect of disarma-
ment in Europe. This was expressed in a memorandum dated January 16th
addressed to you.
And that evidently shows that was in connection with the embargo
resolution. Had you instructed Simons to do that?
Mr. Casey. Have you a copy of Colonel Taylor's memorandum?
Senator Clark. No; I have not, but that report shows it was in
connection with this embargo resolution, and what I am asking is,
did you instruct Simons to circulate the report among Government
officials ?
Mr. Casey. I would not instruct him unless that report was of
interest to the Government.
Senator Clark. Did you instruct him in this case ?
Mr. Casey. In this case I do not know whether I instructed
him or not.
Senator Clark. That report Avas made to you.
Mr. Casey. Yes; after the fact.
Senator Clark. So that your statement a while ago that the
du Pont Co. had nothing to do with proposed legislation or discus-
sion of it with Government officials was not correct, was it?
Mr. Casey. I said we made no attempt to influence legislation.
Calling attention to the effect of an embargo in Europe, struck me
as being of interest to the officers of the Army and Navy. We had
1130 MUNITIONS INDUSTRY
nothing to do with the matter whatever, but it was a question of
advising them what effect this resolution might have in Europe, and
that is a matter of military importance to the Army and Navy.
Senator Bone. It would be intensely interesting to the officers of
the United States Army?
Mr. Casey. Yes.
Senator Bone. And can you tell the committee whether it would
also be interesting to the people of the United States to know the
effect on world politics ; do you think it might not be equally inter-
esting to the people of the country to have these facts ?
Mr, Casey. We would not be the proper ones to give that out.
Senator Bone. You gave it to the Army officers.
Mr. Casey. Yes.
Senator Bone. Army officers are not the only people who suffer in
case of war. The mothers and fathers of the boys who go into war
also pay the price.
JMr. Casey. Yes.
Senator Bone. Would you suggest there is any lack of propriety in
having the people know what was going on?
Mr. Casey. We were not the proper ones. The newspapers are
covering these matters.
Senator Bone. The people pay the price, and all of the bills,
Mr. Casey. Yes.
Senator Bone. Can you say that information of this kind should
not go to the people of the country? Do you think these things
should be kept from the people?
Mr. Casey. They should not be.
Senator Bone. Do you think there should not be given to the
])eopIe, the fathers and mothers whose boys go out and pay the price,
full information; you would not want to suggest that, would you?
Mr. Casey. Oh no.
Senator Bone. I was thinking about some of the suggestions of this
situation being confidential. Nothing should be confidential when
some boy has to shoulder a musket and go out and die. Would you
share my view on that?
Mr. Casey. I would.
Senator Pope. Now, Mr. Casey, I am referring to a document
which I should be fair and say contains the stamp to which reference
w^as made this morning, put there either by you or the du Pont Co,
This memorandum is dated Wilmington, Del., April 7, 1932, and
Washington, D.C., April 6, 1932, apparently being a report of actions
by Mr, Simons on April 6, It says :
I called by appointnaent on General Hof to discuss House Joint Resolution 282,
proposing a resolution whereby the United States Government would join all
other nations in renouncing the sale or export of armaments, munitions, or
implements of war.
I think you said a few minutes ago so far as you knew, you would
have no objection to an embargo for all nations?
Mr, Casey, Yes, that is right.
Senator Pope, This memorandum further reads:
Since Mr. Fish has introduced somewhat similar resolutions on several other
occasions, the Ordnance Department had not taken the bill very seriously and
was not aware that it had been reported out of committee and put on the House
Calendar.
MUNITIONS INDUSTRY 1131
Senator Bone. Major Casej^, one question suggests itself to me in
passing here. Can you tell us why, in discussing these embargo
resolutions, the suggestion was made there about the vital need of
maintaining private manfacture of munitions in this counti*y?
What is the association of ideas? Can you enlighten us on that?
Why would that question of private manufacture come up in corre-
spondence or discussion about that embargo on munitions?
Mr. Casey. I might tell you a story there, if you will permit me.
Senator Bone, I do not want to prolong it, but I thought there
might be a short reply.
Mr. Casey. This will be short. Directly after the war, you must
realize that the United States had two of the finest powder plants
in the world, one at Old Hickory and one at Nitro, W.Va., with
probably the greatest capacity of any country in the w^orld. In
that situation, together with the fact that there were tremendous
stocks of surplus powder left over, our directors gave serious con-
sideration to going out of the powder business indefinitely. When
I heard that, I wanted to see whether there would be any objection
on the part of the Ordnance Department of the Army, primarily
to our going out of the business, so on my next trip to Washington,
I think it was in the latter part of May, or in June 1919, I men-
tioned the matter to General Williams, and explained to him about
our powder plants and terrific stocks, and there did not seem to be
any reason at all for us staying in the business. As a result of that
he wrote a letter to the president of the company, at that time Mr.
Irenee du Pont, and that resulted in an exchange of correspondence
which Mr. du Pont probably has with him. But, summing it up,
they urged us to stay in the powder business in the interest of
national defense, one reason being they felt we had the facilities, that
means the technical knowledge and the ability to expand to supply
the needs in a number of tilings to the Government in time of
emergency.
As a result of that, and the further correspondence, we entered
into an arrangement with the Ordnance Department whereby we
agreed to undertake experimental research work to try to correct
some of the shortcomings of the ammunition and guns that the report
of the Westervelt Board had named, that being a Government board.
Senator Bone. Was this your information, or did you understand
from the Government that if there was a world-wide embargo on
munitions that would put all private plants out of business; or in
your judgment would that be the effect of such an embargo?
Mr. Casey. I am talking about 1919.
Senator Bone. Perhaps we do not understand each other. I am
talking about the vital need of maintaining private manufacturing
of munitions in this country, and I was wondering if a world-wide
embargo would stop that?
Mr. Casey. If a world-wide embargo would stop all private manu-
facture of munitions, then we are relieved of our obligations to sup-
ply material, and we look upon this thing as a thing we want to do.
because we could take the money invested in that and put it into
the development of commercial things.
Senator Bone. How would you get the money out of the plants
if you had to junk them?
1132 MUNITIONS INDUSTRY
Mr. Casey. We would take whatever is left, that is all I can say.
Of course, as to what is invested in the plant, the working capital
is invested in the plant.
Senator Bone. Keeping in mind it is the policy of your company
not to oppose embargoes where all of the nations enter into an
agreement to impose a general embargo, I call your attention par-
ticularly to this joint resolution numbered 282 which has been re-
ferred to in this memorandum, and a copy of which has been intro-
duced into the record. This resolution provides :
That the American delegates participating in the general disarmament con-
ference now being held at Geneva, Switzerland, be requested to propose a multi-
lateral agreement renouncing the sale or export of arms, munitions, or imple-
ments of war to any foreign nations, in accordance with the intent and purpose
of the Kellogg-Briand pact renouncing war as an instriuiient of national
policy.
Now, keeping that in mind, I want to read you further from the
report or memorandum submitted to you by Mr. Aiken Simons, as
follows :
General Hof called up General Macfarland, of the office of the Assistant Secre-
tary of War, and invited his attention to the above (now that is, H.Kes. 282
and the fact it had been reported out of committee), at the same time calling
attention to a letter which the Assistant Secretary of War had written to
Mr. Morin under date of March 6, 1928, protesting against H.J. Resolution 183, of
somewhat similar purport. General Hof suggested that with slight modification
the above letter would serve the purpose at the present time.
At General Hof's suggestion, called on Colonel Macfarland and discussed
the matter with him. He also was not aware that the resolution had come
out of committee.
Called on Admiral Larimer, Chief of the Bureau of Ordnance, U.S.N., and
discussed the same matter with him. Admiral Larimer called up Capt. H. K.
■Cage, chief of the Material Division, Office of (.'hief of Naval Operations, and
called his attention to the resolution and its status, of which neither of these
officers had been aware until their attention was called thereto. Captain
Cage will take proper action to have the bill opposed on the floor of the House.
Who is Captain Cage ?
Mr. Casey. I believe he is a naval officer, from the reading of that.
Senator Pope. What do you know as to what action was taken
by Captain Cage to have the bill opposed on the floor of the House ?
Mr. Casey. I have not the slightest idea. You want to realize
the reason we direct their attention to these things is this, as I said
before we are in the business because the Government has asked us
to be in the business, and if there is going to be any change where
the Government does not want us in the business we feel we should
take action and notify these people and have them say they still
want us in the business. It is their job to fight, and not ours.
Senator Bone. By "they", do you mean the War Department?
Mr. Casey. They are the only peo})le we have any contact with.
Senator Bone. You are not referring to the Congress of the
United States?
Mr. Casey. No; they are the only ones we have any contact with.
Senator Pope. What else did you do to bring that to the attention
of the naval officers and have the bill opposed by naval officers?
Mr. Casey. We were making no efl'ort to have the bill opposed.
We simply directed their attention to the bill because of the effect
it might have on their national defense plan. If you will take
the office of the Secretary of War, I think you will find he is
MUNITIONS INDUSTRY 1133
specifically charged under the act of 1920 with the duty to take
care of what they term industrial preparedness, and if there is a
question of cutting out the private manufacturer, then his entire
program is changed.
Senator Bone. Do j^ou know what appropriate action was taken
by Captain Cage of the War Department ?
Mr. Caspiy. I have not the slightest knowledge. We never went
any further with this matter.
Senator Clark, Now, the so-called " Fish resolution ", which
your representative advised various officials of the War Department
and Navy Department as to its status, and reported to you by this
memorandum of April 6, 1933, was not the same resolution referred
to in that memorandum dated in 1933 when he circulated the Taylor
report, was it?
Mr. Casey. That I do not know.
Senator Clark. In other words, there was another resolution in-
troduced in the Senate by Senator Borah at the request of the Presi-
dent of the United States, which resolution was reported out by the
Foreign Relations Committee and filibustered to death by the Sen-
ator from Connecticut?
Mr. Casey. That I do not know.
Senator Clark. What did you understand when you got these
reports ?
Mr. Casey. In order to know what I am talking about I would
have to see the memorandum of Colonel Taylor referred to in this
report.
Mr. Raushenbush. My investigators tell me that they do not
have it.
Senator Clark. Colonel Simons was acting under 3'our instruc-
tions when he made these representations to the War and Navy
Departments ?
Mr. Casey. Yes; it undoubtedly would mean we would have to de-
cide what our future action would be.
Senator Clark. What I mean, he was acting under your instruc-
tions when he reported to you?
Mr. Casey. Yes.
Senator Clark. So he was not a mere irresponsible agent as Mr.
Bates was in South America?
Mr. Casey. Oh, no.
Senator Pope. What was your attitude toward the Nye resolu-
tion under Avhich we are now acting ?
Mr. Casey. What is that?
Senator Pope. What was your attitude toward that resolution?
Mr. Casey. At the beginning we did not know exactly what it
all meant, and I believe at one time I had a talk with Fay Brabson
of the Military Intelligence, and I have talked to other people
about what they felt this proposition meant, but, beyond that, we
have had no further conversation except at the time we may have
talked about it in a friendly way, but that is all.
Senator Pope. You were the one who talked to Mr. Brabson about
the matter?
Mr. Casey. Yes.
Senator Pope. What was the nature of your talk with him?
1134 MUNITIONS INDUSTRY
Mr. Casey. I simply talked with him because he is a man I had
known for a number of years and I spoke to him about this
resolution.
Senator Pope. What did you ask him to do ?
Mr. Casey. I did not ask him to do anything. I said, " Here,
Secretary Hull is from your State and you might talk to him about
it."
The Chairman. About what? Having Secretary Hull help ac-
complish passage of the resolution. Is that what you were refer-
ring to?
Mr. Casey. What?
The Chairman. Were you urging him to approach Secretary Hull
to urge passage of the resolution?
Mr. Casey. I did not urge passage or nonpassage ; nothing of that
sort. You must remember^ Senator, in writing these reports we tried
to make them what you might term chronological.
Mr. Irenee du Pont. Senator Nye, might I call on you to make
good on your statement yesterday morning that I would be given
an opportunity in connection with this investigation to meet state-
ments which come out in the record which I wish to correct?
The Chairman. Let us permit Senator Pope to finish this particu-
lar point first.
Mr. Irenee du Pont. Pardon me.
Senator Pope. I think you attempted to make it clear here that
so far as you are concerned, and Mr. Simons is concerned, that all
you did when you discussed these matters with the naval officers and
the Army officers was simply to find out their opinion on the matter.
Mr. Casey. That is all.
Senator Pope. No other interest?
Mr. Casey. No attempt whatsoever to try to influence them. It
was because of the possible effect on us ; yes, sir.
Senator Pope. Who is the president of the Federal Laboratories
Co.? Do you know?
Mr. Casey. John Y. Young.
Senator Pope. John Y. Young. Where are they located?
Mr. Casey. John W. Young, I guess it is. At Pittsburgh.
Senator Pope. I offer in evidence a letter from Mr. Aiken Simons
to Mr. Young, under date of December 28, 1932, just after Christmas,
as " Exhibit No. 482."
(The letter referred to was marked " Exhibit No. 482 ", and appears
in full in the text.)
Senator Pope. That letter reads as follows :
My Dear John : Thank you for the very handsome dressing case which
came to me on Christmas morning. I will find it very useful.
I spent a very quiet but very pleasant Christmas despite the rotten weather.
Regarding the attempts of Mr. Hoover and the "cooky pushers " in the State
Department to effect embargoes on munitions sent out of the country, I do
not believe that there is the least occasion for alarm at present. The Presi-
dent and the State Department both lack authority to do anything now and in
the spirit that Congress is in and with the large amount of oral business ahead
I feel quite sure that no further authority will be granted.
Wishing you a very prosperous New Year.
And he signs :
Sincerely, Aiken Simons.
MUNITIONS INDUSTRY 1135
The Chairman. Senator Pope, does that particular letter carry
a stamp revealing that upon instructions of the "War and/or Navy
Department it is of a confidential nature?
Senator Pope. I am interested in that rather " luscious " term,
" cooky pushers." Do you know what Mr. Simons meant by " cooky
pushers " in the State Department?
Mr. Casey. I have not the slightest idea, and I could not be re-
sponsible for a statement of that kind. That is a personal letter
thanking him for a little brief case.
Senator Pope. Do you think it might ha', • anything to do with
those people who might have been favorablt to embargo acts and
similar legislation?
Mr. Casey. I could not telJ.
Senator Pope. Do you know whether he included Secretary Stim-
son in that category ?
Mr. Casey. I could not say.
Senator Pope. He mentioned Mr. Hoover and the " cooky pushers "
in the same breath. Do you know whether he included Mr. Hoover
in that category?
Mr. Casey, Again I cannot say. I have not the slightest idea.
Senator Pope. Did he ever talk to you about who were the " cooky
pushers " up there ?
Mr, Casey. No; in fact, I never heard the expression before, be-
cause I never saw the letter.
Senator Pope. You think, in the light of this statement here, just
after Christmas Day, when he was at peace with the world and
he said :
I do not believe that there is the least occasion for alarm at present. The
President and the State Department both lack authority to do anything now
and in the spirit that Congress is in and with the large amount of oral busi-
ness ahead I fell quite sure that no further authority will be granted —
that he was making that as a disinterested party, without knowledge
of what Congress might do?
Mr, Casey, Yes, sir.
Senator Clark, Major, if this was a letter intended to promote
" peace on earth, good will among men ", do you know how it hap-
pened to get into the official files of the du Pont Co., from which
it was taken by our investigators?
Mr. Casey. We opened everything, and that may have been
in their personal files.
Mr. Irenee du Pont. The investigators did look through personal
files in our corner of the building, I do not know whether they
found anything.
Mr, Casey. Anything they wanted to see we gave them.
Senator Clark. Even though this was a personal letter, it con-
tained a certain clear assurance on this embargo which had been
placed by President Hoover.
Senator Pope. Referring back to your statement about the Nye
investigation, I want to submit this memorandum b}'' you, Mr,
Casey, under date of February 15, 1934, and I will read the first
paragraph into the record.
The Chairman, Which, incidentally, was only a few days after
the resolution spoken of had been introduced. That was introduced
on the 6th of February,
1136 MUNITIONS INDUSTRY
Senator Pope. Also it contains this stamp which we have referred
to [reading] :
Had a talk with Colouel Brabson of Military Intelligence and drew bis at-
tention to the Nye resolution. As Colonel Brabson comes from Tennessee
and is very close to Secretary Hull, he will discuss this matter with him so
that when the matter is referred to the State Department, at least they will
be familiar with the situation and the possible disadvantages from the view-
point of the Army.
Mr. Casey. That is what I had ah'eady referred to, Senator. I
say, the only thing that I learned was talking to Fay Brabson.
Senator Pope. You referred to the fact that he had been advised
there were disadvantages from the standpoint of the Army.
Mr. Casey. If there were disadvantages, it was their job, not ours.
Senator Pope. That is all.
The Chairman. Mr. Raughenbush, before you proceed Mr. du
Pont has a matter that he wants to discuss, and which I think he
might do at this time.
Mr. Irenee du Pont. Senator, it was suggested that I talk to you
personally, but I would much rather address the entire committee
because the offense which I am accused of having committed in the
papers applies to the entire committee and not you, of course.
From time to time I have noticed articles in the papers, of which
I will read a short one here from the New York Times of September
10 of this year :
The public study into the huge du Font's affairs is being made over objec-
tions to Irenee du Pont, head of the century-old concern. His criticism of
the committee some months ago irritated several members, who sharply an-
swered him. Chairman Nye announced that he had refused the du Pont
demand that its trade secrets be withheld from the press.
" These munitions makers have been doing business secretly for so long
that it Is al)0ut time their affairs were made public", he continued. "The
very fact protests have come from abroad shows the necessity for continuing.
The inquiry will go on."
I was at first mystified by these references as to some dispute in
the committee.
On May 22 of this year I wrote a personal letter, which the inves-
tigators did not take from my file, although it was there, and pos-
sibly you might want to put it in the record. It was a personal let-
ter to one Paul Harris, Jr., an International Y.M.C.A. man. He
liad made an attack in Washington at the National Cathedral School
for Girls on the du Pont Co., and had made statements which have
been disproved over and over again, and went back for some 30
years. I tried to correct him on that. Incidentally, I might also
say that this had nothing to do with the committee, because I never
heard of it on May 22 of this year. It may have been created at that
time, but I was not aware of it.
In that letter I stated, in part, as follows :
I have not read TraflSc in Arms, but will try to secure a copy of it. Per-
.sonally, I believe that the attack on munitions makers is caused by three
efforts :
(1) A subservient force instigated by the Third Internationale and allied
interests to weaken the defensive powers of capitalistic countries;
(2) Effort of idealists to prevent war through a mistaken notion that pre-
paredness is a cause of war ; and
(3) A desire on the part of many newspapers and magazines to sell copies
by handing out to the public lurid reading which will help their sales.
MUNITIONS INDUSTKY 1137
That, I say, is my opinion [reading] :
Frankly, my belief in the first cause is based on what seems to be a self-
evident proposition — that people cannot be held in a state of virtual slavery,
without freedom of individual action, as now maintains in Russia excepting by
force. The Russian Government admits an army numbering some nine mil-
lion. They claim to have an enormous number of army airplanes. If and
when their hold on Russia is weakened, they must, to defend their position,
have war with some foreign country. It would only be the part wisdom of
those in control of that unfortunate country to wish to weaken, the defense of
any prospective antagonist.
There can be no question but that there is an effort by those with high ideals,
of which you are doubtless one, to stamp warfare from the face of the earth.
It is a most laudable effort, but if turned in the wrong direction may greatly
increase the incidence of warfare. Certainly, an unarmed United States, with
no preparedness, would be a more enticing victim for Japan or Russia, or per-
liaps some European power, than any other I can think of. Its enormous wealth
alone would make it a coveted prize. Japan's recent attacks in the Far East
ought to indicate that we cannot depend on an aggressive nation's respect for
the rights of others.
The third case above given hardly needs explanation. It must be apparent
to all that newspapers and magazines are financially benefited by selling
copies. Any lurid article is grist to their mill and they cannot be expected to
be too accurate in checking up the details of the statements which may be made.
Some of that was reported to and copied in the press without my
knowledge or consent, over a month after it was mailed to Mr.
Harris. I know nothing of it. It was not my action and I am
sorry it got into the press, and I certainly would not have been so
discourteous to the committee to even have offered that, if it reflected
on them, or to have done anything in the matter, but I have been
made the cat's-paw in this matter, and nothing of the kind ever
entered my head and I did not know the committee had been
appointed.
I hope that will square me with the committee.
The Chairman. Thank you, Mr. du Pont.
Mr. Vandenberg. I would like to make one comment on that let-
ter. You are arguing, Mr. du Pont, that the net result of this
undertaking might be to weaken the national defense of the United
States. Am I wrong in the conception, which I confess is one of
my dearest dreams — am I wrong in the conception that if we are
to create a system under which every American resource is dedicated
to the national defense, maintained without profit, in other words, if
we create a common reservoir into which everything America has
for the purpose of defense goes for the common defense, that that
would weaken us ? Would it not make us invincible ?
Mr. Irenee du Pont. Mr. Senator, I think we have exactly that
situation today. I think the Army has gone over this country with
a fine-tooth comb to find every industry which can be put to use, and
if the United States goes to war, there will be no profit to munition
makers. We did not make any profit during the war and paid more
in taxes than we made in profits.
Senator Vandenbj:rg. What I want to know is with reference to
the objectives of the committee, as set up in this resolution, whether
that would weaken our defenses. It seems to me it would immeasur-
ably strengthen them.
Mr. Irenee du Pont. Perhaps I have not got a clear comprehen-
sion of it. When the letter was written I did not consider this
matter because I did not know there was a committee. From what
1138 MUNITIONS INDUSTRY
1 have seen in the papers, the object is a plan to nationalize making
munitions of war. By " nationalizing " that means putting it in
the hands of the United States Government or some branch of it.
It cannot possibly be as efficient or as elastic in expanding. The
munitions industry of the United States, in order to be of use in
time of stress, must be in that situation. It is very important that
concerns have the " know-how " and nucleus to expand. Personally
I think if a -traitor to the United States sold the plans of Pearl
Harbor or Diamond Head or something else to an enemy of the
United States, that there would be less damage done than if you
stopped the manufacture of munitions of war by private individuals.
I will give you a sample of it. You say there is large profit in
this. The reason the du Pont Company did so well in making war
supplies during the World War was because we had a free hand.
I want to give example of a single instance, one of the instances
which are innumerable. Alcohol became scarce and there was in-
sufficient to go around, and the Government had a bureau to look
after the shortage. We used three-tenths of a pound of alcohol
per pound of smokeless powder, and were called down by the official
in charge at Washington as to why we put in a wrong report. I
said, " That is not a wrong report." ' They said : " The reports show
that it has always taken nine-tenths of a pound ", and I told him,
" We used to take nine-tenths of a pound ", but that the research
that we did on alcohol during the war had enabled us to reduce the
net amount to three-tenths.
In the 1917 year alone we must have saved 200,000,000 pounds of
alcohol by that saving in the consumption of alcohol. It had gone
up in price from 4 cents a gallon to 12 cents a gallon, so that our net
saving from that was $24,000,000, by this condition of practical
research, not test-tube research in the laboratory, but this is checking
up by chemical analysis, by measuring alcohol used here, there, and
everywhere, where evaporation takes place, where leaks are happen-
ing, and stopping the leaks.
To get that kind of work, we offered rewards. You have asked for
reports of bonuses granted. Not only were bonuses paid but good
salaries were paid, and those men were kept on their toes, knowing it
was to their interest to each and all to do their level best. The
reason we made such enormous profits during the war was very
largely due to the savings which we were able to obtain by concentra-
tion on every detail and rewarding those who were successful.
I think this underlying principle of rewarding those who do good
work is an underlying principle which you cannot refuse to recognize
as valuable.
I can go back to one of the greatest philosophers of all time who
said, "A laborer is worthy of his hire." You Biblical students may
know to whom I refer. I would not set myself up in contradiction to
him, but it seems to me the intent is good work, honestly done, and
good work honestly done saves enormous sums of money and ought
to be highly rewarded.
Senator Vandenberg. I am not going to answer your address,
which has powerful persuasion in it, and I am not one of those who
favors Government in business, but, on the other hand, I fail to
understand how there can be any private character whatsoever to the
munitions business.
MUNITIONS INDUSTRY 1139
Mr. Irenee du Pont. I agree with that, that there won't be, but
it is just too bad. I think we will be a year getting started in case of
war, just as we were in the World War, because many must have
known it was coming 6 months ahead of the time, certainly after the
sinking of the Lusltania.
Senator Vandenberg. Whether or not this committee recommends
the nationalizing of the munitions business is in the lap of the gods.
I do not know whether it should be nationalized or not. That is one
of the things we are to find out. That subject is not prejudged. The
challenge which I find in your statement is the premise which you
adopt, that we are going to weaken the national defense.
Mr. Irenee du Pont. I think you are, sir.
Senator Vandenberg. Because, so far as I am concerned, the objec-
tives which I have in mind would make the United States absolutely
invincible against the world.
Mr. Irenee du Pont. Senator, do you appreciate the difficulty of
overcoming the inertia and lack of knowledge and organization, to
start any large military affair; that is, during a war when it starts?
Senator Vandenberg. Yes.
Mr. Irenee du Pont. Just think of what would happen in the
powder industry, I am more familiar with that than I am anything
else. I know perfectly well when war w^as declared in April 1917,
that the Government had no plans and were perfectly at sea as to
what to do in the matter of powder, and did not know how much
they should have. They had never had the experience. We had
had experience building powder plants. We were called on to build
two large plants and before getting under way, almost, we received
a peremptoiy telegram saying, " Do nothing until you hear from us '\
signed Newton D. Baker, Secretary of War; and we never heard
anything more in that connection. We contracted to operate the
other one for them and produce powder at approximately 10 cents
a pound lower than the pre-war price, and were able to do that by
means of the great efficiency which had been obtained.
Mr. Raushenbush. Mr. Chairman, evidence is being given on the
part Newton D. Baker took or did not take on delaying the war
plans. That is a long controvei-sial subject. May I ask that before
any evidence is given on that, we have a chance to examine into it?
Mr. Irenee du Pont. I am not attacking Newton Baker. We re-
ceived the telegram, and the purpose of it or the why of it I do not
know.
The Chairman. Mr. Raushenbush, are we developing any part of
this in an orderly manner later on?
Mr. Raushenbush. We are, at some length.
The Chairman. We are going to have ample discussion on that,
and there is going to be ample opportunity for the witnesses to dis-
cuss it, when we reach that particular stage of the hearing.
Senator Vandenberg. I am probably responsible for Mr. du Pout's
statement, but I was challenging his statement.
It certainly does not weaken the national defense to make it im-
possible hereafter that one-half of our people should be in the front-
line trenches for $30 a month while the other half is in the shipyards
at $30 a day.
83876— 34— PT 5 9
1140 MUNITIONS INDUSTRY
Mr. Irenee du Pont. Why do you not pay the soldiers $30 a day?
Senator Vandenueijg. Or vice versa.
Mr. Irenee du Pont. I know from having seen it, that they lost
time and that there was lost motion trying to get together an organ-
ization to do these things. And the Government built one plant
without any aid except the plans which we had prepared, and never
went into operation
Mr. Rausiienbusii. Testimony is being given on the plant at Old
Hickory, and I must challenge that.
The Chairman. The Chair will sustain the objection. We will
come back to that later and there will be ample discussion of every
part of it.
Senator Vandenberg. Mr. du Pont, in connection with profits you
mentioned your high taxes. The reason your taxes were so high
during the war was because your profits were so large. The Gov-
ernment took a small portion of those enormous profits which you
made by way of excess-profits tax, and so forth.
Mr. Irenee du Pont. Senator, I think you were not present when
I made the report. My statement was that it was a retroactive tax
on exports.
Senator Vandenberg. I was present.
Mr. Irenee du Pont. I beg your pardon. It was practically an
export tax levied retroactively on us, after we made our contracts
and could not change the price, and then had to pay a matter of
$13,000,000 for that year. I say that is not a fair thing to do. It is
not a question of what taxes the Government should raise at all. To
single out one concern and levy on exports retroactively, I say to you
it was unfair and I still think so.
Senator Vandenberg. So far as such profit is concerned, you did
get enough profit out of the war to pay out some 250 percent in
dividends and still have $60,000,000 left over in surplus at the end of
the war, did you not?
Mr. Irenee du Pont. That is perfectly true.
Senator Vandenberg. So that so far as this profit question is con
cerned, it is by no means a purely patriotic, humanitarian endeavor
on the jDart of the du Pont Co.
Mr. Irenee du Pont. Senator, may I object to that? The du
Pont Co. made those profits out of foreign sales. The United States
was not in the war when it began over there.
Senator Vandenberg. I understand, but the Unit<?d States was in
the war afterward. You made profits out of your business during
the time the United States was in the war, did you not ?
Mr. Irenee du Pont. The earnings we had left paid 70 percent of
the tax we paid that year.
Senator Vandenberg. It costs you 24 cents a pound to make TNT
and you sold it to the United States Government for 50 cents a pound.
Mr. Irenee du Pont. No matter what we charged, it was not
enough for the back taxes.
Senator Vandenberg. You mean by retroactive taxes in that case
that they recaptured it?
Mr. Irenee du Pont. No, sir; that retroactive tax was in 1916,
before the United States entered the war, when the United States
could not have been motivated from the standpoint of the war.
MUNITIONS INDUSTRY 1141
Senator Bone, Mr. dii Pont, are we to gather from your statement
a fair inference, that if preparedness is placed in the hands of the
War Department, the whole thing is a " flop " unless private muni-
tions makers look after details? Is that it?
Mr. Irenee du Pont. No; the real reason is this: The "War De-
partment did not touch smokeless because it knew the du Pont Co.
was there.
Senator Bone. What is the War Department for? Just to sit in
an office and have no knowledge of these things ?
Mr. Irenee du Pont. They have got plenty to do.
Senator Bone. Do you not think a very thorough knowledge on
the part of the War Department officials is necessary as to how to
launch a war in case we got into one ? That would be a part of the
national defense, would it not?
Mr. Irenee du Pont. I am not attempting to run the War De-
partment.
Senator Bone. I understand.
Mr. Irenee du Pont. I say a private manufacturer can produce
things, if he has an organization from which the men can be drawn
and organized, better than the Government can organize such an
organization.
Senator Bone. How would we know that when the Government
has never done it? I think we can all agree, so far as the War
Department is concerned, that it has relied on private companies
to create the necessary munitions. That is right. Now, unless we
try it out, how do we know that the War Department cannot do it ?
The War Department can hire specialists and technicians, can it not?
Mr. Irenee du Pont. It does not do any good to hire specialists
and technicians. You must have an organization.
Senator Bone. Can not they get an organization? Are we to
understand that the du Pont Co. now presents to its country this
picture: That the United States Government is 30 inept — perhaps
the word is not altogether proper, but let us say it anyway — is so
stupid, so inept, so unbusinesslike that it cannot hire and pay large
salaries and could not do the work you are doing? I would like to
have an answer to that.
Mr. Irenee du Pont. I will answer the first question first. You
say you have never tried to have the Government prepare for war.
The French made their own powder and relied on their own powder
factory, and had to come to us and buy hundreds of millions of
pounds. The Germans relied on their industrial people and made
enough not only for their war purposes, but for Austria. That was
done by private concerns. If we had not shipped powder to France
and England, the possibilities are that Germany would have won
the war, and we would have been taken next and been a German
colony.
Senator Bone. Do you think the du Pont Powder Co. kept the
United States from being a Germany colony?
Mr, Irenee du Pont. I think we were a great influence ; yes, sir.
Senator Bone. This country was so helpless that were it not for a
private corporation in this country that made $255,000,000 of profits
during the war, we would be a German colony now ?
Mr, Irenee du Pont, You are trying to put me in a position of
being a conceited ass, and I am not. I am reciting facts that I know.
1142 MUNITIONS INDUSTRY
I am trying to convince you gentlemen, because you have got a tre-
mendous responsibility. You must look at what happened in this
country when we went into the war and at what will be done in the
way of preparedness by a number of industrialists. AVe could not
start tomorrow and make powder the way we did then, but we have
a nucleus.
Senator Bone. Do you not think it is a strange situation
Mr. Irenee du Pont. It is a hell of a situation.
Senator Bone. That after 157 years of national life Ave sit here,
in a Senate room, with this matter before the committee, and the
statement is made that this country might have been a German
province were it not for a few private concerns ? Is not that rather
a somber picture?
Mr. Irenee du Pont. It is a somber picture.
Senator Bone. That this Government is so helpless that we would
be a German colony today if it were not for these private companies.
Mr. Irenee du Pont. The average man in 1916 thought he was
perfectly safe out in the Middle West and was beyond attack by
Germany. If Germany had won from France, she would have won
from England, too. They started with the motto " der Tag ", which
referred to their conquest of the world, without any question, and
do you suppose that they would not have come over here and
fought us?
Senator Bone. Do you suppose we would have had any trouble
with Germany if it had not been for our insistence on the exporta-
tion of munitions during the war?
Mr. Irenee du Pont. I think that depends on how much the
Kaiser wanted to rule the earth.
The Chairman. Please proceed, Mr. Raushenbush.
Mr. Raushenbush. Before going on to the rest of the outline,
I would like to ask one question. Who was the General Williams
whose decision the du Pont Co. asked? What is his station in life
now?
Mr. Casey. He has retired.
Mr. Raushenbush. What activity is he in?
Mr. Casey. Nothing that I know of. I think he was working
for the N.I.R.A. the last I heard. That is the last I heard of
him anyway.
Mr. Raushenbush. I have before me a report of William N.
Taylor, your Paris agent, and the LCI. Paris agent, put in the
record as " Exhibit No. 476 ", in some other connection, under date of
August 2, 1933, and because it brings out from your agent some
experience that hai)pened with some of the munitions makers in
Holland, which forced the French Government to expend a great
deal of money because the question of private munitions had been
affected thereby, I would like to read from this report. He has been
talking about the question of whether Bofors has or has not a case
in Holland, Bofors, I believe, being one of your main competitors
in the powder field.
I am reading from page 3 of this exhibit :
In connection with this, you will recall that about a year ago there was
a great newspaper excitement in France over the 1,500 half-finished guns
in Holland in the possession of the II. I. H. which, the Fi-ench newspapers
MUNITIONS INDUSTRY 1143
claimed, was a secret stdck of heavy guns held in Holland by the Germans.
The result of this cause<l the French Government to buy the most important
pieces. It turned out that this whole French newspaper row was originated
by Vlessing and Haegen in order to sell this stock and that it was a vast
publicity farce which the French newspapers fell for due to their desire
for anti-German news. Vlessing said that they managed this whole publicity
affair without having to pay a cent to the newspapers. Vlessing and Haegen
are extremely proud of this feat and discussed with me in great detail how
they got the French press excited on this matter by constantly denying that
they knew anything about it and by making it all very mysterious and leaving
the journalistic spirit do the rest.
This Avas addressed to you, Mr. Casey. Does anybody else in the
company see these reports?
Mr. Casey. Sometimes we do refer some of the reports to the
committee.
Mr. Raushenbush. Would the president of the company see the
report ?
Mr. Casey. I could not say that he would.
Mr. Raushenbush. That is a fair story of how a munitions com-
pany, in order to get rid of stock, drums up this anti-war feeling,
which is constantly raging between France and Germany, and in
this case they did it in great glee without paying a penny to the
French papers, as they say, and made the French taxpayers pay out
a great deal of money for junk.
Is not that a correct outline of what happened?
Mr. Casey. I would say so.
Mr. Raushenbush. I should like to go on with some questions
that I would like to address to the president of the company, if I
may. Mr. Lammot du Pont, you have been president of the com-
pany for the last how many years?
Mr. Lammot du Pont. Eight years.
Mr. Raushenbush. Do you feel pretty w^ell conversant with what
goes on, with what the agents of your company do in South Amer-
ica and Europe?
Mr. Lammot du Pont. I am afraid I am not.
Mr. Raushenbush. You do take some responsibility in public
statements about the activities of the company ?
Mr. Lammot du Pont. Yes.
Mr. Raushenbush. The point I am raising is whether you know
of these activities. I wonder if, as the testimony goes on, you could
indicate to us — because this is important — to what extent you knew
of these activities and to what extent you did not?
The first question I want to raise goes back to 1932, There was at
that time, and there has been since, a good deal of hostility between
the Bolivians and the Paraguayans. You were selling to both sides,
were you not — or attempting to?
Mr. Casey. I do not think we were selling either of them.
Mr. Raushenbush. I have here before me a report addressed to
Major Casey, signed by Mr. Bates, dated August 5, 1932, saying:
Called at the Bolivian Legation, 2830 44th Street, Washington, D.C., and
spoke to His Excellency Luis O. Abelli, Envoy Extraordinary and Minister
Plenipotentiary of Bolivia to the United States. The Bolivian Minister showed
considerable interest in military prqpellants and explosives and wanted, par-
ticularly, information on demolition and fragmentation airplane drop bombs ;
also the addresses of American manufacturers able to supply the bombs, and
addresses of the companies manufacturing armored tanks.
1144 MUNITIONS INDUSTRY
Then in the same letter he goes on :
Called also at the Paraguayan Legation. The Minister was absent, but
finally reached him by telephone. He, too, was interested in receiving prices
and description of our military products.
Mr. Lamott du Pont. I do not think I would have been informed
about that at the time.
Mr. Raushenbush. You would not know that. Later on, in 1934,
in May, when the hostilities between Peru and Colombia were only
slowly drawing to a close; when the feeling of hostility was only
slowly drawing to a close, there is another report signed by Mr. Casey
headed " Trend of Business " in which he speaks of selling. He says :
Business worthy of note received during the month includes 50,000 pounds
of caliber .50 smokeless powder on order from Frankford Arsenal and 88,000
pounds of TNT purchased by the Peruvian Government. We have also been
indirectly responsible for the sale of approximately 340,000 pounds of TNT
to the Atlas Powder Company, which is to be used in the loading of airplane
drop bombs for the Colombian Government.
That is both Peru and Colombia for which you are taking credit,
and through the Atlas Co.
I wish at this time to offer a list of your agents in South America
as taken from your files, as of February 24, 1934, as " Exhibit
No. 483."
(The document referred to was marked " Exhibit No. 483 ", and is
included in the appendix on p. 1338.)
Mr. Raushenbush, Somewdiat earlier in 1932 — and we went over
this testimony in the first week to some extent — you were dealing
with the Electric Boat Co., having negotiations on munitions for
Peru. The negotiations fell through, but they were taken very
seriously, apparently. If I may summarize this, the testimony of
last w^eek showed that your legal advisers had prepared certain pro-
posed arrangements. At the same time I have before me a report
signed by Mr. Bates dated September 29, 1932, discussing these
negotiations. This reads :
Called on Mr. Henry R. Carse, president of the Electric Boat Company, 40
Wall Street, New York. The gist of Mr. Carse's conversation was this : The
Electric Boat Company some years ago had built four submarines for the
Peruvian Government. The Pemivian Government still owes the Electric Boat
Company $600,000. Efforts to collect thisi amount have proven of no avail.
The letter ends up this way :
GoluDihian Consul.
I called at the consulate, checked Remington's information that the order
for 3,000,000 rounds was forthcoming. We renewed our proffers to the con-
sulate to furnish military propellants to the Colombian Government and our
name is now on file with them in the event San Cristobal resumes manufacture.
That was both Colombia and Peru, was it not?
Mr. Lammot du Pont. It sounds so, from your reading of it.
Mr. Raushenbush. Did you know that?
Mr. Lammot du Pont. I think it is quite likely that that was
referred to me.
Mr. Raushenbush. The expenses of your Paris office are shared
equally, we brought out, I believe, by I.C.I, and the du Pont Co.;
is that correct ?
Mr. Lammot du Pont. I think not.
Mr. Raushenbush. I beg your pardon.
Mr. Lammot du Pont. I think not.
MUNITIONS INDUSTRY 1145
Mr. Raushenbush. How are they shared?
Mr. Casey. If you will allow me to answer that. I.C.I, con-
tributes not over half and in no case do they contribute in excess of
2,500 pounds. I think that is the arrangement.
Mr. Raushenbush. As a matter of fact, about half is what it
amounts to, is it not?
Mr. Casey. It has been running that way, but they agreed to pay
half provided that half is not more than 2,500 pounds.
Mr. Raushenbush. I have before me the annual report of the
situation in the territory of the Paris office, smokeless powder de-
partment, on December 31, 1933, from which I wish to read several
paragraphs and offer this document as an exhibit.
(The document referred to was marked " Exhibit No. 484 ", and
is included in the appendix on p. 1339.)
Mr. Raushenbush (reading) :
Beginning 1933 the Paris office of E. I. du Pont de Nemours & Co. began
to take over the territory of Southern Europe from the Paris office of Im-
perial Chemica,! Industries, and as I.C.I, had several changes which they
wished to make in their agencies in these countries, we waited until these
were completed and then adapted our arrangements to theirs. As I.C.I, had
suitable agents in the territory, we decided that we would simply take the
I.C.I, agents and add to their work the du Pont representation.
*******
The difficulties encountered by the governments in this territory in obtain-
ing foreign exchange, have made the export of powder and explosives extremely
small, although all war departments in this territory have announced their
desire for larger quantities than previously considered.
This was December 31, 1933, at the time that there was a good
deal of war feeling. The report goes on, a little below :
On every frontier, Germany has a delicate problem, and Germany is taking
certain steps which the military people agree are destined to make her a
very dangerous adversary in case of war.
The following paragraph is :
The prices in Europe have been up to now going down, as competition tor
the small amount of business offered has been extremely severe. The differ-
ent manufacturers are making tremendous efforts to sell, mainly in view of
being Avell in with the customers in case of larger requirements, as men-
tioned above.
The question that I would like to raise there is what knowledge
anybody in the company here who is before us had of these tre-
mendous efforts which the different manufacturers were trying to
make to sell to these European powers.
Who are your strongest competitors over there ?
Mr. Casey. Bofors is one.
Mr. Raushenbush. Bofors, of Sweden?
Mr. Casey. Yes. I think I may have here a memorandum which
might be of interest to the committee. I cannot say that it is a
complete list, but it represents the entire sales of military pro-
pellants and explosives in Europe in the last five years. If you
would like, I would be very glad to give you a copy of this.
Mr, Raushenbush. I think I have seen this. I think perhaps a
copy without some analysis as to the time the sales were made and
when they jumped, would be valueless. If you will allow us to have
tliis and examine it, I shall appreciate it.
1146 MUNITIONS INDUSTRY
Mr. Casey. Of course. An interesting summary of that situa-
tion would be about as follows : That in the last 5 years, that is 1930
to 1934 to date, inclusive, the total amount of business in military
propellants and explosives in Europe was $2,511,333. That is in 5
years, or an average of about $500,000 per year.
Mr. Raushenbush. Major Casey, figures and facts like that really
should be accompanied with explanations such as given in your
annual reports from Taylor on the growth of the individual powder
factories in the countries supplying themselves — Germany and so
forth. So, if we may proceed and take up these figures later I
should prefer that. This report on the prospects for 1934 ends with
this statement — or rather I should say that this report ends with
the statement, " Prospects for 1934." The language used is :
However, as mentioned above, all these countries desire large reserve stocks
and our prospects for sales lay largely in getting these orders, which is a
very possible undertaking.
These are really reserve stocks in case of war, are they not?
Mr. Casey. Mobilization stocks, I think they call them.
Mr. Raushenbush (reading) :
It will probably mean some financing on our part, and as these are extra-
budgetary operations, they must be handled with different methods than those
used in meeting ordinary adjudications.
These agents that you chose in Europe are agents who are close
to the Government in some way or have connections that make them
valuable to you, because all munitions business is done with govern-
ments, is it not?
Mr. Lammot du Pont. I cannot tell you much about the sales of
agents, except the policy of the company which is to sell powder.
We cultivate that business. We therefore select the agent who, in
our judgment, is most competent in the long run.
Mr. Raushenbush. And the munitions business or the powder
business is different from all others in fact, in that you deal with
governments abroad; governments only. That is true, is it not?
Mr. Lammot du Pont. I do not think that is literally true.
Mr. Raushenbush. As far as the military end of it goes, it is true?
Mr. Lammot du Pont. Very largely.
Mr. Raushenbush. You would not sell military powder to rebels.
You would sell to governments?
Mr. Casey. Recognized governments.
Mr. Raushenbush. Recognized governments; yes.
Mr. Casey. Yes.
Mr. Raushenbush. And being governments, your contacts with
them would have to be through people who you believe will be able
to get the business ; is not that true ?
Mr. Lammot du Pont. Will make the contacts ; yes.
Mr. Raushenbush. So what you try to have is influential people
in each country who have some sort of contact with the government
and from whom you can expect to get a reasonable amount of
business ; that is true ?
Mr. Lammot du Pont. We select individuals who are influential
in this particular respect.
Mr. Raushenbush. I call your attention to a letter of October 21,
1931, from Mr. Taylor to Mr. Casey, which rearranges some of the
MUNITIONS INDUSTRY 1147
agents' contracts in Europe. I do not want to go into European
history in 1931, but there were troublesome times there, and if
I understand this letter correctly, you are jumping the commissions
through these agents from 5 percent to 7 percent. Is that correct?
Mr. A. Felix du Pont. I think there is only one there.
Mr. K.AUSHENBUSH. And that one is where ?
Mr. A. Felix du Pont. Klawe in Poland.
Mr. Kaushenbush. You are jumping his commission. Of course,
the larger the commission that a man gets, the more interested lie
is in selling.
Now, wdien the Electric Boat Co. representatives were here, they
mentioned 3 percent as being a very reasonable commission. I
believe some other companies had even higher commissions than
that. Is 7 percent considered a fair commission in the military
business ?
Mr. A. Felix du Pont. I think so.
Mr. Kaushenbush. Does Bofors give more than that, if you
know ?
Mr. A. Felix du Pont. I could not tell you.
Mr. Kaushenbush. Are they not very important competitors?
And is it not very important to know what Bofors gives their
salesmen ?
Mr. Casey. We have no way of finding out. We have no contact
with Bofors.
Mr. Kaushenbush. Who are your main competitors?
Mr. Casey. On that list you will find the names of a number of
different competitors that appeared in these different adjudications.
Mr. Kaushenbush. You know the main ones, Mr. Casey. Bofors
is one. Is there anybody else ?
Mr. Casey. I think there is an Italian company and a company
in Holland. Their names appear in that memorandum.
Mr. Kaushenbush. I notice in examining your correspondence
that when the sales get to be out of the continent of Europe, very
few of the continental companies outside of Bofors are competitors
of yours and I.C.I's.
Mr. Casey. Looking at it from the standpoint of world-wide com-
petition, they are the most active.
Mr. Kaushenbush. I have one further item here from Mr. Pick-
ard, vice president in charge of foreign affairs — he is the vice presi-
dent in charge of foreign affairs of your company, is he not?
Mr. Lammot du Pont. He is a member of the foreign relations
committee.
Mr. Kaushenbush. This is addressed to Mr. Casey and reads :
Please advise what steps have been taken to secure military sales business
in the unhappy event of hostilities between China and Japan.
There is no indication in that letter as to whom you intended to
sell to at all. Can you answer that? Was it to both sides?
ISlv. Lammot du Pont. It might have been both sides or either
side.
Mr. Kaushenbush. I will offer this letter as an exhibit.
(The letter referred to was marked " Exhibit No. 485," and is in-
cluded in the appendix on p. 1346.)
1148 MUNITIONS INDUSTRY
NATURE OF DU PONT FOREIGN RELATIONS
Mr. Raushenbush. I have here a report from Mr. Taylor to Mr.
Casey dated August 14, 1933, which I will offer as an exhibit.
(The report referred to was marked " Exhibit No. 486," and is
included in the appendix on p. 1346.)
Mr. Raushenbush. This consists of a discussion already touched
on in a discussion of some documents by Senator George, which were
put in the record earlier in the day, concerning the method of sell-
ing between I.C.I, and du Pont to China. There seems, if I -im
summarizing this correctly, to be a very considerable difficulty as
to whether the sales are sufficiently active there and then it goes on
to say, on the second page :
In the memorandum, Japan is mentioned. They liandle Japan in a different
way and believe it should not be handled by the same people as are handling
China. Japan offers no possibility of business except for specialties, of which
I.C.I, gets their share. All standard military material is manufactured in
the country, and there have been no purchases of powder or explosives abroad.
That seems to indicate, does it not, that I.C.I, is willing or trying to
sell in Japan at the same time it is trying to sell in China?
Mr. Lammot du Pont. I would think so ; yes.
Mr. Casey. If they were maintaining neutrality, they would have
to do it. They cannot sell to one nation and not to another, if they
are observing the laws of neutrality.
Mr. Raushenbush. And as soon as you sell to one nation and not
to another, you are taking part
Mr. Casey. You are taking part ; yes.
Mr. Raushenbush. You are, in short, becoming a diplomatic
agency, are you not?
Mr. Casey. Yes.
Mr. Raushenbush. Mr. Casey, I should like to ask Mr. Lammot
du Pont whether you are correct in stating the position of the com-
pan3\ Here a little while ago you told us informally the story of an
instance where your company had the only source of explosives avail-
able to a government which you would not mention and which I am
not going to mention, within the last year, you said.
Mr. Casey. I said the only source in this country.
Mr. Raushenbush. The only source in this country?
Mr. Casey. Yes.
Mr. Raushenbush. And for various reasons various people re-
quested you to refuse to sell.
Mr. Casey. Yes. That was at the request of people in our own
Government, an unofficial request. They knew that there was no
obligation on our part to abide bj^ it, but they asked us if we would
not take that action.
Mr. Raushenbush. Mr. Lammot du Pont, I want to ask that
question in another way. When a munitions company becomes so
closely an agent of a government that a government, according to
what Mr. Casey says, uses it to force recognition or nonrecognition
of another government, presumably a friendly government, is it not
taking a very close and dangerous diplomatic relationship? Is not
that a dangerous diplomatic relationship for a munitions company to
get into ?
Mr. Lammot du Pont. I would not think it was; no, sir.
MUNITIONS INDUSTRY 1149
Mr. Irenee du Pont, I do not see what else you could do. After
all, we are United States citizens and have got to support the Gov-
ernment. Would you expect us to do contrary to their request ?
Mr. Kaushenbush. No. I am amazed that the request was made.
1 do not quite understand the situation, I am afraid. But instead
of the State Department, or whoever it was — I shall withdraw " State
Department " ; I do not know what department the matter was re-
ferred to; but whatever department made this request of 3'ou, they
were really getting you, through your economic power of being able
to sell or not sell munitions to keep in power or throw out of power
a government of what I presume is some Central American or South
American nation.
Now, because of that and the use of the word " interference " that
Mr. Pierre du Pont made some time ago in speaking of the embargo,
I would like to come back early tomorrow morning to the question
of whether a munitions company not only by selling, but refusing to
sell powder, cannot overthrow the administration of a foreign coun-
try, and whether it cannot also seriously change the whole state of
military competition between two countries.
The Chairman. Mr. Raushenbush, what is the background of
Colonel Taylor?
Mr. Casey. May I answer that? Colonel Taylor, I believe, was
educated in Harvard, studied architecture, and I believe spent a good
])art of his time in France, continuing his studies in architecture.
Exactl}^ when he came back to this country, I do not know. But I
know he has told me that he attended, I think, the very first Platts-
burg camp. During the war he went into the service and at the con-
clusion of hostilities I think he had gotten no further than Fort Sill,
but he was at that time in command of the Nineteenth Field Artillery.
After the war he was taken on when the du Pont Co. organized an
export department and, because of his knowledge of French and the
French people, was sent to the other side. He was there in the in-
terest of export business. At that time we had only begun to try to
sell powder abroad. Before the World War, there were only two
attempts to sell powder made in foreign countries, one being in the
case of France, after a couple of battleships had been blown up and
they felt probably they might like to investigate something else, and
two attempts were made in 1912 and 1913, and both fell flat.
The other foreign attempt that I know of was along, I think,
about a year after, or maybe at the time that the two Argentine*
battleships, the Rivadavia and Moreno were delivered. It was felt
that there might be the possibility of interesting the Argentine Gov-
ernment in more powder of that type. Most of their powder was of
the English or German type. But those were the only instances
I know of before the war. But after the war, in order to try to keep
a nucleus of an organization together, for the benefit of the United
States Government, and knowing that it would probably be some
time before we could possibl}^ expect any business from the Govern-
ment, we began this attempt abroad and we were just like children
in the wilderness when we started.
Senator Bone. Because j^our company is very close to and has
friendlj^ relations with our Government, and because of its ability
to arrive at a common understanding with our Government, on
matters of policy such as have been discussed here, your company
1150 MUNITIONS INDUSTRY
finds itself in a position of being almost, if not quite, a semi-ofRcial
agency of our Government, does it not?
Mv. IijEXEE DU Pont. I do not think we could properly say an
official a^■enc^^ We may say — I am quite sure — that the War Depart-
ment and the Xavy Department look on us as a material aid.
Senator Bone. When I used the term " semi-official " I am not
using it in an ividious sense.
Mr. Irenee du Pont. We are not a semi-official agency like Colonel
House was during the Wilson Administration. That was semi-
official. That is the impression that the word leaves. We feel that
we are obligated to the Army and the Navy to tell them all we can
about defense ; anything that comes to our knowledge, we certainlj^
pass it along and certainly we would be guided by anything that they
told us in the matter.
Senator Bone. In respect of refraining from supplying an order
of munitions, such as has been under discussion here, in that particu-
lar instance, as possibly in others, you have followed suggestions
of the War Department, and have been guided by them. That is
correct ?
Mr. Irenee du Pont. I think we have tried to help them in every
way we could.
Senator Bone. In some respects, then, your relations with the
Government would be similar to those of Soley of England with the
British Government?
Mr. Casey. Senator Bone, I might sum it up in this way, which
may establish the principle. We make no move in any foreign
country without first advising both branches of the service. If
they have any objection, no matter what the objection is, we are
satisfied and we stop any effort there.
Senator Bone. Manifestly then, there is a guiding force which is
entirely divorced from and independent of your own organization to
which you yield allegiance and obedience in matters of that kind.
Mr. Casey. Absolutely.
Senator Bone. That being the War and Navy Department of the
United States. That is what I am getting at.
Senator Clark. That is substantially the same relationship that
was had by Krupp to the Imperial German Government, before the
war, was it not?
Mr. Casey. I cannot say.
Senator Pope. Mr. du Pont, was this agreement that was finally
entered into in 1932 with the I.C.I, brought to the attention of the
Government either before or at the time it was entered into? I
mean brought to the attention of our Government?
Mr. Lammot du Pont. I doubt whether that one was, Senator,
because it specifically excluded munitions.
Mr. Casey.. I believe the Senator is referring to the selling agree-
ment, is he not?
Senator Pope. The agreement introduced in evidence here. I think
is dated October 10, or something like that.
Mr. Lammot du Pont. You are referring to the agreement pro-
viding for the joint agency?
Senator Pope. Yes.
Mr. Lammot du Pont. I believe that was brought to the atten-
tion
MUNITIONS INDUSTRY 1151
Mr. Casey. Allow me to answer it in this way. They were familiar
with the previous arrangements, this being only a slight change from
the previous arrangement. We had the arrangement, as you remem-
ber, in 1926.
Senator Pope. You mean that the 1926 agreement was brought
to the attention of the Government?
Mr. Casey. Yes.
Senator Pope. At the time that it was entered into, or afterwards?
Mr. Casey. Well, they knew about the general idea that we had
in mind before that.
Senator Pope. Did you show them a copy of the agreement?
Mr. Casey. No, sir.
Mr. Irenee du Pont. The Senator is talking about the joint-sales
agreement, you are not talking at cross purposes ?
Mr. Casey. I think I understand the agreement the Senator
referred to.
Senator Bone. Did you seek the approval of our Government, of
this agreement?
Mr. Casey. No ; we did not.
Senator Pope. Has it ever been brought to the attention of the
Government ?
Mr. Casey. The last agreement, in detail; no. But, as I say, the
other agreements were known and this last one was merely an ampli-
fication of the other. This last agreement was purely an experiment,
for this reason: The situation was such that we really felt we were
going to drop out of the foreign field, because we could not aflford
to maintain the effort, because of the lack of return. Therefore,
this was, you might say, almost a last attempt to see if, by a combi-
nation, which might bring about a reduction of expense, we might
not be able to continue. It was an experimental proposition. The
agreement speaks for itself when it says that it will be tried for two
years.
Senator Pope. Just because of the kind of incident that arose
where your joint agent was involved in a matter that concerned the
1934 embargo, would it not seem reasonable that you would bring
that situation to the Government so that they would understand it?
Mr. Casey. Do you mean that particular illustration ?
Senator Pope. I mean the agreement.
Mr. Casey. I think that incident was brought to their attention.
Senator Pope. I am asking whether that does not suggest that the
agreement should have been brought to the attention of the
Government.
Mr. Casey. Perhaps it might have. In connection with that agent
proposition, perhaps it should. That might have sounded a little
worse than it really was, in view of the signature to the letter. But
let us assume that Mr. Bates, who got his advice from the I.C.I, office
in Buenos Aires, had simply cut his letter off after he said, " In order
to conform to the embargo President Roosevelt, we are not going to
quote ", and left it there- The answer would have been that I.C.I,
in Buenos Aires would have promptly notified their home office and
we were out of it. The result would have been the same.
Senator Bone. Major Casey, is there anything unique in the rela-
tions of the du Pont Co. to this Government or do European govern-
1152 MUNITIONS INDUSTRY
meiits frequently sustain to private munitions concerns a somewhat
similar relationship^
Mr. Casey. That I cannot sa}'. I do not know of my own know-
ledge, anyway, that any manufacturer has ever tried to conform to
the Welshes of his government any more than we have.
Senator Bone. Senator Clark has referred, very amply, I think,
to the relationship of the Krupp concern in Germany to the Im-
perial German Government prior to the War.
Mr. Casey. I have no knowledge of that except what I have heard.
Senator Bone. That was a generallv understood relationship; was
it not?
Mr. Casey. We have also heard the same thing about the Schneider
concern in France.
Senator Bone. In other words, that relationship seems to exist in
France between the French Government and the Schneider concern.
Mr. Casey. I believe so, but I have no knowledge of it.
Mr. Rauspienbush. Mr. Lammot du Pont, addressing you simply
because you are president of the company, Mr. Casey is making some
statements of significance, of a certain significance, which may be mis-
interpreted here. He is saying, in effect, that the company does
nothing in relation to other governments that our Government does
not approve of. Is that it?
Mr. Casey. I do not say that.
Mr. Rauspienbush- Would you re-phrase it for me. then, please.
Mr. Lammot du Pont. I think you said that we take no new move
without informing our Government of it.
Mr. Raushenbush. The implication in his statement is that the
Government assented or consented to everything you did in connec-
tion with the foreign governments.
Mr. Lammot du Pont. I do not think so.
Mr. Casey. They have not the authority to do that. We would
not put them in such an embarrassing position when they do not
have the authority to do that.
Mr. Raushenbush. You are testifying to the committee in such
a way as to indicate that you stay within the boundaries of what
our Government desires you to do.
Mr. Casey. Why shouldn't we? We are American citizens. I do
not see wdiat else we could do.
Mr. Raushenbush. And it gives the impression, the implica-
tion is, that everything you do in connection wdth foreign govern-
ments or refrained from doing, is with the approval of our Gov-
ernment ?
Mr. Casey. There is no intention to give that impression.
Mr. Raushenbush. So you consult them, but you may do things
that they might not approve of?
Mr. Casey. We could do things that they do not approve of, but
the fact remains that we do not.
Mr. Raushenbush. Then you do say that everything j^ou do is
approved by them?
Mr. Casey. No ; we do not say that.
Mr. A. Felix du Pont. Allow me to try to clarify that? Our
custom and what we have followed for many years, is to inform our
Army and Navy and the proper officials of the Army and Navy, of
MUNITIONS INDUSTRY 1153
every move that we make with regard to sales to foreign govern-
ments; if it seems advisable, we also inform the State Department.
Having done that many times we find there is no particular use in
it, because all they will admit they are interested in is whether we are
selling to a nation against whom there is an embargo. If there is
not an embargo, that is all; they have nothing to say to us.
The Chairman. Is that policy of your company also common to the
companies that your company owns and controls, such as for example,
the Remington Arms?
Mr. A. Felix du Pont. Our connection with the Remington Arms
Co. is quite short, as you know. They have their own organization
still.
The Chairman. That is understood, but you have your directorate
there, you have an active interest in it, and does that policy prevail
in that company in any form?
Mr. A. Felix du Pont. It has not prevailed in the Remington
Arms Co. before we took it over, so far as I laiow ?
The Chairman. Does it prevail now ?
Mr. A. Felix du Pont. I think so; we are getting towards that.
Some of these men are fairly independent still, and not inclined to
cooperate in the organization.
Dr. Sparre. I can answer that the same rule does prevail in the
Remington Arms Co.
The Chairman. How long has it prevailed?
Dr. Sparre. Since we took control of that company about in June
of 1933.
Mr. Casey. Senator Nye, I might answer this ; I have taken several
officials of the Remington Co. to Washington to establish the same
contacts, in order that they might keep the Army and Navy Depart-
ments posted in every phase of arms consumption.
The Chairman. The committee will stand in recess until 10 o'clock
tomorrow morning.
(Thereupon the committee took a recess until tomorrow, Friday,
Sept. 14, 1934, at 10 a.m.)
INVESTIGATION OF MUNITIONS INDUSTEY
FRIDAY, SEPTEMBER 14, 1934
United States Senate,
Special Committee to Investigate
the Munitions Industry,
Washington^ D.C.
The hearing was resumed at 10:45 a. ni., in the caucus room,
Senate Office Building, pursuant to the taking of recess, Senator
Gerald P. Nye presiding.
Present: Senators Nye (chairman), George, Clark, Pope, and
Vandenberg.
Present also : Stephen Raushenbush, secretary.
The Chairman. The committee will be in order, Mr. Raushen-
bush, do you wish to proceed where you left off last night?
TESTIMONY OF PIERRE S. DIT PONT, IRENEE DU PONT, LAMMOT
DU PONT, A. FELIX DTJ PONT, FIN SPARRE, J. BAYARD ELIASON,
AND W. S. CARPENTER AND K. K. V. CASEY— Resumed
Mr. Lammot DU Pont. Mr. Chairman, there are one or two matters
in the nature of corrections of the record which I would like to refer
to. May I do so now?
The Chairman. Very well.
Mr. Lammot du Pont. First, the joint agency agreement which
was being discussed at the close of our session yesterday was a 2-year
agreement and expires some time within the next few months. I
thought that was brought out, but the record does not indicate it.
Senator Clark. That was with the I.C.I. ?
Mr. Lammot du Pont. The joint agreement between the I.C.I, and
du Pont, dated 1932, being a 2-year agreement, and therefore expires
sometime this year — within the next few months.
The Chairman. Does that contain any provision for renewal?
Mr. Lamjmot du Pont. I do not know, but the document itself will
show that. I thought it was brought out on yesterday, but it was
not.
The Chairman. I do not recall it.
Mr. Lammot du Pont. Secondly, in the testimony of yesterday I
asked that my letter to Sir Harry McGowan, in reply to his letter
which was introduced, be introduced in the record. I understood that
was to be done.
The Chairman. That was ordered.
Mr. Lammot du Pont. But it does not appear in the record.
83876— 34— PT 5 ] 0 1 1 55
1156 MUNITIONS INDUSTRY
The Chairman. Does the other letter appear in the record in its
entirety ?
Mr. Lammot du Pont. Sir Harry McGowan's letter, I understand,
is in the record, but my reply to it is not, and that is the one I ask
be put in.
Mr. Raushenbush. We can have that inserted at that time, and
we can also have inserted, Mr. Chairman, the letter of Mr. Lammot
du Pont to the heads of departments and presidents of subsidiary
companies at the same time, which follows the letter from Sir Harry
McGowan.
The Chairman. Very well.
Mr. Lammot du Pont. I do not know anything about that letter.
Mr. Raushenbush. It is a connective letter which seems to follow
there.
Mr. Lammot du Pont. The letter to which I referred was a letter
of June 17, 1933, from me to Sir Harry McGowan.
Mr. Raushenbush. I received that this mornino; and I do not know
what happened to it, and I am turning it over to the reporter.
The Chairman. Let those letters be given suitable numbers and
inserted in the record. I refer to the letter from Mr. Lammot du
Pont to Sir Harry McGowan and also to the other letter. What was
the date of that ?
Mr. Raushenbush. June 17, 1933; also signed by the president of
the du Pont Co. to the heads of departments.
The Chairman. Let that letter be inserted as well.
(The two letters above referred to were marked " Exhibits Nos.
480 and 480-A" and appear in the text in the proceedings of Thurs-
day, Sept. 13, 1934, on p. 1117.)
The Chairman. Proceed, Mr. Raushenbush,
Mr. Lammot du Pont. There is one other point, Senator, in Mr.
Irenee du Pont's testimony, toward the close of yesterday, where he
referred to the lack of preparedness on the part of the United States
Government. He tells me that he had in mind the situation in 1916
rather than the situation which exists today. I do not think that was
clear in the record. Do you wish him to amplify that ?
The Chairman. I think with j^our explanation that it amply
clarifies whatever his thought was at that time.
Mr. Irenee du Pont. I thought I brought that out; that I was
talking about the World War in 191G when I s]5oke about the pre-
paredness of the du Pont Co. and what we could do.
Mr. Lammot du Pont. The record does not show" it.
Mr. Irenee du Pont. I do not want it to appear that if war were
declared tomorrow we would be able to do what we did in 1917.
Mr. Raushenbush. Mr. Chairman, before getting into the two main
subjects which we want to take up this morning, which j^ick up from
where we were discussing on yesterday afternoon the i>ower and in-
fluence of a large company with international connections in the for-
eign affairs of the world and the preparedness of other countries, I
want to call attention here and ask a question about a cable from
I. C. I., which is dated February 19, 1934, and which I want to read.
(The cable referred to was marked " Exhibit No. 487 " and is
included in the appendix on p. 1348.)
MUNITIONS INDUSTRY 1157
Mr. Raushenbush. That cable reads as follows :
I.C.I. , Ltd., London. Advise Hercules Powder Co., Rotterdam, Holland, in-
quiring (about) prices delivery (of) 50 tons diphenylamine for shipment to
New York, N.Y. I.C.I. London naturally anxious (to) consummate busi-
ness suspecting inquiry placed because of your inability (to) supply. How-
ever, do not wish to disturb your market and before offering request you to
advise if any reason you prefer they do not quote and secondly at which
price per Ion c.i.f. New York, N.Y., you consider I.G.I. London justified (in)
quoting. Cable immediately.
Is it a fair inference that I.C.I, and yourselves on this question
of diphenylamine have a market arrangement that practically, to
use the stock broker's phrase, " rigs the market " on that product ?
Mr. Lammot du Pont. No.
Mr. Raushenbush. What is the situation as brought out by that
cable?
Mr. Lammot du Pont. I think the cable speaks for itself. There
is no arrangement with respect to that product.
Mr. Raushenbush. Yet I.C.I, was still having difficulty as to
whether you would allow them to quote because the}^ did not wish
to disturl3 your market, and also at what price you would allow
them to quote.
Mr. Lammot du Pont. The cable does not so read to me.
Mr. Raushenbush. What else would it mean ?
Mr. Lammot du Pont. What it says [reading] :
However, do not wish to disturb your market and before offering request you
to advise if any reason * * *.
Evidently they are reserving the right to quote and quote any
price they see fit.
Mr. Raushenbush. They ask specifically the price you would
consider I.C.I. London justified in quoting.
Mr. Lammot du Pont. They are just asking our opinion.
Mr. Raushenbush. There is a report before me from Shanghai,
dated August 1, 1933, and signed by R. Montague Smith. Who is
R. Montague Smith ?
Mr. Lammot du Pont. I cannot answer that myself. May I see
the exhibit?
Mr. Raushenbush. The exhibit has been put before you.
(The document referred to was marked " Exhibit No. 488 " and is
included in the appendix on p. 1349.)
Mr. Lammot du Pont. I am informed that Mr. Smith is a repre-
sentative of the Imperial Chemical Industries in Asia, the Far East.
Mr. Raushenbush. On the last page of that document, under
the heading of " Canton ", he describes a certain situation which only
becomes clear if you realize that there was at the time a difficulty
between the Cantonese and the Nanking factions. It is a matter of
common knowledge, is it not, that those two groups were at various
times on the point of severing diplomatic relations ?
Mr. Lammot du Pont. There were internal difficulties in China.
1 do not recognize the names of the contestants, but I guess they
are right.
Mr. Raushenbush. That document starts off on the last page as
follows [reading] :
It is expected that the Canton Arsenal will be in the market for powder for
shell bombs and hand grenade fillings in the future, as they are studying the
1158 MUNITIONS INDUSTRY
matter very carefully. We are definitely handicapped in this business on ac-
count of the fact that the British Government require export permits before
they allcw the export of any munitions into China. This export permit cannot
be obtained until after the Chinese Minister in London has seen the Huchao —
That is the permit, is it not ?
Mr. Lammot du Pont. I do not know.
Mr. Raushenbush (continuing reading) :
which has to be approved by the Nanking authorities, and the Cantonese
naturally do not favor any arrangement which necessitates their applying to
the Central Government for permission to export into their territory.
In the past, Jardines —
That is the I.C.I. — dii Pont agent out there, is it not?
have managed to persuade the Cantonese authorities to write to Nanking for a
permit, but it must be understood that the only reason why the Cantonese
accede to this request is because they have no alternative either because
prices submitted were under those of continental firms, or they could not
obtain the material elsewhere. The above also applies to shipments from
America.
Then you go on, and this is what seems to me to be important in
it [reading] :
It would be a great help to conducting business if these restrictions could
lie lifted, and we suggest that representations be made to the British Foreign
Office and the State Department in Washington in this respect. It could be
stated in this representation that on no account would military munitions be
supplied to the Cantonese Government if a state of v\-ar existed between them
and the Central Government.
Now, is it not a fair interpretation that with those two govern-
ments threatening hostilities, and one government, the Canton Gov-
ernment, was very rehictant to ask the Nanking Government, the
Central Government, for a permit, your agent out there makes this
proposal definitely that we lift all the restrictions and put pressure
on the British Foreign Office and the State Department at Washing-
ton, and you make a proviso : " It could be stated that on no account
would military munitions be supplied to the Cantonese govern-
ment " — that is the minor government — " if a state of war existed
between them and the Central Government."
You realize that there is a possibility of war, and your people
out there are perfectly willing and eager to get munitions to those
people who may be conducting the war, and then you come along
and say, " Of course, once the war is declared, we would not supply
them with munitions."
Is not that a fair summary of your agent's report?
Mr. Lammot du Pont. I do not think it is.
Mr. Raushenbush. Go ahead.
Mr. Lammot du Pont. What is the question ?
Mr. Raushenbush. That you g(i aiiead and say what is your
summary.
Mr. Lammot du Pont. Just what the letter says, which is not very
long. It says it would be a great help to our business if something
were done, and suggests that repre entations be made — no pressure.
It suggests that representation^ bf- made.
Mr. Raushexbush. To the British Foreign Office and State De-
partment, and it goes ahead and pives the assurance, which is the
usual assurance, that, of course, if there were a state of war declared,
that no further munitions would be shipped. It is simply dealing
MUNITIONS INDUSTRY 1159
with the problem of supplying a possible insurrectionary or rebel
government with munitions on the promise that at the time war is
declared the munitions will no longer be sent.
Mr. Lammot du Pont. It is stated in this letter that this statement
could be made. It does not say that it is made or w^ill be made, but it
could be made.
Mr. Eaushenbush. But the situation which involved getting busi-
ness led to that sort of thing, did it not, that sort of an attempt to
get around the permit system ?
Mr. Lammot du Pont. I cannot say what it led to.
Mr. Eaushenbush. Who handles that sort of thing when it comes
up?
Mr. Lammot du Pont. Our smokeless powder department, Major
Casey. Your question, Mr. Eaushenbush, is whether your summary
is a fair one, and I say, in my opinion, it is not.
Mr. Eaushenbush. Yes, sir.
Mr. Lammot du Pont. You in your summary refer to pressure
being brought to bear, which this does not mention.
Mr. Eaushenbush. This says that it is proposed by the agent,
suggested by the agent, that representations be made.
Mr. Lammot du Pont. Yes, sir. I differentiate between repre-
sentations and pressure.
Mr. Eaushenbush. You never bring pressure. There is no such
thing as pressure by your company ?
Mr. Lammot du Pont. Not on this subject.
Mr. Eaushenbush. In the matter of selling, you would never say
there was pressure by the company on a governmental department
or the British Foreign Office? I mean that is " out."
Mr. Lammot du Pont. To do business ?
Mr. Eaushenbush. To do business.
Mr. Lammot du Pont. I think that is correct.
Mr. Eaushenbush. There is no pressure, so that the word " repre-
sentation " is the word to use.
Mr. Pierre du Pont. May Major Casey state what was done under
that letter from our agent, whether anything was done in regard
to it?
Mr. Eaushenbush. By the way, in this connection may I ask the
president of the company this question : A great deal of testimony
seems to have been going into the record from subordinate officials
of the company. May we understand that those statements stand
as the official attitude of the company unless corrected by you on the
stand ?
Mr. Lammot du Pont. Certainly; the company is responsible for
the acts of its men.
Mr. Eaushenbush. We would be very glad to hear what happened
in that matter.
Mr. Lammot du Pont. I noticed that on yesterday, on several occa-
sions, replies were given which might be construed as statements of
policy of the company, and I think some of those were not always
exactly correct.
Mr. Eaushenbush. Will you help us out, Mr. du Pont, at that
point, when these statements are made which seem to be giving the
policy of the company, and check them at that point?
Mr. Lammot du Pont. I think I did.
1160 MUNITIONS INDUSTRY
Mr. Raushenbush. Did you in every case?
Mr. Lammot du Pont. I think so.
Mr. Raushenbush. I was particularly interested in that one about
when Government consent was not obtained and what it meant or
signified.
Mr. Lammot du Pont. The question about this letter has been
raised, and I inquire whether you would desire to have Major Casey
state what was done in this matter ?
Mr. Raushenbush. The answer is " yes."
Mr. Casey. I might add that we had had at different times requests
from the Cantonese indirectly, and never paid any attention to them,
because there was only one source of supply, so far as we were con-
cerned, to China, and that was the Government recognized by the
United States. When this particular letter came, we took absolutely
no action and did not think it was a matter which we should inter-
fere with in any way. If the Cantonese wanted to be recognized,
they had to take that up themselves with the United States Govern-
ment. We had no intent at any time to interfere in matters of that
sort, either directly or indirectly.
RELATIONS WITH MITSUI & CO., LTD., JAPAN
Mr. Raushenbush. The attitude of your agents on the scene and
the things which they suggest seem significant enough to bring that
out, but it is not a very important point. I would like to go on
to this question of the purchase of the ammonia-oxidation plant by
Japan. On July 2, 1930, there is a letter from H. G. Chickering,
of the development department, addressed to Mitsui & Co., Ltd.,
New York. I will offer that as " Exhibit No. 489."
(The letter referred to was marked "Exhibit No. 489", and is
included in the appendix on p. 1350.)
Mr. Raushenbush. Could any of you tell us in a somewhat de-
scriptive way what this Mitsui & Co., Ltd., is and what its relations
to the Japanese Government are ?
Mr. Lammot du Pont. My understanding is that Mitsui & Co. is
a privately owned corporation in Japan of very old standing, hun-
dreds of years, and one of the highest regarded and largest corpora-
tions in the country. They are engaged in a number of branches of
industry, among others in the chemical industry. But what their
relations with the Japanese Government may be, I do not know,
except that I know that on some particular commodities they enjoy
a monopoly, granted by the Japanese Government.
Mr. Raushenbush. There are some chemical branches in which
they enjoy a monopoly granted by the Japanese Government, are
there not?
Mr. Lammot du Pont. I do not know that. I only know about
one commodity.
Mr. Raushenbush. That is camphor ?
Mr. Lammot du Pont. That is camphor. I only know that because
we purchase camphor from Mitsui.
Mr. Raushenbush. You use that in your chemical business to
some extent?
Mr. Lammot du Pont. Yes, sir.
MUNITIONS INDUSTRY 1161
Mr. Kaushenbush. The letter of July 2, 1930, which I have offered
for the record, just described, simply raises the question with Mitsui
& Co. and points out:
* * * we regret to note that the prospective clients in Japan have not
as yet made any definite move toward the purchase of our ammonia oxidation
process.
On April 23, 1931, there was a report from the Foreign Relations
Department, signed by J. K. Jenney, assistant director, to various
vice presidents of the company, wdiich I would like to introduce as
" Exhibit No. 490 ", being Messrs. F. A. Pickard, vice president, and
J. E. Crane, vice president.
(The report referred to was marked "Exhibit No. 490" and is
included in the appendix on p. 1351.)
Mr. Raushenbush. There are some paragraphs in that report
which seem to be of interest. [Reading] :
Presumably, if we are to sell the process in Japan at all we would prefer to
sell it to the Mitsui interests, not only because they are linked up with the
Claude interests —
The Claude interests were the French interests for a somewhat simi-
lar ammonia process ? Is not that true ?
Mr. Lammot du Pont. Mr, Claude was the inventor of a nitrogen
fixation process.
Mr. Raushenbush (continuing reading) :
but also because it is a matter of general company interest to keep as friendly
relations with this company as possible. The point for the Foreign Relations
Committee to decide bears on the I.C.I relationship involved.
I will skip a paragraph, and the report continues :
I believe this obligates us to take the matter up with I.C.I, before making an
offer or carrying on any further negotiations with Mitsui. We have no con-
tractual obligations which would prevent us from concluding the deal with
Mitsui, even though such a deal might hurt I.C.I.'s interests considerably, Japan
being 1 of their 2 or 3 most important export markets.
Mr. Wardenburg is the president of your ammonia company ?
Mr. Lammot du Pont. He is in charge of our ammonia depart-
ment.
Mr. Raushenbush. He is in charge of your ammonia department.
[Continuing reading :]
Mr. AVardenburg, of course, quite justly points out that Mitsui seems resolved
to go ahead with their expansion program, and it is hard to see how I.C.I, can
be much worse off whether we sell them our process or whether they go ahead
on their own or with some third party.
Mr. Pierre du Pont. We operate under those Claude patents, and
we have a right to sell them in Japan, have we not?
Mr. Lammot du Pont. I do not think that is correct.
Dr. Sparre. No; none whatever.
Mr. Pierre du Pont. I thought they acquired it.
Dr. Sparre. The du Pont Co. bought that ammonia process from
the French company in 1924. At that time, as far as I recollect, the
Japanese company had already bought the same rights from the
French company for Japan, but the licensees of the French company
had to exchange information under the purchase agreement to ac-
quire the ammonia process from the French company, which is the
usual provision in the purchase of patents and processes.
1162 MUNITIONS INDUSTRY
Mr. Lammot du Pont. Mr. Secretary, I think you are getting con-
fused on this, because you have not realized what the subject of this
letter is. I will read the first sentence.
Mr. Raushenbush. Yes, indeed.
Mr. Lammot du Pont [reading] :
I attach herewith copy of a report from Mr. F. A. Wardenburg to the board
of directors of the du Pont Ammonia Corporation, relative to the proposed sale
of contact conversion process rights to Mitsui in Japan.
The contact conversion process applied to hydrogen and not to
ammonia.
Mr. Raushenbush. All right. Were there two processes being dis-
cussed throughout these years?
Mr. Lammot du Pont. A great many more than two.
Mr. Raushenbush. I mean with Japan, with Mitsui.
Mr. Lammot du Pont. I cannot say that I remember how many
subjects were discussed with Mitsui, but this letter refers to the con-
tact-conversion process. That was a process for manufacturing
hydrogen.
Mr. Raushenbush. The other one was described as the ammonia
oxidation process. Is that right?
Mr. Lammot du Pont. The ammonia oxidation process is a process
for converting ammonia into nitric acid. The contact conversion
process is a process for producing hydrogen.
Mr. Raushenbush. Both of them have some relation to war ma-
terials, do they not?
Mr. Lammot du Pont. As baking bread does, they have.
Mr. Raushenbush. A little more than that; do they not?
Mr. Lammot du Pont. Maybe a little more than that.
Mr. Raushenbush. Quite a bit more?
Mr. Lammot du Pont. Nitric acid and ammonia are both required
as raw materials for some munitions, but the}^ are also both used as
raw materials for peace-time use.
Mr. Raushenbush. Peace-time use as well as military?
Mr. Lammot du Pont. Yes, sir.
Mr. Raushenbush. The connection of the Mitsui Co. with the
Claude process is described in a letter of April 24, 1931", from the for-
eign relations department to Mr. Wardenburg. This again the
contact conversion process. I will offer that as " Exhibit No. 491."
(The letter referred to was marked " Exhibit No. 491 " and is
included in the aj^pendix on p. 1351.)
Mr. Raushenbush. The postscript on that letter states :
The Mitsui people, who are Claude licensees in Japan, have heard through
Londou of our part in the development of a contact conversion process and
seem to be desirous of purchasing rights for use of this process in Japan. No
definite offer has been made, but one will be in the near future. In the mean-
time Mitsui has asked us to keep this matter strictly confidential as they have
to clear up certain commitments they have made with Air Liquide.
Air Liquide is a big French chemical organization, is it not?
Mr. Lammot du Pont. Yes; that is the company with which Mr.
Claude was connected.
Mr. Raushenbush. They used the Claude process, all right.
On March 23, 1932, you prepared a memorandum covering relations
between Mitsui and clu Pont with respect to hydrogen process. Will
MUNITIONS INDUSTRY 1163
you tell US again just what that is? That is not the ammonia process
but the other one ?
Mr. Lammot du Pont. The hydrogen process referred to, I think,
is the contact conversion process referred to there.
Mr. Raushenbush. I put that before you and offer it as " Exhibit
No. 492."
(The memorandum referred to was marked " Exhibit No. 492 "
and is included in the appendix on p. 1352.)
Mr. Raushenbush. The memorandum was addressed to the As-
sistant Secretary of State, Mr. Rodgers, the 28th of March, 1932, and
simply summarizes your relations with Mitsui in regard to this con-
tact conversion process.
There is a further memorandum to the executive committee, dated
two days later, March 30, 1932, signed by Mr. Lammot du Pont. I
will read a part of that memorandum into the record [reading] :
On March 28 the writer called on Assistant Secretary of State Rodgers,
having had an appointment witli Secretary Stimson, who, unfortunately, was
ill and by doctor's orders saw nobody.
Dr. Hornbeck was called in, and it happened that Mr. P. S. du Pont and
Senator John G. Townsend were also present, the latter having arranged the
appointment.
The matter of the sale of the rights to our hydrogen process to Mitsui & Co.
was discussed. The matter was put before Mr. Rodgers in the light that (1)
the deal was an important one to the du Pont Co. ; (2) that we were given
to understand that the process was not primarily for military purposes ;
(3) that the plant would probably not be in operation for a year and a half,
and certainly not within a year; (4) that having this process did not mean
that Mitsui & Co. or the Japanese nation could purchase any more ammonia,
nitric acid, or munitions than they could without the process, but that it would
mean their ammonia could be produced more cheaply; (5) that there might
be some value in a continuation of friendly relations between Mitsui and du Pont
from the international point of view; (6) that the desire of Mitsui & Co. to
acquire the process preceded any warlike activities between Japan and
China
Let me interrupt at that point. 1932 was a time when there was a
great deal of friction between China and Japan, was there not?
Mr. Lammot du Pont. I think so.
Mr. Raushenbush. And the nations of the world were considering
the possibility of boycotting one of the belligerents; was not that
about the time?
Mr. Lammot du Pont. I do not recall that.
Mr. Raushenbush. The seventh sentence of this reads :
That du Pont felt some embarrassment in refusing to deal with Mitsui at
this time, it being necessary to reverse our previous position, if we were to
take the stand of not selling the process.
That is a true statement of what you informed the State Depart-
ment about it at the time, is it not?
Mr. Lammot du Pont. May I read the rest of the memorandum
before answering that?
Mr. Raushenbush. Yes, indeed.
Mr. Lammot du Pont. Yes, sir ; that is a correct statement of what
I advised Dr. Hornbeck.
Mr. Pierre S. du Pont. Should it not be made clear that both this
hydrogen and ammonia process are used in connection with making
fertilizer either as nitric acid or as ammonia, and that this par-
1164 MUNITIONS INDUSTRY
ticular field was connected with fertilizers, and so represented. That
is the way I understood it at the time. I remember the question
being brought up.
Mr. Raushenbush. Mr. Pierre S. du Pont, you will notice that
the sentence No. 4 says, among the ways it was put before the State
Department —
That having this process did not mean that Mitsui «& Co. or the Japanese
Nation could produce any more ammonia, nitric acid, or munitions tlian tliey
could without the process, but that it would mean their ammonia could be
produced more cheaply.
Mr. Pierre S. du Pont. Yes.
Mr. Raushenbush. It was not a matter of giving Japan a new
military supply or source of supply; it was simply cheapening the
way in which they could produce it.
Mr. Pierre S. du Pont, That would be a military advantage and
also a peace advantage in enabling them to produce fertilizer more
cheaply.
Mr. Raushenbush. From the military angle, a country that can
produce a great deal of ammunition cheaply in peace time can pre-
pare at less expense for a war, of course, than otherAvise.
Mr. Pierre S. du Pont. That is true, but the representation at
the time was, I believe, that this process was chiefly intended for the
fertilizer industry, to avoid importations from Chile.
Mr. Lammot du Pont. That was our understanding; yes.
Mr. Irenee du Pont. Would it not be appropriate at this time
to refer to Senator Bone's statement on this subject? This is a
patented process. The patent is published the world over. In case
of war, what is there to prevent a country from taking the patent and
using it?
Mr. Raushenbush. Then on the 26th day of July 1932, there was
a contract signed between you and the Mitsui Mining Co., which I
should like to put in the record as " Exhibit No. 493."
(The contract referred to was marked " Exhibit No. 493 " and is
included in the appendix on p. 1352.)
Mr. Raushenbush. It provided for a payment of $300,000 for
that process and some help in putting it in, did it not?
Mr. Lammot du Pont. I do not recall those figures, but if they
are stated in the agreement that way, it is correct.
Mr. Raushenbush. I remember it from other correspondence; I
refer you to page 2, the second paragraph, which says :
Mitsui agrees to pay du Pont at Wilmington, Del., in United States gold coin
of the present weight and fineness, or its equivalent, the sum of $300,000 pay-
able $100,000 upon the signing of the contract, a further $100,000 1 year there-
after, and the remaining sum of $100,000 2 years after date hereof.
Then, later on, in the third paragraph it goes on to say :
When, however, the total of all payments made under this agreement shall
have amounted to $300,000, exclusive of payments for services as covered by
paragraph 10 hereof, no further payments shall be required from Mitsui, re-
gardless of the amount of hydrogen manufacturing capacity installed for
ammonia manufacture.
Mr. Lammot du Pont. That is correct.
MUNITIONS INDUSTRY 1165
Mr. Raushenbush. Then, on page 5, paragraph 10, the language
is:
Du Pont agrees to furnish not to exceed three men for a period of not to
exceed 2 years each to assist Mitsui or its subsidiary or subsidiaries with the
design, construction, and placing in operation of its first unit of pressure con-
tact conversion.
In paragraph 11 they say :
Du Pont agrees that it will, during the period of 7 years from date hereof,
permit four visits, not exceeding 4 months each, by not more than three em-
ployees of Mitsui during each visit, to du Font's ammonia plant for the pur-
pose of study and training on those subjects, information relative to which is
given hereunder, but on those subjects only, and du Pont further agrees to give
every reasonable assistance to such employees of Mitsui.
The agreement is signed by Jasper E. Crane, vice president of
du Pont & Co. and by Reisuke Ishida, attorney and manager, New
York branch, Mitsui & Co., Ltd.
This was not tlie same thing as the ammonia-oxidation process,
Vv-as it?
Mr. Lammot du Pont. No.
Mr. Raushenbush. What happened to that discussion?
Mr. Lammot du Pont. Which discussion?
Mr. Raushenbush. Concerning the ammonia -oxidation process.
Mr. Lammot du Pont. My recollection is that no deal was ever
closed on that. That is my recollection, that we never closed any
deal with them.
Mr. Raushenbush. Why did the negotiations stop; not through
unwillingness on your part to continue them?
Mr. Lammot du Pont. I cannot recall at this date, Mr. Raushen-
bush, but my natural suspicion would be that our price was too high.
Mr. Raushenbush. Your price was too high. Well, it is the dealing
in these processes which cheapens munitions, even if they do not give
a country new sources of munitions; they seem to some of the mem-
bers of the committee who have spoken to me about it, to constitute
transactions of equal importance with the sending of divisions of an
army; for instance, one gas process or one process might be equal
to a division, let us say, or perhaps two divisions, in an army. For in-
stance, take this ammonia process which was discussed at some
length. I have before me a letter dated July 1, 1930, from Mitsui
to you in regard to that ammonia-oxidation process.
Mr. Lammot du Pont. This is the one that was never sold.
Mr. Raushenbush. Yes ; this is the one that was never sold. But
I am talking about the negotiations that were going on rather
casually in connection with it. The first paragraph says:
* * * We know that army, navy, and Mitsui Mining Co. have keen
interest in your process, and also they will need it sooner or later.
Then a little later there is a discussion again of the contact process.
That is the one that w^as sold?
Mr. Lammot du Pont. The contact conversion process ?
Mr. Raushenbush. I have here a document which I will offer as
" Exhibit No. 494 ", which is headed " Proposed sale of contact con-
version process rights to Japan."
1166 MUNITIONS INDUSTRY
(The document referred to was marked " Exhibit No. 494 " and is
included in the appendix on p. 1355.)
Mr. Raushenbush. This comes from F. A. Wardenburg, presi-
dent du Pont Ammonia Corporation, to the board of directors, the
clu Pont Ammonia Corporation. It is dated April 21, 1931.
After discussing the proposed sale of the contact conversion proc-
ess rights to Japan, it goes on in the second paragraph of the second
page to say :
The present large overproduction of nitrogen in the world makes con-
struction of any nitrogen plant a dubious undertaking, but there seems more
justification for additional capacity in Japan than in any other country, per-
haps, in view of their large imports and their desire to be self-supporting in
nitrogen supply for military purposes, as well as for agriculture.
This was at a time, 1931, when it w^as already clear to some people
that Japan was expanding, and the head of your chemical company
reports to his board that there is justification for additional capacity
in Japan more than in any other country, perhaps, in view of their
large imports and their desire to be self-supporting in nitrogen
supply for military purposes as well as for agriculture.
There is another paragraph called " Recommendation ", which
says:
We appreciate that any increasing capacity in nitrogen manufacture in
any part of the world has its effect upon our business, but we believe
that our interests would not be hurt by the installation of additional ca-
pacity in Japan to the extent of the payments that could be secured for the
sale of the Japanese rights.
There, in 1931, you were told by the president of your Ammonia
Corporation that that was pretty thoroughlj^ for military purposes*
Mr. Lammot du Pont. No.
Mr. Raushenbush (reading) :
* * * Their desire to be self-supporting in nitrogen supply for military
purposes * * *.
That is given preference. That is put first. Then he adds —
As well as for agriculture.
Mr. Lammot du Pont. That is in connection with a different point.
It is in connection Avith a statement that there seems more justifica-
tion for additional capacity in Japan than in any other country.
That is the point that Mr. Wardenburg is making there.
Mr. Raushenbush. Mitsui already had plants twice as large as
your own, did they not ?
Mr. Lammot du Pont. Not by this process.
Mr. Raushenbush. By the other process ?
Mr. Lammot du Pont. Yes. I do not accept your figures, but they
had very large plants.
Mr. Raushenbush. And here they are having put in a capacity
which would enable them practically to be self-sustaining from the
military angle.
Mr. Lammot du Pont. They were simply negotiating for a process.
What capacity they built under that process would be a later
develojDment.
Mr. Raushenbush. Thisi is the process that went through, is it
not ?
Mr. Lammot du Pont. Yes.
MUNITIONS INDUSTRY 1167
Mr. Raushenbush. This is the contact conversion process?
Mr. Lammot du Pont. Yes.
Mr, Raushenbush. I want to come back to that memorandum of
the discussion that you had with the State Department on the matter.
In that connection you said in paragraph 4 —
that having this process did not mean that Mitsui & Co. or tlie Japanese
Nation could produce any more ammonia, nitric acid, or munitions tlian they
could without the process, but that it would mean their ammonia could be
produced more cheaply.
Mr. Lammot du Pont. That is correct.
Mr. Raushenbush. So substantially that is correct that they could
iiot produce any more of these things ?
Mr, Lammot du Pont. That is correct.
Mr. Raushenbush. By this process, even if they installed plants
as outlined in that contract ?
Mr. Lammot du Pont, They could install their additional plants
in the use of their other process,
Mr. Raushenbush. Anyhow, then, they could do it more cheaply?
Mr. Lammot du Pont. That is the reason they can do it more
cheaply, but not in any greater volume.
Mr, Raushenbush, It would simply cost the Japanese less to keep
up their army; keep their army prepared for such invasions of
Manchuria as were made, than otherwise would have been nccessjiiy.
Mr, Lammot du Pont, It might clarify your mind a little, Mr.
Raushenbush, if I tell you that ammonia, for which this process is
used, is a comparatively cheap article. It sells for around 5 cents
a pound, A reduction in cost of the thing referred to is a matter
of a fraction of a cent a pound,
Mr. Raushenbush. But it was worth enough so they were willing
to put up $900,000 for it.
Mr, Lammot du Pont. If they make enough ammonia.
Mr, Raushenbush. If they make enough ammonia ; with $900,000
right off the bat.
Mr. Lammot du Pont. The big use for ammonia is for fertilizer
purposes.
Mr. Raushenbush. That seems to be in the sphere of argument,
in view of these letters.
Mr. Lammot du Pont. No; there is no argument about it. Sta-
tistics prove that there are millions of tons of fertilizer used and
millions of tons of ammonia used every year.
Mr. Raushenbush. Did we not have the same argument in con-
nection with Muscle Shoals, which was built supposedly for military
purposes, but later on there was a question of diverting it into the
manufacture of fertilizer?
Mr. Lammot du Pont. I never had any argument about it.
Mr, Raushenbush. I am not referring to yourself, but there w^as
a public argument that went on in Congress for a number of years,
Mr, Lammot du Pont, I do not know anything about it,
Mr, Irenee du Pont, I was quite familiar with that matter. The
method of making ammonia at Muscle Shoals was completely obso-
lete in 1918; that is, this process of making ammonia costs a fraction
of what it would have cost to make it by the cyanimide process,
which was proposed for Muscle Shoals.
1168 MUNITIONS INDUSTRY
Mr. Raushenbush. I want to switch for a moment to the conn-
try across the Japanese ocean, China, and ask the president of the
company whether he is at all conversant with those matters indi-
cated in a letter dated August 17, 1932, which I lay before him.
Mr. Lammot du Pont. I was not familiar with those matters in
1932, at the. time this letter was written, but since then I have
referred to our records, and I think I am generally familiar with
the subject.
Mr. Raushenbush. You mean within the last few weeks you have
seen the records on that matter?
Mr. Lammot du Pont. Yes.
Mr. Raushenbush. That deals with commissions to officials?
Mr. Lammot du Pont. And others.
Mr. Raushenbush. I beg your pardon.
Mr. Lammot du Pont. It deals with commissions to officials and
others.
Mr. Raushenbush. Officials and others; yes. I was not aware
myself, Mr. Lammot du Pont, that you knew about these matters. I
supposed that in a very large organization this sort of thing would
be beyond you, and yet I was interested in your reaction to finding a
letter like that in front of you, and I wish, if you would care to do so,
you would comment on it at this moment.
Mr. Lammot du Pont. I have nothing further to say about this
letter, except that I was not familiar with these matters in 1932, but
since then I have familiarized myself with them in a general sort of
way.
Mr. Raushenbush. This is a discussion of the treatment of officials
in China, and seems to treat the subject reasonably casually, does it
not? As if this were not an unusual thing at all; it names one
general and several other high officials.
Mr. Lammot du Pont. Did you ask me a question ?
Mr. Raushenbush. I am trying to have you comment on that with-
out necessarily going into all the details. If tliis is a casual matter
and they treated this casually without further repercussions, then is
it not true that you are in a competitive system in which everybody
does this ? You are not the pioneer in this business of paying com-
missions to officials?
Mr. Lammot du Pont. Not in China.
Mr. Raushenbush. Other people do it?
Mr. Lammot du Pont. I understand that is so.
Mr. Raushenbush. Other competitive companies do it?
Mr. Lammot du Pont. I understand so. I have never been in
China myself. Do you wish me to say whether this is in accord with
the company's policy or not?
Mr. Raushenbush. The fact that it took place indicates what the
company's policy was at the time, does it not?
Mr. Lammot du Pont. I am afraid not.
Mr. Raushenbush. Mr. Lammot du Pont, just treating this as
people who are trying to be intellectually honest about a situation,
the company's policy is what the agents in the field do, not what the
president at the head of the company says to the public ; is not that
a fact?
Mr. Lammot du Pont. No; that is not a fact. I think the com-
pany's policy is dictated by the head management. Sometimes
MUNITIONS INDTTSTRY 1169
agents in the field deviate from that policy and sometimes their
deviation is brought to light.
Mr. Raushenbush. The head of a police force can say to the citi-
zens, " Gentlemen, we are going to have the cleanest, most honest
police force in the world." But if the cop on the beat holds up some
prostitute — and it is done often enough — that is the policy of that
police force, is it not?
Mr. Lammot du Pont. If it is done often enough, I think your con-
tention would be correct.
Mr. Raushenbush. This question of commissions to high officials
in China in 1932 was unusual?
Mr. Lammot du Pont. You make a statement and ask me a ques-
tion at the same time.
Mr. Raushenbush. I am asking you the question, Was it unusual ?
Mr. Lammot du Pont. Was what unusual ?
Mr. Raushenbush. The payments by the company's agencies, joint
agent of the company and LCI. out there, of commissions to high
officials in the Chinese military administration, generals, and so
forth; was that an unsual policy?
Mr. Lammot du Pont. It certainly was unusual, extremely unusual.
Senator Vandenberg. May I ask you this question? You can
answer it yes or no. I am not interested in going into detail on mere
hearsay. We can develop the facts later. In other parts of the
world, have you ever been told by your agents that your terms must
include what are delicately described as commissions for government
officials or their relatives?
Mr. Lammot du Pont. I think we have been told that at times, but
not in all foreign countries.
Senator Vandenberg. But what?
Mr. Lammot du Pont. Not in all foreign countries.
Senator Vandenberg. Oh, no.
Mr. Lammot du Pont. And not on all occasions in any foreign
country.
Senator Vandenberg. As a matter of fact, have your agents or
have they not reported on certain occasions that these so-called " com-
missions " to government officials or their relatives are a necessary
part of the quotations which you must make?
Mr. Lammot du Pont. Yes. We have been told on a number of
occasions that that is the general practice in certain foreign countries.
Senator Vandenberg. Have you ever included cost items of that
character in your quotations?
Mr. Lammot du Pont. Not to my knowledge. If that appears
from this letter — evidently it appears from this letter to have been
done in this case.
Senator Vandenberg. I am not thinking alone of China at this
time. I am thinking of the rest of the world and I am not re-
flecting on your company's action. I am thinking of the nature of
world competition in respect to munitions sales. Do you very often
confront the situation that the sales, or the prospect of it, may as well
be abandoned except as those so-called " commissions ", which we
would probably call bribes, are included in the quotations?
Mr. Lammot du Pont. We have been told that.
1170 MUNITIONS INDUSTRY
Mr. Pierre S. du Pont. May I amplify that statement from my
experience ?
Senator Vandenberg. Yes.
Mr. Pierre S. du Pont. I have in mind only three occasions when
that question was actively discussed. It dates back to my boyhood.
I remember my father stating the policy that such a thing was
entirely improper, and I guess it has made a lifetime impression
upon me. A Russian contract for powder was ready for delivery
and it was announced that it could not be accepted unless a com-
mission was paid. I remember my father saying that the powder
could remain there forever, so far as he was concerned, before any such
thing would take place. But that is old history. When we first went
into Chile, we were told that no operation could be conducted there,
no manufacturing operation, unless a commission were paid in order
to get machinery, and so on, into Chile. That question was actively
discussed and we decided that we would stay out and the machinery
remain undelivered in Chile if a commission were necessary. I think
our shipments were delayed somewhat. But they went in without
any payment.
The third occasion that I remember was in connection with busi-
ness with Russia in the Great War. We had been told that no such
business could be done with Russia without paying a commission.
It was the custom of the country and it could not be broken down.
Colonel Buckner, who was our chief negotiator for powder in those
days, consulted with me. I was president of the company at that
time. He consulted with me as to whether we would accede to this
custom if necessary, and we decided — we both agreed — that we would
not submit to any such thing. A great deal of powder was sold to
Russia, but not to my knowledge was any commission passed. I
think an investigation of every record that we have would show
that nothing of the kind was done. I am firmly convinced that that
is the policy of the company.
Under that policy, I am not clear whether this transaction was
known to our agent at the time or whether this man who was sup-
posed to have made tlie distribution did it and then reported it.
But whatever was done was entirely contrary to the policy of the
company and certainly should not be countenanced in any way, and
I am certain that our board of directors and our committee would
not countenance any such thing.
Senator Vandenberg. I am sure that that is so. I am not think-
ing, in asking my question, about the Chinese incident, because we
know that China seems to have a rule unto herself frequently. Is
it not a fact, however, that that practice obtains in other countries
than those even which you have mentioned?
Mr. Pierre S. du Pont. I understand so; yes.
Mr. Lammot du Pont. I understand so.
Senator Vandenberg. Do you suppose that your agents may find
it necessary to pay some of these so-called " commissions " and find
some other way of charging it to their expenses ?
Mr. Pierre S. du Pont. I hope no such thing occurs and, if it
does occur, I hope the company will take every precaution to stop it.
It is certainly contrary to the policy of the company and if I had
had known about it I should have "protested absolutely. It might
MUNITIONS INDUSTRY 1171
have been done in possibly one or two cases when a man has gotten
overenthusiastic, but certainly it is not the policy of the company
and it should be stopped, if there is any means of stopping it.
Senator Vakdenberg. I think it would be very interesting if we
could have on the stand, for the presentation of a typical picture, one
of these key men in the export field. May I inquire whether, for ex-
ample, Mr. Bates ever comes to the United States or is expected in
the United States in the near future?
Mr. Pierre S. du Pont. I do not know a thing about it.
Mr. Lammot du Pont. Yes ; he does.
Senator Vandenberg. Do you know when he is calculated to be
here again?
Mr. Lammot du Pont. I think he is in this room now.
Senator Vandenberg. Mr. Bates is here now ?
Mr. Lammot du Pont. Yes, sir.
Mr. Eaushenbush. Under the circumstances I simply want to
read a few lines from this letter as to the amount paid in commission
to Chinese officials, where he says he told one of the officials of your
company on numerous occasions that a certain general and an agent
who, I believe is in the financial department, participated in the
5-percent distribution, and several other officials in a certain province,
and the paragraph I refer to reads :
It will be recalled that the payment to officials was deemed essential for
doing the business we did, and the 5 percent allowed was thought sufficient.
Now, at the time of this Chinese-Japanese trouble you were really
getting into a situation where you were securing cheaper powder
for Japan on one side and giving bribes to China on the other. That
was the situation?
Mr. Lammot du Pont. No; that does not represent it at all, Mr.
Kaushenbush. We were not furnishing cheaper munitions to Japan.
It was clearly our understanding that the process was desired in
connection with commercial uses of ammonia.
Mr. Raushenbush. Now, Mr. du Pont, that does not seem to me
cjuite fair, in view of your testimony and the reports to the depart-
ment. You say you are very sorry this whole matter had to be
discussed at the time of the Chinese-Japanese fracas, and it really
came up before then?
Mr. Lammot du Pont. That was the statement to indicate that the
Japs did not have in mind a war w^hen they first tried to acquire it.
Mr. Raushenbush. It was right in the middle of a hot spot where
America was, through your company, which is a great company con-
nected wdth other companies, offering Japan something that would
strengthen her in a military way.
Mr. Lammot du Pont. No ; it was to strengthen them in the am-
monia process, used principally for fertilizer, and incidentally for
munitions.
ISIr. Raushenbush. Before getting off of this one incident — and I
am almost through with it — there are always a certain number of
people in the country who think that sometime we may have to go
to war with the great eastern power called " Russia." Testimony
was interjected m the hearings yesterday by Mr. Irenee du Pont
that possibly this munitions committee sitting here might be giving
83876—34 — pt 5 11
1172 MUNITIONS INDUSTRY
aid and comfort ro the iireat Kiissian Army. Is it not a fact that
about this time and before, you were setting up in Russia a some-
what similar ammonia oxidation plant, as yon were in Japan?
jNIr. Lammot du Pont. No: I think that was a different matter..
The process we sold to Russia was ammonia oxidation, and the
process we sold to Japan was contact conversion.
Mr. Raushenbush. Both of them had to do with the military
anii'Ie.
Mr. Lammot du Pont. No ; as I explained before, the sale to Japan
was with the understanding the product was desired principally for
fertilizer purposes.
Mr. Raushenbush. I call your attention to a letter dated July 16^
1930, to Mr. W. H. O'Gorman, which speaks of sending two men over
there to start on the ammonia-oxidation plant, and right after that
discussion of ammonia oxidation in Sweden, on November 27, 1930,
there is an extract from a letter signed by Homer H. Ewing. [Read-
ing as follows :]
They asked if we could supply a smaller unit, whereupon I emphasized the
importance of having excess capacity available for emergency requirements,
such as may be called for in time of war.
That was ammonia oxidation, was it?
Mr. Lammot du Pont. That was not sold to Japan.
Mr. Raushenbush. We are talking about Russia now, and I am
trying to make the point that at the time when a good many people
felt there was some danger of our having to engage in war with
Russia your company was giving them capital resources which might
in some event be used in case of war.
Mr. Lammot du Pont. We were selling Russia a process that could
be used in time of war.
Mr. Raushenbush. In view of that, then Mr. Irenee du Pont's
testimony that the munitions committee was the one that was assist-
ing and aiding Russia, should be coupled with the fact that the
du Pont Co. was assisting in doing that also?
jNIr. Iiucnee du Pont. If you will refer to my testimony, I said if
the committee's finding leaves America unprepared for war. we
might suffer from an attack. This was selling a process to a country
that is starved for fertilizer, and that is actual starvation. You have
taken such a great interest in Paraguay and Bolivia that they must
not hurt each other, then should Russia be allowed to starve for lack
of fertilizer? It does not seem to be very consistent.
Mr. Raushenbush. The evidence the committee has is what hap-
pens in the field. This is what the agents really do when they are
out there. Yon gentlemen are the representatives of a vast organi-
zation, and like the President of the United States, who does not
know what every N.R.A. boy does out in the field, you are at arm's
length from the situation, and it seems to me possible that things are
being done in your name and with yotu' consent that have far more
significance than you attach to them.
Mr. Pierre S. du Poxt. I believe those occasions are very rare.
Mr. Raushenbush. There are Russia and Japan.
Mr. Pierre S. du Poxt. You have introduced no evidence that indi-
cated anything contrary to our policy, or indicating that anythino
was done contrary to our policy either in Japan or Russia. You
MUNITIONS INDUSTRY 1173
-were talking about the company's right in carrying out the policy of
the management.
Mr. Raushenbush. What I mean is that those things seem to
give some of these countries capital resources which would be used
in war, and a process is as much a capital resource as a factory is.
Mr. Pierre S. du Po^-T. The only time that was mentioned was in
connection with Sweden.
Mr. Raushenbush. Sweden bore out the Russian situation.
Mr. Pierre S. du Pont. That was the only time that was mentioned
in any exhibit introduced.
Mr. Raushenbush. It seems to me in the one from Wardenburg
regarding the use of that process back in 1930 it was merely brought
out about Japan getting ready for military purposes.
Mr. Pierre S. du Pont. That was a communication to the company,
and he gave it as his opinion what Japan was contemplating, and
he gave it as his opinion that this process was going to be used by
Japan for commercial purposes. But he pointed out it could be
used for war, and he gave his reasons why he thought this was not
going to be used for war.
ARGENTINE POWDER FACTORY
Mr. Raushenbush. Perhaps we can get back to that after we are
through with this next incident.
On May 29, 1930,_ there is a letter from Mr. W. H. O'Gorman
signed as assistant director. What is his position ?
Mr. Lammot du Pont. Assistant director of sales, smokeless
powder department.
Mr. Raushenbush. This letter is addressed to Col. W. N, Taylor
in Paris, and that starts off the story of the du Pont Co. in the
Argentine. This letter reads:
In reference to your letter T-1924 it is noted that H. I. H. may make a
bid for cruiser business in South America.
Who is " H. I. H." ?
Mr. Casey. That is a Dutch company.
Mr. Raushenbush. Were they the ones described the other day
as taking part in selling Dutch junk to the French?
Mr. Casey. No; that other incident, I think, was a man who had
been a waiter, and made some money.
Mr. Raushenbush. The letter then proceeds as follows:
The best prospect in South America for the sale of cruisers or destroyers
is undoubtedly Argentina. Other South \merican countries have little money
to spend for naval equipment but Argentina is very ambitious in the progress
of building up her navy.
Under the present administration, however, little funds will be appropriated
in this connection. The President of Argentina is a pacifist and although
he has been a bit more broad-minded, insofar as military appropriations go,
during his present administration than he was during his last one, it is quite
unlikely any large expenditures will be made for military equipment during
this administration.
Argentine naval officials frequently told us that only du Pont powders would
be used for guns of larger caliber which may be installed on cruisers. Since 1912
the Argentine Navy has been using du Pont nitrocellulose powder, and it is very
unlikely that any change will be made. The United States Navy cooper-
ates 100 percent with the Argentine Navy, and on powder or made-up charges
the United States Bureau of Ordnance has always fmictioned as inspector for
1174 MUNITIONS INDUSTRY
the Argentine Navy. This connection in itself is one that the Argentine Navy
fully appreciates and, insofar as propellants are concerned, we feel assured
tliat we have enough support through our agent and our friends in the Argen-
tine Navy that du Pout powder will be specified in the event that cruiser
and armaments are purchased abroad.
We will take this subject up with our agent in Argentina and see that he
does the necessary in connection with spreading good propaganda.
Very truly yours,
W. H. O'GoKMAN, Assistant Director.
I am simply reading that to refresh your memory on the Argentine
question. Were you president of the company when this happened
in May 1930?
Mr. Lammot du Pont. Yes.
Mr. Raushenbush. Could you tell us the connection of the du
Pont Co., without my going through all of this correspondence with
a powder factory proposed back there in 1930?
Mr. Lammot du Pont. I don't think I can give you the whole
history of the case, but I think I can answer your questions in regard
to it.
Mr. Raushenbush. Do you know pretty thoroughly what happened
there?
Mr. Lammot du Pont. I think I know pretty much all about it.
My recollection, however, after 4 years is not sufficient to give you
a very connected account of the whole thing.
Mr. Raushenbush. Won't you tell us what happened in regard
to the Argentine powder factory and the du Ponts ?
Mr. Lammot du Pont. My recollection is that the Argentine Gov-
ernment was considering the construction of a powder factory. I
am not clear whether they came to us or our agent went to them and
indicated we were capable of building such a plant. My recollection
is that he indicated to them we were able to build the plant, and
that we were able also to su]3ply them their requirements for powder
if they desired ; that is, he indicated that the du Pont Co. was willing
and anxious to do business with them on some basis.
Negotiations were entered into on both basis, if I recall correctly,
but I also understand neither of them bore any fruit.
Major Casey says I am wrong in stating the negotiations bore
no fruit, and that we did sell them smokeless powder for two battle-
ships, but this is the negotiation of 1930, and my recollection is we
did no business at that time.
Mr. Raushenbush. It carried on until 1934 as far as the powder
factory is concerned, and will you tell the story of the powder
factory, what you know of it from 1930 on ?
Mr. Lammot du Pont. I know we offered our services to construct
a factory, and I also know there was competition in that respect.
Mr. Raushenbush. Competition from whom?
Mr. Lammot du Pont. I do not know, but it was understood we
were not the only people who could build a powder plant for them.
I think that is an important thing to bear in mind on these other
subjects you have brought up, that we had no monopoly on any of
these jobs. We had no monopoly on the construction of a powder
j)lant in Argentine; we had no monopoly on furnishing smokeless
])OAvder ; we had no monopoly on the oxidation of ammonia ; and we
had no monopoly on the production of hydrogen for use in making
ammonia.
MUNITIONS INDUSTRY 1175
Mr. Raushenbush. You were in a competitive situation and had
to do the things that the situation demanded?
Mr. Lammot du Pont. Yes. In many cases we think we have
(he better, if not the best, processes.
Mr. Raushenbush. That is the best of your memory on the history
of the powder factory in Argentine ?
Mr. Lammot du Pont. Yes.
Mr. Raushenbush. Before going further can we get an agreement
that a powder factory is far more important to a country than a
battleship; a battleship is something that can be knocked out, and
a powder factory is something that can keep supplying the country.
Mr. Lammot du Pont. Yes; if it cannot be knocked out.
Mr. Raushenbush. Yes; but it produces, rather than being some-
thing that can be consumed ?
Mr. Lammot du Pont. I do not think there is much distinction
between a battleship and a powder plant.
Mr. Raushenbush. We will let it stay at that; they are very
similar.
I want to call your attention to a letter dated November 29, 19o0,
sent by Mr. O'Gorman to Mr. White of the Imperial Chemical In-
dustries of New York, in which he states that there is a question of
proposals for a powder plant down in Buenos Aires, in the Argen-
tine, and that I.C.I. is involved in the question and also advises that
Retienne is acting for Koln Rottweiler. That was the company Dr.
Sparre testified j'esterday was a party to the 1907 agreement, the
German company?
Mr. Lammot du Pont. Yes.
Mr. Raushenbush. The last paragraph on the first page of this
letter reads as follows :
We advised you that Retienne, acting for Koln Rottweiler, had presented an
offer to the Argentine Government to construct and fully equip the powder
mill and have it in operation within 2 years, the price to be $2,200,000. We
understand that I.C.I, can make a tentative offer which will compete with
Retienne's bid.
You were in close connection with I.C.I, and the German company
there offering the bid ?
Mr. Lammot du Pont. It sounds as if we were in close competi-
tion rather than close relation.
Mr. Raushenbush. In close relation with I.C.I.. Was Koln Rott-
weiler, the German company, later on connected with the South
American company you started down there in later years, the Explo-
sive Interests, Ltd.?
Mr. Lammot du Pont. No; I think not. I think it was the
D.A.G., if there was any Germany company.
Mr. Raushenbush. That is the other big Germany company?
Mr. Lammot du Pont. Yes; the explosive company, commercial
explosives, I should say.
Mr. Raushenbush. The second paragraph from the end of the let-
ter reads as follows :
It is the writer's understanding that this new arrangement is felt to be of
mutual advantage and that, if either party succeeds in getting a contract the
I.C.I.-du Pont partnership agreement will be effective to the extent of the profits
derived from such a contract. However, if either party suffers a loss under a
contract which may be awarded, the other party will not be charged with any
part of this loss.
1176 MUNITIONS INDUSTRY
That is simply stating you and the I.C.I, would share the profit
that might be derived?
Mr. Lammot du Pont. Yes; that is correct.
Mr. Raushenbush. Now, along comes a letter dated March 28,
1930, from Carames to Bates, which letter I offer as " Exhibit No.
495."
(The letter referred to was marked " Exhibit No. 495," and is in-
cluded in the appendix on p. 1356.)
Mr. Raushenbush. Mr. Chairman, I suggest that we might have
Mr. Bates on the stand at this time.
Senator George. Would you come forward, Mr. Bates?
TESTIMONY OF N. E. BATES, Jr.
(The witness was duly sworn by Senator George.)
Mr. Raushenbush. There is a letter here from Carames, Buenos
Aires, which has just been offered as " Exhibit No. 495." Was he the
agent of du Pont and I.C.I, in Buenos Aires?
Mr. Bates. He was not the I.C.I, agent in that year.
Mr. Raushenbush. He was your agent — the du Pont agent?
Mr. Bates. Yes, sir.
Mr. Raushenbush. You mean he was not the I.C.I, agent in that
year ?
Mr. Bates. No. He was not.
Mr. Raushenbush. But he was the agent of du Pont?
Mr. Bates. Yes.
Mr. Raushenbush. Who was the I.C.I, agent in that year?
Mr. Bates. It was the I.C.I, office in Buenos Aires.
INIr. Raushenbush. Who was in charge of the LCI. office in
Buenos Aires?
Mr. Bates. I think the manager was Mr. Morgan.
Mr. Raushenbush, Do you remember his initials?
Mr. Bates. David.
Mr. Raushenbush. I call your attention to a paragraph in this
letter, " Exhibit No. 495 ", as follows :
I am also sending details of what has been decided lately by the Govern-
ment, with reference to the powder factory. You must regard this as strictly
confidential. In view of the very confidential nature of the matter, and that
it is urgent, I am sending it by air mail and promise to send you further de-
tails later on regarding explosives. I have been promised further details of a
very confidential nature as additions to the proposal.
He is telling you the Argentine Government, its Congress, and
the Legislature, and everybody have decided that for better national
defense they are going to have a powder factory. That is correct?
Mr. Bates. Yes.
Mr. Raushenbush. I now call your attention to a letter from
G. W. White to E. I. du Pont de Nemours & Co., dated February 4,
1931. which I offer as " Exhibit No. 496."
(The letter referred to was marked " Exhibit No. 496 ", and is
included in the appendix on p. 1357.)
Mr. Lammot du Pont. You will note that letter is a year later
than the other one.
Mr. Raushenbush. Yes; this process has dragged on apparently
from 1930 to 1931. This whole discussion is dragging, but they are
still talking about the same powder factory.
MUNITIONS INDUSTRY 1177
Mr, Lammot du Pont. My recollection is it was a very long-
extended negotiation, but the reason I called your attention to the
date is, I think there is a little difference in the consideration and
the relationship between the companies in the two letters.
Mr. Kaushenbush. Will you describe that?
Mr. Lammot du Pont. The later letter says the du Pont-I.C.I.
partnership scheme is still in operation. My recollection is that the
previous letter did not refer to any such relationship with the I.C.I.
Perhaps I am in error in that, and it was you who said the relation
was closed.
Mr. Raushenbush. The second from the last paragraph on the
second page of the letter which was previously introduced says
that the I.C.I, is cooperating closely in the matter.
On April 3, 1931, there is the final bid of the du Pont Co., which
ranges between $3,091,000 and $3,141,000, and on August 5, 1932,
we come to a letter from Mr. White, of the I.C.I, in New York, to
the du Pont Co., which letter is offered in evidence.
(The letter referred to was marked " Exhibit No. 497 ", and is
included in the appendix on p. 1357.)
Mr. Raushenbush. I read from this letter, " Exhibit No. 497 ", as
follows :
Further to my letter of Jviiie 15, I.C.I, have now had an opportunity of discus-
sing the value of Senor Carames' services with one of their Buenos Aires reiu-e-
sentatives. The latter speaks very highly of the work done hy Senor Carames
in connection with the Government powder factory and has recommended that
I.C.I, continue to retain this gentleman. In view of this, you might consider it
desirable to make a payment to Senor Carames and I should like to know what
you decide in this connection.
There was no powder factory in 1932 ?
Mr. Lammot du Pont. Are you asking me?
Mr. Raushenbush. Yes; I am asking you,
Mr. Lammot du Pont. I think there was not.
Mr. Raushenbush. This letter states that —
The latter speaks very highly of the work done by Seiior Carames in connec-
tion with the Government powder factory and has I'ecommended that I.Cil.
continue to retain this gentleman.
What is the work he had done?
Mr. Lammot du Pont. I i^resume the work he had done was in
connection with the negotiations.
Mr. Raushenbush. I call your attention to a cable from Mr. Bates
dated June 22, 1933, which is offered as an exhibit.
(The cablegram referred to was marked " Exhibit No. 498 ", and
is included in the appendix on p. 1358.)
Mr. Raushenbush. This cable, " Exhibit No. 498 ", reads as fol-
lows :
Antonio Carames indignant our offer $1,500. Claim cancelation he obtained
competitors powder-plant contract and contract maintained for several years
past without any remuneration has been very valuable to E. I. du Pont de
Nemours & Co. Imperial Chemical Industries, Ltd., and merits much higher
consideration.
Antonio Carames has great influence on present administration. On the
$1,500 offered Antonio Carames absolutely refuses agency and will become very
dangerous enemy our business nest few years as well as business E. I. du Pont
de Nemours & Co., Argentine, S.A. Du Pont Argentina-Buenos Aires which
must be avoided.
1178 MUNITIONS INDUSTRY
Have discussed the matter with E. I. du Pont de Nemours & Co.. Argentine,
S.A., du Pont Argentina-Buenos Aires who agree with me suggesting that we
offer Antonio Carames $6,000 in cash for services rendered and yearly retainer
of $3,000 payable monthly to cease at our discretion, thus avoiding any possible
damage our interest.
You must consider company's interest as well as military sales division.
Prospects are 2,100 charges 35-millimeter, 50 tons du Pont FNH powder, 100
tons pyro cannon powder, 100 tons rifle powder, and possible Argentine powder
factory. Cable reply by Saturday. If you wish to telephone, advise by cable.
Forward all letters.
Can you explain the first paragraph in that cable, Mr. du Pont?
Mr. Lammot du Pont. Who was this cable addressed to?
Mr. Raushenbusii. Mr. Bates might answer that.
Mr. Bates. To Major Casey, I think.
Mr. Lammot du Pont. My explanation of the first paragraph is
that it is something in the nature of a squabble between the agent and
the principal as to what the agent's services are worth.
Mr. Raushenbush. Take that paragraph word by word —
Antonio Carames indignant our offer $1,500. Claim cancelation be obtained
competitors powder-plant contract and contact maintained for several years
past without any remuneration has been very valuable to E. I. du Pont de
Nemours & Co. Imperial Chemical Industries, Ltd., and merits much higher
consideration.
Mr. Lammot du Pont. That is Carames' claim.
Mr.RAusHENBusH. That is Bates' report on Carames' claim?
Mr. Lammot du Pont. Yes ; Carames makes the claim his services
are valuable. You know an agent does not mind blowing his own
horn.
Mr. E.AUSHENBUSH. That is your interpretation of it, Mr. du Pont?
Mr. Lammot du Pont. Yes.
Mr. Raushenbush. I call your attention to cable No. 9, which is
offered as " Exhibit No. 499."'
(The cable referred to was marked " Exhibit No. 499 ", and is in-
cluded in the appendix on p. 1359.)
Mr. Raushenbush. This " Exhibit No. 499 " is a cable from Bates,
Buenos Aires, dated June 26, 1933, and reads as follows:
Referring to your cable no. 4 Antonio Carames leaving here for Europe July
6 returning by way of New York, N.Y., presumably sent by President secret
mission Imperial Chemical Industries, Ltd. Buenos Aires, Argentina, agrees
with me suggesting that we offer Antonio Carames $250 per month to be can-
celed at any time by payment $6,000 in monthly installments.
Remuneration if any (for) services rendered cancelation of powder plant
to be discussed in London and/or Wilmington, Del., with Antonio Carames.
Mr. Lainimot du Pont. That is referring to the previous claim
of Carames.
Mr. Raushenbush. I call your attention to a memorandum from
the files, which is offered as " Exhibit No. 500."
(The memorandum referred to was marked " Exhibit No. 500 ", and
is included in the appendix on p. 1359.)
Mr. Raushenbush. This " Exhibit No. 500 " is a memorandum of
a telephone conversation with Mr. Bates and Mr. Casey signs it,
showing that the company and I.C.I, were still discussing how much
Carames should be paid. I call your attention to a cablegram signed
by Nick, dated July 2, 1933. addressed to Casey, du Pont, Wilming-
ton, Del., which I offer as " Exhibit No. 501."
MUNITIONS INDUSTEY 1179
(The cablegram referred to was marked " Exhibit No. 501 " and is
inchided in the appendix on p. 1359.)
Mr. Raushenbush. This cablegram reads as follows :
No. 10 Carames accepts temporary arrangement pending interviews London
Wilmington $125 monthly. Ready sign contract Carames similar Veiga dura-
tion 3 years with 6 months cancelation clause. Wire innnediately if satisfac-
tory. Suggest don't send White or London my letter no. 13. Writing you fully
also London air mail this week.
Then I want to put in an item found in your files, being an ex-
tract taken from the foreign trade development division in the month
of June 1932.
(The extract referred to was marked "Exhibit No. 502" and
appears in full in the text.)
Mr. Raushenbush. This extract reads :
A number of discussions have been had with Mr. Bates, who is now in Buenos
Aires, regarding his negotiations with Sr. Antonio Carames, their agent here for
military powders. Mr. Carames has had the idea that it would be only equi-
table for him to receive a cash payment for work done by hinJ in heading off
the Retienne contract and further that he should be paid a retainer in view
of the expenses that he has been put to in connection with his work.
That refers to the Koln Rottweiler contract —
I.C.I, has been paying him a retainer of £300 per year. While he will make
no definite statement in the matter, we get the idea that he has had in mind
a cash payment of something like $15,000 and a retainer of about $400 per
month. * * * In view of Sr. Carames' very great influence in govern-
ment circles and considei'ing the character involved —
Mr. Lammot du Pont. You left out something.
Mr. Raushenbush. Do you want it put in? I would be very
glad to put it in.
Mr. Lammot du Pont. Let me read it first.
Senator Bone. What is that gentleman's name, Mr. Raushenbush?
Mr. Raushenbush. Carames — C-a-r-a-m-e-s.
Senator Bone. What are his connections down there ?
Mr. Raushenbush. It has been brought out that he is now the
du Pont agent in Buenos Aires.
Mr. Bates. He is now the du Pont and LCI. agent in Buenos
Aires.
Senator Bone, What was he at the time this letter was written?
Mr. Bates. He was our agent. He was a partner of Crocker & Co.
Mr. Raushenbush. Do 3^ou want that part in ?
Mr. Lammot du Pont. Yes, sir. It is being offered in evidence.
Mr. Raushenbush. I am perfectly willing to take the respon-
sibility for that. [Reading:]
Mr. Bates has had many talks with him and has advised Major Casey fully
in the matter. In view of Sr. Carames' very great influence in government
circles and considering the character involved, which is exceedingly self-
centered and very vindictive towards those against whom he has a grudge, I
have thought it proper to suggest to Mr. Bates that, in attempting to arrive
at some mutually satisfactory agency arrangement with Sr. Carames, due
consideration be given to the company's considerable present investment in
the Argentine and that there be weighed any possible undesirable effects that
might accrue from Carames' "nuisance value" were he to be left feeling
generally " sore " at the company as a result of the present negotiations. Of
course, the figures that we have surmised are probably what Carames would
like to have and both Mr. Bates and I agree that he would, no doubt, be
satisfied with no cash payment, but with some modest retainer in addition to
the amount that I.C.I, has been paying him in the past, and which, under
the new arrangement, is to be assumed by Wilmington. However, in all this
1180 MUNITIONS INDUSTRY
Mr. Bates clearly understands that while I have suggested that the matter
be looked at from a broad company viewpoint basis. I do not have in mind
that any part of any retainer to Carames be assumed by any department
other than the smokeless powder, in possible conjunction with I.C.I.
Is not a fair interpretation of that, that Carames, according to
this, had killed an offer from your competitors, this Koln Rottweiler
Co., and Carames was trying, to use the common phrase, to hold you
up for $15,000, and that your man down there. Bates, points out that
now the fellow has a " nuisance value?" You do not get a " nuisance
value " unless you know something which you could tell your com-
petitors. Is not that true ? That is what a " nuisance value " is in
this case?
Mr. Lammot du Pont. No ; I do not think so. I think the " nuis-
ance value " there applies to our other interests in the Argentine.
Mr. Eaushenbush. What would Carames know about the com-
pany which would give him a "nuisance value?"
Mr. Lammot du Pont. I suppose he could use his influence against,
the company in its various commercial lines down there.
Mr. Rauspienbush. Would it not be a fact that he would go and
tell everybody, if he wanted to, what du Pont and I.C.I, had done
in holding up this contract and heading off the Retienne contract?'
Mr. Lammot du Pont. I do not think that is the idea at all.
Mr. Raushenbush. Let us go ahead. We can come back to that
later.
Mr. Lammot du Pont. What he probably had in mind was Seiior
Carames would go around to influential people and say the du Pont
Co. was a bunch of crooks, and he knew it because he had been
employed by them.
Mr. Raushenbush, And you think that would be an unfair state-
ment in this case?
Mr. Lammot du Pont. I think so.
Mr. Raushenbush. There are more cables here, discussing the
matter between you, to which I assume you will agree, and I come
to one of August 4, 1933, about 3 years after the powder discussion
was started.
Mr. Lammot du Pont. Oh, no. It started before that; 1918, Major
Casey says.
Mr. Raushenbush. The country had apparently decided, accord-
ing to previous evidence today, to do this in 1930.
Mr. Lammot du Pont. Somebody reported.
Mr. Raushenbush. Carames reported it. And a bid was in from
Koln Rottw^eiler of 2,000,000 pounds, and later on you put in a bid,,
and obviously negotiations were started. We have had your bid in.
as evidence.
Mr. Lammot du Pont. Yes, sir.
Mr. Raushenbush. The matter was not in the academic stage..
Argentine is trying to build, in this way, and then those other events
took place. Here is a cable from Laing. He is an I.C.I, man in^
London, is he not?
Mr. Bates. Yes, sir.
Mr. Raushenbush. This is addressed to White Impkemix, New
York:
191. Have interviewed Carames who will accept whatever arranged withi
Crocker.
MUNITIONS INDUSTRY 1181
Crocker is the other man in the agency at Buenos Aires?
Mr. Bates. Eight.
Mr. Raushenbush (continuing reading) :
His claim, and we cannot seriously question it, is that over the years
expense has been 2,000 pounds (stop) We are willing pay half or lesser
amount (stop) Bates who we suggest should handle matter for his prestige
might satisfy Crocker with 1,500 pounds (stop) Building of factory question
reopens December and we are preparing accordingly. For interim period exist-
ing contract continues.
I will offer that as " Exhibit No. 503."
(The cable referred to was marked " Exhibit No. 503 " and is in-
cluded in the appendix on p. 1360.)
Mr. Eaushenbush. Now, I am almost through, but here is a letter
w^hich I wish to put in as " Exhibit No. 504 ", under date of August
15, 1933, headed "Antonio Carames — Argentine " and signed b_Y W. N.
Taylor, who is your Paris agent.
(The letter referred to wa.s marked " Exhibit No. 504 " and is in-
cluded in the appendix on p. 1360.)
Mr. Eaushenbush. That letter reads in part as follows:
I met Mr. Carames on his steamer on his arrival at Boulogne, and motored
him to Paris. I did my best to make his stay agreeable, which he seemed
to appreciate.
Here is Mr. Taylor's report, following Mr. Bates' various re-
ports
Mr. Lammot du Pont. This whole letter here is from Colonel
Taylor.
Mr. Eaushenbush. Yes, sir; from Colonel Taylor. I skip two
paragraphs. [Continuing reading :]
Carames told me his story, whicla you know from Mr. Bates' reports. His
principal claim was that, in spite of the fact that it did not seem to h'ni prob-
able that stopping the factory could have meant a very large monetary gain
to us, none the less both Wilmington and London urged him to stop it, a matter
which cost him considerable money, the outlay of whicla at the time was known
to both companies. That having spent this money at our request and having
not given an opportunity to earn commissions, he was entitled to reinilnirse-
ment.
Carames explained that having canceled the contract with the Germans three
times, he could not continue to do it any longer, and that at the end of De-
cember or the first part of .January, if we did not put in an offer for the factory
a contract would finally be signed with the Germans, which would be final.
In view of this, I.C.I has agreed to make a serious endeavor to get this con-
tract, and are preparing an offer and prices which they feel will compete
favorably with the German proposal.
In our meeting in Paris with Mr. L. Smith, he said that he would be satis-
fied if the present interim agency contract was continued and if a payment
of .$10,000 was made to Crocker & Co. He said he d'd not wish to settle this
matter as his partner, Crocker, was the person to be satisfied. INIr. Smith
and I discussed with him different phases of his .story, but we did not make
any promises of any kind. We told him settlement would be made through
Bates with Crocker & Co., and to this he agreed.
After this conversation Mr. Smith talked this over in London and then sent
me a copy of their cable to Mr. White under date of August 4, in which they
will agree to pay half of the $10,000 and request Wilmington to make the
final arrangements on this matter and suggest that this thing be handled
through Bates with Crocker & Co. From our conversation with Carames, it
appeared clear to us that it was wise to have this done through Mr. Bates,
because Carames appeared to think that Mr. Bates had no authority and could
make no decisions and we felt it was advisable to force Mr. Carames to
accept Mr. Bates' authority.
1182 MUNITIONS INDUSTRY
It would be wise to have the settlement made with Crocker & Co. before
Carames leaves Europe, which will be early in November, as I.C.I, would like
to go into the details of the factory proposal with him before he leaves, and
they hesitate to discuss this matter in detail until this other matter has been
settled.
Certainly your Paris agent takes this story of Carames, that he
held up the factory, the powder factory which the Argentine wag
building because I.C.I, and du Pont gained by holding up the fac-
tory, and he took out the competition with the Germans, and Taylor
takes it very seriously.
Mr. Lammot du Pont. He does not say that.
Mr. Raushenbush. He reports it.
Mr. Lammot du Pont. He reports it, that is all.
Mr. Raushenbush. He also goes on to say that I.C.I, ig appar-
ently willing to pay one-half of the $10,000 which seems to be neces-
sary to satisfy the man.
Mr. Lammot du Pont. To settle the Carames claim.
Mr. Raushenbush. To settle the Carames claim which Mr.
Carames sayg he has due.
Mr. Lammot du Pont. Taylor says nothing to the effect that he
thinks Carames' claim is correct.
Mr. Raushenbush. He certainly does not say anything in there
to indicate that he thinks it is not correct, does he ?
Mr. Lammot du Pont. I do not gather that from the letter.
Mr. Raushenbush. At the beginning he states :
I did my best to make his stay agreeable, which he seemed to appreciate.
This was after Bates had said he had a " nuisance value " down
there, and Taylor states :
I did my best to make his stay agreeable.
Mr. Lammot du Pont. Colonel Taylor starts off with a statement :
Carames told me his story.
That immediately indicates to me that Colonel Taylor did not alto-
gether put 100 percent reliance on the story.
Mr. Raushenbush. He says:
which you know from Mr. Bates' report.
The story is one that was known inside the company.
Mr. Lammot du Pont. That is Carames' claim.
Mr. Raushenbush. At no point did Mr. Bates question what
Carames did, and Mr. Bates, sitting next to you, states Carames
held up this contract.
Mr. Lammot du Pont. Did Mr. Bates say that?
Mr. Raushenbush. Yes.
Senator Bone. Mr. Bates, was the contract with the German
organization canceled ?
Mr. Bates. It was canceled.
Senator Bone. Three times?
Mr. Bates. It was canceled once to my recollection.
Senator Bone. Carames takes credit for having brought about the
cancelation of that agreement?
Mr. Bates. He takes credit for it; yes.
Senator Bone. Did he work on it?
Mr. Bates, He told me he did. I was not there all the time.
MUNITIONS INDUSTRY 1183
Senator Bone. Do you have any reason to believe that he did
work at it?
Mr. Bates. I do not know, really.
Senator Bone. You were all together and often observed it. You
were reporting on this man's ability and his " nuisance value ", were
you not? That is correct?
Mr. Bates. That is correct; yes, sir.
Senator Bone. Do you believe he had influence enough in Gov-
ernment circles to bring about the cancellation ?
Mr. Bates. I knew he had several friends in Government circles.
Senator Bone. He was apparently working on it?
Mr. Bates. I have no evidence, and I never saw him or heard him
say anything to the officials.
Senator Bone. You evidently had something of that sort in mind
in reporting to the company.
Mr. Bates. I took Carames' word that he was working at that.
Senator Bone. It was evidently of sufficient importance in your
mind to repOrt it to your company and to comment on it frequently
and suggest his value as being a " nuisance value." You meant by
that to get rid of him in some way and get him out of the picture,
did you not?
Mr. Bates. No ; I meant if he got mad at us he might do us some
harm.
Senator Bone. In Government circles?
Mr. Bates. Not necessarily in Government circles, no ; because he
has a large circle of friends in Buenos Aires.
Senator Bone. I know, but this large circle of private friends
was not buying powder and munitions. The Government was the
agency you were trying to sell to, was it not? You do not sell
smokeless powder to private citizens, do you ?
Mr. Bates. No, sir; you do not.
Senator Bone. Your only clients were the Government?
Mr. Bates. But the company sells other products.
Senator Bone. I understand that.
Mr, Raushenbush. Then, there is more correspondence?
Mr. Lammot du Pont. Mr. Raushenbush, you made a statement
which I thought was incorrect, and you gave me this document to
prove your statement is correct, and I find no such proof.
Mr. Raushenbush. May I have this? (Referring to paper.) This
is " Exhibit No. 502."
Mr. Lammot du Pont. Your statement was that Mr. Bat€s said
that Carames had canceled the contract. I did not hear Mr. Bates
say that.
Mr. Raushenbush. Mr. Bates, in your responses to Senator Bone's
questions a moment ago, did you not answer that you were aware
that that was what Carames was doing?
Mr. Bates. The Government canceled the contract.
Mr. Raushenbush. I am talking about the reference in here.
Mr. Bates. I could not say that. I do not see how a man can
influence a government to cancel a contract.
Mr. Raushenbush. Let us go over this once more. (Referring to
"Exhibit No. 502.") [Reading:]
A number of discussions have been had with Mr. Bates, who is now in
Buenos Aires, regarding his negotiations with Sr. Antonio Carames, their agent
1184 MUNITIONS INDUSTRY
here for military powders. Mr. Carames had had the idea that it would be
only equitable for him to receive a cash payment for work done by him in
heading off the Retienne contract and further that he sliould be paid a retainer
in view of the expenses that he has been put to in connection with his work.
I.C.I, has been paying him a retainer of £300 per year. While he will make
no definite statement in the matter, we get the idea that he has had in mind
a cash payment of something like $15,000 and a retainer of about $400 per
month. Mr. Bates has had many talks with liim and has advised Major Casey
fully in the matter. In view of Sr. Carames' very great influence in govern-
ment circles and considering the character involved, which is exceedingly self-
centered and very vindictive toward those against whom he has a grudge,
I have tliought it proper to suggest to Mr. Bates that, in attempting to arrive
at some mutually satisfactory agency agreement witli Sr. Carames, due con-
sideration be given to the company's considerable present investment in the
Argentine and that there be weighed any possible undesirable effects that might
accrue from Carames' " nuisance value " were he to be left feeling generally
" sore " at the company as a result of the present negotiations. Of course, tlie
figures that we have surmised are probably what Carames would like to have
and both Mr. Bates and I agree that he would no doubt be satisfied with no
cash payment, but with some modest retainer in addition to the amount that
I.C.I, has been paying him in the past, and which, under the new arrangement,
is to be assumed by Wilmington. However, in all this Mr. Bates clearly under-
stands that while I have suggested that the matter be looked at from a broad
company viewpoint basis I do not have in mind that any part of any retainer
to Carames be assumed by any department other than the smokeless powder
in possible conjunction with I.C.I.
He was doing something in connection with the smokeless-powder
division, which was to have a factory in the Argentine as a com-
petitor. Can anybody read the letter without coming to the con-
clusion that the talk about $15,000, and later $10,000, was on the
basis of stopping those contracts?
Mr. Lammot du Pont. It was all on the basis of Carames' claim,
who claimed to have stopped the building of the power plant.
Mr. Raushenbush. And Bates believed that?
Mr. Lammot du Pont. I did not hear that. You put those words
in Mr. Bates' mouth, and I did not hear them.
Mr. Raushenbush. Those who were dealing with this matter
were taking it seriously, certainly.
Mr. Lammot du Pont. Carames claimed to have stopped the con-
tract. Whether he did or not, I do not know.
Mr. Raushenbush. There are cables here about giving him interim
commissions.
Mr. Lammot du Pont. There is no doubt that Carames worked
for us. He claimed a lot of things which we did not altogether
agree with, and this made a settlement of it.
Senator Vandenberg. Mr. Bates, in the course of your negotia-
tions with Mr. Carames, did he tell you that he had made any
arrangements for special commissions to any intervening persons in
connection with the transaction?
Mr. Bates. By intervening persons, he had engaged the services
of an engineer who was related to some official there.
Senator Vandenberg. Who was he related to; do you recall?
Mr. Bates. Yes, sir ; the president.
Senator Vandenberg. The president's son was an engineer?
Mr. Bates. He was, yes, sir; but he had no political position.
Senator Vandenberg. No political position?
Mr. Bates. Absolutely not.
MUNITIONS INDUSTRY 1185
Senator Vandenberg. And there is no significance, in your mind,
as to the relations with the president's son, other than tlie pro-
fessional relationship as an engineer ; is that correct ^
Mr. Bates. That is correct. Carames wanted to get an engineer
to explain the highly technical details of this proposal, and when
I arrived there he told me he had engaged the services of this man.
Senator Vandenberg. In making the arrangements of this nature
for technical services, would you say that the compensation proposed
as an ordinary, professional compensation, or was it something more
than that?
Mr. Bates. It was slightly high, I think.
Senator Vandenberg. A little higher than ordinary ?
Mr. Bates. Considering the man you are hiring, perhaps not.
Fees in the Argentine are pretty high.
Senator Vandenberg. How long have you been in the export
business, the munitions business, Mr. Bates f
Mr. Bates. Since 1925.
Senator Vandenberg. You are an American citizen ?
Mr. Bates. Yes, sir.
Senator Vandenberg. What have you to say as to the general com-
petitive practice — I am not interrupting you, am I, Mr. Raushen-
bush?
Mr. Raushenbush. No, indeed.
Senator Vandenberg. What have you to say as to the general
competitive practice in the Avorld-wide sale of munitions as respects
the necessity for paying special political commissions, entirely aside
from commercial commissions ?
Mr. Bates. Senator, my experience has been this : That I have
never been called upon to pay any commissions or make any proffers
whatever. We try to sell our products on their merits, except for
this one instance here.
Senator Vandenberg. Except in this one instance ?
Mr. Bates. That instance which I just told you about; that this
man advised me he had engaged this engineer to explain the technical
details of the proposal.
Senator Vandenberg. You say that is an exception to the rule;
that you are selling on merit. What do you mean hj that ? If this
is an exception to the rule, what do you mean ?
Mr. Bates. I did not exactly mean that. What I meant is that
this is probably one instance where you might say that the agent
engaged the services of an influential man.
Senator Vandenberg. And engaged his services for his influence
perhaps more than for his technical information?
Mr. Bates. I would not say that.
Senator Vandenberg. You are ulso the agent for I.C.I. ?
Mr. Bates. Yes, sir.
Senator Vandenberg. Do you consider that a responsibility on
your part runs equally to du Pont and to I.C.I., or does one have
a larger responsibility in your view than the other?
Mr. Bates. The responsibility is equal, so far as offering military
])ro])ellants are concerned.
Senator Vandenberg. You are under responsibility to tell LCI.
everything that you tell du Pont.
1186 MUNITIONS INDUSTRY
Mr. Bates. No ; I do not think so.
Senator Vandenberg. In some instances you specifically notify
du Pont that you prefer that I.C.I, should not know about some
particular thing which you are reporting, do you not?
Mr. Bates. I think we have made that statement; yes, sir.
Senator Vandenberg. Now I am coming back to the incident re-
specting the embargo. You evidently have some latitude in respect
to reporiing to I.C.I. When an embargo incident arises, however,
you refrain from making a du Pont bid because of your fidelity to
the American embargo policy, but you immediately report to I.C.I.
Do you consider that you are under any responsibility to report to
I.C.I. ?
Mr. Bates. Senator, the way that thing happened was this: I
received a telegram from I.C.I, telling me that that man had inquired
for prices on TNT. So I cabled and said that we could not quote —
that is, du Pont could not quote because of the embargo. Then since
I.C.I, already knew of the inquiry, I merely said — by way of tau-
tology— that they should quote. We received the inquiry from I.C.I.
Senator Vandenberg. In the letter of May 29, 1930, from Mr.
W. H. O'Gorman, assistant director, to Col. W. N. Taylor, the final
paragraph says — no; I might interrupt myself by saying that the
letter referred to the sale of cruisers in South America and in the
Argentine — and the final paragraph says :
We will take this subject up witli our agent in Argentina —
I assume that is you —
and see tliat lie does the nece-sary in connection with spreading good
propaganda.
Did he take it up with you ?
Mr. Bates. I do not remember it.
Mr. Casey. What is the date of that.
Senator Vandenberg. May 29, 1930.
Mr. Casey. I think he refers to Carames.
Senator Vandenberg. What would be your interpretation of " does
the necessary " in South America in connection with spreading good
propaganda ? Is there anything invidious in that phrase ?
Mr. Bates. I do not think so. He refers there, I think, to per-
suading the Argentine officials to buy du Pont powders for those
boats.
Senator Vandenberg. Have you ever paid any special commis-
sions— let us call them for the sake of delicacy — to either officials
or agents of business concerns in connection with your South Ameri-
can work?
Mr. Bates. I have not; no, sir.
Senator Vandenberg. Never paid any?
Mr. Bates. Not a cent.
Senator Vandenberg. All right; Mr. Raushenbush.
Senator Bone. Is that your construction of the words " does the
necessary ", which you have just given us?
Mr. Bates. Yes, sir; it is. Because there was an instance of
buying British cruisers or cruisers built in the United States. As a
matter of fact, I think the Argentine bought English war vessels.
Senator Bone. This expression, " does the necessary ", is used in
connection with spreading good propaganda.
I
MUNITIONS INDUSTRY 1187
Mr. Bates. Yes.
Senator Bone. How would you do the necessary?
Mr. Bates. By telling the Argentine Government that our Gov-
ernment and other governments in the world find that nitrocellulose
powder for use in guns is better than nitroglycerin powder.
Senator Bone. Then that word " necessary " has no other impli-
cations than what you have given it?
Mr. Bates. I do not think so.
Senator Bone. You do not think so, but do you know ?
Mr. Bates. I do not know.
Senator Bone. You do not know?
Mr. Bates. I remember the incident in that particular letter, and
it referred to that particular propaganda — trying to persuade the
Argentine Navy to specify guns made for nitrocellulose powder.
Senator Bone. We have an expression interspersed throughout the
entire record about " doing the needful ", and I am wondering if
" does the necessary " has any similar implication. You assure me
that it does not; is that correct?
Mr. Bates. That is correct.
Senator Bone. You want to be understood as assuring us that
that does not have any significance such as other witnesses have
attributed to similar words?
Mr. Bates. In that particular instance there I do not think it
means that at all, Senator.
Mr. Irenee du Pont. Do you mean by " does the necessary ", Sena-
tor, is equivalent to offering a bribe ? Is that the idea ?
Senator Bone. I am asking the witness to interpret it if it has
any meaning. It is a very unusual combination of words to employ
in a business letter. The ordinary business man does not talk about
" doing the needful " or " does the necessary."
Mr. Lammot du Pont. I disagree with that statement as to this
combination of words. That expression is a very common one,
Senator.
Senator Bone. It is?
Mr. Lammot du Pont. Yes, sir.
Senator Bone. Let me suggest this, Mr. du Pont: Whenever a
similar expression has been found in the exhibits in this case, the
witnesses have said, almost without exception, that it means the
passing of money.
Mr. Lammot du Pont. It does not mean that to me.
Senator Bone. When we have witness after witness testifying be-
fore the committee that that is what that expression means, you can
understand why I ask the question.
Mr. Lammot du Pont. I say what I have said, because I use that
expression myself a great deal in my business.
Senator Bone. That is precisely why I ask, when I see it in your
letters, if it has the same meaning that it has when it is employed
by other munitions concerns. We have had witness after witness
here saying that " doing the needful " and the like meant " greas-
ing " someone.
Mr. Lammot du Pont. It does not mean that to me.
83876— 34— PT 5 12
1188 MUNITIONS INDUSTRY
Senator Bone. It may have an entirely different meaning with
the du Pont organization, and that is precisely why I am trying
to bring this out.
If you assure us that it has not, why, that's that.
Senator Vandenberg. Mr. Bates, does the president whom we have
been discussing have more than one son ?
Mr. Bates. I do not think so ; I am not sure.
Senator Vandenberg. I call your attention to these copies of cable-
grams which I am not offering for the record. If you will refer
to those, Mr. Bates, you will see that the word is in the plural,
" sons."
Mr. Bates. That is an error in decoding.
Senator Vandenberg. You say it is an error in decoding?
Mr. Bates. Yes.
Senator Vandenberg. The only son referred to is the engineer to
whom you have previously referred?
Mr. Bates. That is true.
Senator Bone. There was one other question that I had in mind.
Mr. du Pont, you say that that expression to which we have referred
is frequently used by you. What does it mean ?
Mr. Lammot du Pont. It means, when I use it, that the person
addressed is to do what is evidently necessary in the light of some
document. For instance, I receive a communication from someone
asking me for a contribution. I pass it to my secretary with a note,
" Please do the needful " or " do the necessary." That means to
comply with the request and write a courteous letter, something of
that kind ; " do that which is obvious from the document which I
pass along." That is the way I use it, and I use it very frequently
that way.
Senator Bone. I am very sure that you can understand our interest
in view of what has transpired before in this hearing.
Mr. Lammot du Pont. I think it is correct to say that that phrase
has not appeared in any of our documents that have been placed
in evidence.
Senator Bone. Well, this is in the exhibit from Mr. O'Gorman,
who is the director of sales in your company.
Mr. Lammot du Pont. Is he not quoting someone else ?
Senator Bone. No. Your assistant director of sales is writing to
Colonel Taylor, your Paris agent.
Mr. Lammot du Pont. Quoting somebody else. He did not tell
Taylor to do the needful.
Senator Clark. No. He says in this letter that your agent in the
Argentine would be instructed to do the necessary in regard to
propaganda.
Senator Bone. Yes.
Mr. Lammot du Pont. Is there anj' other place Avhere that has
appeared in any of our exhibits?
Senator Bone. I have not observed it in those documents that J
have seen.
Senator Clark. I think what Senator Bone refers to is that in this
hearing, in connection with other companies, the phrase '' to do the
needful " has come to have almost a trade significance, apparently.
Mr. Pierre S. du Pont. We have not had the advantage of sitting
in at all of your hearings; or disadvantage, as the case may be.
MUNITIONS INDUSTEY 1189
Senator Clark. That is the reason I am makins: the explanation
Ihat I have made.
Senator Bone. As a matter of fact, one witness after another has
testified that it was practically a good old trade custom to use that
sort of expression.
Mr. Raushenbush. There is one more question of fact that I
should like to refer to. Tliis concern, the Koln Rottweiler crowd that
seems, according to the evidence, to have been taken out of the picture
later on, became part of the D.A.G. ?
Mr. Lammot du Pont. I do not think that is correct.
Mr. Raushenbush. Is not that correct ?
Mr. Lammot du Pont. There were two commercial powder com-
panies in Germany, D.A.G. and Koln Rottweiler.
Mr. Raushenbush. Are they hooked up in any way ?
Mr. Lammot du Pont. I understand they are both part of the I.G.
now,
Mr. Raushenbush. Let me try and see if I can bring out, by ask-
ing some questions, Avhat all this means. We start off with a propo-
sition something like this, that a powder factory is to a country as
important as a battleship; I thought perhaps more so and you
thought perhaps not. It is a great military resource to a country?
Mr. Lammot du Pont. True.
Mr. Raushenbush. Argentine had decided that it wanted a
powder factory and they had passed legislation to get themselves
the powder factory.
Mr. Lammot du Pont. That was at a late stage in the negotiations.
Mr. Raushenbush. Well, at a very early stage Carames passed on
confidential information that the matter w^as up.
Mr. Lammot du Pont. When he said that they decided on a fac-
tory that was about 1930. Major Casey stated that the negotiations
started in 1918.
Mr. Raushenbush. Apparently a more recent law had been passed,
because du Pont and I.C.I, were taking it seriously and talking
,^bout Koln Rottweiler, and so forth. At that point du Pont and
I.C.L, according to the evidence, decided that, regardless of what
the Argentine Government thought its proper defenses should be,
they should not have a powder factory and they managed to take the
only possible competitor that protruded itself into the scene, the
German competitor for this powder factory, out of action for a
period of many years. The evidence goes on further, as I read it,
that the agent, realizing that he was not going to get a commission
on business he had been active in promoting, demanded $15,000. and
a discussion was held between I.C.I, and du Pont about a $10,000
price. The agent Avas recognized to have some nuisance value. In
Colonel Taylor's letter I think there was some eagerness to talk to
him before he talked to the Germans when he was visiting there.
The nuisance was in some form bought off.
The Argentine Government and the Argentine people probably do
not know, and will not until the cables of this moment, why they
have not got a powder factory today.
A jiowder factory is important also from the angle of embargoes.
People constantly say that an embargo is not fair to one nation be-
•canse the other has a powder factory; that is, an embargo is unequal
(jbefore the fact.
1190 MUNITIONS INDUSTRY
We had testimony from one of your own people the other day tliat
the only fair thing was to sell to both sides in any hostility. That
was the only way to keep neutrality.
Here you are creating a situation that gives an excuse for that sort
of an argument. The only thing that really interests me to add to
this is whether it would be possible that the people in South America
or in China would get the same idea that we got yesterday from your
people, that du Pont was a semi-official connection of the Govern-
ment. It was certainly only that feeling that allowed your people
to put on this stamp that read, " Upon instructions of the War
and/or Navy Departments * * * 55 when the War and Navy
Departments denied having given those instructions or that per-
mission.
Mr. Lammot du Pont. Why, Mr. Raushenbush, that is not a cor-
rect statement.
Mr. Raushenbush. That was the statement made during your
testimony yesterday immediately following the statement that was
made that Colonel Slaughter, of Military Intelligence, had come up
to the committee and informed the committee that that stamp was not
authorized.
Mr. Lammot du Pont. That is true. But none of our witnesses
ever said that that stamp was authorized, did they ?
Mr. Raushenbush. I certainly gathered that that was the testi-
mony.
Mr. Lammot du Pont. I thought it was clear that I had given
the instructions for the application of that stamp myself.
Mr. Raushenbush. The stamp that read " Upon instructions of
the War and/or Navy Departments * * * " ?
Mr. Lammot du Pont. Yes. I gave the authority for I be use of
that stamp.
Mr. Raushenbush. Of course, the transcript will show H. b'lt I
am very sure that the testimony was that it had not been authorized
by General MacArthur.
Mr. Lammot du Pont. We received a letter from General Mac-
Arthur instructing us, or rather calling our attention to the fact, that
home matters in our file were confidential. He asked u? to take
precautions to see that those documents which were confidential were
not given out publicly. I saw that letter, and the wording of that
stamp was suggested to me. I approved the use of that stamp as a
means of carrying out my understanding of General MacArthur'5
request. Is that clear?
Mr. Raushenbush. That is clear.
Mr. Lammot du Pont. Naturally, General MacArthur woidd &ay
he had never authorized the stamp. I authorized it. But I thought
I was carrying out the suggestion that General MacArthur had given
us in safeguarding those documents.
Mr. Raushenbush. Perhaps I am under a misapprehension,
but
Senator Clark (interposing). Mr. du Pont, you realize, or you
would have been advised by your legal department if you had con-
sulted with them, that neither General MacArthur nor anybody else
has authority to instruct you to disregard the process of the United
States Senate.
MUNITIONS INDUSTRY 1191
Mr. Lammot du Pont, He did not give us any such instructions.
Senator Clark. You evidently thought so from the stamp that
jou placed on the letter?
Mr. Lammot du Pont. No, sir. I am no attorney, Senator, and
perhaps I make errors in respect of the legal interpretation. But
the letter of General MacArthur called our attention to the fact
that there were certain documents in our files which were confidential
and suggested that those confidential documents should be safe-
guarded. That is the understanding I had of General MacArthur's
letter. It may not be a proper legal interpretation of what he said,
but that is what I thought he said; and I thought the simple, per-
fectly proper method of carrying out the suggestion was to place the
stamp on every confidential document so that your committee would
know and be warned that in the estimation of the du Pont Co. that
document was one of the confidential documents to which General
MacArthur referred.
Senator Clark. It certainly appears to me, speaking as a member
of the committee, if that was your intention, that the wording of
the stamp was very unfortunately phrased.
J\Ir Lammot du Pont. Xo ; it sounded very good to me.
Mr. Rausiienbusii. Later on, when the secretary of the committee
suggested the stamp simply be " E. I. du Pont de Nemours & Co.
considers this confidential ", that stamp was adopted right away?
Mr. Lammot du Pont. That language was never suggested to me,
as far as I recall. It seems to me it might have answered the
purpose.
Mr. Raushenbush. It was put on later documents, was it not?
Mr. Lammot du Pont. I do not know about that.
Mr. Raushenbush. I did not mean to get into this argument. I
thought that was all settled. The only point that I was trying to
raise was this : Would it be possible for some of these South Ameri-
can and other countries to get the idea that because of this semi-
official connection of du Pont, or very close connection — let us put it
that way ; I think the word " semi-official " was used yesterday —
Mr. Lammot du Pont. I do not know that I used that term,
Mr. Raushenbush. Let me finish my question, please; that what
the du Pont Co. was doing in South America or anywhere else had
in some way the approval of the Government. Could they have
gotten that misconception at all, that it had the approval of our
Government ?
Mr. A. Felix du Pont. What they were doing in what way?
Mr. Raushenbush. Let us say in Argentina.
Mr. Lammot du Pont. You mean in trying to sell a powder plant?
Mr. Raushenbush. Not trying to sell one; trying not to sell a
powder plant.
Mr. Lammot du Pont. I think trying to sell one.
Mr. A. Felix du Pont. No ; we were not trying to.
Mr. Lammot du Pont. Well, they were negotiating.
Mr. A. Felix du Pont. What we want to do is to sell powder and
not build plants.
Mr. Raushenbush. Yes. You are trying to sell powder and not
build plants. That was the economic explanation of the action taken.
Mr. A, Felix du Pont, We will build plants if they tell us to, but
we would rather sell powder.
1192 MUNITIONS INDUSTRY
Mr. Raushenrush. And that is the explanation of this whole-
matter.
Mr. Lammot du Pont. The record shows that w-e made a bid.
Mr. Raushenbush. A very high bid.
Now, I should like to ask you just this question. I am not going
to read these five cablegrams into the record. But I should like to
ask you this question : If those five cablegrams here combined were
read into the record, would it not happen that a very serious situa-
tion, a very dangerous situation to life or property might ensue in a
particular South American country?
Mr. Lammot du Pont. I cannot ansAver that; I do not know.
Mr. Raushenbush. If no such situation would ensue, then the
committee would have had no particular reason for withholding' those
cablegrams ?
Mr. Lammot du Pont. I do not know^ what you are referring to.
Mr. Raushenbush. You have read the cables?
Mr. Lammot du Pont. The ones that w^ere offered in evidence ?
Mr. Raushenbush. No ; they are not offered in evidence.
Mr. A. Felix du Pont. The ones that we had before us just now.
The Chairman. They are not offered in evidence.
Mr. Lammot du Pont. They are not the ones we have seen ?
INIr. Raushenbush. You have seen them.
Mr. Pierre S. du Pont. Senator, may I say a word on this Argen-
tine situation?
The Chairman. Have you finished this particular point, Mr.
Raushenbush ?
Mr. Raushenbush. I have not. I w^as trying to get an answer to
that question.
Mr. Lammot du Pont. If you w'ill allow Mr. Pierre du Pont to
proceed with Avhat he wants to say, perhaps by that time I shall be
able to give it some thought and perhaps give you an answer.
The Chairman. I would now suggest that you try to get an answer
to that question, Mr. Raushenbush.
Mr. Lammot du Pont. Perhaps while Mr. Pierre du Pont is speak-
ing, I will be able to formulate an answer to your question.
Mr. Pierre S. du Pont. The impression seems to be that it was de-
cidedly to the advantage of the Argentine Government to have a
powder plant and that in some way they were frustrated by our
efforts or the efforts of others. That is not necessarily true. If the
proposition was to build a plant there without supplying the raw
materials, it might very well have been greatly to the disadvantage
of the Argentine Nation and possibly this propaganda refers or
relates to pointing out to the Argentine Government that the powder
plant in itself was useless unless they could get the raw materials.
It takes, as I pointed out yesterday, 5 to 9 times as much raw mate-
rials to run a powder plant as there is powder made. It is much
easier to import the powder than it is to import the raw materials.
So I think before this question is determined one way or the
other — I think it is immaterial, really — we should discover whether
the proposition was a complete powder plant with safeguarded raw
materials or not. If it w^as not, the Argentine Government or Nation
might have suffered severely by thinking that it had a powder plant
and finding out later that it had nothing but a shell which could not
be operated. I think the question in immaterial to the discussion, but
MUNITIONS INDUSTRY 1193
I do not want it left that we tried to do something to the dis-
advantage of the Argentine Government.
Mr. Raushenbush. On that point, if you wish, we could go back
over all of this testimony in which I.C.I, and du Pont define what
they are bidding on, plant plus machinery plus patents, and so forth,
which does not, in any of these letters that we happened to have
pulled, indicate that this is a foolish proposition in any sense. We
could go over all of that record to convince you, if it is necessary.
Mr. Irenee du Pont. Mr. Chairman, I am a little mystified, be-
cause if it is wrong to prevent Argentina from having a powder
plant, why is it wrong to help Japan have a powder plant ? A little
while ago we were accused of doing something awful because we
helped Japan. Now we are accused of doing something that is not
right because we did not help another country. I do not quite follow
the logic of that argument.
Mr. Raushenbush. Mr. du Pont, it is only your feeling that the
ethics of a situation are being discussed that leads you to raise that
question. It is not the ethics of any of these situations that we are
talking about. I mean this 5-percent commission to officials in
China — they are ethical matters, perhaps. But what we are trying
to get at is what people abroad think of what a company does in
helping other countries prepare in a military way, or in preventing
them from preparing in a military way. We have had illustrations
today of both, it seems to me. Those things are important. I am
not passing any ethical judgment on it. In one case you seem to have
stopped a country from using a source. As Mr. Felix du Pont said,
you do not want them to build plants, you want to sell them powder.
In the other case you helped Japan with a process that made it
possible to produce powder more cheaply.
Mr. Irenee du Pont; I can straighten this thing out. We are not
in business to help or harass other nations. We have no right to
do that and have no desire to do it. I do not know anything about
it particularly, but certainly we are engaged in the business of manu-
facturing powder among other things ; a very minor part of our busi-
ness, but such as it is, it seems to me it ought to be followed in a
businesslike way. If we can make money by showing the Japs how
to make their hydrogen cheaper, thereby reducing the cost of their
fertilizer a fraction of a cent a pound — well, why not? If they
will share it with us. And if we can sell good powder to Argentina,
the best powder that we know how to make, why should we not sell
it ? They do not have to buy it, if they do not want it.
Mr. Lammot du Pont. I am prepared to answer your question
now, Mr. Raushenbush.
Mr. Raushenbush. Mr. Chairman, Mr. du Pont is ready to answer
the question that I raised with him about the possible effect of
publishing these cablegrams.
Mr. Lammot du Pont. I think it would be undesirable to publish
those communications.
The Chairman. You agree with the committee that it would be
undesirable ?
Mr. Lammot du Pont. I agree; yes. But that has nothing to
do with our alleged semi-official relations with the United States
Government.
1194 MUNITIONS INDUSTRY
Mr. Raushenbush. My question was somewhat different. Are you
in a situation where the divulgence of certain things that you do
may cause a political repercussion in a certain South American
country ?
Mr. Lammot du Pont. I think the publication of those might
do so; yes.
Mr. Raushenbush. That is the answer to the question.
Mr. Lammot du Pont. But I do not think our relations with the
United States Government
Mr. Raushenbush. They do not enter into this.
Mr. Lammot du Pont. No.
Mr. Raushenbush. Nobody has said that.
The Chairman. The committee will stand in recess until 2 : 15 p.m.
(Whereupon, at 1 : 05 p.m., the committee took a recess until
2: 15 p.m. of the same day.)
after recess
(The committee reconvened, pursuant to the taking of recess, at
-2: 15 p.m.)
The Chairman. Let the committee come to order.
The Chair desires to inject for just a moment reference to testi-
mony of yesterday involving an exhibit in the form of a memo-
randum found in the file of Mr. Casey, which was signed by initial,
by Mr. Casey himself. This memorandum is dated Februarj^ 23,
1934, relating evidently to a visit in Washington on February 15,
1934, and contains the following :
Had a talk with Colonel Brabson, of Military Intelligence, and drew liis
attention to the Nye resolution. As Colonel Brabson comes from Tennessee
and is very close to Seci'etai-y Hull he will discuss this matter with him, so
that when the matter is referred to the State Department at least they will be
familiar with the situation and the possible disadvantages from the viewpoint
of the Army.
What report, Mr. Casey, did Colonel Brabson make to you follow-
ing this time concerning any contact he had had with respect to the
so-called "Nye resolution"?
Mr. Casey. I never heard anything more about it. I simply felt
that when I called his attention to it and the possible effect on the
national defense, I was through with it.
The Chairman. I feel I owe, and the committee owes, a very brief
statement in that connection for the record. If Colonel Brabson did
approach Secretary Hull — which I know he did not do — but if he
did, his mission was evidently wholly unsucessful, as other like mis-
sions would have proven, because the committee has enjoyed at the
hands of Secretary Hull the fullest measure of cooperation in this
investigation, and at the time the resolution was pending — and it
liad been introduced only a week before this memorandum was
written — during that time I had, as sponsor of the resolution, very
:sympathetic and helpful consideration at the hands of Secretary
Hull.
I think the record ought to be made clear with respect to that.
Mr. Casey. There was at that time really very little knowledge of
-exactly what this proposition meant, and as Colonel Brabson has
ibeen a friend of mine of more than 25 years' standing, I spoke to hini
MUNITIONS INDUSTRY 1195
about it, and I stated that the only thing we were concerned about is
the possible effect anything of this sort may have on national defense.
I said nothing more about it, because I knew he came from the same
State as Secretary Hull.
Senator Clark. Colonel Brabson did not tell you he was going to
talk to Secretary Hull ?
Mr. Casey. No; he did not.
Senator Clark. It so happens I have known Colonel Brabson for
many years, and I think he has too much of a sense of propriety to
do any such thing.
The Chairman. Nevertheless, the memorandum says he would.
Mr. Casey. I don't think he was committed to do it.
The Chairman. Senator Clark, you may proceed.
Senator Clark. Mr. du Pont, I have here a memorandum from
the files of the Remington Co. in reference to the Rheinisch West-
fulisches Sprengstoff, which I offer in evidence under the appro-
priate number.
(The document referred to was marked " Exhibit No. 505," and
appears in full in the text.)
Senator Clark. This memorandum, " Exhibit No. 505 ", refers to
Mr. Pickard. Who is he? He is a member of your bureau of
foreign relations, I believe.
Mr. Lammot du Pont. Yes.
Senator Clark. This memorandum reads as follows :
Export pnces.— When Mr. Pickard talks with I.C.I, and R.W.S. he will
probably draw them out on how best Remington can cooperate with them
toward a higher level of prices in the foreign field. R.W.S. are bad offenders,
so far as prices are concerned on center-fire metallics in Latin America, and
should be made to realize that unless they raise their prices ours can very
readily be reduced. The usual excuse is French competition, but we know
they now have a working arrangement with the French manufacturers. We
helped to bring them together about 4 years ago.
Now, R.W.S. in this memorandum is the Rheinisch Westfulisches
Sprengstoff, A.G.?
Mr. Lainimot du Pont. I believe so. However, that " West-
fulisches " is not spelled right ; but that doesn't matter.
Senator Clark. We are not responsible for that ; these memoranda
were copied by your own office force. However, R.W.S. is the com-
monly recognized abbreviation for that firm, however it may be pro-
nounced or spelled, is it?
Mr. Lammot du Pont. Yes.
Senator Clark. In other words, that memorandum indicates that
some years prior to the memorandum which is undated, there had
been a working agreement between the French and German cartridge
manufacturers amounting to a price agreement, at least so far as
center-fire cartridges are concerned; does it not?
Mr. Lammot du Pont. I really clon't know anything about them,
Senator.
Senator Clark. That is what this memorandum would indicate, is
it not?
Mr. Lammot du Pont. This is evidently a reference to ammuni-
tion.
Senator Clark. Yes; it is.
Mr. Lammot du Pont. And I take it to be a reference to sporting
ammunition.
1196 MUNITIONS INDUSTRY
Senator Clark. Center-fire cartridges are used in all high-powered
military rifles, are they not?
Mr. Lammot du Pont. They are, but as I say I don't know any-
thing about this, and I would infer this refers to sporting ammu-
nition.
Senator Clark. There is nothing in this letter to indicate it refers
to sporting ammunition as distinguished from military ammunition,
is there? At any event, what I am getting at, this does indicate a
very definite relationship between a large German ammunition man-
ufacturing agency and a large French manufacturing agency, which
had been brought about through the intervention and mediation of an
American agency, whether it was Remington, which you now control,
or the du Pont Co. itself.
Mr. Lammot du Pont. I don't think you are on the right track,
there. This communication is by the R.W.S., is it not — it is signed
by R.W.S.
Senator Clark. Yes.
Mr. Lammot du Pont. That is the German company.
Senator Clark. That indicates a very definite agreement. Do you
understand R.W.S. was writing about itself and saying :
R.W.S. are bad offenders, so far as prices are concerned on center-fire metallics
in Latin America, and should be made to realize tliat unless tliey raise their
prices, ours can very readily be reduced.
Mr. Lammot du Pont. Who did sign that ?
Mr. Raushenbush. Nobody signed it, but it was in your I-G ex-
plosives file.
Mr. Lammot du Pont. Who wrote it ?
Senator Clark. It is a memorandum taken from your files.
Mr. Lammot du Pont. Wlio wrote it?
Senator Clark. I do not know.
Mr. Lammot du Pont. Neither do I.
Senator Clark. Did j^ou have any agreement between the German
and French manufacturers of small arms ammunition?
Mr. Lammot du Pont. We certainly did not earlier than a j'ear
ago.
Senator Clark. When did you learn about this agreement between
the German and French manufacturers?
Mr. Lammot du Pont. I never learned about it at all. and I don't
think the company did more than a year ago, because that is when
we got into the ammunition business.
Senator Clark. Did you have any information on this?
Mr. Lammot du Pont. I am quite sure we did not before a year
Senator Clark. I am asking did you have any information of a
working agreement between the French and German manufacturers
of center-fire cartridges?
Mr. Lammot du Pont. No.
Senator Clark. Mr. Felix du Pont, did you ?
Mr. A. Felix du Pont. No.
Senator Clark. Mr. Casey, did you?
Mr. Casey. No; but I might add I think when Mr. du Pont said
sporting ammunition, I think he is correct, because Germany is
prohibited
MUNITIONS INDUSTRY 1197
Senator Clakk. I am not asking about that; we will come to that
later. Do any of you have any such information; did you, Mr.
du Pont?
Mr. Irenee du Pont. No.
Senator Clark. Now, Mr. du Pont, the situation between the Ger-
man and the French ammunition manufacturers, besides being of
great interest to your Remington division and probably to other
arms manufacturers, seems to have been of great interest to the
du.Pont Co., too; was it not?
Mr, Lammot du Pont. I would not say of great interest, but of
some interest on account of our acquisition of the Remington Co.
CONTRABAND OF ARMS IN GERMANY
Senator Clark. I will offer as the next exhibit a letter from Wil-
liam N. Taylor to Major Casey, of date June 27, 1932.
(The letter referred to was marked " Exhibit No. 506 ", and ap-
pears in full in the text.)
Senator Clark. This letter is from Col. William N. Taylor, your
Paris representative, and reads as follows:
I heard on my last visit to Holland that the German political associations,
like the Nazi and others, are nearly all armed with American revolvers and
Thompson machine guns, and that there is a regular business of bootlegging
of small weapons from America to Germany, the center of which being Cologne
and most of the bootlegging being done by Dutch.
However, this is only a rumor like so many other rumors.
Very truly yours,
William N. Taylor.
Then, again, I offer as an exhibit a letter dated January 9, 1933,
from William N. Taylor, your Paris representative, addressed to
Major Casey.
(The letter referred to was marked " Exhibit No. 507 ", and ap-
pears in full in the text.)
Senator Clark. I read this " Exhibit No. 507 ", as foUoAvs :
There are four men in Germany principally engaged in the contraband of
arms.
James Magnus & Co., 'Burckai-dstr, Hamburg. Maurice Magnus is in charge
of the military business. They have a representative in New York called Leo
Kohn, 90 West Street. Maurice Magnus does not work in the name of the firm
but takes orders in his own name. He claims to be a second-hand arms dealer
in a legitimate manner, but, in reality, his work is all contrary to rules and
regulations. The only legitimate work w'e know about is the sale of Polish
rifles to Finland. His credit is not very good, because the manufacturers
who sell to him become immediately involved in an illegal transaction and hence
find it difficult to collect.
Beno Spiriro, Hamburg. This man deals largely with the Balkans and
South America. His credit is supposed to be a little better than that of Magnus.
Carlowitz, Hamburg. There three men work together. Each one has his own
Set of customers and in selling to them all three sign the contracts. When
the principal defaults in payment, you call on the second who also defaults,
and the collection becomes extremely confused due to the number of signa-
tures. It is undesirable to deal with these people ; they are all under suspicion
and their operations are irregular and payment is bad. However, they do a
large business.
Kunst & Albers. This is a more respectable firm and is a large commission
house which dealt before the war mainly with Russia and China. They still
have several offices in China and are supposed to deal in a legitimate manner.
They enjoy better credit.
All the purchases made by these people are c.i.f. free port of Hamburg.
1198 MUNITIONS INDUSTRY
It is perfectly legitimate to ship to the free port of Hamburg and deliver
there. It is also perfectly legitimate to take goods out of the free port of
Hamburg and ship them where you wish.
The Swiss factories, the Czechoslovakian factories, the Austrian factories,
Dordrecht, and Bofors all ship their goods to the free port of Hamburg, and
hence they are delivered to their various customers. That is why rumors of
shipments of arms are always current in the city of Hamburg.
It is illegitimate for the German manufacturers to ship to the free port of
Hamburg, but it is managed. Once in the free port, there is no difficulty in
getting them out.
It is supposed that in the year 1932, 400 to 2,000 tons of powder were shipped
from the free port of Hamburg. The destination is not known and the original
manufiicturers are not known. Most of all is supposed to go to Russia in
bond through Riga.
The principal agent for purchases for Russia is a Mr. Jacobson in Copen-
hagen, who handles the Russian business for Bofors, Solothurn & Dottiken.
In Holland there is an attempt to control the illegitimate traffic of arms.
Every dealer must have a license arid is carefully watched.
There is a certain amount of contraband among the river shippers, mainly in
arms from America. Arms of all kinds coming from Amorica are transshipped
in the Scheldt to river barges before the vessels arrive in Antwerp. Then they
can be carried through Holland without ]iolice insjiection I'v interfei-once. The
Hil lerists and Communists are presumed to get arms in this manner.
The principal arms coming from America are Thompsi n submachine guns
and revolvers. The number is great.
Along the Lemberg frontier there is a small traffic of arms into Germany,
revolvers and small weapons, which can be bought in the retail stores in
Holland.
It is worthy of note that in view of the difficulties of trading, due to the
fact {hat the politicians in a desire to restrain abuses have put so many res-tric-
tions, taxes, duties, and licenses, on legitimate trade, that in all international
business the amount of smuggling and fraud has increased enormously. The-
illegitimate dealers pay no taxes nor dutips and are free from all restrictions,
hence they can outbid and ou'deal the legitimate dealers.
The legitimate export of powder in Europe has not been above 300 tons in
1932. but it is supposed that the illegitimate trade is over 1.000 tons, much of
it made in Germany.
Over control only affects correct dealing, but favors smuggling.
So far I have kept av/ay from these smugglers, but I am going to Hamburg
at the first reasonable opportunity and call on them to see what information:
I can get about the business.
Very truly yours,
William N. Taylor.
Mr. Lammot du Pont. Senator, I think yon misread the next to
the last parao;raph. Yon read it, " Onr control only affects correct
dealino; but favors smuggling."
Senator Clark. You are correct. Thank you, Mr. du Pont, for
calling it to our attention.
Now, first, let me ask all of you gentlemen, in each of these two
letters leference is made to large quantities of American manu-
factured Thompson submachine guns being smuggled into Germany.
Did Colon -^1 Taylor ever tell any of you gentlemen, or was it ever
menticned in any of his raiher voluminous reports, who was han-
dling the shipment of these arms from the United States to
Germany?
Mr. Casey. No; he did not.
Mr. Lammot du Pdxt We do not manufacture any submachine
guns.
Senator Clark. I understand, but I notice he made that state-
ment, and I wondered if it had ever come to your attention?
Mr. Lammot du Pont. No, sir.
MUNITIONS INDUSTRY 1199
Senator Clark. Now, this last letter I just read, in which reference
is made to the arming of the Hitlerists and the Communists, was
written immediately prior to Hitler taking power in Germany, as it
was written January 9, 1933.
Mr. Lammot du Pont. I have no information about that, but I
presume that is correct.
Senator Clark. If I may say in that connection, I understand the
committee has requested the du Pont Co. to get together what
information they can on the shipment of contraband machine guns,
and that Major Casey has undertaken to do that work for the
committee.
Now, on January 18, 1934, there is another report from Colonel
Tayor to Major Casey, which I offer as an exhibit under the appro-
priate number.
(The letter referred to was marked " Exhibit No. 508 ", and ap-
pears in full in the text.)
Senator Clark. I read from this " Exhibit No. 508 ", as follows :
The coutraband of ammunition is increasing tremendously. I.C.I, have re-
ceived continuous enquiries for delivery to the free port of Hamburg from
Magnus and Beno Spiriro. (They are two of the rather shady dealers men-
tioned in the last letter.)
We have invited Beno Spiriro to meet us this week in Paris, but he refused
to come.
We are going further into this matter.
This was the same Beno Spiriro he referred to as a cheap char-
acter who would not pay his bills, in the last letter, wasn't it, Mr.
du Pont?
Mr. Lammot du Pont. There seems to be a similarity in the two
names.
Senator Clark. The letter reads further:
There seems to be the beginning of a decided increase of activity in the ammu-
nition business in Europe. The immediate cause of excitement is the possi-
bility of revolution of the Croates in Serbia, which, if it takes place, will cause
considerable trouble.
Very truly yours,
William N. Taylor.
Then, I call your attention to a letter to Major Casey from Colonel
Taylor dated March 4, 1933, which I offer as an exhibit under its
appropriate number.
(The letter referred to was marked " Exhibit No. 509 ", and ap-
pears in full in the text.)
Senator Clark. " Exhibit No. 509 ", the letter from Colonel Taylor
to Major Casey, reads :
I wrote to you sometime ago a little article on the question of contraband of
arms and pointed out that the Dutch laws permitted the transport in canal
shipments from Belgium into Germany in transit through Holland without any
government inspection.
I also mentioned that certain small arms of American origin were taken in
Belgian boats from the Scheldt through Holland into Germany.
The Dutch newspapers have been objecting to this and recently a Belgian
deputy has asked this question in the Belgian Parliament and asked if any
measures had been taken by the Government to prevent this traffic. The
Belgian Ministry replied that this matter had been taken up and that the
Belgian Minister at The HagTie had been instructed to consult with the Dutch
Government on this matter in an attempt to stop this.
It would appear that a good many of these arms come from Liege.
1200 MUNITIONS INDUSTRY
So it would appear that the matter mentioned in Colonel Taylor's
previous communication to you had been of sufficient importance to^
be the subject of legislation and diplomatic correspondence?
Mr. Lammot du Pont. Not our diplomatic correspondence.
Senator Clark. No; but I say the subject of contraband munitions
mentioned in Major Taylor's communications to you were actually of
sufficient importance to be the subject of diplomatic correspondence..
jMr. Lammot du Pont. I do not know that. Colonel Taylor is
simply reporting the information to us.
Senator Clark. That is reported by Colonel Taylor to you?
Mr. Lammot du Pont. He had gotten this information and was
passing it on to us.
Senator Clark. He reported to you that it had been the subject of
legislative action and diplomatic correspondence.
Mr. Lammot du Pont. Colonel Taylor had not had that diplomatic
correspondence.
Senator Clark. No ; he did not have the diplomatic correspondence,.
but he called the information to your attention as it came to his
notice. He called to your attention the fact that it had been the sub-
ject of diplomatic correspondence also?
jNlr. Lammot du Pont. Colonel Taylor was just reporting the
things to us, was our view.
Senator Clark. Referring to " Exhibit No. 505 ", a memorandum
taken from the Remington tiles, having to do with an agreement be-
tween French and German ammunition manufacturers, it is a fact, is
it not, Mr. clu Pont, that the R.W.S. referred to in that memorandum
is now the Dynamit-Actien-Gesellschaft, which is commonly known
in trade circles as "D.A.G."?
Mr. Lammot du Pont. I do not know. This is not the same as
Koln Rottweiler. I do not know whether this is a part of the
D.A.G. or not.
Mr. Carpenter. It is not a part of the D.A.G., but I believe they
are both owned by the I.G., which is a large German company.
Senator Clark. I call your attention to another letter, taken
from your files, Mr. du Pont, addressed to Mr. C. K. Davis, presi-
dent. Remington Arms Co., Inc., Bridgeport, Conn., written on the
letterhead of the Remington Arms Co., Inc., 25 Broadway, New York,
N.Y., evidently being an inter-office communication, dated October
22, 1933. That will be offered as an exhibit and appropriately
numbered.
(The letter referred to was marked " Exhibit No. 510 *' and is
included in the appendix on p. 1361.)
I direct your particular attention to the next to the last para-
graph on the second page of this letter which is signed by Mr. A. A.
Dicke, and which reads as follows :
On account of my rather intimate acquaintance with Mr. von Herz, Dr.
Mueller, and many others in the R.W.S. (now the D.A.G.) organization,
practically all correspondence between the two companies was handled through
me, and I have continued in this relationship even after my resignation as vice
president of the Remington Arms Co., Inc. That is the reason why the letter
referred to was sent to me.
That would appear to be a letter from a former vice president
of the Remington Arms Co., Inc., who has had direct charge of
MUNITIONS INDUSTRY 1201
whatever went on between the Kemington Arms Co., and K.W.S.,
and he now makes the statement that the R.W.S. is now known as
the " D.A.G."
Mr. Lammot du Pont. I do not know anything about that.
Senator Clark. I am trying to establish the identity for this.
Mr. Lammot du Pont. I am afraid you cannot establish it from
my information, Senator.
Senator Clark. I have established it from the exhibit I just of-
fered. Is there anybody else in your organization who would be
better prepared to give information with regard to the identification
of these companies ?
JSIr. Lammot du Pont. I think somebody connected with the Rem-
ington Arms Co. might.
Senator Clark. Have you anybody here from that company?
Mr. Lammot du Pont. Only Dr. Sparre, who is a director, and I
do not think he would be informed on that.
RELATIONS WITH DYNAMIT-ACTIEN-GESELLSCHAFT, GERMANY
Senator Clark. This letter just put in the record, Mr. du Pont, is
from the former vice president of the Remington Arms Co., ad-
dressed to the president of the Remington Arms Co., who personally
handled their negotiations with R.W.S., who states that R.W.S. is
now known as '' D.A.G."
Mr. Lammot du Pont. I do not say that is not true, but I do not
know.
Senator Clark. I see. You are not prepared to testify to it.
I offer this statement from Mr. Dicke, the former vice president of
the Remington Arms Co.
I offer in evidence and ask to have marked the appropriate number
an exhibit which is an extract from the directors' report of the
Dynamit-Actien-Gesellschaft, 1933, showing this hook-up.
(The report referred to was marked " Exhibit No. 511 " and is
included in the appendix on p. 1362.)
Senator Clark. I will read a certain portion of that, pronouncing
as well as I can the names. On page 5, toward the bottom of the
page, these minutes state [reading] :
We have comiuunity-of-interests agreements with the following firms " :
Mr. Lammot du Pont. I beg your pardon, Senator, but we seem to
have no page no. 5 in here.
Senator Clark. I marked the numbers with pencil myself, Mr.
du Pont.
Mr. Lammot du Pont. It is the first page of the report?
Senator Clark. Yes, sir [reading] :
We have community-of-interests agreements with the following firms :
Carbonit Aktiengesellschaft ; Gustav Genschow & Co., A.-G. ; Koln-Rottweil,
A.-G. ; Rheinische Gummi & Celluloid Fabrik ; Sprengstoffwerke Dr. R. Nahnsen
& Co., A.-G.
We belong to the following unions, conventions, and similar syndicates gov-
erning price and sales :
Deutsche Sprengstoff-Konvention ; Sprengstoff-Verkauf s-Gesellschaft, m.b.H. ;
Zundschnur-Verkaufs-Gesellschaft, m.b.H.; Sprengkapsel-Syndicat ; Celluloid-
Verkaufs-Gesellschaft, m.b.H. ; Munitions- Verband ; Vereinigung Deutsch(r
Kunstharzfabriken.
1202
MUNITIONS INDUSTRY
Going on to the next page :
The most important of our holdings of shares are the following :
Nominal
stock in RM
Nominal
holding in
RM
Carbonit Aktiengesellschaft
G. C. Dornheim Aktiengesellschaft
Deutsche Celluloid-Fabrik Eilenburg
Fabrik elektrischer Zunder Qesellschaft m.b.H
Selve-Kronbiegel-Dornheim A.-G
SprensstotTwerke Dr. R. NTahnsen & Co. Aktiengesellschaft
Spreg^itolTwerke Kieselbach-Kunigunde G. m.b.H
Rheinische Gummi und Celluloid Fabrik
Aktiengesellschaft Dynamit-Nobel, Bratislava (Pressbm-g).
1, 500, 000
500, 000
8, 000, 000
3, 000, 000
900, 000
700, 000
600, 000
1, 000, 000
Kc 13,200,000
417,500
482, 000
2,211,500
2, 820, 000
615, 000
351, 600
300, 000
fiOO, 000
Kc. 6, 745, 200
Now, Mr. du Pont, from your familiarity with the trade, you
know that many of these companies which are enumerated there as
being controlled by D.A.G., or with whom they have agreements,
are or were prominent arms and explosives manufacturers, do you
not? In other words, what I am getting at, Mr, du Pont, is this:
It is a fact that D.A.G. is the great German explosives trust, is
it not?
Mr. Lammot DU Pont. Yes, sir.
Senator Clark. There is no question about that, and it is well
recognized throughout the trade. Is not that a fact?
Mr. Lammot DU Pont. Yes, sir. There are a few names which
I recognize in here, Senator.
Senator Clark. Perhaps you could not recognize them from my
pronunciation.
Mr. Lammot du Pont. I have been reading them, after I got
the drift of your question, and the few which I recognize are not
munitions concerns. The Deutsche-Celluloid-Fabrik Eilenburg, I
think, is a celluloid company.
Senator Clark. They are all tied in with this great Munitions
Trust, are they not?
Mr. Lammot du Pont. Yes, sir. The Rheinische Gummi und
Celluloid Fabrik, I think, is a rubber company.
Senator Clark. There is no question but that the D.A.G. is the
great German munitions combine, is there ?
Mr. Lammot du Pont. Surely.
Senator Clark. I will ask you to look at page 6, the second page
of that report, immediately following what I have read, in which
this statement is made :
The balance sheet and the profit-and-loss account are based on our com-
munity of interests agreement with the I.G. Farbenindustrie A.-G.
And on the last page you will find this statement:
Based on the agreement with the I.G. Farbenindustrie A.-G., our net profit
amounts to RM 1,679,199.95.
Now, the I.G. or the I.G. Farbenindustrie A.-G., commonly known
as I.G., is the great chemical combine of Germany, is it not?
Mr. Lammot du Pont. Yes, sir.
Senator Clark. So that you have a great explosives combine of
Germany, the D.A.G., and the great chemical combine, I.G., tied in
MUNITIONS INDUSTRY 1203
together in a combine, the exact manner of which we need not go
into at this time.
Mr. Lammot du Pont. Yes, sir.
Senator Clark. There is no question about the D.A.G. and I.G.
being tied in together, is there?
Mr. Lammot du Poxt. Xo.
Senator Clark. There is also in evidence from the last exhibit
the fact that the D.A.G., the explosives combine, and the I.G., the
great German chemical combine, are so closely related that they
show i^rofits and losses together.
Mr. Lammot du Pont. Are you asking me a question ?
Senator Clark. I just made the statement that it appears from
that exhibit that you just examined, that there was such an intimate
connection between the D.A.G. and the I.G., the great explosives
combine and the great chemical combine, that their profits "and
losses are reflected in their balance sheets. That statement is spe-
, cifically made in the minutes which I just read.
Mr. Lammot du Pont. I presume that is correct.
Senator Clark. Now, Mr. du Pont, I offer for the record, for ap-
propriate number, a document which was taken from your files, and
which we found marked in 5^our files as " Unsigned — in effect as
gentleman's agreement." This purports to be a license agreement
covering patented inventions and secret inventions between E. I.
du Pont de Nemours & Co., party of the first part, and The Vereinigte
Koln-HottAveiler Pulverfabriken and Dynamit Actien Gesellschaft,
party of the second part.
(The agreement referred to was marked "Exhibit No. 512" and
api^ears in the appendix on p. 1367.)
This agreement starts out : .
" This agreement, made in the city of Hamburg, Itepublic of Germany, as
of the 1st day of January, A.D. 1926, between—"
the parties named, which I have just read.
What do you know about this agreement, Mr. du Pont?
Mr. Lammot du Pont. That is an agreement between the German
companies and ourselves, vrhich is very similar to the agreement be-
tween I.C.I, and du Pont, in that it provides that each of the parties
may acquire from the other an option to purchase valuable rights
to processes. The agreement with I.C.I., in this respect, is in effect,
in that it has been duly executed by both parties. This agreement
Avitli the German company was drafted along the same general lines
, and was informally agreed to but was not executed. It, therefore,
is not in effect, I believe, legalh', but we have notified the Germans,
I think informally, that we were satisfied to be bound by it, that is,
we would agree to the agreement verbally, informally, but we have
not executed it.
Senator Clark. In other words, that notice on this contract, as
we found it in your files, unsigned, " in effect as gentleman's agree-
ment ", is literally accurate. The contract has not formally been
- completed by signature, but that it is in effect practically, as a gen-
tleman's agreement between the two companies.
Mr. Lammot eu Pont. If you mean by a gentleman's agree-
; ment
83876— ^4— PT Ti 13
1204 MUNITIONS INDUSTRY
Senator Clark. I am asking what you meant by this notation. It
is not my notation but a notation by somebody in connection with
your company.
Mr. Lammot du Pont. I know what my interpretation of a " gen-
tleman's agreement " is, but I do not know what yours is.
Senator Clark. I am asking you yours.
Mr. Lammot du Pont. My interpretation?
Senator Clark. Yes.
Mr. Lammot du Pont. My interpretation of a " gentleman's agree-
ment " is one which is not executed but which the parties have
considered.
Senator Clark. And are proceeding under?
Mr. Lammot du Pont. Yes; but I think also, Senator, the term
" gentleman's agreement " applies to the ability of either party to
get out of it.
Senator Clark. The point I am making is that you have had these
negotiations and are actually proceeding under that agreement at
the present time, are you not ?
Mr. Lammot du Pont. Yes, sir.
Senator Clark. Even though that may not be binding and valid^
and even though it might be voided by either party.
Mr. Lammot du Pont. Yes, sir; I think we would be perfectly
right, both legally and ethically, if we notified these companies that
after tomorrow we would not be bound by the agreement.
Senator Clark. Or they with you?
Mr. Lammot du Pont. Or they with us.
Senator Clark. This agreement, Mr. du Pont, provides for an
exchange of patents and processes on black powder in all varieties^
on all varieties of smokeless propellants for sporting purposes; dis-
ruptive explosives of all kinds for industrial purposes; detonators;
electric detonators; safety fuses; powder fuses; detonating fuses;
electric igniters, and generally all devices for initial detonation or
ignition; the components which form the ignition and propellant
charges of sporting ammunition ; and the ingredients and component
parts of the above insofar as they are applicable to explosives.
Mr. Lammot du Pont. There was an error in your statement^
Senator. I do not know whether you intended it.
Senator Clark. What is that?
Mr. Lammot du Pont. You said that this provided for an exchange
of rights. It does not, I think. It provides for an offering from one
to the other of rights.
Senator Clark. I will read the first paragraph on page 2, which
will perhaps explain it better than my language did [reading] :
Each party agrees to and until the 31st day of December, A.D., 1935, upon
making or ohtaining any patented invention or discovering or acquiring any
secret invention, to disclose in writing to the other party immediately, or in any
event within 6 months thereaftei', full particulars in respect thereof, and there-
after to furnish to the other party, whenever and so often as the other party
shall request, copies of all claims, specifications, applications, and patents in
respect of any such patented invention, and copies of all writings setting forth
any such secret invention and such information as the other party shall request
in respect of any such patented invention or secret invention.
Mr. Lammot du Pont. That is correct.
Senator Clark. That seems to me to provide for the exchange of
your patents and secret processes.
MUNITIONS INDUSTRY 1205
Mr. Lammot du Pont. No, sir; it does not.
Senator Clark. Will you explain what that means ?
Mr. Lammot du Pont. It provides for the exchange of infor-
mation.
Senator Clark. That is what I had reference to.
Mr. Lammot du Pont. A subsequent paragraph refers to granting
rights.
Senator Clark. I will read that :
Each party shall forthwith appoint one or more competent, trustworthy, and
experienced persons in its employ for the purpose of receiving such particulars
and information from the other party. Whenever and so often as the other
party shall request and at the expense of such other party, each party shall
supply experienced chemists, engineers, foremen, and other experts to assist
such other party in investigating, testing, applying, or using any patented or
secret invention disclosed as aforesaid.
Mr. Lammot du Pont. That again refers to information and no
granting of rights.
Senator Clark. I was not speaking of rights, but exchange of
information, be it a secret or patented process, either one, and this
applies, as I understand it, to both. I mean, it applies whether
you have patented the process or maintained it as a secret formula.
You are obligated, by this agreement, to furnish any such thing you
may have discovered, and to inform the German company, and if
they desire, to furnish your personnel to train them in connection
therewith.
Mr. Lammot du Poxt. We are not obligated to do the former.
"We are obligated to offer them the rights, but we are not obligated
to give them the rights. We are obligated to give them the
information.
Senator Clark. You are obligated to notify them that you have
discovered a new process or patented a new process.
Mr. Lammot du Pont. Yes, sir.
Senator Clark. And if they desire it, you are obligated to furnish
it to them?
Mr. Lammot du Pont. No; we are obligated to offer it to them,
presumably for a price.
Senator Clark. I have not arrived at the question of terms, but
you are under an obligation to notify them of your discoveries,
whether they be patents or processes ; yes, sir, and assuming a satis-
factory price arrangement between you, you are obligated, at their
option, to furnish them not only with the patent or the process, but
also with expert personnel to train them in the use of that invention.
Mr. Lammot du Pont. If they will accept our terms, we are obli-
gated to give them the rights.
Senator Clark. I was not getting at the question of terms. This
agreement is. in many respects, similar to your agreement with the
I.C.L, is it not?
Mr. Lammot du Pont. Very similar ; and it also applies, like the
I.C.I, agreement, only to commercial explosives.
Senator Clark. I am coming to that in just a moment, Mr.
du Pont.
Mr. Lammot du Pont. Yes, sir.
Senator Clark. It also goes into the allocation of territory, like
the I.C.I, agreement does, does it not?
1206 MUNITIONS INDUSTRY
Mr. Lammot du Pont. No, sir; neither agreement does.
Senator Clark. Does it not provide that in some cases licenses
will be given to them, and in the licensing agreement is not an
allocation of the territory made ?
j\Ir. Lamjuot du Pont. "We are obligated to give certain rights for
certain territories.
Senator Clark. That means an allocation of territory so far as
they are concerned, does it not?
Mr. Lammot du Pont. I do not think that is correct, Senator.
Senator Clark. You agree to trade Avith them and license them in
certain territor}^ just as you did with the I.C.I., and in certain ter-
ritory you have notified them that you won't give them a license, or
will reserve that for your own exclusive exploitation. In other
words, there is an A territory, a B territory, and a C territory
allotted in the world, as to part of which they can have an exclusive
license, and as to part of which it is nonexclusive, and as to the other
part of which there is no license granted at all. Is not that correct?
jNIr. Lammot du Pont. Correct. In that territory which we agree
to offer them a nonexclusive license on, that does not allocate to them
that territory. Do you see that point?
Senator Clark. Yes; I see that point; unless they have traded.
INIr. Lamisiot du Pont. That is why I did not want you to think
this is a division of territory.
Senator Clark. It does provide that they shall not be given any.
license in certain territory which you reserve exclusively for your-
self, and that in certain other territory they may be given an exclu-
sive license; that is, assuming that they have agreed with you on
terms ; and in a certain territory they shall not be given an exclusive
license, but may be given a nonexclusive license. That is the A, B, C
territory.
]\Ir. Lammot du Pont. Correct.
Senator Clark. Now, Mr. du Pont, you said a moment ago, and
said the same thing on yesterday, that this agreement with the
D.A.G., the German explosives trust, and also the agreement with
the I.C.I., the British explosives trust, covered only commercial ex-
plosives, and, of course, that is true in the terms of the contract,
but necessarily a great many of these commercial explosives have
great military utility, have they not? For instance, you would say
TNT was covered by a commercial use, would you not ?
Mr. Lammot du Pont. I do not think so. Senator ; no.
Senator Clark. Mr. du Pont, I have forgotten exactly which one
of 3^ou gentlemen it was, but day before yesterday twice you testified
that the very profitable TNT plant which you had during the war —
it was Mr. Pierre du Pont — was a commercial plant.
At page 1733 of the transcript of testimony made day before yester-
day the following appears [reading] :
Senator Bone. I am going to see, Mr. dxi Pont, if I can more particularly
identify this plant more definitely, and for that purpose I wili take the report
you tiled with the Bureau of Internal Revenue [reading] :
"At tlie outbreak of the war in August 1914 the manufacture of TNT in Ihis
country was practically in its infancy. The du Pont Co. was, it is believed, a
pioneer in the manufacture of this product" — that is to say, TXT — • "and
started the erecti:in of a small plant about 1912. * * * "
You will remember that.
Mr. PiEKRE DU Pont. That was a commercial plant.
MUNITIONS INDUSTRY 1207
Then, again, on page 1746, in the examination of Mr. Carpenter
by Mr. Raushenbush, the TNT plant, which was so profitable during
the war, was again referred to as a commercial plant. So that it
would certainly seem from the state of the record that TNT is at
least a commercial product as well as a military product.
Mr. Lammot du Pont. I think that is true, but TNT does not
seem to be covered by this agreement.
Senator Clark. That is a commercial explosive, is it not ?
Mr. Lammot du Pont. Yes; but the agreement specifically men-
tions the commodities which are covered.
Senator Clakk. Are not many forms of detonators both commer-
cial and military ?
Mr. Lammot du Pont. I do not think detonators are used in a
military way at all.
Senator Clark. If you wanted to blow up a bridge with TNT.
would you not use a detonator for it, in case of war ?
Mr. Lammot du Pont. I am afraid I am not technically informed
on blowing up bridges.
Senator Clark. That might be a very important military activity.
Mr. Lammot du Pont. A detonator is the technical name for an
article. It is sometimes known as a " blasting cap."'
Senator Clark. I may not be technically familiar with it, but I
know for what purpose detonators are used for both military and
commercial activities. So that if the French Army were driven back
by the Germans across the Meuse. as was the case in the war, and was
extremely anxious to blow up the bridges after them, TNT detonators
would be of importance, would they not?
Mr. Lammot du Pont. Yes, sir.
Senator Clark. So that it is impossible, as you agree, to draw a
hard-and-fast distinction between military and commercial uses of
detonators, and things of that sort? For instance, dynamite is ordi-
narily considered a commercial explosive; but if you did not have
any better explosive it might be a very vital and important munition
of war, might it not?
Mr. Lammot du Pont. It might be.
Senator Clark. A dynamite bomb dropped out of an airplane will
probably do quite a lot of damage, would it not?
Mr. Lammot du Pont. If it went off. Senator, your original ques-
tion was as to whether TNT was included, and I said I did not think
it was.
Senator Clark. I thought my original question was whether TNT
is a commercial as well as a military explosive.
Mr. Lammot du Pont. Yes ; I think it is ; but I do not think TNT
is included in this list of products.
Senator Bone. Is it excluded, Mr. du Pont?
Mr. Lammot du Pont. It is not mentioned.
Senator Bone. Then, if it is recognized in the trade as a comercial
explosive, it might very readily be included in the terms of the
agreement.
Senator Clark. I include TNT, Mr. du Pont, because of this
lan<2uage in the contract: "Disruptive explosives of all kinds for
industrial purposes." I take it that TNT might be a disruptive
explosive for commercial purposes as well as military purposes,
miffht it not?
120S MUNITIONS INDUSTRY
Mr. Lammot du Pont. I think TNT is never used as a disruptive
explosive for commercial purposes.
Senator Clark. It might readily be used as a disruptive explosive
for commercial purposes, might it not?
Mr. Lammot du Pont. I do not know whether it could be or not,
Senator ; but it is not. In other words, it is not an efficient explosive
for the purpose, and, therefore, it is not used for commercial pur-
poses. I think I am correct in stating that the commercial use of
TNT is not as a disruptive explosive.
Senator Clark. I was simply using that as an illustration, Mr.
du Pont. It is a fact, is it not, and well recognized by everybody
that the great bulk of explosives can be used for either commercial
or for military purposes, although one may be more commonly used
in the commercial and industrial field and the other more commonly
resorted to in the military field, but, lacking one, either one can be
substituted in the other field, can it not?
Mr. Lammot du Pont. I think they could be substituted.
Senator Clark. That is all I am getting at.
Mr. Lammot du Pont. But, generally speaking, commercial ex-
plosives are rarely used for military purposes.
Senator Clark. That is perfectly true, but what I am getting at,
Mr. du Pont, is this : That within this broad definition of " com-
mercial explosives " you have a very wide field of instrumentalities,
like dynamite and detonators of various kinds and aerial bombs,
that might very readily be used for military purposes as well.
Mr. Lammot du Pont. I presume they might be, Senator. Would
it clear up this point if I make this statement : That if we made an
invention in the manufacture of TNT, I would not report it to the
Germans under this agreement?
Senator Clark. Why is that, Mr. du Pont?
Mr. Lammot du Pont. Because I would not consider it a disrup-
tive explosive for industrial purposes, and it does not seem to come
into the other categories mentioned. It is not a black powder ; it is
not a smokeless propellant, and it is not a detonator.
Senator Clark. It would be a disruptive explosive if anj-body
wanted to use it for commercial purposes, would it not?
Mr. Lammot du Pont. I woulcl say it is not used for commercial
purposes.
Senator Clark. It would be, if anj^bocly wanted to use it for
commercial purposes, would it not? It might be the case that some
other product would be better or cheaper for disruptive explosive
purposes, but if anybody wanted to buy TNT and use it for disrup-
tive explosive purposes commercially, they could, could they not?
Mr. Lammot du Pont. That might be.
Senator Claek. I do not care to argue as to what interpretation
you put on the contract.
Mr. Lammot du Po>sT. I would interpret the contract that way.
Senator Clark. I Avould say from my limited knowledge, if this
were actually a signed contract, and from a legal standpoint you
failed to notify them of the invention of a new form of TNT, I
would say that they had a good cause of action against you. You
have a highly paid legal staff of your own, which might not agree
with that, but it seems to me, under the terms of this agreement, you
i
MUNITIONS INDUSTRY 1209
would be bound to notify them of the invention of any new TNT or
any other new explosive.
Mr. Lammot du Pont. I am quite sure we are not so committed.
Senator Bone. This being purely a gentleman's agreement and one
which could not be subject to a strict interpretation in court in case
of an action being brought, it would be more natural to liberally con-
strue it between the parties, I take it, because of that very fact, would
it not?
Mr. Lammot du Pont. If that agreement were signed by us, I
would interpret it in exactly the same way.
Senator Bone. But, not being signed, and there not being legal
sanction behind it, but being a gentleman's agreement, the parties
could give it a liberal interpretation and would be justified in doing
it, would they not ? In other words, I take it you attempted to pre-
serve as far as you could your harmonious relations with the German
company; naturally you would not care to enter into those relations
unless 3^ou could sustain them and, all things being equal, if the com-
bination were profitable to you. I just assumed that because that
would be an ordinary incident of the business.
Mr. Lammot du Pont. Evidently this agreement indicates har-
monious relations.
Senator Bone, That is what I am getting at. Naturally, you
would not want to needlessly irritate the man with whom you had
entered into harmonious business relations.
Mr, Lammot du Pont. No.
Senator Bone. That atouIcI follow in the ordinary practice of
business.
Mr. Lammot du Pont. Senator, if the Germans had an invention
with respect to TNT I would not expect them to give up the knowl-
edge of it, under this agreement.
Senator Clark, Just to clear up the relationship between commer-
cial or nonmilitary and military, to clear up the use of these terms,
I wish to read from the record at page 1892 the testimony of Mr.
Lammot du Pont and Mr. Pierre S. du Pont, on the day before
yesterday, or yesterday.
Senator George. The transition from the nonmilitary to the military use
of them, however, is both swift and easy, is it not?
Mr. Lammot du Pont. In some cases it is. But those cases are items of
minor importance in commercial business.
Mr. Pierre S. du Pont. It is not true, however — correct me if I am wrong
in this — that the prime ingredients of militai'y propellants are the same as
used in sporting powders, and in some disruptive explosives. For instance,
gun cotton and nitroglycerine are both used in military propellants and are
used very largely in sporting powders. So that the fundamentals bear direct
relation to both branches of the industry, military and industrial,
Mr. Irenee du Pont. Senator, I think your point is well taken and I think
its weight is gi*eater than has been stressed.
Industrial manufacture in the chemical industry will tie into the produc-
tion in a large way and economically, of military explosives. I think that
information of this kind may cheapen the costs and make available more
military supplies by reason of having it. *
Mr. du Pont, is there any official definition of commercial explo-
sives ? What I am getting at is this : We have in effect now, in the
United States, although not technically an embargo on the export
of munitions to certain countries, actually an embargo, Bolivia and
Paraguay, to be exact.
1210 MUNITIONS INDUSTRY
Would not the export of commercial explosives which might be
used for military explosives for military purposes be forbidden
under that embargo unless an extremely clear showing were made
that they were to go into purely commercial use instead of military
use?
Mr. Lammot du Pont. I do not think the question wovdd be
decided on whether the material was ever used for commercial or
military purposes. I am not sure that I get your question.
Senator Clark. That happens to be the ruling of the State De-
partment, as I happen to know. In other words, the State Depart-
ment recognizes that these commercial explosives may be very
readily used for military purposes, and in a recent case in which it
was sought to import blasting powder, a commercial explosive
showing was required as to exactly the destination and the use to
which it was to be put. And in that, the State Department well
recognized that the so-called commercial explosives could be very
readily converted into military explosives, if they were permitted
to be imported.
Mr. Lammot du Pont. Blasting powder is nonembargoed, I under-
stand— that is, is not embargoed.
Senator Clark. It was embargoed until a showing was made as
to its destination in the particular case of which I speak.
Mr. Lammot du Pont. I understand TNT is embargoed.
Senator Clark. In other words, what I am getting at is this:
There is an interchangeability between explosives for commercial
purposes and for military purposes, even though one may be more
suitable for ordinary commercial use and the other more suitable
for ordinary military use. That is correct, is it not?
Mr. Lammot du Pont. There is a possible interchange, but it is
not usual.
Senator Clark. For instance, in the strikes that are going on now
in this country, somebody might take explosives that were ordinarily
denominated as commercial explosives and use them for what would-
be military purposes, or vice versa.
So that we come back to the proposition, Mr. du Pont, that the
information and the patents which you are obligated under this
contract toward this gentleman's agreement as long as it is enforced
to exchange with this German company, could in time of war have a
direct bearing on the effectiveness of a large quantity of war ma-
terials; is not that correct?
Mr. Lammot du Pont. It could not be.
Senator Clark. Why not?
Mr. Lammot du Pont. Because munitions are not included in the
agreement.
Senator Clark. Detonators might be munitions, I think we agreed
a while ago.
Mr. Lammot du Pont. Certain detonators, suitable for military
purposes, would nol? be included in this agreement, because such
detonators would be called by their proper names.
Senator Clark. What is the proper name of a detonator for mili-
tary purposes?
Mr. Lammot du Pont. I do not know.
Senator Clark. That is the name by which they are commonly
spoken of in the Army.
tlUNITIONS INDUSTRY 1211
Mr. Lammot du Pont, I think in tlie torpedo it is the war head.
:is it not?
Senator Clark. I am not familiar
Mr. Lammot du Pont. Neither am I .
Senator Clark. With the naval nomenclature. But a detonator
in the Army is a detonator.
Mr. Lammot du Pont. I think in military explosives every given
detonator is known by its own name. But I do not know very
much about it.
Senator Clark. In my time in the Army, a detonator was known
as a detonator,
Mr. Lammot du Pont. Mr, A. Felix du Pont suggests that they
are known as " primers " in military language.
Senator Clark. I always heard them spoken of as detonators.
Mr. Lammot du Pont. I think a detonator is a general term; a
detonator is a thing that detonates something else.
Senator Clark, That is perfectly true, and that is the term used
in this contract.
Mr, Lammot du Pont. There are lots of different kinds of det-
onators.
Senator Bone. Would that term be sufficiently broad to compre-
hend all of these classifications ?
Mr. A. Felix du Pont. The corresponding article to a detonator
in military use is a primer, and it is used for igniting propellant
powders. It is also used- — and there you get a little bit tangled up —
in the bursting charges for shells it is again called a detonator.
Senator Clark. If you Avere to invent a new process for any sort
of explosives
Mr. Lammot du Pont. Dynamite ?
Senator Clark. Well, dynamite or any other shattering explosives
or disruptive explosive, and put the Germans in possession of your
secret process, as you would he bound to do under this contract
Mr. Lammot du Pont. You are wrong there, Senator. If it were
a military disruptive explosive, we would not be bound under this
agreement to give it to tliem.
Senator Clark. Going back to your admission hitherto this
afternoon that commercial explosives can be used for military pur-
poses, although perhaps not used with as great facility as others—
that is, military ex]5losives — after you had classed this explosive as a
commercial explosive and put the Germans in iDOssession of your
secret formula for the manufacture of it. it being your patented
process, and they were to engage in a war, there would be nothing to
prevent them from taking those ]3rocesses and using them in the
manufacture of war explosives would there?
Mr. Lammot du Pont. Senator, we would not class the military
explosives as commercial explosives.
Senator Clark. But Mr. clu Pont, it has been admitted here two or
three times that commercial explosives may be used for military pur-
poses, even though with not as great facility as the military explosives.
Then, being in possession of the process for the manufacture of these
commercial explosives in the event of war, there would be nothing
to prevent them from taking those processes and using those ex-
plosives for militar}^ purposes if they did not have anything better.
1212 MUNITIONS INDUSTKY
Mr. Lammot du Pont, Yes. We would j^ive them information
regardino; commercial explosives.
Senator Clark. And being in possession of that, the_y could use
them for anything that they pleased in the event of "war.
Mr. Lammot du Pont, They would be of no use to them in war.
Dynamite is practically of no use in a war; blasting powder is
practically of no use in a war.
Senator Clark, What do they use for mining operations in a war?
]\Ir. Lammot du Pont. TNT, I believe.
Senator Clark. They also use dynamite, do they not?
Mr. Lammot du Pont. I do not think they do, Senator, I am not
very warlike myself.
Senator Clark. Dynamite can frequently be used in a war if you
had no other substitute for it.
Mr. Lammot du Pont. I do not think it is used for military mines;
no, sir.
Senator Clark, How about nitroglycerin?
Mr. Lammot du Pont. Nitroglycerin itself is certainly not used in
military operations itself.
Senator Clark. I understand that it is used in the manufacture
of munitions of war?
Mr. Lammot du Pont. Nitroglycerin is used in the manufacture
of some kind of propellant powder; for instance, cordite.
Senator Clark. What I am getting at is this : Nitroglycerin would
be an ingredient, so to . speak, of both commercial and military
explosives ?
Mr, Lammot du Pont. Yes,
Senator Clark, And if you were to invent some new process touch-
ing nitroglycerin, would you feel bound under this contract to notify
your German friends?
Mr, Lammot du Pont, That is another question. I would have to
look up the contract.
Mr. Pierre S. du Pont. While Mr. Lammot is looking that up, let
me say that I think there is a little confusion here. You are right
in regard to the interchangeability of certain explosives and my
brother is trying to define what we consider our obligations under
this agreement. We may make a classification that is not in ac-
cordance with your interpretation, or it may not be technically cor-
rect. What we do may be right and it may be wrong.
Senator Clark. I understand, but since you have no contract that
the other party can enforce, you can give it any interpretation you
please ?
Mr. Pierre S. du Pont. But even if it were a bona fide contract,
the understanding between the two as to what was in one classifica-
tion or in other classifications might not be a correct understanding,
that is, it might result in an incorrect classification, but as long as
they both agreed to it, that is what it would be.
Senator Clark, But the point is that the testimony here has uni-
formly been that there is a certain interchangeability between the
commercial explosives and military explosives. That is, certain
things which ordinarily you would consider as military explosives
could be used for military purposes and vice versa?
Mr. Pierre S. du Pont. Sometimes they are somewhat similar.
MUNITIONS INDUSTRY 1213
Senator Clark. For instance, take the TNT. You speak of your
TNT plant as a commercial plant?
Mr. Pierre S. du Pont. It is somewhat like this : During the recent
war I understand that the Germans did not have sufficient wool to
make clothing, so they made clothing out of paper. You would
hardly include paper as a material for making clothing, but it can
be used for that purpose.
Senator Clark. There is no question of TNT being a military
explosive, is there?
Mr. Pierre S. du Pont. It is military, but it is not commercial.
Senator Clark. What did you mean then the other day when you
spoke of your very profitable plant as being a commercial plant?
Mr. Pierre S. du Pont. Let me explain that. That commercial
plant was originally started to make a nitrotoluol of less degi*ee
of intensity, if I may put it that way, for certain commercial safety
explosives. That same plant was later developed to make TNT,
which was not either used or known, as I understand it, at the time
that our commercial plant was built. But that plant could be used
for either and grew from one plant to another.
Senator Clark. Surely. Now suppose, under this contract, you
were to go over and show the Germans your process for making this
commercial TNT or commercial
Mr. Pierre S. du Pont. Nitrotoluol.
Senator Clark. I understand that TNT is trinitrotoluol. Sup-
pose you were to go over there and show them your commercial
process for making this toluol. A war would come along and they
would very nicely be able to convert that plant by the addition of
simply one other formula into a TNT plant, would they not ?
Mr. Pierre S. du Pont. That is true. But notwithstanding, we
do not interpret the agreement that way. We may be entirely wrong.
I am just saying what we do.
Senator Clark. So then, in spite of the fact that your ov^•n TNT
plant was a commercial plant, you would not feel compelled to
disclose any information to the Germans as to the invention of a
new process respecting TNT, if I understand you correctly.
Mr. Lammot du Pont. I would not think that we were expected
to do so, and I would not give them the information or send them
the information.
Senator Clark. Of course, it would appear from the exhibits here
today that the first question of whether this TNT plant was a
munitions plant or a commercial plant had to do with your return
to the Bureau of Internal Revenue, and, secondly, it had to do with
this contract. It would appear that the definition of TNT really
depends on whom you are dealing with, whether the Internal Reve-
nue Department or the D.A.G. in Germany, because in one case
you say that the TNT plant was a commercial plant, while in the
other case you say that it would not be included as a commercial
explosive.
As a matter of fact, Mr. du Pont, while Germany is now forbidden
by the various treaties signed after the war to manufacture arma-
ment, it is a fact that the}' are manufacturing, under agreements sucn
as we have referred to, various high explosives which have extreme
value in time of war; your reports from Europe indicate that, do
they not?
1214 MUNITIONS INDUSTRY
Mr. Lammot du Pont. They are only reports of information that
has been received.
Senator Clark. I understand. But do not your reports indicate
that? You have vei-y conijjlete report service from Europe, as has
been indicated here from time to time in the record ?
Mr. Lammot du Pont. The reports indicate that, Senator, but we
do not know whether the reports are correct or not.
Senator Clark. You have an information service on which you
rely very largely, do you not?
Mr. Lamm()T du Pont. Not always. We do not rely on all these
reports. That is gossip reported to us, and we treat it as gossip.
Senator Clark. As a further point, Mr. du Pont, if the Germans .
were manufacturing munitions of war, explosives which might be
useful in war time, they might be depending very largely on the
secret processes which they obtain from your company?
Mr. Lammot du Pont. You mean in future or in the past ?
Senator Clark. That they are entitled to obtain from your com-
pany under that contract.
Mr. Lammot du Pont. Certainly not in the future, Senator.
Senator Clark. Not if you abrogate the contract, certainly.
Mr. Lammot du Pont. No, if v;e keep the contract in effect. We
are not required to give them information in regard to any military
explosive. I said that a number of times, and I believe it to l3e true.
That is the way I interpret it.
Senator Clark. We still do not seem to be able, Mr. du Pont,
desi^ite the fact that all of you gentlemen have admitted this inter-
changeability between commercial and military explosives, to agree
as to what your obligations are under that contract.
Mr. Lammot du Pont. I have a very clear understanding of what
our obligations are.
Mr. A. Felix du Pont. Perhaps I can clear up something there in
regard to commercial and military explosives.
Senator Clark. Please do. I shall be glad to have it.
Mr. A. Felix du Pont. There are two great classes of so-called
" explosives " used in war time. One is a propellant charge. We
do not call that an explosive. That is smokeless poAvder. An enor-
mous amount of that is used, as you know, and that is used to send
the projectile out of the gun.
The other is the bursting charge for shells. That is TNT. It is
also used in airplane bombs. You seem to be under the impression
that if people did not have TNT, they could use dynamite for that
purpose. They could not.
Senator Clark. Not for that particular purpose ; no.
Mr. A. Felix du Pont. That is the enormous amount that is used.
If it was used for demolition purposes, like blowing up bridges
Senator Clark (interposing). What I am getting at is this: That
there are many purposes for which dj'namite could be used, or other
explosive might be used as a military munition, if you did not have
TNT, which happens to be the new process and the best one.
Mr. A. Felix du Pont. No, Senator; it is a question of quantity
in that case and use. Wherever you could substitute dynamite for
TNT, it would be in bloAving up a bridge, something like that. But it
is unquestionable that any country could find enough dynamite to
blow up bridges.
A
MUNITIONS INDUSTRY 1215
Senator Clark. What did they use before they had TNT?
Mr. A. Felix du Pont. They used black powder.
Senator Clark. TNT is a rather new development, is it not ?
Mr. A. Felix du Pont. Yes.
Senator Clark. And black powder is covered under this con-
tract with Germany, is it not?
Mr. Lammot du Pont. Yes.
Senator Clark. Which is both a commercial and a military
munition.
Mr. A. Felix du Pont. No invention has improved black powder
in 200 years.
Senator Clark. But if you were to invent a process for black
powder, whether for commercial or military purposes, j'ou would be
required to turn it over to this German company.
Mr. A. Felix du Pont. It would be a miracle.
Senator Clark. That could be construed as being commercial even
though it might be also used for military purposes.
Mr. A. Felix DU Pont. You mean black powder?
Senator Clark. Any one of this whole list; any process or im-
provement which w^as brought about through your research on any-
thing, the principal use of which was for commercial purposes, you
would be required to turn over, would you not ?
Mr. Lammot du Pont. I think so, for its principal use.
Senator Clark. Then there is no disagreement on the subject.
Wliat is dynamite used for now ?
Mr. Lammot du Pomt. Mostly in mining and construction work.
Senator Clark. It is not used for military purposes ?
Mr. Lammot du Pont, Not at all, except for demolition.
Senator Clark. There is a great deal of demolition in war time,
is there not?
Mr. Lammot du Pont. Very little.
Senator Clark. How is that?
Mr. Lammot du Pont. Very little, I believe. I do not mean de-
molishing eneni}^ structures, but demolishing your own structures.
Senator Clark. Well, that is entirely dependent upon the course
of the war, Mr. du Pont. A retreating army alwaj^s endeavors to de-
molish whatever it can to hinder the enemy.
Mr. Lammot du Pont. You do not shoot dynamite over into the
enemy's territory.
Senator Clark. I understand that, but you do use it very largelj''
for demolition purposes in a retreat, do you not ?
Mr. Lammot du Pont. If you run across a bridge and want to de-
stroy it so that the enemy may not follow you, dynamite would be
a very good explosive to use for that purpose. It is usually your
own bridge.
Senator Clark. In this agreement between the D.A.G. and du
Pont, the British Empire was omitted. Why was that?
Mr. Lammot du Pont. Omitted ?
Senator Clark. Yes.
^Ir. Lammot du Pont. You mean no rights
Senator Clark. It was excluded from the territory in which rights
could be granted.
1216 MUNITIONS INDUSTRY
Mr. Lammot du Pont. I think that that is due entirely to the fact
that we had an agreement with I.C.I, whereby we were obligated to
offer them exclusive rights for the British Empire.
Senator Clakk. So that this agreement of yours with D.A.G.
really fitted into your agreement with I.C.I. ?
Mr. Lammot du Pont. Yes.
Senator Clark. You were negotiating with D.A.G. in contempla-
tion, of course, of your contract which had been signed with I.C.I. ?
Mr. Lammot du Pont. Yes.
Senator CLAmc. Mr. du Pont, I call your attention to a letter to
the executive committee of du Pont from Mr. J. Thompson Brown.
He is one of your directors, is he not ?
Mr. Lammot du Pont. Yes, sir.
Senator Clark. He is a member of the executive committee. I
offer that letter as " Exhibit No. 513."
(The letter referred to was marked " Exhibit No. 513 " and is
included in the appendix on p. 1372.)
Senator Clark. It is dated March 23, 1927. It is headed " Eeport
of conference in February and March with British and German
explosive interests." It reads :
Ou account of differences of opinion as to tbe extent to wliicli du Pont and
Nobel * * *
When they say " Nobel " they mean I.C.L, do they not?
Mr, Lammot du Pont. I think so.
Senator Clark (reading) :
* * * which du Pont and Nobel should share with the D.A.G., the compensa-
tion which tbe D.A.G. had agreed to pay other German explosives companies for
withdrawing from and limiting their activities in tbe export markets, and
also because of a threatened resignation of tbe manager of Explosives Indus-
tries, Ltd., it was thought well that tbe writer should visit London, Hamburg,
and Cologne for discussion of these as well as other live subjects with officials
of tbe British and German explosives companies. Consequently tbe writer
sailed for England on February 5 and returned to Wilmington on March 15.
There is attached hereto as exhibit A copy of minutes of meeting held at
Nobel House,. London, on February 16. It will be noted from these minutes
that it was agreed between du Pont and Nobel that du Pont's share of tbe
compensation to the German competitive companies, known as " Coswig,
Lignose, and Gnaschwitz ", should rightly be placed at £937/10 annually,
whereas it bad been contended by Nobel that du Pont's share should be £3,000
annually. The D.A.G. gi-oup had entered into agreements to pay annually to
Coswig for a period of 10 years tbe sum of £5,000 in consideration of Coswig
limiting its shipments of high explosives to the export markets to 250 tons
per annum, and bad made similar arrangements with Lignose and Gnaschwitz
to pay to each of them £2,000 per annum to abstain from shipping explosives
to tbe export markets. Tbe writer agreed with Nobel that it would be proper
to allocate to Chile and Bolivia 100 tons of tbe 250 tons accorded Coswig in
tbe export markets, tbe balance to be delivered to the Dutch East Indies, and
contended that it would be proper that one-half of the cash compensation to
l)e paid Coswig should be considered as payable by the South American market,
liut that as neither Lignose nor Gnaschwitz had entered tbe export markets,
and therefore had not been competitors of du Pont, du Pont should not share
in tbe compensation to them. These points were conceded by Nobel and were
later agreed to by Dr. Muller on behalf of the D.A.G. while the writer was
in 'Cologne.
While in Hamburg on February 28 it developed that German deliveries of
"high explosives to Mexico have been made in 25-kilo cases, i.e., 55 lbs. net
weight, and that deliveries under the du Pont-Hercules-D.A.G. agreement to
date, including a shipment going forward on March 2, have amounted to
O.OOO.OUO pounds, leaving 4,400,000 pounds of German high explosives still to
be delivered.
MUITITIOISrS INDUSTRY 1217
What was that agreement with Hercules, Mr. du Pont — the du
Pont-Hercules-D.A.G. agreement? Was Hercules a party to this
agreement that you had with D.A.G. ?
Mr. Lammot du Pont. No, sir.
Senator Clark. What agreement with D.A.G. was it that Hercules
was a party to? Hercules was another American powder company,
was it not?
Mr. Lammot du Pont. Yes.
Senator Clark. Concerning which your company recently has been
engaged in some litigation?
Mr. Lammot du Pont. I do not recall the litigation. It was one
of the companies split off from the du Pont company in 1913,
Senator Clark. Under a court order ; that is what I had in mind.
Mr. Lammot du Pont. I cannot think for the moment, Senator,
what the du Pont-Hercules agreement is.
Senator Clark. It evidently had to do with Mexico.
Mr. Lammot du Pont. It is evident that it had to do with Mexico ?
Senator Clark. Well, it is not of much importance.
Mr. Lammot du Pont. In any event, it refers to dynamite.
Senator Clark (reading) :
Mr. Marquardt agreed that D.A.G. would accept cash compensation for its
undersales of the E.I.L. quota during the 15 uTonths ending December 31,
1926, on the same basis as arranged with Nobel early in 1926, viz : £10 par ton
of high explosives, Ss. per thousand detonators, 6s. per hundred electric deto-
nators, 6d. per thousand leet of safety fuse.
With reference to the undersales of the E.I.L. quota, of D.A.G.,
does that indicate that when D.A.G. did not sell up to the quota
allotted to it by LCI. and du Pont, the compensation was paid to
D.A.G. for their failure to sell up to their quota ?
Mr. Lammot du Pont. This all refers to sales by E.I.L.
Senator Clark. Who is E.I.L.?
Mr. Lammot du Pont. E.I.L. is a company organized to sell com-
mercial explosives in certain countries in South America.
Senator Clark. That was the export company?
Mr. Lammot du Pont. You might call it an export company.
Senator Clark. Which is owned by du Pont-D.A.G.-I.C.L?
Mr. Lammot du Pont. Yes.
Senator Clx\rk. Was that interest between the three companies
equal in E.I.L. ?
Mr. Lammot du Pont. I do not think it is equal; no, sir. I have
forgotten the proportions.
Senator Clark. Do you recall about what the proportions were?
It is not important, but it is interesting to know.
Mr. Lammot du Pont. I do not think it is equal, Senator. My
impression is that the I.C.I, and du Pont interests are larger than
that of D.A.G.
Senator Clark. But this provision of the contract
Mr. Lammot du Pont. Dr. Sparre said that D.A.G. has 25 percent.
Senator Clark. And the remainder is divided about equally
between I.C.I, and du Pont.
Mr. Lammot du Pont. I think that is correct.
Senator Clark. And that is a company formed for the purpose of
<?ontrolling the export field in South America ?
1218 MUNITIONS INDUSTRY
Mr. Lammot du Pont. No, sir. It is a British company formed',
to sell commercial explosives in certain countries of South America..
Senator Clark. And under that a quota is given to D.A.G.
Mr, Lammot du Pont. Yes, sir.
Senator Clark. Of the total sales in South America; and when
D.A.G. is not able to sell up to its quota of total sales, then they are
reimbursed by the other two companies ; is that the idea ?
Mr. Lammot du Pont. No, sir; that is not the idea.
Senator Clark. Will you explain what it does mean?
Mr. Lammot du Pont. It shows that you have a misconception of
this company. E.I.L. is a British company formed to sell commer-
cial explosives to certain countries of South America. It is not a
manufacturing company. E.I.L. is not a manufacturing company.
It secures its goods to sell from the three stockholders, and it draws
those goods from the stockholders in a certain proportion which is
known as the quota. If it does not draw from D.A.G. as many
pounds of powder as the quota represents, then D.A.G. gets some
compensation.
Senator Clark. From E.I.L.?
Mr. Lammot du Pont. From E.I.L.
Senator Clark. Which in effect is a contribution, 75 percent of it,,
from du Pont and I.C.I.
Mr. Lammot du Pont. Correct.
Senator Vandenberg. Are j^ou the originator of this alphabetical
arrangement?
Senator Clark. There are more alphabetical organizations that we
are coming across here than there are in Washington.
Mr. Lammot du Pont. We deny any credit for the results anyway.
Senator Clark. Reading further from this exhibit:
In conference witli Dr. Paul MuUer, in Cologne, on March 4 he agreed to
the distribution of the compensation to the outside German explosives com-
panies, as already stated, and approved the arrangements made in Explosives
Industries, Ltd.
In view of the very excellent type of delay-nctinn electric blasting cap.
produced at the Troisdorf factory of the Rhenisch-Westfalische-Sprengstoff AG,
and the desirability of du Pont putting out a similar article, the writer ar-
ranged with Dr. Muller to purchase the Eschbach United States Patent 1570733
for $7,.50O, to be pa'd in three annual installments. Assignment agreement
will be drawn and sent to Cologne at an early date.
It was also arranged with Dr. Muller that Mr. William Eschbach, manaj2:er
of the detonator factory at Troisdorf, will come to America during this year,
and that there will be discussed with him while he -e the subject of lead-azide-
tetryl-aluminum-shell detonatoi's, now manufactured almost exclusively at
Troisdorf; and that subsequently du Pont would send ( ne cr n;(»re men to
Trosdorf to make an exhaustive stud.v of the manufacture of this pi'oduct.
Dr. Muller made assurances that the processes involved in the manufacture
of these detonators would not be offered to other American explosives manu-
facturers pending a decision by du Pont. He indicated that should we even-
tually decide to adopt this type of detonator he would exviect du Pont to
pay for the process a lump sum of lOD.ODO marks, and to n.srree to a royalt.y
payment to he applied from the start of manufacture, the 100,000 marks orig-
inally paid to be credited to the royalty payments.
Mr. Laimimot du Pont. Senator, your pronouncement in one point
makes me think you misunder-stood this entirely. You referred to
the aluminiim-shell detonators. The shell and the aluminum go.
together. It is not a detonator for a shell, but the aluminum shell
is one of the component parts of the detonator.
MUNITIONS INDUSTRY 1219
Senator Clark. That is not the point I had in mind, and I did
not know anything about that at all. I do not profess to be fa-
miliar with that detonator and I have not the faintest idea of that
type at all, or what it is.
Mr. Lammot du Pont. I have to keep close track on you, to keep
you straight.
Senator Clark. What this arrangement means is that du Pont
and I.C'.I. will share with D.A.G. the cost of carrying the competi-
tors to keep them out of the world market ?
Mr. Lammot du Pont. No; they share the expense of keeping
certain competitors out of certain South American markets.
Senator Clakk. Well, they were world markets, were they not?
Mr. Lammot du Pont. No; they were just the markets in those
countries.
Senator Clark. That is one of the components of the world
markets, the South American market, and you were sharing with
this German company and this British company the expenses of
keeping competitors out of certain markets. So that, the intent and
purpose of all of these agreements w^as to guarantee in the world
market the sale of explosives by no one else except those controlled by
du Pont, LC.L, and D. A. G.?
Mr. Lammot du Pont. That is not a fair statement.
Senator Clark. I cannot see why it is not a fair statement.
Mr. Lammot du Pont. Because this E.I.L. Co. dealt only in cer-
tain South American countries, and the competitors that were kept
out of those markets, as you indicate, only were some of the com-
petitors. Tliere were many other competitors that were not kept out.
Senator Clark. Yes; but you did contribute to keep competitors
out of the world market ?
Mr. Lammot du Pont. Not all competitors.
Senator Clark. You refused to contribute to these companies
where they were not direct competitors of the du Pont as well as
the E.I.L. In other words, the mere fact that a company was a
comiDetitor of E.I.L. and did not induce you to make any contribu-
tion, but it also had to be a competitor of the du Pont Co. That
clearly appears from this exhibit I just read.
Mr. Lammot du Pont. No; I think you are wrong.
Senator Clark. I call your attention to this letter of Mr. Thom])-
son dated March 23, 1927, " Exhibit No. 513." That was the report
of Mr. Brown, and on page 2 he refers to this compensation, which
reads :
aud coiiteucled that it would be proper that one-half of the cash compensation
to be paid Coswig should be considered as payable by the South American
market, but that as neither Lignose nor Gnaschwitz had entered the export
markets, .and tlierefore had not been competitors of du Pent, du Pont should
not share in the compensation to them.
That clearly had reference to compensation that the du Pont Co.
should pay?
Mr. Lammot du Pont. That disproves your previous statement.
Senator Clark. No ; it does not.
Mr. Lammot du Pont. May I ask the stenographer to read your
question ?
83876— 34— PT 5 14
1220 MUNITIONS INDXJSTEY
Senator Clark. My idea was that your contribution was based
on compensation of du Pont, and you said that was not true.
Mr. Lammot du Pont. And I repeat it.
Senator Clark. Your statement entirely differs with that of Mr.
Thompson Brown.
Mr. Lammot du Pont. I think we must be talking about different
things. You say our compensation paid to these competitors was
based upon whether or not
Senator Clark (interposing). Whether or not they were competi-
tors of du Pont. That is precisely the distinction Mr. Thompson
Brown makes in the report to you in the letter I just read in which
he says :
The writer agreed with Nobel that it would be proper to allocate to Chile
and Bolivia 100 tons of the 250 tons accorded Coswig in the export markets,
the balance to be delivered to the Dutch East Indies — .
And then he continues :
and contended that it would be proper that one-half of the cash compensation
to be paid Coswig should be considered as payable by the South American
market, but that as neither Lignose nor Gnaschwitz had entered the exports
market, and therefore had not been comiDetitors of du Pont ; du Pont should
not share in the compensation to them.
Mr. Lammot du Pont. That is right ; they had not been competi-
tors previous to the formation of E J.L.
Senator Clark. Now, were you successful in keeping these com-
petitors out of the market?
Mr. Lammot du Pont. So far as I know.
Senator Clark. That matter falls under your jurisdiction; you
are familiar with the ordinary course of contracts which your com-
pany enters into controlling certain markets?
Mr, Lammot du Pont. I don't know whether some of these Ger-
man companies live up to the exact letter of the agreement. To the
best of my knowledge and belief they have not sold in those par-
ticular markets, those particular South American markets.
Senator Clark. I will ask you to look at exhibit A which was at-
tached to the letter of Mr. Thompson Brown, being the minutes of
a meeting held at Nobel House on the 16th of February 1927, and
which I will ask to be marked as an exhibit with the appropriate
number.
(The document referred to was marked " Exhibit No. 514 ", and is
included in the appendix on p. 1374.)
Senator Clark. It appears that there were present at this meet-
ing Mr. J. Thompson Brown, Mr. Wendell K. Swint, Mr. H. J.
Mitchell, Mr. J. Laing, and Mr. A. G. Major, representing E. I.
du Pont de Nemours & Co. and Nobel Industries, Ltd.
At the bottom of the first page of that exhibit, Mr. du Pont, we
find this remark :
Atlas and Hercules activities: The activities of these two companies, par-
ticularly in Colombia, w^ere discussed.
Atlas and Hercules were two American explosives companies?
Mr. Lammot du Pont. Yes.
Senator Clark. Were they two of the companies split off from
du Pont?
Mr. Lammot du Pont. Yes, sir.
MUNITIONS INDUSTEY 1221
Senator Clark. That was the result of an antitrust proceeding,
was it not?
Mr. Lammot du Pont. Yes, sir.
Senator Clark. In which you were ordered by the court to sepa-
rate the entities of these companies from the du Pont Co.?
Mr. Lammot du Pont. Yes, sir.
Senator Clark. When was that?
Mr. Lammot du Pont. In 1913.
Senator Clark. I will read this again:
Atlas and Hercules activities : The activities of these two companies, par-
ticularly in Colombia, were discussed, and Mr. Brown stated that in conversa-
tions he had had with their representatives he had been informed that neither
company intended to institute more aggresive measures, and that he felt they
would be content with a share of the market not In excess of their present
proportions. Mr. Brown, during his forthcoming visit, will explain the situation
to the Germans.
Now, does that indicate you had an unsigned agreement with Atlas
and Hercules as to the limit of their sales in 1927?
]\ir. Lammot du Pont. No, sir.
Senator Clark. What does that report of Mr. Brown indicate
when he said he felt justified in reporting to his European associates
that Hercules and Atlas would be satisfied with a certain proportion ?
]Mr. Lammot du Pont. That was the result of conversations Mr.
Brown had with two competitors.
Senator Clark. That did not amount to an agreement?
Mr. Lammot du Pont. Certainly not.
Senator Clark. Mr. Brown felt confident enough, though, to re-
port it to his British associates, and reported to you that he would
report it to his German associates in the near future ?
Mr. Lammot du Pont. Yes, sir.
The Chairman. Senator Clark, may I interrupt for a minute?
Senator Clark. Yes, sir.
The Chairman. Does this agreement by any chance mark the in-
auguration of the N.R.A. idea?
I^Ir. Lammot du Pont. I do not get jout meaning, Senator.
The Chairman. Well, we have here a limitation of production and
what not, involved, and is that at all basic of what has followed in
our production program?
Mr. Lammot du Pont. There is no limitation of production in this
E.I.L.
Senator Clark. Was any coniDensation paid to Hercules and Atlas
for agreeing to limit their participation in the market to what it
had been prior to 1927?
Mr. Lammot du Pont. No, sir.
Senator Clark. Do you know of any reason why they should have
agreed to that?
Mr. Lammot du Pont. Agreed to what?
Senator Clark. Why they should agree to limit their share in the
market to what they had enjoyed in 1927?
Mr. Lammot du Pont. No, sir ; I know of no reason.
Senator Clark. Or any assurance they had given Mr. Brown to
justif}' him in reporting this to the British and German associates?
Mr. Lammot du Pont. There were no assurances given Mr. Brown
and he did not say so.
1222 MUNITIONS INDUSTRY
Senator Clark. He did not say assurances, but certainly he gave
his British associates information on which they woukl be justified,
in view of his familiarity with the American situation to rely on.
The activities of these two companies, particularly in Colombia,
were discussed and Mr. Brown stated he had been informed, and that
he felt they would be content with a share of the market not in
excess of their present proportion ; that is, 1927, and that Mr. Brown
during his forthcoming visit will explain the situation to the
Germans.
You know of no agreement that was entered into.
Mr. LxVMMOT Du Pont. No, sir ; I am quite sure there was none.
Senator Bone. Why would two large competitor companies of that
size voluntarily restrict the scope of the volume of their business?
Mr. Lammot du Pont. There were various reasons but I do not
know what they were.
Senator Bone. As I recall the testimony of the first day of this
hearing, the Atlas and -the Hercules Powder Co., when they were
separated from the parent organization and reorganized into sepa-
rate entities, found the stock of those companies largely in the hands
of du Pont stockholders.
Mv. Lammot du Pont. All of the stock was paid to du Pont stock-
holders as a dividend.
Senator Bone. So that the then present du Pont stockholders were
the owners of the Hercules and the Atlas ?
Mr. Lammot du Pont. Yes, sir.
Senator Bone. Can you advise us whether that ownership still is
in du Pont stockholders?
Mr. Lammot du Pont. It has been largely dissipated, I believe.
Senator Clark. Was that true in 1927?
Mr. Lammot du Pont. Yes, sir. Senator, you will remember one
of the provisions of that dissolution was that the stock that was
given du Pont stockholders, who were personally defendants in the
Government stock suit, should be stock that would not have the
right to vote for 5 years. That was done with the expectation that
after 5 years that stock would be so dissipated it would not make any
difference whether it voted or not.
Senator Bone. The rather peculiar thing is that any big organiza-
tion such as they are would voluntarily consent to a restriction of
output. We hear so much discussion of curbing the initiative and
what not in this examination, that I wonder why any concern would
curb their initiative.
Mr. Lammot du Pont. They did not say they were going to curb
their production. They did not say they were going to do anytliing.
Senator Bone. Didn't he say he he had been informed, or had
gathered that information?
Senator Clark. He said he had been informed.
Mr. LAM]\roT du Pont. I don't know liow he got the information.
Mr. Pierre S. du Pont. I could make a suggestion to show the
character of the transaction that would call for such a situation.
Suppose Hercules are selling to a customer in the T"^nited States, and
that customer happened to have business in Colombia, Chile, or
somewhere else, it is quite natural Hercules would sell to that cus-
tomer, but at the same time it might not pay Hercules to send
MUNITIONS INDUSTRY 1223
down to that country to increase sales. That might very well occur,
but I have not the least idea it did.
Senator Clark. It would follow if it was a simple casual transac-
tion like that that so busy a man as Brown would not have felt it
necessary to go to England to convey that information to his British
associates, and then go to Germany to convey that information to his
German associates.
Mr. Lammot du Pont. Senator, that was not the reason he went
to those countries.
Senator Clark. This is one of the most important headings of this
report.
Mr. Lammot du Pont. I do not know that it is one of the most
important headings.
Senator Clark. It is one of the headings here.
Mr. Lammot du Pont. It is one of the headings ; yes.
Senator Clark. He said he had been informed neither one of
these companies intended to institute more aggressive measures, and
he felt they could be content with a share of the market not in excess
of their present proportion. That does not indicate any such casual
transaction as Mr. Pierre du Pont has suggested.
Mr. Pierre S. du Pont. My suggestion was made applying to regu-
lar business, and I have not the slightest idea that was the case.
Senator Clark. Now, this exhibit A to the report reads further :
Coswig : Gnaschwitz-Lignose.
After discussiou it was agreed that du Pr.nts could not be expected to par-
ticipate ill the financial obligations entered into by the Germans with Gnasch-
witz and Lignose. As regards Coswig, it was decided tliat du Font's share
should be confined to a participation in that sum properly applicable to the
South American markets, the balance to fall to the British and German com-
panies in such shares as may be agreed. Mr. Brown agreed to an equal shar-
ing of the sum between South American (excluding Chile and Bolivia) and the
rest of the world. Accordingly it was agreed that the £2,.500 applicable to
South America should be paid through tlie intermediary of Explosives Industries
Ltd., which will result in the following apportionment of that sum :
f s. d.
Du Pont share 37% percent 937 10 0
Nobel share 371/2 percent 937 10 0
D.A.G. share 25 percent G25 0 0
Total 2,500 0 0
In the event of Coswig not shipping the whole or any part of the 100 tons
allocated to Chile and Bolivia, and that market having to compensate them
on the shortage, the pa.vment to be borne, as follows :
Seventy-five percent by Chile Explosives Co.
Twenty-five percent by D.A.G.
Chile Explosives Co. was a subsidiary of du Pont, was it?
Mr. Lammot du Pont. The Chile Explosives Co. I think that is
correct.
Senator Clark. In other words, was this 75 percent to the clu Pont
organization and 25 percent to D.A.G. ?
Mr. Irenee du Pont. No; that is not a subsidiary; we are stock-
holders in the Chile Co., but not in control.
Senator Clark. That is like E.I.L. ?
Mr. Irenee du Pont. I don't know the E.I.L.
Mr. Lammot du Pont. It is not the same thing ; the Chile Co. is a
manufacturing company.
1224 MuisriTioNS industry
Senator Clark. It is not a subsidiary of the dii Pont Co., but you
do have stock interest in it ?
Mr. Lammot du Pont. Yes, sir.
Senator Clark. Now, I call your attention to exhibit B attached
to Mr. Brown's report, being the minutes of a meeting held at Nobel
House, London, on the 16th day of February, 1927, a copy of which I
ask to be marked as an exhibit under the appropriate number.
(The document referred to was marked '" Exhibit No. 515 ", and is
included in the aj^pendix on p. 1375.)
Senator Clark. There were present at this meeting Mr. J. Thomp-
son Brown, Mr. Wendell R. Swint, and Mr. P. H. Chase, representing
du Ponts, and Mr. H. J. Mitchell and Mr. E. D. Metcalfe represent-
ing Noebel.
I read from this exhibit of the report, as follows :
Mr. Metcalfe said that from reports so far received from Mr. Clark a total
of 705 tons crude glycerin has been acquired as a result of his visit to Paris
and Mars'eilles ; although no knowledge was to hand of the exact prices paid,
stated that the figure would probably work out at about £69 per ton for crude.
Mr. Chase referred to conversations with Mr. Metcalfe and Mr. Clark in
regard to the right of the du Pont Co. to call for participation in these pur-
chases, and as it appeared to be clear that some misapprehension existed as
to what course the parties were expected to follow as the result of the previous
meetings, it was decided to lay down definite guiding principles to be followed
in all future operations on the Continental glycerine market, as follows :
"(1) The parties shall keep each other informed as to whether and to what
extent they are interested in continental purchases, and a mutual understanding
shall be arrived at from time to time to leave the market free to each other
for such time as may be arranged.
"(2) In no circumstances shall it be permissible for both parties to operate
on the market simultaneously, and, in the event of both desiring to purchase,
an understanding must be arrived at as to which party shall carry out the
business and in what proportions any quantities purchased shall be allocated.
"(3) Whenever either party desires to operate on the continental market,
due notice of their intention to institute operations shall be given to the other
party before any action is taken. Such other party shall have the right to
declare the extent of its interest in any new purchases made at the time of
such approach, which declaration shall entitle it to take over such proportion
of the purchases as is represented by its declared interest, but not more than
50 percent, at the price of purchase.
"(4) Should either party declare that it is not interested, then such party
shall have no title to call for any participation in purchases made as a result
of operations by the other party."
*******
The du Pont representatives indicated that they had no interest in the
purchase which Mr. Clark was not effecting on the continental market.
That agreement simply meant that du Ponts and LCI. would
attempt to control the glycerin 'market by joint purchases or by
inviting interested parties and notifying them of intent to purchase
so that other interested parties would not enter into the market ?
Mr. Lammot du Pont. No, sir.
Senator Clark. Was not that iin agreement between you and
I.C.I, by which you Avould cooperate to control the market, one
staying in the market and the other having the right to call for a
participation in the purchases?
Mr. Lammot du Pont. The arrangement was tliat one would be in
the market and the other would not be, but that did not control the
price of glycerin.
Senator Clark. You were two of the largest purchasers of
glycerin?
MUNITIONS INDUSTRY 1225
Mr. Lammot du Pont. I think there were other purchasers of
glycerin in the European markets that would far outweigh us.
Senator Clark, du Pont and I.C.I, are not the largest purchasers ?
Mr. Lammot du Pont. I do not knoAV about I.C.I, because I do
not know how much glycerin they buy. We buy very little glycerin
in Europe.
Senator Clark. Of course glycerin is the basis of nitroglycerin ?
Mr. Lammot du Pont. Yes, sir.
Senator Clark. The French, English, and German armies use
military powders containing large quantities of nitroglycerin?
Mr. Lammot du Pont. Not the French.
Senator Clark. Some European powers do.
Mr. Lammot du Pont. I think England and Germany both do, but
I am not certain about Germany.
Senator Clark. I understand you do not use nitroglycerin powder
in the American Army ?
Mr. Lammot du Pont. I think the United States Army never has
used glycerin.
Senator Clark. You use nitrocellulose?
Mr. Lammot du Pont. Yes.
Senator Clark. Well, it is true you can use glycerin in the manu-
facture of powder ?
Mr. Lammot du Pont. Yes, sir.
Senator Clark. Would this agreement you had exercise influence
on the price of glycerin which would be used in the manufacture
of European powders?
Mr. Lammot du Pont. No, sir; that is entirely wrong.
Senator Clark. Why?
Mr. Lammot du Pont. Because our purchases in the European
market have no effect on the price of glycerin.
Senator Clark. What do those purchases amount to of du Pont
andl.C.L?
Mr. Lammot du Pont. I cannot give you a very good idea of that,
and I don't believe there is anybody here that knows that.
Dr. Sparre. My opinion is, about this, the whole production of
glycerin is about 75,000 tons. I think the du Pont Co. use about
5,000 tons or 4 percent of the total production, of which we buy more
than half in the United States.^
Senator Clark. What does the I.C.I, purchase?
Dr. Sparre. Very much less.
Senator Clark. Unless du Pont and LCI. were both substantial
factors in the control of prices, why was it necessary to enter into
this agreement as to one being out of the market and the other being
in the market ?
Dr. Sparre. I think the facts will show that the combined pur-
chases of du Pont and I.C.I, could not be more than 7 percent of
the world's production.
Mr. Irenee du Pont. There is no interest in having that agree-
ment, except that the concerns should not compete against each other.
Senator Clark. There is no reason why they should enter into the
agreement unless it is to control the price ?
Mr. Irenee du Pont. It is a perfectly prudent thing to do. I
didn't know anything about it and never heard of it before.
1 Dr. Sparre later submitted corrected figures regarding the production and consumption
of glycerin. They appear in the appendix on p. 1396.
1226 MUNITIONS INDUSTRY
Senator Clark. If the whole amount of transactions of these two
companies is so small as not to influence prices, there was no point in
making such a contract.
Mr. Irenee du Pont. The point is, the price of anything is im-
portant. If you and I are going to buy 1 percent of a certain stock,
and if we go into competition with each other we might bid it up.
Senator Clark. If you and I agree with each other, we would not
buy a loaf of bread, and neither of us would buy a loaf of bread, it
would not affect the price of bread, and it would be a silly thing
to do.
Mr. Irenee du Pont. Yes; but if you compete with each other in
the market, it is a prudent thing to have such a contract.
Senator Clark. So you think this agreement between these two
Companies would have a substantial effect on influencing the price of
glycerin ?
Mr. Irenee du Pont. I don't say that, but I say it seems to be a
prudent thing if there are two purchasors of a certain commodity
that they should not bid against each other.
Senator Clark. If there was not sufficient influence that it would
control the market as to price and supply, and if it did not do that
there would be no purpose in having the contract.
Senator Bone. Do you believe in the competitive system in busi-
ness?
Mr. Irenee du Pont. I do ; very much.
Senator Bone. You are thoroughly committed to that principle?
Mr, Irenee du Pont. Absolutely ; yes. I never saw a monopoly
yet that did not go to seed.
Senator Bone. Is that the attitude of your company ?
Mr. Irenee du Pont. I believe it is. It certainly was the attitude
■of the company when I was president.
Senator Bone. You, being one of the chief executives, would know
its attitude. Would you say it is the attitude of the du Pont organi-
zation that competition is a good thing in business?
Mr. Irenee du Pont. Not cutthroat comi^etition.
Senator Bone. Evidently you were trying to eliminate competition
by this sort of agreement.
Mr. Irenee du Pont. We don't think you should feel it was elimi-
nating competition at all. It seems to me reasonable competition is
good.
Senator Bone. I do not want to put the words in your mouth, of
course.
Senator Clark. It is eliminating competition to pay somebody to
stay out of the market. I am not speaking of the glycerin now, but
I am speaking of the last remark.
Now, Mr. Felix du Pont, you are of course familiar with the fact
that under the Versailles treaties and the treaties made after the
war German}'' was prohibited from entering into the manufacture of
propellants ?
Mr. A. Felix du Pont. I did not understand you.
Senator Clark. I say j^ou are familiar with the fact that under
the treaties made at the conclusion of the war and since Germany
is forbidden to manufacture propellants?
Mr. A. Felix du Pont. Yes.
MUNITIONS INDUSTRY 1227
Senator Clark. I want to ask Mr. Lammot dii Pont this: Early
' in 1933 you were considering' the possibility of selling a large quan-
tity of military powder to Germany, and you notified the I.C.I, to
that effect.
Mr. Lammot du Pont. I do not think that is a proper description
of what we were considering at that time. I think you are referring
to an agreement with Mr. Giera.
CONTRACTS FOR GERMAN SALES
Senator Clark. I will read you a portion of a letter dated the
6th of March 1938, on the letterhead of Imperial Chemicals, London,
from Harry McGowan, and that is Sir Harrv McGowan, the head of
the I.C.I, is it?
Mr. Lammot du Pont. Yes, sir.
Senator Clark. I will ask to have this letter first marked as a
committee exhibit under the appropriate number.
(The letter referred to was marked " Exhibit No. 516 " and ap-
pears in full in the text on p. 1243.)
Senator Clark. In this letter Sir Harry McGowan says :
It is clear from our records that although Germany, Austria, and Hungary
are not dealt with in the agreement, the understanding is clearly that, as, and
when the Treaty of Versailles is modified the whole position as at present
covered by the general military agreement should be reviewed.
Although our German friends have been out of the export military business
for many years, they probably have manufactured for local requirements, and
I think we may assume that they have not been idle in their research. It is
definitely established that they have not been so in military detonators. I feel
sure that when freedom to manufacture is granted for home use and possibly
for export they will expect to take a prominent position in the business and one
which will be in keeping with our arrangement with them on blasting explo-
sives, and we have in fact kept in mind this possibility.
Then it is apparent from this letter, Mr. du Pont, that it was the
expectation of your British associates that the world would be di-
vided and price quotations set, between du Pont, I.C.I. , and the
German interests, when the Treaty of Versailles was modified, is
it not?
Mr. Lammot du Pont. No, sir.
Mr. Clark. That certainly is the statement there.
Mr. Lammot du Pont. It is not, as I read it.
Senator Clark. It states [reading] :
It is clear from our records that although Germany, Austria, and Hungary
are not dealt with in the agreement —
Mr. Lammot du Pont. What agreement is he referring to ?
Senator Clark. I wnll come to that in just a minute [continuing
quotation] :
The understanding is clearly that, as and when the Treaty of Versailles is
modified, the whole position as at present covered by the general military
agreement should be reviewed.
Although our German friends have been out of the export military business
for many years, they probably have manufactured for local requirements, and
I think we may assume that they have not been idle in their research. It is
definitely established that they have not been so in military detonators. I feel
sure that when freedom to manufacture is granted for home use and possibly
for export they will expect to take a prominent position in the business and
one which will be in keeping with our arrangement with them on blasting
explosives, and we have, in fact, kept in mind this possibility.
1228 MUNITIONS INDUSTRY I
Mr, Lammot du Pont. Senator, I think that the general military-
agreement referred to there is the agreement between I.C.I, and du
Pont with respect to joint offices.
Senator Clark. Yes; but he certainly siDccifically contemplates
that when the German interests are able to do it, they shall come into
this agreement.
Mr. Lammot du Pont. It does not say so.
Senator Claek. That is certainly the inference to be drawn
from it.
Mr. Lammot du Pont. No ; he says
Senator Clark. He refers in this letter to the appointment of
Mr. Giera as your agent for the sale of military powder in Germany.
Mr. Lammot du Pont. Yes, sir.
Senator Clark. Major Casey, who is Mr. Giera?
Mr. Casey. Mr. Giera was until about 10 years ago a Swiss citizen
in this country.
Senator Clark . His real name is Brenner, is it not, Peter
Brenner ?
Mr. Casey. I never heard that.
Senator Clark. You have known him how long?
Mr. Casey. Since about 1916. He came to me with a letter of
introduction.
Senator Clark. That is about 18 years ago ?
Mr. Casey. That is about 18 years ago. He came to me with a
letter of introduction from two people, an old friend of mine by the
name of Col. H. C. Wilson, now dead, and another man, Capt. Lau-
rence Angel, who, at that time, I think, was connected with the
Maxim Munitions. He came to me regarding submarine mines and
wanted us to test out a chemical detonator which he had for sub-
marine mine work. He claimed at the time that he had, while a
Swiss citizen, been assigned to Germany, in accordance with the usual
practice of sending about 20 Swiss officers each year to serve with
the German Army for training, and said that because of his chemi-
cal and explosive knowledge — I am repeating what he told me —
that the Germans did use him on submarine mine projects, which
included the mining of the Dardanelles, Heligoland, Buenos Aires,
and Kiaochaw. We did test out his chemical detonator, but beyond
doing that we had no interest in his project because it was a little
removed from our efforts. I understood later, however, that a firm
of lawyers in New York by the name of Manley & Grand, who or-
ganized the Ordnance Engineering Corporation, had decided that
there was something in this submarine project of his. Later, when
the United States got into the war, I understand that he was of con-
siderable assistance to Captain Fullenweider, of the Navy, on designs
of submarine mines.
Senator Clark. Major Casey, I do not want to interrupt you, but,
going back a little bit, we have understood, also, he was a German
agent before the United States entered the war, affiliated with Boyed
and Von Papen and sabotage.
Mr. Casey. I did not know that until 1918.
Senator Clark. You are familiar with that?
Mr. Casey. Yes, sir.
Senator Clark. Did he ever tell you that?
Mr. Casey. Yes, sir.
MUNITIONS INDUSTRY 1229
Senator Clark. That he was affiliated with Boyed and Von Papea
•during the war?
Mr. Casey. Yes, sir.
Senator Clark. And Avhen the United States entered the war he
saved himself from being shot by turning spy for the United States ?
Mr. Casey. That I do not know.
Senator Clark. He did not tell you that ?
Mr. Casey. I do know he assisted them.
Senator Clark. Go ahead with your story, Major. I did not mean
to interrupt you.
Mr. Casey. I was also under the impression that he assisted Naval
Intelligence. That I am not sure of, excej^t on his statements. I
•only saw him spasmodically. I saw him at the time of Colonel Wil-
son's death, at the funeral. I think I ran into him in Admiral
Niblack's office, who was at that time at the head of Naval Intelli-
gence. I think it was about the latter part of 1932 — after he had been
trying for a great many years to get me to go to the lower Catskills,
where he had a hunting lodge, to get some deer shooting — and I went
up there finally.
Senator Clark. All I am asking you at this time is as to whether
you know the man, and not a narration of the details, which I will
come to in a minute. This Mr. Giera is generally known as an
international spy, is he not?
Mr. Casey. I think he would be.
Senator Clark. Is it not a fact, Major Casey, that he boasts that
lie has been an agent for 13 different governments ?
Mr. Casey. Yes, sir.
Senator Clark. He has been an agent for the Chinese, has he not I
Mr. Casey. Yes, sir.
Senator Clark. And the Germans and Japanese?
Mr. Casey. I do not know about agent for the Chinese. Mining
Kiaochaw for the Chinese Government.
Senator Clark. And he has been an agent for the Japanese ?
Mr. Casey. I understand so.
Senator Clark. And has been an agent for 13 governments in all ?
Mr. Casey. Yes; on his submarine work.
Senator Clark. Is it not his claim that he assisted Germany in
the work of mining Heligoland, and when he turned into an Ameri-
can spy he furnished the plans of the German Heligoland to the
United States and also the German submarine base off of Yucatan?
Mr. Casey. That I do not know.
Senator Clark. He never told you that?
Mr. Casey. He never told me that.
Senator Clark. Del Fungo Giera, and it is alleged his real name is
Peter Brenner.
Mr. Casey. That is something I have learned for the first time.
Senator Clark. And tliat he entered the United States under a
forged passport prior to the war. Did you have anything to do
with or was Kemington a part of du Pont at the time Remington
loaned Giera a gun or field piece to test out a propellant which he
claimed he invented, which he claimed would revolutionize the ord-
nance of the world?
Mr. Casey. It is true that I learned that Remington had in an
exhibit room an old 3-pound navy gun on an old navy mount, an
obsolete type of gun. He was very anxious to get hold of the gun.
1230 MUNITIONS INDUSTRY
Senator Clark. You heard of the propellant that he claimed to
have invented which would revolutionize the ordnance of the world ?
Mr. Casey. Using solid hydrogen.
Senator Clark. Using hydrogen as a substitute for any other
explosive, and passing it through water. Did you know he proposed
to build a factory in this country to manufacture war material for
Japan ?
Mr. Casey. So he said.
Senator Clark. Now, Mr. Felix du Pont, on February 1, 1933,
a contract was signed by yourself as vice president and manager
of the smokeless powder department, with Mr. Giera, covering a
proposed sale of military propellants to Germany, was it not?
Mr. A. Felix du Pont. Yes, sir.
Senator Clark. I offer you three documents marked " A, B, and
C ", which consist of proposed drafts of this contract, and also a
letter from Mr. Abrams, which I will ask to have marked as the
appropriate exhibit. That is from Mr. Abrams of the legal depart-
ment of the du Pont Co. to Mr. T. R. Hanley of the du Pont Co.
(The letter referred to was marked " Exhibit No. 517 " and is
included in the appendix on p. 1375.)
Senator Clark. In that letter he states in part as follows :
To the best of my recollection the draft marked " B " was the agreement
executed under date of February 1, 1933.
Now, Mr. du Pont, I will ask you whether you can identify the
contract of February 1 any more definitely than is shown in that
letter.
Mr. A. Felix du Pont. Of February 1 ?
Senator Clark. I say, can you identify the contract of February
1 any more definitely than is done in the letter of Mr, Abrams ?
Mr. A. Felix du Pont. Than it is done in Mr. Abrams' letter ?
Senator Clark. Yes. In other words, do you know if any of those-
drafts were the one actually signed on February 1?
Mr, A. Felix du Pont, I will have to look this over a bit.
Senator Clark. Look them over as much as jou please. It will
take some time.
Mr. Lammot du Pont. Mr. Raushenbush, did you not take from
our files a signed copy of this agreement ? You ought to know which
is the one that was signed.
Senator Clark. We have not got the one signed, but simply the
drafts.
Mr. Lammot du Pont. It will save us looking through this if you
have the one that was signed.
Senator Clark. All we know is what is contained in ]Mr, Abrams'
letter.
Mr. Lammot du Pont. Your investigators went through our files.
Senator Clark. It is my understanding that the original contract,
actually signed on the 1st of February 1933, was destroyed.
Mr, Lammot du Pont. I did not know that.
Senator Clark, On the 2d of February 1933, and it is a question
which of these drafts found in your files was the original contract,
and Mr. Abrams of your legal department states in the exhibit which
I just showed you that this draft B was the contract of February 1.
]\Ir. Lammot du Pont. The original contract was destroyed ?
MUNITIONS INDUSTRY 1231
Senator Clark. I will examine as to that in just a minute. These
are the only drafts which we have, and I accompany that with Mr.
Abrams' letter.
I will read Mr. Abrams' letter, Mr. du Pont, if it will refresh
your memory in any way. [Reading :]
T. R. Hanley, Bldg.
Mr. T. R. Hanley is also in the legal department of the du Pont
Co., is he not ?
IVIr. Lammot du Pont. Yes, sir.
Senator Clark. This is an interoffice memorandum and reads :
I enc-lose herewith copy of my letter of January 23 to Major Casey, together
with copies of three drafts of agency agreements with D. F. Giera.
The draft marked "A" was the one enclosed with my letter of January 23. I
believe this draft was revised before execution.
To the best of my recollection the draft marked " B " was the agreement
executed under date of February 1, 1933.
I believe the draft marked " C " was drawn at the time of Captain Giera's
return on February 2 but was never executed.
The above explanation represents my best recollection of the status of these
three drafts but it is possible that any one of them was the one executed on
February 1.
Mr. A. Felix du Pont. I do not recognize any of these as being the
contract that we signed with Giera and put into execution for a short
time.
Senator Clark. How long a time did you put it into execution?
Mr. A. Felix du Pont. To the best of my recollection, it was a 6
months' contract.
Senator Clark. Yes ; but the contract which you signed on Febru-
ary 1 was torn up on February 2, was it not ?
Mr. A. Felix du Pont. Yes.
Senator Clark. I am referring to the contract of February 1 now.
Do any of these drafts represent the contract signed on Februar}^ 1
and torn up on February 2, as Mr. Abrams suggests?
Mr. A. Felix du Pont. I think it does.
Mr. Irenee du Pont. If you do not know, say so.
Senator Clark. I would like to have Mr. Felix du Pont answer
this. He signed the contract and it is a question of identifying the
contract I am getting at.
Ml. A. Felix du Pont. I do not know. The best way to identify
that would be to be perfectly siu*e that when Mr. Abrams gave you
these, or turned these in, that he did not have several among his notes
or files of unsigned specimens of contracts.
Senator Clark. The original was destroyed on February 2. Mr.
du Pont, was it not ?
Mr. A. Felix du Pont. That is correct.
Senator Clark. Why was that destroyed?
Mr. A. Felix du Pont. Because it "was not the right kind of
contract.
Senator Clark. Why was it not the right kind of contract? You
had signed it, had you not?
Mr. A. Felix du Pont. Yes, sir.
Senator Clark. You had authority from the du Pont Co., as vice
president, to sign the contract?
Mr. A. Felix du Poxt. I had authority from Mr. Lammot du Pont,
and I signed it, and on that verv same d'av the contract was discussed
1232 MUNITIONS INDUSTRY
in our executive conxmittee, and it was found not to hold enough
provisions to protect us from possible misinterpretation or action
and so we were not satisfied with it. Mr. Giera had just gone, and
we called him back, and he agreed to turn his contract over, and we
took out ours and tore them up and made a new contract.
Senator Clark. Do you know whether Giera had a photographic
copy of his contract?
Mr. A. Felix du Pont. Absolutel3^ I believe that is one of the
first things he did.
Senator Clark. Now, this draft B, which Mr. Abrams thinks was
the contract actually executed on Februarj^ 1, I will read and see if
that refreshes your memory [reading] :
This agreement, made this 2d day of February 1933 by and between E. I.
du Pont de Nemours Co., a corporation organized and existing under tlie
laws of the State of Delaware, United States of America (liereinafter referred
to as the "company"), and D. F. Giera, of Pelha'm, State of New York, United
States of America (liereinafter referred to as the "agent"),
Witnesseth : That for and in consideration of the premises and of the cove-
nants contained herein, the parties hereto have agreed as follows:
1. The company hereby appoints and constitutes the agent to act as its special
agent for the Kingdom of Holland and as its exclusive agent for the Republic
of Germany, to negotiate the sale of military propellants and military explosives
to purchasers (other than the Government of Holland and its colonies) located
in said territories. The agent accepts such appointment and agrees that at all
times during the continuance of this agreement he will use his best endeavors
to promote the sale by the company of military propellants and explosives within
the aforesaid territories.
2. The agent shall not, during the continuance of this agreement without the
written consent of the company, act as agent for any other company, corpora-
tion, individual, or collection of individuals engaged in the manufacture and/or
sale of goods of a nature similar to or competing with the said products covered
by this agreement, nor shall he be concerned, engaged, or interested, either
directly or indirectly, in the business of any company, corporation, individual,
or collection of individuals engaged in the manufacture and/or sale of goods of
a nature similar to or competing with the products covered by this said
agreement.
3. The agent shall bear all expenses and assume sole responsibility in con-
nection with such negotiations, and shall not make any representation, submit
or accept any tender, enter into any contract, or execute any document on
behalf of the company, except with the approval of the proper officers or other
authorized representative or representatives of the company ; it being further
understood that no obligation on the part of the company, either to the agent
or to third parties, shall arise in connection with orders not so accepted.
4. The company shall furnish, without charge to the agent, its duly accredited
representative or representatives to assist and advise the agent on technical,
financial, and legal matters incident to the completion of any negotiations
undertaken by the agent hereunder.
5. The agent shall receive as full compensation for his services hereunder a
commission as shown on schedule A attached hereto and made a part hereof.
Any commission due hereunder shall be payable to tlie agent pi'omptly upon
receipt by the company of the selling price upon which such commission is
based. Such commissions shall be paid in United States currency at such place
as shall be designated in each instance by the agent, unless prevented by war,
act of governmental authority, or other circumstance beyond the control of the
company.
6. If, in the reasonable opinion of the company after consultation with the
agent, it appears at any time to the company that the agent is not in a posi-
tion to negotiate successfully with any prospective customer or customers within
said territories, the company, after notice to the agent in writing, may appoint a
special representative to obtain orders from such customer or customers ; and
no commission shall be payable to the agent hereunder with respect to orders
negotiated by such special representative.
MUNITIONS INDUSTRY 1233
7. The company shall have the right to terminate this agreement upon written
notice to the agent, should the agent bi'each any of the provisions of this agree-
ment or become incapacitated, by illness or otherwise, from i)erforming his
obligations hereunder for a period of 6 consecutive months. No commission
shall be payable hereunder on orders accepted after such termination.
8. The agent shall have the right to terminate this agreement upon 6
months' previous notice in writing to the company. No commission shall be
payable hereunder on orders accepted after such termination.
9. Unless otherwise terminated in accordance with paragraph 7 or 8 hereof,
this agreement shall continue in full force and effect for the period of 3 years
from the date hereof.
In witness whereof the company has caused this agreement to be executed
in duplicate by its officers duly authorized and its corporate seal to be here-
unto affixed, and the agent has hereunto set his hand and seal the day and
year first hereinabove written.
[seal] E. I. Du Pont de Nemotjrs & Co.,
By — — , Vice President.
Attest :
, Secretary.
Mr. Lammot du Pont. Senator, I would like to protest against the
introduction of that document, for the reason that it purports to
be a copy of a contract which the company executed and almost im-
mediately found to be an undesirable contract.
Senator Clark. We will come to that in just a minute.
Mr. Lammot du Pont. May I finish?
Senator Clark. Yes.
Mr. Lammot du Pont. We found it to be an undesirable contract
and, with the consent of the other signatory, destroyed it and imme-
diately executed another one which replaced it. I say that purports
to be a copy of that original agreement, but we have no means now
of identifying it positively. Therefore, we do not know whether
this paper which has been introduced is proper evidence or not.
Senator Clark. I propose to examine Mr. Felix du Pont upon
the subject of the negotiations leading up to that contract and the
execution of the contract. I may say, further, that this document
identified by an attorney for the company, who assisted in its prep-
aration, as one of the drafts leading up to the contract, in the
absence of the contract, would be admissible in a court of law. It
is my purpose at the proper time to offer this exhibit, but I had
not clone so yet.
Mr. Lammot du Pont. I thought you were offering it on Mr.
Felix du Pout's identification.
Senator Clark. Mr. Felix du Pont has not identified it yet.
Mr. Lammot du Pont. He said that he could not identify it.
Senator Clark. I am trying to find out if this is the contract which
he did execute on February 1, 1933.
Mr. Lammot du Pokt. He read it and said he could not identify
it, and I protest its introduction.
Senator Clark. That is all right. I am addressing my questions
to Mr. Felix du Pont. I am reading this for the purpose of refresh-
ing his memory. I am asking him, after having heard that read, if he
can identify that as the draft of contract signed on February 1, 1933?
Mr. A. Felix du Pont. No; I cannot. The reason is, frequently
we make minor changes in contracts being prepared by our legal de-
partment, and if the contract is not finally executed, they have noth-
ing but maybe one or two copies in their files, and they themselves
cannot tell which is the one which they actually submitted.
1234 MUNITIONS INDUSTRY
Senator Clark. That is Avhat Mr. Abrams states in liis memo-
randum. There was a contract executed on February 1, 1933, was
there not?
Mr. A. Felix du Pont. Yes, sir.
Senator Clark. Does this draft B which I have just read essen-
tially set forth that contract?
Mr. A. Felix du Pont. It is quite similar to it.
Senator Clark. It is quite similar to it.
Mr. A. Felix du Pont. Yes, sir.
Senator Clark. Do you recall any differences between the contract
which you executed on February 1 and the draft which I have just
read, and which has been stated by Mr. Abrams to be probably the
draft which you actually did sign?
Mr. A. Felix du Pont. I have not a very good memoiy for all the
terms of a contract when I have only seen it once, and that original
contract I only saw once, read once, and signed.
Senator Clark. You had participated in the negotiations for that
contract, had you?
Mr. A. Felix du Pont. Participated in the negotiations for the
contract ?
Senator Clark. Yes.
Mr. A. Felix du Pont. Yes.
Senator Clark. Did that draft B that I read substantially set out
the agreement you made with Mr. Giera?
Mr. A. Felix du Pont. It is quite similar.
Senator Clark. Does it differ in any essential from the one which
you actually signed, that you can recall?
Mr. A. Felix du Pont. No ; not that I can recall.
Senator Clark. Not that you can recall. In other words, this
draft B which I have read substantially represents the agreement
which you had actually signed, and you are uncertain as to whethei
it is the exact contract which you signed on February 1 or not?
Mr. A. Felix du Pont. That is correct.
Senator Clark. You say this contract was torn up on February 2.
You started to explain why it was torn up, Mr. du Pont. "Why was]
that contract destroyed on February 2?
Mr. A. Felix du Pont. We began to discuss the contract after it
was signed, and gave it further discussion with other officers of the
company.
Senator Clark. With what officers of the company? Describe
in some detail as to what took place after the contract of February 1.
1933, had been signed ?
Mr. A. Felix du Po^^T. After the contract was signed, it hap-
pened to be on the same day there was a meeting of our executive
committee, and the matter was mentioned in the executive commit-
tee, I believe by Mr. Lammot du Pont, and the other members of the
committee discussed it in various ways and called me in. I imme-
diately recognized that I had made a slip in not taking the custo-
mary procedure of bringing it before a member of our foreign rela-
tions department, and it was Mr. Pickard, of the foreign relations
department, who thought that the contract did not bind this man,
Giera, employed as important a way as it should.
MUNITIONS INDUSTRY 1235
Senator Clark. In what way was it suggested, do you know ?
Mr. A. Felix du Pont. May I ask if you have a copy of the
second contract ; the one which was signed ?
Senator Clark. Are you referring now to the contract of Feb-
ruary 15?
Mr, A. Felix du Pont. I think so; yes, sir.
Senator Clark. Yes ; I have a copy.
Mr. A. Felix du Pont. If you would read this and read that, you
will see there are many precautionary clauses in the second one, and
it is quite obvious why we changed it.
Senator Clark. This contract of February 1, 1933, however, Mr.
du Pont, had been prepared by your legal department, had it not ?
Mr. A. Felix du Pont. Yes.
Senator Clark. On your instructions?
Mr. A. Felix du Pont. Yes.
Senator Clark. These three drafts, and possibly others which we
have here, and possibly letters had been prepared by your legal
department, after conference with you?
Mr. A. Felix du Pont. Yes.
Senator Clark. And when the matter was discussed in executive
committee, it was decided that some other provisions should be
included ?
Mr. A. Felix du Pont. That is correct.
Senator Clark. And you then sent for Mr. Giera ?
Mr. A. Felix du Pont. Yes.
Senator Clark. And he agreed to destroy the original contract?
Mr. A. Felix du Pont. Yes.
Senator Clark. Was any compensation paid him at that time for
that?
Mr. A. Felix du Pont. No.
Senator Clark. Any agreement for compensation?
Mr. A. Felix du Pont. No.
Senator Clark. Now, Mr. du Pont,' did you have any contract
with Giera between the 2d of February 1933 and the 15th of Feb-
ruary 1933?
Mr. A. Felix du Pont. I do not think so, but I am not quite cer-
tain. Senator, if you have a copy of the second contract, it will
help me refresh my memory.
Senator Clark. I am not certain which is the second contract and
which is the first, in what I am trying to find out, Mr. du Pont.
Apparently you yourself destroyed the first contract?
Mr. A. Felix du Pont. That is correct.
Senator Clark. No evidence of it, except so far as there may exist
a photographic copy taken by Mr. Giera ?
Mr. A. Felix du Pont. That is correct.
Senator Clark. Did Giera tell you he was taking off a photo-
graphic copy?
Mr. A. Felix du Pont. No ; but he told somebody else.
Senator Clark. Did he deliver his copy of the contract to you ?
Mr. A. Felix du Pont. Yes.
Senator Clark. You destroyed them both?
Mr. A, Felix du Pont. Yes.
83876— 34— PT 5 15
1236 MUNITIONS INDUSTEY
Senator Clark. Did you do that personally ?
Mr, A. Felix du Pont. Yes.
Senator Clark. Now, I will offer drafts A, B, and C as exhibits^
(The contract A was marked " Exhibit No. 518 " and is included in
the appendix on p. 1376.)
(The contract B was marked " Exhibit No. 519 " and is included in
the appendix on p. 1377.)
(The contract C was marked " Exhibit No. 520 " and is included in
the appendix on p. 1379.)
Senator Clark. Exhibit B, which was marked our " Exhibit No.
519," it was stated by Mr. Abrams was the contract actually executed
on February 1 and destroyed on February 2, 1933.
I now offer another exhibit, to be known as " Exhibit No. 521 ",
which is the agreement of the 15th day of February 1933 by and
between the du Pont Co. and D. F. Giera.
(The contract referred to was marked " Exhibit No. 521 " and is
included in the appendix on p. 1380.)
Senator Clark. That is the contract you referred to heretofore as
the second contract?
Mr. A. Felix du Pont. The second contract.
Senator Clark. Executed on the 15th day of February. Will you
please look that over and see if that is the contract you actually exe-
cuted on the 15th of February?
Mr. A. Felix du Pont. Yes ; that coincides with my copy.
Senator Clark. That was a new contract, was it not, for the pro-
posed sale of military propellants to Germany, appointing Mr. Giera
agent of the du Pont Co. Was it signed by you as vice president
of the du Pont Co.?
Mr. A. Felix du Pont. Yes, sir.
Senator Clark. I will ask you again, because we had not put in the
second contract at the time I previously asked this question, was there
any contract in existence between the du Pont Co. and Giera between
the 2d of February, when the first contract was destroyed and the
15th of February, when the contract which you have just identified,
was entered into?
Mr. A. Felix du Pont. No; there was not.
Senator Clark. There was no contract between you at all?
Mr. A. Felix du Pont. No.
Senator Clark. What is the difference between the contract of
February 1, and the contract of February 15, Mr. du Pont?
Mr. A. Felix du Pont. The essential differences are that in the
second paragraph of the contract of February 15 it says :
Whereas it is understood to be tbe desire and expectation of Germany to be
relieved in tlie near future of tlie prohibitions of limitations upon the impor-
tation of arms and ammunition to whicli it is subjected under the terms of the
treaty of Versailles ; * * *_
That was a clause that we put in.
Senator Clark. In other words, 5^our first contract, the one that
was destroyed on February 2, was a straight contract of agency for
military propellants in Germany, without any reservation of that
sort whateA^er, based on the Versailles Treaty or anything else ?
Mr. A. Felix du Pont. Yes; just like all of our other agency con-
tracts in Europe.
MUNITIONS INDUSTRY 1237
Senator Clark. Were there any other differences that you care to
point out?
Mr. A. Felix du Pont. An essential difference is on the next page,
paragraph 4, which says :
It is expressly understood that the company will not enter into any contract
for the sale of military propellants or explosives to the German Government
without first obtaining the approval or consent of the United States Government.
Senator Clark. There was no such reservation in the first
contract ?
Mr. A. Felix du Pont. No; we forgot to put it in.
Senator Clark. That is to be seen.
Mr. A. Felix du Pont. I have just been reminded that there is an-
other essential point here and that is that in the second contract,
Holland is eliminated. It is mentioned in the first contract.
Senator Clark. In other words, in the contract of February 1,
1933, the terms applied to Holland, except the Dutch Government,
and to Germany without any exception whatever?
Mr. A. Felix du Pont. Yes.
. Senator Clark. And the second contract was simply limited to
Germany ?
Mr. A. Felix du Pont. Yes.
Senator Clark. But there was no contract whatever, no contrac-
tual relations, between Giera and the du Pont Co. between Febru-
ary 2 and February 15?
Mr. A. Felix du Pont. No ; there was none.
Senator Clark. Is that vour understanding, Mr. Lammot du
Pont?
Mr. Lammot du Pont. Yes, sir.
Senator Clark. I will now offer as an exhibit a letter dated Febru-
ary 9, 1933, from Mr. Lammot du Pont to Sir Harry McGowan, Im-
perial Chemical House, Millbank, Westminster.
(The letter referred to was marked " Exhibit No. 522 ", and ap-
pears in full in the text.)
Senator Clark. This letter is marked " Personal and Confidential."
It reads :
Dear Sir Harry : We have made an agreement in the nature of an agency
appointment with Mr. E. D. Giera, looking toward the sale of military pro-
pellants to the Republic of Germany.
I understand that Germany is excluded from our understanding with respect
to sale of military explosives in Europe, under which we keep each other
advised of our movements, but we feel that it is desirable that we should
inform you in this case.
That is evidently a military agreement to which he refers in his
letter which has been read.
This letter continues :
I am enclosing herewith a copy of the agreement with Mr. Giera, which
speaks for itself, and which I understand covers the entire understanding
between him and us. For various reasons we desire this matter considered
confidential, but particularly so because we feel that any knowledge of such
an agreement leaking out might get to some parties whose interest it would be
to block Mr. Giera's efforts. Will you, therefore, please consider this letter and
the agreement strictly confidential?
Yours sincerely,
Lammot du Pont, President.
1238 MUNITIONS INDUSTRY
That letter, Mr. du Pont, is dated February 9 ?
Mr. Lammot du Pont. Yes.
Senator Ci^rk. But that is in the period in which you say no con-
tractual relations existed between Mr. Giera and the du Pont Co.?
Mr. A. Felix du Pont. That is very easy to explain, Senator.
Senator Clark. We should be very glad to have your explanation.
Mr. A. Fp:lix du Pont. Because when we made the first contract
we had no intention of not making a second contract with Giera.
But it was requested that when the second contract was prepared it
be passed upon by our executive committee. We waited for another
meeting of the executive committee before the second contract was
finished. Therefore, it was to all intents and purposes — that is, the
intention was that Giera would have a contract and he was simply
waiting for the new contract to be made.
Senator Clark. Mr. du Pont, do you understand that when your
cousin said —
We have made nn agreement in the nature of an agency appointment with
Mr. E. D. Geira looking toward the sale of military propellants to the Republic
of Germany —
And when he also said —
I am enclosing herewith a copy of the agreement with Mr. Giera, which speaks
for itself and which I understand covers the entire situation between him and
us —
that he was referring to a contract to be negotiated sometime in the
future ?
Mr. A. Felix du Pont. Yes; I am sure so. I do not think there
is anything unusual about that at all.
Senator Clark. You think it is not unusual, when a contract has
not been signed, to say :
We have made an agreement in the nature of an agency appointment with
Mr. E. D. Giera, * * *
A copy of which is enclosed? Is that customary to say when you
are expecting to sign a contract sometime in the future? Do you
then say, "We have made a contract and we enclose a copy wdiich
speaks for itself "?
Mr. A. Felix du Pont. I am not sure how that is, but I think it
is quite possible that Mr. Lammot du Pont, expecting to have the con-
tract to enclose, may have dictated the letter at that time and held
it up until the contract was ready.
Senator Clark. Mr. Lammot du Pont, what is your recollection
of this, sir ?
Mr. Lammot du Pont. My recollection is that I dictated this letter
immediately after the execution of the first contract and I held it
on my desk for a copy of the contract after it was signed. After the
second contract was signed I attached a copy of the second contract
and mailed the letter.
Senator Clark. Let me see if I get that right. You dictated this
letter before the first contract was signed?
]\Ir. Lammot du Pont. I think it was after the first contract wasj
signed.
Senator Clark. After the first contract was signed, but held it on |
your desk to get a copy of the contract?
Mr. Lammot du Pont. Yes.
MUNITIONS INDUSTRY 1239^
Senator Clark. Then you enclosed a copy of the second contract?
Mr. Lammot du Pont. I think so.
Senator Clark. But it appears, Mr. du Pont, that the letter was
dated February 9.
Mr. Lammot du Pont. Yes, sir.
Senator Clark. Which was 8 days after the signing of the first
contract and 7 days after the first contract had been destroyed and
nearly a week before the second contract had been signed. Yet you
say, " "We have made an agreement a copy of which I enclose here-
with."
Mr. Lammot DU Pont. I dictated that letter on the 9th of February,
I think.
Senator Clark. And that was a week before the second contract
was signed?
Mr. Lammot du Pont. A week after the first contract was signed.
Senator Clark. Yes.
Mr. Lammot du Pont. Fully expecting that a new contract would
be signed. I held it on my desk until I could get a copy of the
signed contract. The error that I made is in not correcting the date
of the letter when I sent the final draft.
Mr. Casey. Perhaps that can be explained in this way. Senator.
The usual day for meetings of the executive committee is Wednes-
day. Wednesday was the first, which was the time Felix du Pont
just mentioned as the time he spoke before the committee and they
said, " That won't do. We will have to have that contract changed.
So, on the second, which was Thursday, Giera came down and de-
stroyed the first contract. Then we started in to modify the con-
tract so that it would be suitable to Giera, conforming with the res-
ervations that the executive committee insisted must be in before any
contract could be signed. That second meeting of the executive com-
mittee, therefore, occurred the following Wednesday, which was the
8th. At that time the conditions of the contract were agreed on by
the executive committee, which then waited the arrival of Giera
before it was definitely signed. Then, as a result of the meeting of
the 8th, it was drawn up in the usual form of contract with a blank
date. Giera never came down until the loth, which happened to be
another executive committee meeting day.
Senator Clark. That does not explain why Mr. Lammot du Pont
on February 9 wrote Sir Harry McGowan saying, " I am enclosing
herewith a copy of the agreement with Mr. Giera, which speaks for
itself ", when, as a matter of fact, the contract was not actually en-
tered into for nearly a week in the future.
Mr. Casey. Senator, I was present at the meeting of the commit-
tee on the 8th. I remember that one of the things brought up was
that Sir Harry McGowan should be notified as soon as possible. So,
I imagine — of course, I cannot go beyond what I actually heard —
but I imag:ine that the very next day, the meeting lasting generally
until late in the afternoon, Lammot du Pont probably wrote that
letter and then waited for the executed contract. On the other hand,
it is possible that he may have sent McGowan a draft
Senator Clark (interposing). Major, that is just pure speculation.
Mr. Casey. But that is all that I can give you.
Senator Clark. I will ask Mr. Lammot du Pont what he was re-
ferring to when he said in his letter of February 9 that he was en-
J240 MUNITIONS INDUSTRY
closing a copy of a contract which the dii Pont Co. had entered into
with Giera. Mr. Felix dii Pont has testified that on February 9
there was no contract between Giera and the du Pont Co.
Now, what I am trying to find out is whether the contract of
February 1 and the contract of February 15 were ever in effect at
the same time?
Mr. A. Felix du Pont. Oh, no ; they were not. No ; certainly not.
Senator Claek. One representing the real contract and the other
representing a nominal contract?
Mr. A. Felix du Pont. Oh, no.
Mr. Lammot du Pont. No, Senator. I think I have given you a
correct explanation of that. I dictated that letter on February 9
and did not send the letter until after the 15th, but failed to correct
the date.
Senator Clark. Do you have any recollection of that subject?
Mr. Lammot du Pont. I have a recollection of dictating that let-
ter long before the copy was received. I had it on my desk for quite
a long while before I was able to mail it to Sir Harry McGowan,
because I was waiting for the contract. I have no recollection of
failing to correct the date.
Senator Clark. Mr. Felix du Pont, returning to these drafts. A,
B, and C; none of these drafts contains any reservation whatever
with respect to the Treaty of Versailles or as to the provisions of
the Treaty of Versailles.
Mr. Felix du Pont. No; I believe not. I will have to look them
over again.
Senator Clark. The provisions of all of them are substantially
like paragraph 1 of the draft marked " B " whereby the company
simply appoints Giera its agent for the kingdom of Holland exclu-
sive of the Government of Holland and for the Republic of
Germany ?
Mr. Casey. Senator, I think that was one of the exceptions that we
were called on the carpet for, because it was not clearly expressed
what the purpose was.
Senator Clark. Major, if you will permit Mr. du Pont to answer
this, I want to get his idea about it, because he is the man who signed
the contract.
Mr. A. Felix du Pont. I have to speak a good deal from my
memory of over a year ago. I do not find that I can readily identify
these copies but, to the best of my knowledge we prepared another
one which may be one of these, took into one of the offices of the
compan}^, perhaps Mr. Pickard, and he found that it was not satis-
factory and we made another. AH of those copies and trial contracts
were made in between the dates February 1 and February 15 and
they were not ever executed.
Senator Clark. Mr. du Pont, in the ordinary course do you destroy
a contract instead of simply canceling it? I mean, is it not unusual
to destroy all copies of a contract? Is that in the ordinary course
of business?
Mr. A. Felix du Pont. No ; it is not.
Senator Clark. Why was that extraordinary procedure followed
in this case?
MUNITIOK^S INDUSTRY 1241
Mr. A. Felix du Pont. Why, because, in the first place, it is most
•extraordinary for anybody to sign a contract and bring it back
again. That is where T! made my first slip.
Senator Clark. For anybody to do what?
Mr. A. Felix du Pont. Sign a contract and ask for it back again.
That contract was executed.
Senator Clark. The contract was originally executed on authority
of the president of the company?
Mr. A. Felix du Pont. Yes.
Senator Clark. Had he signed the contract before it was exe-
cuted ?
Mr. A. Felix du Pont. Yes.
Senator Clark. Mr. Lammot du Pont had looked over this contract
of February 1 with Geira before you signed it, and you did go on
his authority?
Mr. A. Felix du Pont. Yes.
Senator Clark. I still do not understand why it was necessary to
destroy all evidence of the contract instead of simply canceling it, as
is ordinarily done.
Mr. A. Felix du Pont. Well, I will tell you exactly why. We
brought Geira back. He was exceedingly reluctant to turn back the
contract to us. We began to suspect that he wanted to use it in
some way that would not be at all — that we would not like at all.
So I was very much relieved when he finally said he would give it
up and I thought I would get it out of the way.
Senator Clark. Would it not have been sufficient, and would it
not have been in the ordinary course of business, when he gave up
his copy, simply to take the copies and mark them canceled and put
them in your files and preserve an important contract of this sort
that had been entered into, in your own files, after it had been
canceled ?
Mr. A. Felix du Pont. Why, maybe so.
Senator Clark. Instead of destroying all evidence of a rather re-
markable transaction as you yourself had dominated it?
Mr. A. Felix du Pont. No; it was not. When I executed the
contract it was not a remarkable occurrence at all. We gave the
man a contract similar to all the others that we have in Europe.
Senator Clark. I understand, but was it not rather remarkable
and outside of the ordinary course of business to destroy all copies of
the contract that you knew of that were in existence rather than to
put a copy in your files, and mark the contract canceled. That is
what you ordinarily do in your business, is it not ?
Mr. A. Felix du Pont. Well, we do not like to have a signed con-
tract in the files that is not in use. So I tore it up.
Senator Clark. He had agreed to cancel it?
Mr. A. Felix du Pont. According to my ideas it would never be
of any use to him and I might as well get it out of the way.
Senator Clark. He had agreed to cancel it. In other words, tear-
ing up the signed copies of the contract would not have invalidated
the contract unless he had agreed to cancel it. As he had agreed to
cancel it, there was no reason for destroying it; is not that correct?
Mr, A. Felix du Pont. I think we often tear up papers; I think
I would often tear up a paper of that kind.
1242 MUNITIONS INDUSTRY
Senator Clark. Do you recall any other instances of that kind?
Mr. Felix du Pont. I think I remember saying to Major Casey,
" we are through with that ", and I threw it in the waste basket.
Senator Clark. Do you recall any other instance in your whole
experience where you tore up a signed contract after it had been
signejd ?
Mr. A, Felix du Pont. No; I never had an occurrence of that kind
before in my life.
Mr. Lammot du Pont. Senator, I discussed this contract with Mr.
Giera and Mr. Felix du Pont before it was drafted. In that dis-
cussion it was clearly understood by both parties that these two
clauses with respect to the Versailles Treaty and with respect to
the United States Government ajiproval were both to be included
in the contract. That was thoroughly understood before either draft
was made.
Senator Clark, Was that so stated in the negotiations ?
Mr. Lammot du Pont. It was stated in the conversation, as I re-
call it. After the first draft was made, I think Mr. Felix du Pont
is correct in saying that I read it, and I failed to note, and I think
he also failed to note, at that time that those two clauses had not
been included. A member of our executive committee called our
attention to that fact. We recognized our mistake and agreed with
the other members of the executive committee that the contract
should be revised in those two respects as well as perhaps others.
We got Mr. Giera, reminded him of the conversation, and he, as I
recollect, agreed that those two points had been discussed, that he
had agreed to them, and that therefore it was proper that those two
clauses should be put in the contract. In other words, both Mr.
Giera and ourselves agreed that we had made a mistake in the first
contract and that Ave should draw a new contract to replace it.
Senator Clark. Mr. Felix du Pont has just stated that Giera
agreed to cancel the first contract with very great reluctance.
Mr. Lammot du,Pont. I think so.
Senator Clark. Why should he be reluctant if the first contract
re])resented exactly the provisions he had agreed to ?
Mr. Lammot du Pont. He, as I recall it, had to admit that those
two points had been thoroughly discussed, because I discussed them
with him myself.
Senator Clark. With Giera ?
Mr. Lammot du Pont. Yes; with Giera; and I know he under-
stood what was talked about.
Senator Clark. Was that on the 2d day of February?
Mr. Lammot du Pont. No; I think it was before that. It must
have been before it, because it was before the draft had been pre-
pared.
Senator Clark. What I am speaking of now are the negotiations at
the time the first contract was destroyed. Were you present at the
time?
Mr. Lammot du Pont. I do not think I was.
Senator Clark. You did not talk to Giera when you summoned
him back up there?
Mr. Lammot du Pont. I am not sure, but I think not.
Senator Clark. So you do not know about his reluctance to destroy
the first contract and how it was overcome ?
i
MUNITIONS INDUSTRY 1243
Mr. Lammot du Pont. I have a recollection of reminding Giera of
our conversation when the contract was being negotiated.
Senator Clark. Apparently this contract was signed on one day
and destroyed on another.
Mr. Lammot du Pont. Yes.
Senator Clark. Did you see Giera after the first contract was
signed and before the second contract was destroyed?
Mr. Lammot du Pont, I cannot say that I did.
Senator Clark. So then, therefore, you are not familiar with the
arguments that were used to overcome Mr. Giera's reluctance to
destroy the second contract. Did you have anything to do with
destroying the second contract — I mean tearing it up ?
Mr. Lammot du Pont. I understood that it was to be superseded ;
yes, sir.
Senator Clark. I mean the physical destruction of the contract?
Mr. Lammot du Pont. T was not present at that time.
Senator Clark, Did you know that it was going to be done ?
Mr. Lammot du Pont. Xo; I cannot say that I did. But I am
perfectly clear on this point, that before any contract was signed by
Giera that these provisions of the Versailles Treaty and the United
States Government approval
Senator Clark. You mean before the original signature?
Mr. Lammot du Pont. Yes — were both discussed and I admitted
my error in approving that contract without those clauses. I am
quite sure that both Mr. Giera and ourselves admitted that we had
both made a mistake in signing the contract, because it did not cor-
rectly set forth the verbal agreement prior to the signing of the
papers. Now, a mistaken contract, one signed or executed by mis-
take, is, I think, a natural document to be destroyed.
Senator Clark. What is that?
Mr. Lammot du Pont. I think it is natural to destroy a document
that both parties agree was made by mistake.
Senator Clark. Apparently Mr. Giera was extremely reluctant,
from Mr. Felix du Pont's testimony, to agree to any such thing.
Mr. Lammot du Pont. Judging' from what happened later, I
think he probably was reluctant.
Senator Clark. Now. as for the rest of this letter, " Exhibit No.
516 ", from Sir Harry McGowan to Mr. Lammot du Pont —
My Dear Lammot: I much appreciate your apprising me of the appointment
of Mr. Giera as your agent for Germany. In the event of orders materializing
I assume that these would he definitely for requirements of the Repuhlic of
Germany and not for re-export, although I do not think the agreement safe-
guards you in this respect.
In making the agreement I am sure you could not have had hefore you a
rfeume of the conversations between Colonel Taylor and my people when the
military agreement in general was discussed and worked out. It is clear from
our records that although Germany, Austria, and Hungary are not dealt with
in the agreement, the understanding is clearly that, as and when the Treaty of
Versailles is modified, the whole position as at present covered by the general
military agreement should be reviewed.
Although our German friends have been out of the export military business
for many years, they probably have manufactured for local requirements, and I
thinlv we may assume that they have not been idle in their research. It is
definitely established that they have not been so in military detonators. I feel
sure that when freedom to manufacture is granted for home use and possibly
for export they will expect to take a prominent position in the business and one
which will be in keeping with our arrangement with them on blasting explosives,
and we have in fact kept in mind this possibility.
1244 MUNITIONS INDUSTRY
If the a^ent you have appointed, therefore, is at all active, I think that any
future negotiations would tend to become more difficult and the Germans would
probably consider that as we each reserve to ourselves orders from our respec-
tive Governments they should be entitled to do likewise.
Yours sincerely,
H. MoGowAN.
Lammot Dtr Pont, Esq.,
Messrs. E. I. du Pont de Nemours d Co., Inc.,
Wilmhiffton, Del., U.S.A.
I ask 5'ou ao;ain, Mr. du Pont, if that, in your opinion, does not
indicate certainly an expectation on the part of the I.C.I, that at
such time as the Germans were able to manufacture munitions ai>ain,
Germany was to be allocated to them in an agreement with you and
I.C.I.
Mr. Lammot du Pont. I do not think it so indicates; no, sir.
Senator Clark. Well, that is a difference of opinion. Now, Mr.
Felix du Pont, in May 1933 you received a letter from Longley,
Bogle & Middleton, attorneys, who represented Mr. Giera, which I
will offer as " Exhibit No. 523."
(The letter referred to was marked " Exhibit No. 523 ", and ap-
pears in full in the text.)
Senator Clark. This letter says —
that deliveries under this agreement were assured to both himself and Count
Westarp, of the German military staff.
Did representatives of the du Pont Co. actually meet with repre-
sentatives of the German military staff on the probable sale of
$7,000,000 worth of military powder to the German Government ?
Mr. A. Felix du Pont. A member of the military staff; no.
Senator Clark. This letter, " Exhibit No. 523 ", "is on the letter-
head of Longley, Bogle & Middleton and is dated May 27, 1933, and
it reads:
Gextm:men : I have had brought to me by Capt. Del Fungo Giera. of Pelham,
N.Y., a contract dated February 15. 1933, executed between himsielf and your
company, relating to the sale of military propellants and military explosives.
He has also left with me a copy of his contract executed February 1, 1933.
Captain Giera has related to me the history of the transaction and advised me
of the negotiations leading up to the execution of these documents.
Under date of February 14, 1933
Mr. Lammot du Pont. That is wrong, that date.
Senator Clark. It was actually in April.
Mr. Lammot du Pont. It should be April.
Senator Clark. I will read the letter as it is. [Reading :]
Under date of February 14, 1933, you gave notice of termination of your
contractual relationship with him, and it is of this he complains. This action
obviously creates considerable financial loss to Captain Giera, for funds ex-
pended in the interests of your company, and I may say very serious em-
barrassment through his failure to carry out his business with the people
to whom he expected to sell your products. He advises that deliveries under
this agreement were assured to both himself and Count Westarp, of the
German military staff.
Captain Giera has been put to an out-of-pocket expense of upwards of
$36,000, and you have agreed that he should be reimbursed for the expense
which he has incurred in this business of yours. In this figure he has not
included any allowance for his own services, but states that he does feel
that you should see him repaid for the amounts disbursed in vour company's
behalf.
I tnist that I may hear favorably from you at an early date.
MUNITIONS INDUSTRY 1245
Mr. A. Felix du Pont. I want to make an exception to that date,
February 14. It is April 14.
Senator Clark. I simply read the exhibit as it was. I understand
that it was in April. I think* I have a communication somewhere
which was addressed to Captain Giera. I will ask you again, Mr.
du Pont, whether you actually had any direct negotiations with
Count Westarp, who is mentioned in this letter, or any other repre-
sentative of the German military staff ?
Mr. A. Felix du Pont. Giera brought a man who he introduced
to us as Westarp ; brought him down and introduced him to me.
Senator Clark. Where was that; Wilmington?
Mr. A. Felix du Pont. In Wilmington ; yes, sir. I was not at all
sure that he was a representative of the German military staff. He
represented him as an assistant of his, as I remember it. I think
I had even more misgivings about the contractual relations that
we were in at that time when I met this man.
Senator Clark. Was that while the contract of February 15 was
in effect?
Mr. A. Felix du Pont. Yes.
Senator Clark. And he brought Westarp down there?
Mr. A. Felix du Pont. Yes.
Senator Clark. Do you recall about when it was with reference
to the negotiation of the contract?
Mr. A. Felix du Pont. No. I think it was shortly after the
working contract was signed.
Senator Clark. He did not tell you at that time that Westarp was
a member of the German military staff?
INIr. A. Felix du Pont. I don't remember, but I think he did.
Senator Clark. Did this statement, in the letter from the firm of
lawyers I just read, that Westarp was a member of the German
staff' occasion any disturbance on your part?
Mr. A. Felix du Pont. No.
Senator Clark. What did you do ?
Mr. A. Felix du Pont. We did nothing.
Senator Clark. What was the nature of the conversation of
Westarp and Giera when they came down there ?
Mr. A. Felix du Pont. Giera told me Westarp was going to Ger-
many right away, and, as I understand, he did sail a few days
afterward.
Senator Clark. When was the contract with Giera actually can-
celed, referring now to the contract of February 15 ?
Mr. A. Felix du Pont. May I ask someone who has knowledge of
that?
Senator Clark. Yes. I think I can find it myself.
Mr. A. Felix du Pont. I have a note here that I informed our
executive committee by letter dated April 18 that I had given notice
of the cancellation of the contract, so it was directly before that date
of April 18.
Senator Clark. That contract provided for cancellation on 6
months' notice?
Mr. A. Felix du Pont. Yes ; I think it was 6 months.
Senator Clark. And this notice that you gave here to terminate
the contract in accordance with its terms was 6 months in the future?
Mr, A. Felix du Pont. Yes.
1246 MUXITIONS IN'DUSTKY
Senator Clark. That is, 6 months after April 18, or whatever
date you sent this letter?
Mr. A. Felix du Pont. I am not just sure what the communication
to him was. *
Senator Clark. At that time you paid Giera $25,000, did you not ?
Mr. A. Felix du Pont. Yes, we did; but sometime afterward?
Senator Clark. When did you pay the $25,000?
Mr. A. Felix du Pont. I do not remember that exactly. We got
this letter from the lawyer asking for $36,000, and we discussed it a
number of times with various ojBicers of the company and finally took
it up in executive committee meeting. Then, finally it was decided
we would offer the lawyer $25,000, and that was for immediate
cancellation.
Senator Clark. You did not owe him $25,000 or anything else,
did you? The contract itself had provided he was to pay all ex-
penses of any negotiations he might conduct on any business he
might transact for your company, and you were to pay him a straight
commission ?
Mr, A. Felix du Pont. Yes; but he represented to us that he had
a 6-month contract, and that having entered into that contract in
good faith he went ahead with certain expenses of his own which
were necessary, and which, by the way, I think he greatly exagger-
ated, and therefore we offered to him a sum of money for immediate
cancellation of the contract to reimburse him for the expenses he
said he had incurred.
Senator Clark. Did the letter with the photographic copy of the
contract have anything to do with that paj^ment?
Mr. A. Felix du Pont. No; I never saw that photographic copy.
Senator Clark. I understand, but it is stated that the lawyer had
been shown a photographic copy of the contract of February 1 with
Mr. Giera.
Mr. A. Felix du Pont. No ; that did not affect us at all.
Senator Clark. And subsequently you had an arrangement with
Mr. Giera for handling some Japanese business for you ?
Mr. A. Felix du Pont. I guess that is true, t will ask Major
Casey to answer that, as he is more familiar with it.
Senator Clark. Major Casey, did you conduct those negotiations?
Mr. Casey. Yes, sir.
Senator Clark. Yes; I believe this letter is signed by you.
Mr. Casey. I believe you have the first and last page.
Senator Clark. I have the complete letter here.
Mr. Casey. What is the page number?
Senator Clark. 1 and 2.
Mr. Casey. What is the date of that?
Senator Clark. That is dated January 10.
Mr. Casey. There is one before that, in December.
Senator Clark. I have a letter from Giera to you in December.
Mr. Casey. Is it December 7?
Senator Pope. When was this; paying the $25,000?
Mr. A. Felix du Pont. I beg your pardon?
Senator Pope. What date was the payment of this $25,000?
Mr. A. Felix du Pont. I have not the date here. It was not long
after the letter from Giera's lawyer which has been given you.
MUNITIONS INDUSTEY 1247
Senator Pope. After that payment you made an arrangement with
him about the Japanese business?
Mr. A. Felix du Pont. Yes.
Senator Clark. You are correct, Major Casey; it is the letter of
December 7 to Giera, of which I have the first and last pages.
This letter of December 7 has to do with the sale to Japan through
Giera of some equipment for the manufacture of powder.
Mr. Casey. Yes.
Senator Clark. That was not a proposition for the sale of powder,
but the sale of equipment?
Mr. Casey. That is correct.
Senator Clark. What became of that negotiation?
Mr. Casey. At that time Giera said in connection with his mys-
terious explosive powder he had made a contract with the Japanese,
and in connection with that contract they were anxious to buy
powder machinery. I said, " Why do they want to do that, when
they have plenty of their own and can make their own ? " He said,
" They want it." I said, " All right ; I don't think they do, but
what makes you think they want to buy machinery ? " He said,
" They have $500,000 they want to spend for equipment " ; and he
said, " I want 10-percent commission." I said, " In other words,
you mean they have $450,000 ", and he said, " Yes." I said, " All
right; I will give you a proposition, but I am willing to bet you
nothing ever will be heard about it."
So I prepared this letter, the interior pages giving a list of equip-
ment, and incidentally any textbook would give the same equipment.
We gave no prices or anything, but said this is about what they
would be able to get.
However, an interesting paragraph was put in there, and that was
that no blueprints would be given and absolutely no information
about the manufacture of powder. Of course, what I anticipated
was this : That if they bought the machinery they would say, " Now,
we would like to see this machinery in operation ", and that would
mean they would want to visit our plant, and the answer is obvious.
In the letter I knew that was the end of the entire proposition.
We gave them 3 months, and in the meantime I went right down
to Washington and took it up with the Army and Navy and the
State Department and showed them that particular paragraph I
have referred to, and they all practically agreed with me that was
the end of it; and it was the end of it. We never heard another
word about it.
Senator Clark. You got an answer on December 12 from Giera?
Mr. Casey. Yes ; but there was another letter of mine later.
Senator Clark. In this letter of December 12 Giera says :
Will you please confirm in your next letter to me that I will be protected
with 10-percent commission and the outlay of the German venture and your
dealings with the Japanese from now on?
What does he mean by that ?
Mr. Casey. He was still insisting that we owed him $12,000 after-
our having given him $25,000, as he had spent $37,000. So in our
next letter we decided to clear that up once and for all.
Senator Pope. Did you not get a receipt from him in full for all
claims when you paid the $25,000 ?
1248 MUNITIONS INDUSTRY
Mr. Casey. Yes; but he claimed he needed this money in his
development work on the high explosive.
Senator Vaxdemberg. What is he doing now, do you know?
Mr. Casey, The last I heard, I would not give the source of the
information, but I would call it authoritative, and I heard from one
source that he was given $50,000 by the Japanese Government for a
quantity of this explosive and another told me $150,000. I cannot
say either is correct.
Senator Clark. You mean this hydrogen explosive you were talk-
ing about awhile ago?
Mr. Casey. Yes. We went out to see a demonstration of it in a
gun, and we saw throe shots fired and all I can say is I hope the
Japanese buy a lot of it.
Senator Bone. Speaking of the Japanese, was the State Depart-
ment contacted when the proposal came up to sell this nitrogen
machinery to Japan ?
Mr. Casey. I did not handle that, but I believe they were.
Senator Bone. Did they acquiesce in that proposal?
Mr. Casey. I could not tell you that, but I asked them to.
Senator Bone. Can anyone in the group reply to that question ?
Mr. Lammot du Pont. You refer to the nitroo:en machinery and I
think 3'our recollection is incorrect as to that.
Senator Bone. My memory may be defective, but what was the
machinery ?
Mr. Lammot du Pont. Contact conversion process.
Senator Bone. That is what I mean; were those matters brought
to the attention of the State Department ?
Mr. Lammot bu Pont. Yes.
Senator Bone. Do you know whether they acquiesced in this?
Mr. Lammot du Pont. There was a letter introduced in the testi-
mony this morning about that.
Senator Clark. Now, Major, these negotiations with the Japanese
were continued for some time, because some time after that here is a
letter of yours dated January 10, 1934, to Captain Giera signed "A.
Felix du Pont, vice president ", and " K. K. V. Casey, director of
sales ", in which you actually give a memorandum for a contract?
Mr. Casey. Give what?
Senator Clark. Give Giera a memorandum for a contract.
Mr. Casey. Yes.
Senator Clark. This is in relation to the Japanese sale, and I
read from this letter as follows :
With reference to tlie letter dated December 7, 1933, addressed to you and
signed by Maj. K. K. V. Casey, of this company, relative to furnishing smoke-
less-powder-ma Iving equipment to the Government of Japan, and to your lettei
of December 12, 1933, in reply thereto, addressed to Major Casey, you are
hereby advised as follows :
If you present duly authorized representatives of the Government of Japan
at our offices in "Wilmington, Del., and if as the result of conferences and
negotiations between such representatives and representatives of the du Pont
Co., a contract is definitely concluded between the Government of Japan and
tlie du Pont Co. for the manufacture and sale by the du Pont Co. to the
Government of Japan of sonokeless-powder-making equipment, the du Pont Co.
will pay you as full compensation for your services in that connection a
commission equal to 10 percent of the delivered prices, c.i.f. Japanese port, of
all smokeless-powder-making equipment sold to the Government of Japan under
any such contract. Any such commission shall be payable to you promptly
MUNITIONS INDUSTRY 1249
upon receipt by the du Pont Co. of the selling price upon which such commis-
sion is based. Such commission shall be paid in the then existing United
States currency.
Did anything ever come from that?
Mr. Casey, Would you read the rest of it?
Senator Clark. Yes. It reads further as follows :
It is understood that any such contract for the sale of smokeless-powder-
making equipment to the Government of Japan will be negotiated directly
between the representatives of the du Pont Co. and the representatives of the
Government of Japan.
It is to be further understood that all of the foregoing is dependent upon
the negotiation and final conclusion of such contract within a period of 3
months from the date of this letter.
With reference to the German venture referred to in the second paragraph
of your letter of December 12, 1933, we call your attention to the fact that
this matter was finally settled, and our company was released from all claims
resulting therefrom by agreement with you dated July 10, 1933.
Did anything further come from that?
Mr. Casey, The next move was to wait until April 10, which I
think would be the date, I know I kept a ticker on it and con-
sulted with the legal department as to whether we should send a
termination notice, and they said that we should wait until the time
passed, and then advise them that the whole deal is off.
Senator Clark, So nothing further came of the Japanese negotia-
tions ?
Mr, Casey, Not at all.
Senator Clark, Have you any agency agreement with Giera of
any sort, now?
Mr, Casey, Not a bit.
Senator Clark, Now, I call your attention, Major Casey, to a let-
ter of date June 30, 1933, signed by yourself and directed to Colonel
Taylor, your agent in France, and which letter I offer as an exhibit
under the appropriate number.
(The letter referred to was marked " Exhibit No, 524 ", and is
included in the appendix on p, 1382,)
Senator Clark. In this letter, " Exhibit No, 524 ", you say :
Dear Taylor : Because of uncertainties regarding possible flare-back, it is
decided best to cancel our agency arrangement with Giera and the same lias
now been arranged, this cancellation taking effect immediately.
What do you mean by a possible fiare-back?
Mr. Casey, At the time we negotiated with Giera there was con-
siderable talk of the likelihood of Germany being allowed to rearm,
and we felt this way, if that would happen, it might not happen for
months or years, and whoever was in there at that time, was in a
better position to effect a sale than if they had to wait until the
actual occurrence.
Of course nothing could happen until they were permitted by treaty
or otherwise to rearm, and almost immediately after this contract
with Giera was started, the situation in Europe looked very much
as if any idea of Germany being allowed to rearm was almost hope-
less, and with the forthcoming events at that time we figured we had
better terminate these contracts. That was the original termination.
Then on the basis of the original termination where he still had 6
months to operate, we thought it was to our advantage to get a
prompt termination on the best terms we could.
1250 MUNITIONS INDUSTRY
The flare-back I referred to is this, that there was a possibility that
our having made that contract it would flare-back on us as an unde-
sirable thing. After events have shown that it was desirable to ter-.
minate it, and that is the reason we canceled it.
Senator Clark. Did this letter from Sir Harry McGowan inform-
ing the du Pont Co. that this contract should not be made have
nothing to do with that flare-back ?
Mr. Casey. Not a thing. I never saw the letter, and it did not
influence me.
Senator Clark. Did it have any influence on you, Mr. Lammot du
Pont, in canceling that contract, this letter from Sir Harry McGowan
informing you your German associates were unquestionably expect-
ing to have a monopoly of the German market ?
Mr. Lammot du Pont. That letter did not state such a thing.
Senator Clark. The letter in effect said so.
Mr. Lammot du Pont. Not to me.
Senator Clark. Did that have any effect on you, Sir Harry Mc-
Gowan's language?
Mr. Lammot du Pont. Not any effect on me ; no.
Senator Clark. This language had no effect on you whatever?
Mr. Lammot du Pont. No, sir ; not as I recall it.
Senator Clark. It was just as though the letter had never been
w^ritten ?
Mr. Lammot du Pont. As I recall it ; yes.
Senator Clark. Mr. du Pont, do you know whether other com-
panies, either in this country or abroad, were making arrangements
to move in on the German business in case the Treaty of Versailles
should be modified?
Mr. Lammot du Pont. Mr. Giera told me they were.
Senator Clark. Who did he tell you?
Mr. Lammot du Pont. He did not mention any names, but he told
me it was a well-known fact, and I believed it was, but afterward
I did not.
Senator Clark. How is that?
Mr. Lammot du Pont. I believed him at the time, but afterward I
did not.
Senator Clark. When did you quit believing him — after the Japa
nese negotiations fell through?
Mr. Lammot du Pont. No.
Senator Clark. Apparently after the consummation of the Ger-
man contract you were willing to make another contract, in spite of
his well-known record and in spite of the German matter, so when
did you quit believing him?
Mr. Lammot du Pont. I think when we got that letter from the
attorney was when I had the grave doubt.
Senator C?'ark. You were willing to negotiate a contract with him
to be your agent in Japan some months after that,
Mr, Lammot du Pont. I did not do that.
Senator Clark. Didn't you know about the proposed contract of
agency in Japan in January of this year, when Mr. Felix du PonI
and Major Casey wrote that letter?
Mr. Lammot du Pont. I think perhaps I did know about it.
Senator Clark. Did you have any other official contract or associa-
tion with I.G. other than your contracts with D.A.G. in Germany?
MUNITIONS INDUSTRY 1251
Mr. Lammot du Pont, There are no contracts we have.
Senator Clark. Any agreements of any sort?
Mr. Lammot du Pont. No, sir; I think not. I will take that back.
I think we had an arrangement with them with respect to the manu-
facture of ventube. Ventube is a coated soft material used for mine-
ventilating ducts, like a canvas pipe to carry air into mines. We
had a general arrangement with I.G. for the manufacture of that,
and we had a number of patent license agreements granting licenses
to dyestutf patents, also in settlement of patent interferences.
Senator Clark. You did not have any direct agreement with
them '?
Mr. Lammot du Pont. I think not, except this ventube contract.
Senator Clark. Do you have any agreement of any sort with any-
body at the present time, looking to entering into German business
in case the Treaty of Versailles should be modified ?
Mr. Lammot du Pont. No.
Senator Clark. I mean of the same general nature as your con-
tract with Giera.
Mr, Lammot du Pont. No.
Senator Clark. Do you know whether these other companies
have ?
Mr. Lammot du Pont. No.
Senator Ci^rk. Your purpose in making this contract with Giera,
originally you were informed by Giera other companies were pre-
paring to enter into the German field, and you wanted to get your
share from a rather lucrative field ?
Mr. Lammot du Pont. I do not know whether it was lucrative or
not.
Senator Clark. I mean you hoped it would be lucrative.
Mr. Lammot du Pont. Yes ; we hoped it would be lucrative.
Mr. Casey, There was another time when this matter was
broached. We could not understand it, because the German powder
manufacturers would be able to get in production fast enough so
that as fast as Germany was allowed to rearm they could carry on the
necessary requirements. But we were assured that was not the case ;
it would take them a long time.
Senator Clark. Assured by whom?
Mr, Casey. By Giera, because we thought it was a foolish venture
on his part, and a thing for which we would not put up our own
money. He seemed to be so certain of it he was willing to venture
his own money for his expenses.
Senator Clark. What I have been trying to get at, Mr. du Pont,
is this. Is it really helpful, in your opinion, to the peace of the
world, to have a bunch of private munitions manufacturers working
and jockeying around to arm anybody who has money to spend for
arms ?
Mr. Lammot du Pont. Do I consider it helpful to the peace of the
world ? No, sir.
Senator Clark. The competition among private armament com-
panies does have a tendency to exert a tremendous pressure toward
armament, does it not ?
83876— 34— PT 5 16
1252 MUNITIONS INDUSTRY
Mr. Lammot du Pont. I do not think so. I do not believe a
nation would buy munitions or munitions-making equipment because
somebody comes along and offers to sell it to them.
Senator Clark. Is it a matter of your knowledge, and I am asking
you as a man whom I know keeps abreast of the conditions through-
out the world in your own business, is it not a fact that situations
come when a country will be taken advantage of by great war scares
and the purchase of armament in another country?
Mr. Lammot du Pont. I do not know about that.
Senator Clark. For instance, it is a matter of common knowledge
that Hitler was partly financed by Skoda, which is controlled by
Schneider in France, in Berne, and is it not a fact that Hitler's rise
was used in France to stimulate the purchase of armament?
Mr. Lammot du Pont. I do not know.
Mr. Casey. I have heard it.
Senator Clark. Colonel Taylor has not reported those things to
you?
Mr. Lammot du Pont. I have read a statement to that effect from
magazines and such.
Mr. Casey. The real truth on this armament is every nation has
what they call a " mobilization plan ", and I do not believe that
there is one nation in the world today that has the material sufficient
for the needs of the mobilization plan.
Senator Clark. You mean no nation keeps on hand in time of
peace as much material as they would require at the outbreak of a
war?
Mr. Casey. That is not what mobilization means. It means mate-
rial that they would need at the outbreak of war and until they can
manufacture what they need for a continuation. But there is not
one nation, as far as I know^ that has anything like what is called
for in their tactical studies which they call the mobilization plan.
Senator Clark. If any nation did have the material to meet its
mobilization plan, they would iminediately raise the mobilization
plan to require more material. That is the tendency of all nations of
the world.
Mr. Casey. But there is the money that is called for. When there
is any new idea of mobilization they cannot get the money, and they
are always crying they cannot get the money to put their nation in
a position to defend itself.
Senator Clark. Of course all of them are defensive wars and not
offensive wars. You never heard of a mobilization plan in the world
or any military or naval propaganda that openly contemplated an
offensive war. ]
Mr. Casey. That is true.
Senator Bone. Do you think every nation should be as completely
prepared as possible for hostilities, with stores and supplies on hand
which are sufficient to carry them over into production ?
Mr. Casey. That is not a question for me to decide.
Senator Bone. AVould you be a judge and answer that question?
Mr. Casey. Why not apply it to our own country, and then you
answer it ? Don't you think we should be prepared for emergency ?
Senator Bone. Our purpose here is to get all of the information
we can to prepare some kind of a report. We are going to prepare
that report on what evidence we get here and what we get other-
MUNITIONS INDUSTRY 1253
wise, and I am asking you whether a government should equip itself
with supplies to carry itself on until it can get into production, in
case of a war?
Mr. Casey. I think you will find the National Defense Act of
1920 carries that very thing.
Senator Bone. I am asking your opinion.
Mr. Casey. My opinion coincides with that.
Senator Bone. How do you think that preparedness should be
effected — exclusively through private agencies or exclusively through
public agencies, or in part from each ?
Mr. Casey. The combination is the thing.
Senator Bone. What sort of combination do you think would be
the ideal one?
Mr. Casey. I would say this, talking not for the company, but
as an individual if that is perfectly agreeable ?
Senator Bone. When I seek you.r opinion, that is the opinion I
want to get.
Mr. Casey. Private manufacture should be continued because of
information on research and raw materials and the trained personnel
and the ability to go ahead. Have the Government plants for the
purpose at least of training technical men — trained to act as inspec-.
tors when the emergency arises.
Senator Bone. You would not go beyond the mere training aspect
in that sort of thing ?
Mr. Casey. I think, as Mr. Irenee du Pont brought out yesterday,
when it comes to the actual outbreak of hostilities, when there is a
limited amount of what you may term educational orders placed
with the manufacturers to keep the art alive, when the time of ex-
pansion comes you will find the private manufacturers can make that
expansion much more readily.
Senator Bone. You would not be in sympathy with keeping the
art alive through governmental agencies instead of private agencies ?
Mr. Casey. I would, if that was the most efficient method.
Senator Bone. You would base your objection, if you had objec-
tion to public preparation for war, solely on the ground of efficiency ?
Mr. Casey. I think efficiency is what gives you performance when
you need that performance.
Senator Bone, To what extent do you think that lack of efficiency
would be the cause of war?
Mr. Casey. We might take as an illustration the experience of the
last war. In one respect the United States was unusually efficient,
because by reason of orders placed by the Allies they found facilities
existing in this country that, had the United States been brought into
the war in 1914, would not have been in existence.
The result of that was that some of our people got a full picture
of the proposition. We realized also that a great many features of
equipment were really in the nature of a laboratory proposition, and
when they were put out on a production basis the manufacturers
had great difficulty in putting out a manufactured article, and they
found in a great many cases that the specifications based on labora-
tory work had to be suited to manufacturing conditions. It was
really as a result of that, immediately after the war, that the Army
Ordnance Association was started with this idea in mind : The As-
1254 MUNITIONS INDUSTRY
sistant Secretary of War's job is this question of industrial prepared-
ness. In order to have industrial preparedness, there is only one
thing. The manufacturers had to be familiar with just what they
were going to be called on to undertake when an emergency arose, and
the designs had to be of such a nature to manufacture, so that the
manufacturers, whether they were ordnance manufacturers or just
manufacturers who converted their materials to certain uses, would
be able to jout those things into production.
For instance, you take fuses. Fuse parts are made on automatic
screw machines. Any manufacturer with automatic screw machines,
as long as he is able to tool up, can begin producing those metal
parts. If he has had some experience in the tooling up for that job
by educational orders, he can then tool up and probably every week
turn out just a certain number of fuses.
Senator Bone. I quite agree with you, but I just want some in-
formation. What is to prevent a government agency from doing
that very thing? What I am getting at is this: Why is it deemed
inexpedient for the Government to do that thing? Is it simply the
element that it will interfere with profit?
Mr. Casey. No.
Senator Bone. What is it?
Mr. Casey. That does not come in.
Senator Bone. Can you tell me why there is such a determined
effort now to prevent the building of additional battleships in Gov-
ernment navy yards ?
Mr. Casey. I cannot speak for the Government navy yards upon
battleships.
Senator Bone. You understood that there is a very insistent effort
from very high quarters to prevent the building of additional battle-
ships in the navy yards, do you not ?
Mr. Casey. I have heard that.
Senator Bone. And along with that goes the demand for more
preparedness. Why is it deemed unwise for the Government to
prepare itself for times of emergency? Do you not think it is well
for the Government to be fully prepared in that respect, or is there
something ill-omened or unpatriotic about the Government doing it
for itself?
Mr. Casey. No ; on the other hand I think that is what the Ameri-
can Government has been doing.
Senator Bone. I think the country would like to know about this
campaign being carried on against the Government's doing this. You
are business men, engaged in this business and are qualified to express
an intelligent opinion on that particular isolated point.
Mr. Casey, You see, Senator, we really manufacture but one type
of component. We do not supply finished munitions except since we
have taken the Kemington Arms, they could produce small arms
ammunition and small arms.
Senator Bone. I do not think it has been seriously suggested,
Major, that the Government should own sources of supply, but
merely complete the finished product for actual military and naval
combat.
Mr. Casey. If they can do it; yes.
Senator Bone. How do we know if they can do it or not, until
it is tried ?
MUNITIONS INDUSTRY 1255
Mr. Casey, Why not ask them for an estimate on what it would
cost?
Senator Bone. We spent $36,000,000,000 in the last war and asked
no questions about cost ; that is, this Government did.
Mr. Casey. Yes, sir.
Senator Bone. Constituting today one of the almost insuperable
barriers to normal recovery in this country. I think we will all be in
harmony on that point.
Mr. Casey. We will all agree on that.
Senator Bone. It is a very serious thing, because a repetition of
that sort of thing may very completely undermine our whole system,
and when I say " system " I am taking in our economic and social
system, as we know it and understand it. For instance, I have an
article here which I just read last night, where a very prominent de-
fender of the principles of exclusive operation in munitions says :
"Another great international conflict will probably destroy all civil-
ization, as we now know it."
It is conceivable that that might happen, is it not?
I am going to ask you this one other question: Why is it that
there is such a barrage of criticism laid down against Government
building, the criticism being tantamount to the statement — and I do
not use it in an invidious sense — that there is something unpatriotic
in the idea of this Government building its battleships and doing its
own work? Can you tell us why that is?
Mr. Casey. Senator, frankly, I cannot, because as I stated yester-
day, our position is entirely different.
Senator Bone. There is nothing in the suggestion of the Govern-
ment building battleships which will do away with preparedness, is
there, Major?
Mr. Casey. Not that I know of.
Senator Bone. Of course, nobody knows about it. We have got
to try it to find out. If the Government builds a battleship, it is a
battleship, is it not?
Mr. Casey. Yes.
Senator Bone, It is as much a battleship as if a private concern
built it, is it not?
Mr, Casey, There is no question about it.
Senator Bone. Why is it, then, unpatriotic and an assault against
preparedness for the Government to build it?
Mr. Casey. I cannot answer that.
Senator Bone, I have tried to ask every witness coming before
this committee wherein lies the lack of patriotism, the lack of love
of country, the lack of doing right toward preparedness, in a pro-
gram where the Government builds its own instruments, and I have
not had an answer to that.
Mr, Lammot du Pont, Senator, may I interrupt the questions
which you are asking Major Casey to state that that is something on
which we have not come down prepared to answer?
Senator Bone. We have been given certain duties to perform and
I, as one member of the committee, would like to have those ques-
tions answered because the public wants them answered,
Mr. Lammot du Pont, If your committee desire it we would be
very glad to prepare a statement, giving some suggestions along the
1256 MUNITIONS INDUSTRY
line you have asked about. We did not come prepared to give any
such statement, and they are very proper questions, but they are ones
which require a great deal of study to give the right answer. We do
not want to give an offhand opinion on a serious matter of that kind,
but we are glad to give the matter serious study and will report to
the committee, if you desire.
Senator Bone. This question from the ver}^ dawn, the very incep-
tion of the League of Nations, has been a very active question, the
question of whether there shall be public or private preparedness.
Perhaps I got a little afield, but I am trying to elicit from the
Major, or any one of you gentlemen, an answer to this question r
Why is this propaganda arising from private sources in this country
that it is unpatriotic, that it is un-American, that it is an attack on
preparedness, for the Government to do that? How could it be
an attack on preparedness, when the Government wants the manu-
facture of as much munitions of war as private agencies could
manufacture.
Mr. Lammot du Pont. I think your questions can be satisfactorily
answered but I am not prepared now. Mr. Irenee du Pont gave you a
partial answer yesterday.
Senator Bone. He was talking about efficiency, and I am not talk-
ing of efficienc}^ I want to know where the lack of patriotism comes
in, in the Government building battleships.
Mr. Lammot du Pont. I think that question can be answered, but
we are not experts in patriotism.
Senator Bone. Do you have to give any consideration to an answer
to the question as to where lack of patriotism comes in? Do you
think that will require a long study of the matter?
Mr. Lammot du Pont. I think it will require a very careful con-
sideration of it, sir.
Senator Bone. Is it so much of a question of social ethics so that
you would have to determine that?
Mr. Lammot du Pont. I believe it is.
Senator Bone. As to whether it is patriotic for the Government to
do this, would that require study?
Mr. Raushenbush. Senator, the company was not put on notice
that they would be examined on this point.
Senator Bone. If I have transgressed I am sorry.
Senator Clark. Mr. Irenee du Pont made a statement yesterday on
this subject at some £:reat length.
Mr. Irenee du Pont. I have never heard it was not patriotic for
the Government to prepare for war. I think it is the most patriotic
thing it can do. My claim is it hurts preparedness in that if you
lean on a Government bureau or the Army or the Navy for prepared-
ness, when war breaks out, for building up from the minimum
amount to get under way this source of war consumption, you are
going to overwork that personnel so that you cannot train and
recruit troops and in the endless preparation for war, the bureau
having charge of Government plans, you might say, will have
become a system, like the post office. I never heard of a postmaster
being moved up from Chester, Pa., to Providence, R.I. There is
no business possible under the circumstance, and orderly advance in
a bureaucracy, and it cannot be done.
MUNITIONS INDUSTRY 1257
Senator Bone. There is a very orderly handling of the letters in
that bureaucracy, is there not?
Mr. Irenee du Pont. Mr. Wanamaker, when he was Postmaster
General under President Cleveland, made the announcement at one
time that if he was given a private contract to carry the mails, he
could do it for 1 cent less. It costs us 3 cents or 2 cents in the
same town to deliver a letter, and it costs a milkman 2 cents to deliver
1 quart — 2-pound bottle — of milk, and we have competition with five
men going up the same street every day, cutting down the efficiency
very much, because they cannot get together.
I cannot believe that the way the post office must be run, as a
bureau, that it is an efficient organization. I am not critical of
them. It is a part of the system. You have appointed postmasters,
and did you ever select one of the opposite party — I do not know
your political party — who ought to be moved up from a smaller
town? Could that be done and could a political party attempt to
do that and survive? That is a bureaucracy. You will have an
enormous bureaucracy manufacturing munitions, and if you do not
have that bureaucracy, you must put it on the service man, the
Army and Navy, which will greatly increase the personnel, which
I believe would be all to the good, but those are the men who must
train the soldiers and get them under way in time of war.
Senator Bone. That is his business and the business they are
hired for, and the business everyone is paying taxes for, and perhaps
that might be wise.
Mr. Irenee du Pont. Perhaps it might be, but my opinion differs
from yours. For the Government to prepare this thing, they have
got to call on an organization and have the personnel for the organi-
zation. The plants are not as important as the organization. The
du Pont Co. was only able to function during the war because we
had a loyal organization; we knew each other and each other's
capabilities and could work as a unit. Our chief engineer was
called by the United States Government to leave us and go and
build a plant at Charleston. He told them he could not do it. He
said, " I am the chief engineer and we could not do such a thing
without some organization."
It is the men of our organization, not Mr. Lammot du Pont, not
me, or not the gentlemen around here that do it, but the organization
trained to work together; and you would be sunk if you possibly
went from one kind of manufacturer to another and expected to get
a whole new organization in time of war and get it functioning on
that.
Senator Bone. You are referring in some respects to a skeleton
crew of trained men, are you not ?
Mr. Irenee du Pont. No; it is more than a skeleton crew. You
must bring in a large body prepared to act in time of war.
Senator Bone. To what extent did you expand your personnel in
your factories during the war ?
Mr. Irenee du Pont. Before the United States came in?
Senator Bone. From 1914 to 1918.
Mr. Irenee du Pont. I think that was in an annual report, but
it was perfectly enormous. It took 5 years to do it.
1258 MUNITIONS INDUSTRY
Senator Bone. You took a skeleton crew of men and expanded it
into an enormous organization. So why cannot the Government do
the same thing?
Mr. Irenee du Pont. I do not know whether you would call it a
skeleton from which it gradually grew, but, if so, it was quite a good-
sized skeleton — fifteen or twenty thousand men.
Senator Bone. I understand; but it was not a thing which could
not be duplicated.
Mr. Ikenee du Pont. Our organization for this part alone started
with perhaps 15,000 men, knowing each other thoroughly, and from
1914 until 1918 I suppose we had 85,000 men, but very much more
efficient.
Senator Bone. We have gotten off into a discussion of the relative
merits of private and public ownership, which was not my purpose
in the beginning. However, I am willing to discuss it with you,
Mr. du Pont, and anyone else at any time and get all the information
I can ; but my primary purpose in asking the question is to ascertain
from you why it is that in hundreds of articles appearing in the
press and magazines of this country, all avenues of publicity, that
there have been the suggestions repeatedly made, reproduced a
thousand times, that there was something rather immoral and
'' shady " about the Government doing something for itself.
Mr. Irenee du Pont. I never heard it discussed as either unpatri-
otic or immoral. I think it fits better with the adage, " Less govern-
ment in business and more business in government."
Senator Bone. It is an assault on our civilization. That is what
I am getting at.
Mr. Irenee du Pont. Our civilization grew in 100 years more
rapidly, and with greater benefits for the public, than any civiliza-
tion in history, without exception. We worked it on the basis of
individual effort. The kings of only 200 years ago did not have any-
thing compared to what the ordinary laborer today lias. They had
a miserable existence. Their lives were shorter. There were many
diseases and they had no electric lights. They had not even a toilet
in the house. They had no running water; they had no electricity,
no telephone, no radio, no automobile.
Senator Clark. There are a great many people in the United
States todav, Mr. du Pont, who do not have those luxuries, are there
not?
Mr. Irenee du Pont. There are a great many, but we got those
luxuries under that system, and the thing is to stop interfering with
business. You blame the business man for the depression ; you
blame the banker for the depression. I blame the Government for
the depression.
Senator Bone. On this question which I am going to ask you, it
is nothing personal — and I want you to understand that — I have read
stories about you and your brother liaving made contributions to
the Republican Party. You might have made them to the Demo-
cratic Party for that matter.
Mr. Irenee du Pont. I might have as far as the results are con-
cerned.
Senator Bone. Why have you contributed to a political party
which has practiced the things you referred to as to postmasters?
Mr. Irenee du Pont. Both parties have.
MUNITIONS INDUSTRY 1259
Senator Bone. Have you ever raised a voice against appointing
postmasters ?
Mr. Irenee du Pont. I suggested to one of the Senators from
Delaware that instead of appointing a local postmaster, he might
get one from Bridgeport, Conn. I do not know whether they have
a postmaster there, but he might get an assistant, and he burst into
laughter.
Senator Bone. When I was a small boy it was my job to work in
a post office, and I am going to tell you something in strict confidence.
Off the record, Mr. Reporter.
(Informal discussion off the record.)
Senator Bone. Do you think the average man who works in one
of the big industrial plants and stands at a belt for week after week
doing two or three little jobs is doing something where he would
have the chance you referred to?
Mr. Irenee du Pont. One suggestion was made to Felix du Pont.
Maybe he will tell you about a man and an elevator to take the pow-
der upstairs instead of the man carrying it. We began to think
about that. He said, " Mr. Felix, it is awful hard to caTry this up
on my back. Why not put in an elevator? " Those things come in
all the time and we offer rewards for that kind of thing, and the
bright men are brought up.
Senator Clark. The fellow carrying powder upstairs lost his job?
Mr. Irenee du Pont. He did. He got a better job.
Breaking away on that thing, I cannot believe that it is possible
under a bureaucracy, where the head men are constantly changed by
election, to get as great efficiency as under a continuous management
running maybe for some three generations, as is the case with the du
Pont Co. ; the same principles are ap])lied and the men at the top
are expected to w^ork just as hard, or harder, than most of them
under them, and I think it has been demonstrated that it has been a
wonderful thing.
It was not done by the men at the top but done by the organization.
Organization is just the difference between success and failure. We
saw that during the World War. I do not know whether you were
in Washington during 1917, but there were flocks of these cardboard
houses. It was shocking to me to go down there and it made me
sick, the waste motion, passing the buck, and everybody did not want
to make a mistake which would be chalked up against them. What
was the result? Nobody took the initiative. It was very difficult to
get men to take the initiative.
I used to go down with the Major on different things. Take the
efficiency on alcohol, to which I referred the other day. We had a
small plant, and it was not worth while to be gone after, but when
we built up the organization so that it could look into the details, we
found out that we could save alcohol, and toward the finish of the
war we got from nine-tenths of a pound down to three-tenths of a
pound. That is only one item.
Senator Bone. I am glad you disclaim any responsibility for or
any sympathy with the idea than there is something inherently
immoral in the Government doing this thing.
Mr. Irenee du Pont. It cannot be helped. I do not blame you
fellows, but the trouble is with the system.
1260 MUNITIONS INDUSTRY
Senator Clark. There are inherent defects in any democratic
government.
Mr. Irenee du Pont, We still put np with a Democrat — demo-
cratic government. [Laughter.]
Senator Clark. I am not speaking of any party.
Mr. Irenee du Pont. I am very serious about that.
Senator Clark. So am I.
Mr. Irenee du Pont. I think the danger of a central tyranny, with
all power, is that we become slaves to that power. Today the Gov-
ernment is, at least in theory, the servant of the people, and those in
our office today have before them the extremely difficult task of
maintaining the peace and safety of the country and such difficulties
as those.
Senator Clark. Defects are inherent in a democratic form of
government as distinguished from an autocracy?
Mr. Irenee du Pont. I question if we have a democratic form of
government today, and my reason for joining the Liberty League
was, I think, our Constitution is on the verge of going into the scrap-
basket. I have nothing against Mr. Roosevelt and voted for him and
contributed to his campaign
Senator Vandenberg. Mr. Chairman, I want to follow U]) Mr.
Lammot du Pont's statement. Nobody is more familiar with condi-
tions, of course, than the du Pont organization. Nobody knows bet-
ter than you do, and I think no one would agree quicker, that there
are reprehensible features of it, and no one is better able to ^ive a
constructive viewpoint than you; and, for one, I would very much
appreciate a brief from your group indicating what you think should
be done by way of improvement in this general situation, and I am
sure the committee would be very glad to see it.^
The Chairman. Of course we would.
Senator Clark. I want to offer a couple of exhibits for the record,
Mr, Chairman; one being a report from Mr. Taylor to Major Casey,
dated April 10, 1933, and the second being a report from Mr. Taylor
to Major Casey, dated February 6, 1933. It is not necessary to read
them. Major Casey knows what they are. These things were for-
bidden by the Treaty of Versailles,
The Chairman. Those will be given appropriate numbers and be
exhibits in the record.
(The two reports referred to were marked " Exhibits Nos. 525 and
526 ", and are included in the appendix on pp. 1382 and 1386.)
Senator Vandenberg. I would like to ask Mr. Lammot du Pont
one more question.
Referring again to this letter of Sir Harry McGowan, dated March
6, to Mr. Lammot du Pont, in which he says that the German asso-
ciates are expected to take a prominent position in the business and
one which will be in keeping with our arrangement with them, on
blasting explosives, he says that that is after the Treaty of Ver-
sailles is to be modified and that " We have in fact ke]3t in mind that
possibility."
I would like to ask, Mr. du Pont, if the Treaty of Versailles was
modified in that particular, if the du Pont Co. would feel called upon
1 In response to this request, Mr. Lammot du Pont submitted a memorandum for the
consideration of the committee on November 14, 1934. This memorandum appears in
the appendix on p. 1411.
MUNITIONS INDUSTRY 1261
to enter into a similar agreement with your present German asso-
ciates as that at present in effect with regard to blasting powders.
Mr. Lammot du Pont. No obligation to do so ; no, sir.
Senator Vandenberg. You do not feel as Sir Harry does, that that
is included ?
Mr. Lammot du Pont. He is referring to the I.C.I, obligation.
Senator Vandenberg. Yes. He says that the Germans would
expect an agreement which would be in keeping with the present
arrangement. You would not feel any such obligation?
Mr. Lammot du Pont. No, sir.
Senator Vandenberg. That is all.
The Chairman. Mr. du Pont, where is Colonel Simons?
Mr. Lammot du Pont. At this time ?
The Chairman. Yes.
Mr, Lammot du Pont. I understand he is ill. I presume he is at
home.
The Chairman. Is he in the country ?
Mr. A. Felix du Pont. He is in Wilmington, Del.
The Chairman. If it is not already thoroughly covered in the
record, what are his connections with the company?
Mr. A. Felix du Pont. He is an assistant to Major Casey, engaged
in military sales contacts.
Mr. Casey. I think, Senator Nye, I explained that yesterday, but
you might not have been present at the moment.
The Chairman. I must have been distracted at the time.
Mr. du Pont, coming back to this reference which was made yes-
terday to the class of your investments during and since the war, j^ou
had agreed that you would prepare for us a statement covering just
how many of the companies involved through capitalization and
spending of new money, how much of it came out of the surplus of
the company, and so forth. I hope that in that work, when you do
prepare it, that you will make a very distinct division as between
the companies that were organized during the war and those which
were organized after the war.
]\Ir. Lammot du Pont. I think Mr. Carpenter explained, Senator,
that we could not make a sharp line of division between them.
The Chairman. As best you can, of course.
Mr. Lammot du Pont. We put all the money into one pot, and we
could not tell which dollar it was we were drawing out.
Mr. Carpenter. Would a statement showing our investment in
each new industry each year over that period cover what you have
in mind. Senator?
The Chairman. I might suggest that back in April 1915 you
acquired the plant of the Smokeless Powder Co.
Mr. Carpenter. International Smokeless Powder.
The Chairman. For $5,760,000. Indicate there whether there was
a new issue of stock floated, or whether that was bought and paid for
with money out of the funds of the company.
Mr. Carpenter. That was practically the du Pont Co. at that
time.
The Chairman. If 3^011 would pursue that course with respect to
all of them, we would appreciate it.
Mr. Carpenter. On that point it was actually a cash payment
made.
1262 MUNITIONS INDUSTKY
The Chairman. On that particular one you paid cash ?
Mr. Carpenter. We paid cash for that particular company.
The Chairman. Mr. du Pont, do you possess any newspaper prop-
erties in Delaware?
Mr. Lammot du Pont. No, sir.
The Chairman. Do your brothers?
Mr. Lammot du Pont. No, sir.
Mr. Irenee du Pont. The Christiana Securities, in which you and
I are interested, possess newspaper properties. I do not think you
take much interest in the details.
The Chairman. What is the name of the company ?
Mr. Irenee du Pont. They changed the name of the paper and
change it ever so often, and it is the Journal Every Evening or the
Every Evening Journal. It was a consolidation of the two papers
the Journal and the Every Evening, and I do not know which way
it reads this year.
The Chairman. Do you have any newspaper interests outside of
DelaAvare ?
Mr. Lammot du Pont. No, sir.
The Chairman. Have you recently negotiated for newspaper prop-
erties outside of Delaware?
Mr. Lammot du Pont. I have not. and the company to Avhich
Irenee refers has not.
The Chairman. Have any of you. as individuals, negotiated for a
newspaper?
Mr. Irenee du Pont. The name of this paper is the Journal Every
Evening. It is the only paper in which I have any interest, and we
have not negotiated for a paper for years. We took it on several
years ago, and to save us any trouble we leased it out and we have
no say-so in the operation at all. The Morning New^s was bought
at the same time and is in this consolidation.
The Chairman. I might repeat this question, because we were
diverted. Have you or your brothers or your company entered into
recent negotiations concerning the purchase of a paper outside of
Delaware ?
Mr. Irenee du Pont. Not that I know of.
Mr. Pierre S. du Pont. I have not.
The Chairman. Have you entered into negotiations involving a
loan to one who is to purchase a newspaper or newspapers?
Mr. Pierre S. du Pont. No.
The Chairman. And that is true of all of you ?
Mr. Pierre S. du Pont. Mr. Senator, I might say that the day
before I came down here a friend of mine in Philadelphia sent a tele-
gram to me, asking me to confirm the rumor that we had made a
purchase of a Philadelphia paper, which I denied, because we had
made no such purchase of any kind.
The Chairman. I was trying to avoid the reference to any place
or any particular name.
Mr. Pierre S. du Pont. I know that rumor was abroad, but it has
no foundation.
The Chairman. There has been no foundation for that rumor that
has existed as of recent days ?
Mr. Pierre S. du Pont. So far as I know, none whatever.
MUNITIONS INDUSTRY 1263
The Chairman. Are we to assume that when you speak of non-
ownership of newspapers, you have reference as well to magazines?
Mr. Pierre S. du Pont. Yes, sir.
Mr. Lammot du Pont. Yes, sir.
The Chairman, Mr. du Pont, the letter of May 29, 1933, addressed
to you, " My dear Lammot ", by Sir Harry McGowan, states :
I have been following with interest and no little satisfaction the improve-
ment in industrial conditions obtaining in the States as a result of the policy
introduced by your new President. The improved stock markets and the
favorable developments in both business and politiciil fields must encourage in
you all that confidence which has, not unnaturally, been lacking during past
years.
Particularly am I interested in the press announcements of prospective legis-
lative action which should give incentive to international industry and, notably,
the suggestions of lower tariffs and modifications of the Sherman antitx'ust
laws. In these I can see hope for real progression and, as an early outcome,
improved commodity prices and regained prosperity.
Indicating, as this language does, a very decided interest upon the
part of your British associates in the organization which was devised
to aid in accomplishing national recovery. Were you or your asso-
ciates conferred with at all in the drafting of that national recovery
program ?
Mr. Lammot du Pont. I think not, sir. I do not know of any-
thing.
Mr. Irenee du Pont. I did not quite follow the question.
The Chairman. Were any of you invited into conferences at
which these programs were devised and planned ?
Mr. Irenee du Pont. I do not quite follow that.
The Chairman, The N.R.A. organization, to speak frankly.
Mr. Irenee du Pont. I was never invited in. You were in the
N.K.A., Pierre,
Mr, Pierre S. du Pont. I was a member of the Industrial Advisory
Board.
The Chairman. Yes, but before N.R.iV. was created, before any of
this set-up was brought about, did you participate in conferences
looking toward the formulation of legislation which made place
for it?
Mr. Pierre S. du Pont. No.
Mr. Lammot du Pont. I appeared as a representative of the Na-
tional Association of Manufacturers, in, I think it was, a public hear-
ing, granted by Senator Wagner with respect to the N.I.R.A.
The Chairman. These were the public hearings on the legislation ?
Mr. Lammot du Pont, Yes. I represented the National Associa-
tion of Manufacturers as a member of a committee.
The Chairman. Were you, at the time Sir Harry McGowan was
enthused about the prospect, looking upon this program as enter-
taining a large prospective recovery?
Mr. Lammot du Pont. I think I was, in some respects. My reply
to that letter, I think, is a very good indication of my feelings at
the time.
The Chairman, That I have not seen.
Mr. Lammot du Pont. I think I have a copy of it here. Shall I
read this, Senator?
The Chairman, Is it extended?
Mr. Lammot du Pont, Two pases.
1264 MUNITIONS INDUSTRY
The Chairman. All relating to this ?
Mr. Lammot du Pont. It is a reply to Sir Harry's letter of May 29.
The Chairman. If it relates to this particular question, please
read it.
Mr. Lammot du Pont. It is dated June 17, 1933.
Sir Harry McGowan,
Imperial Chemical House, MillMnJc, Westminister,
London, 8.W.I., England.
Dbur Sir Habry : Your letter of May 29, commenting on the improvement in
tlie industrial conditions in this country, and reiernng to tlie prospective changes
in the international relations, was duly received.
I am much interested in what you say and heartily approve your attitude
toward our patents and processes agreement and the relations between the two
companies. I feel the same; namely, that our relations have been so happy
and have produced such satisfactory results that we should let nothing in the
way of international agreements interfere in any way with the progress we
have made, or may make in the future. If any legislation or international
agreements are brouglit about which affect these I.C.l.-du Pont relations, I am
sure we will be able to adjust ourselves so as to get the continued benefit of
our agreement.
It is difficult to say how much of our improved business activity has been
due to Governmental action, either prospective or accomplished. We have
certainly had a wonderful improvement in business, but when I look at our
chart showing the course of our sales from 1929 up until today it is perfectly
apparent to me that something happened about a year ago which changed the
trend materially. Since July 1932, every month, after allowing for the normal
seasonal variations, has shown either an improvement or holding steady as to
volume of business, except February and March 1933, when our volume suffered
a terrific slump, due, of course, to the financial situation which ended in our
bank holiday. Since the bank holiday tlie improvement has been very much
more rapid, so that I think the public, generally, attribute the improvement in
business to something which the administration has done.
I am enthusiastic about many of Mr. Roosevelt's policies, but cannot go along
with him as to others, but I think the facts and figures show that the putting
into effect of his policies was not what made business " turn the corner."
Yours sincerely,
President.
The Chairman. You were ready to cooperate, though, were you
not, under the national recovery program?
Mr. Lammot du Pont. Yes, sir.
The Chairman. Why were you so long in having a code adopted
covering the chemical industry ?
Mr. Lammot du Pont. We started to negotiate that code, as I
recall it, about August after the enactment, and we did everything
we thought was possible and proper to urge the adoption. We
could not get one approved by the administration until the following
February.
The Chairman. Until February 10 of this year?
Mr. Lammot du Pont. Yes, sir.
The Chairman. Were we with more time I think I should want
to have you discuss certain features of that code. As a reference was
made to it, and as I think it was then suggested that it should be
incorporated in the record, if it has not yet become a part of the
record, I shall ask that it be made an exhibit at this time.
(The code of the chemical manufacturing industry was marked
" Exhibit No. 527 " and is included in the appendix on p. 1389.)
The Chairman. We come now to a question which in the interest
of savins: time
I
MUNITIONS INDUSTRY 1265
Mr. Lammot du Pont. May I interject one moment on the code
matters? Mr. Carpenter reminds me that the chemical inclustry
Generally did comply with the increase in wages and the reduction of
hours voluntarily while the code was in negotiation.
The Chairman. You were operating under the so-called " blanket
code"?
Mr. Lammot du Pont. Yes.
The Chairman. Did the code increase the rate of pay to employees
in your plants?
Mr. Lammot du Pont. The minimum wages were prescribed. I
think it did not affect any of the du Pont Co.'s employees. They
M^ere all above the minimum.
The Chairman. They were all above that minimum before the
code was adopted?
Mr. Lammot du Pont. Yes.
The Chairman. To save time and to insure accuracy, the commit-
tee shall ask you to furnish at your earliest convenience a statement
revealing campaign contributions to party or parties during the
period starting in 1919.^
Mr. Lammot du Pont. By whom?
The Chairman. Well, of course, your corporation is not making
contributions.
Mr. Lammot du Pont. Certainly not.
The Chairman. As to the individual members of your family.
Mr. Lammot du Pont. Only the members of the du Pont family ?
The Chairman. How many directors do you have in the E. I.
du Pont de Nemours & Co. ?
Mr. Lammot du Pont. About 34.
The Chairman. Let us for the time being make it cover only the
members of your family.
Mr. Lammot du Pont. The members of the du Pont family?
The Chairman. Yes.
Mr. Lammot du Pont. Whether they are employees or directors
or otherwise ? I do not think we can answer for
The Chairman. Are not all members of the family directors or
officers of the company?
Mr. Lammot du Pont. No, sir.
The Chairman. Then give us the statement covering all directors
and all officers of the company.
Mr. Lammot du Pont. Who are of the du Pont family ?
The Chairman. No; the entire directorate and all officers.
Mr. Lammot du Pont. Very well.
The Chairman. On yesterday, Mr. du Pont, one of your number
testijfied that it was the policy, as nearly as you knew, of all of the
companies over which the E. I. du Pont de Nemours & Co. held
control to deal in the matter of the munitions trade as your company
did. That is, you were trying to avoid relationships abroad that
smacked of some of these that we have had testimony of during the
past 2 weeks. Now, you all own the Kemington Arms, do you not?
1 The campaign contributions to political parties of officers and directors of E. I. du
Pont de Nemours & Co. appear in the appendix on p. 1403. At the date of publication of
this volume the committee was not in receipt of the entire list.
1266 MUNITIONS INDUSTRY
Mr. Lammot du Pont. We own a large proportion of the stock. L
think it is some 56 percent.
The Chairman. I do not want to prolong the discussion here to-
night, but do you not feel that even as relates to your own company
there are experiences that reveal that success in the business really
depends upon the ability to build up suspicions and fears and maybe
real wars between nations?
Mr, Lammot du Pont. I do not think so ; no, sir.
The Chairman. Do you not think that is the attitude of salesmen,
representatives of the company? J
Mr. Lammot du Pont. I do not think so ; no, sir, 1
The Chairman. Here, under date of December 27, 1933, we find
one Frank Sheridan Jonas, a South American representative of the
Eemingtbn Arms writing to Mr. Owen Shannon of the Curtiss-
Wright Aviation Corporation, using this language :
The Paraguayan-Bolivian fracas appears to be coming to a termination. So
business from that end is probably finished. We certainly are in one hell
of a business where a fellow has to wish for trouble so as to make a living.
The only consolation being, however, that if we don't get the business someone
else will. It would be a terrible state of affairs if my conscience started to
bother me now.
That is the attitude of one Remington Arms salesman seemingly.
Do you not find that attitude existing in a more general way?
Mr. Lammot du Pont. I do not find it so; no, sir. I never saw
that letter or heard of it, so far as I know. What was the date of
that?
The Chairman. That became a matter of record last week, I think.
The date is December 27, 19.^3.
So difficult has been the lask of conducting hearings in this par-
ticular chamber, so unsatisfactory has proved the loud-speaker sys-
tem which we had installed, that the committee will plan to resume
its hearings next Monday moving at 10 o'clock in another chamber,
another room in this building to be selected over the week-end. 1
thought merely for the information of those who must be back here
at that time that they would like to know that there would be a
change of location.
Mr, Lammot du Pont. Senator, you said this morning that we
would not be called on Monday. Is there a change in that plan ?
The Chairman. J was just about to excuse you now and say that
you might be called again at some later date. But unless other
members of the committee have questions to ask you now, you may
understand yourselves to be excused. The committee recesses until
10 o'clock Monday morning.
Mr. Lammot du Pont. Senator, I want to thank you on behalf of
my associates and myself for the courteous reception we have had.
We may have appeared a little nettled at times, but I think we all
realize that your purpose is sincere, and we ap^Dreciate very much
the treatment that we have received.
The Chairman. The feeling of appreciation is mutual, Mr. du
Pont.
Mr. Pierre S. du Pont. May I add my expression of appreciation
for your courtesy, Senator, and wish that instead of waiting for 20
MUNITIONS INDUSTRY 1267
years before we have these reunions we might have them once or
twice a year?
The Chairman. Like this?
Mr. Pierre S. du Pont. Yes; like this. Do not let us wait 20
'years, but have one every year. We will not need so much time to
rehearse.
j The Chairman. The committee will stand in recess until 10 o'clock
I on Monday morning.
I (Whereupon, at 6: 27 p.m., the committee recessed until 10 o'clock
on Monday morning, Sept. 17, 1933.)
it
iif .
S:!S7() -84--IT5 T
APPENDIX
Exhibit No. 450
Moody's Manual or Industrials
(American and Foreign 1933)
E. I. DU PONT DE NEMOURS & COMPANY
History. — Incorporated under the laws of Delaware in 1915, and on October
1st took over the entire properties of New Jersej' corporation known as E. I.
du Pont de Nemours Powder Company, incorporated May 19, 1903, in New
Jersey, to consolidate the various explo.sive manufactories controlled by E. I.
du Pont de Nemours & Co. This later company and its predecessor, a partner-
ship of like name, had been engaged in the manufacture and sale of explosives
for over 100 years, having started in business in the year 1S02. Acquired
General Explosives Co. in August 1924. Company and subsidiaries operate
plants throughout the country for the manufacture of explosives, cellulose
jinHluets, pyraliu, paint, rayon, dyestutt's, ethyl alcohol and cellophane, latter
being a transparent sheet material used extensively for wrapping and other
ptu'poses. In Dec. 1927 acquired luisiness of Excelsior I'owder Manufactur-
ing Co. ; and in March 1928, purchased the minority interest in du Pont
National Ammonia Co., Inc., and also acquired stockholdings of the same
grimp in Lazote, incorporated. After this purchase the du Pont National
Ammonia Co. was <lissolved. In Nov. 192.S du Pont company acquired entire
jissets and business of Grasselli Chemical Co. of Ohio in exchange for 149,392
du Pont common shares which were distributed to Grasseli stockholders on
basis of % share of du Pont for each Grasselli common share. The explosive
business of Grasselli Cliemical was merged with the du Pont explosive depart-
ment ; the Canadian plant and business was transferred to Canadian Industries,
Ltd., and the remaining business together with the acids and heavy chemical
, business of du Pont was transferred to a new company, Grasselli Chemical
Co. (if Delaware. During 1929, du Pont company acquired the entire minority
interests in du Pont Rayon Co., du Pont Cellophane Co., Inc., and du Pont
Ammonia Corp. (formerly Lazote, Incorporated) (majority interests in same
having been already owned by du Pont company) ; acquired all of the properties
and business of Krebs Pigment & Chemical Co. and increased its interest in
Canadian Industries, Ltd. During 1929 company also joined in the formation
nf two new German companies to undertake the manufacture and sale in
Germany of pyroxylin finished, including Duco, and of Ventube, a rubber-
coated fabric tubing used for mine ventilation and in tunnel construction work.
In April 1930 acquired for 241,130 common shares, all the assets and business
(subject to liabilities) of Roessler & Hasslacher Chemical Co. (N.Y.), the
business formerly conducted by that company first being operated by a wholly
owned Delaware corporation of the same name and since the latter i^art of
1932. by a newly organized "The R. & H. Chemicals Department."'
In Aug. 1931 accpiired the dyestuffs and organic chemical properties and
business of the Newport Co., including that company's investment in the
common stock of Acetol Products, Inc. (see appended statement), the capital
stock of Newport Manufacturing Co., and the business and assets of Newport
''heniical Corp. and its other wholly owned subsidiaries, ;nid paid in con-
-ideration therefor 103,500 shares of du Pont 6% debenture stock. The
Newport business was subsequently merged with du Poiit Organ x- Chemicals
I >C'pl .
Number of employees, Dec. 31 1932 (including wholly owned subsidiaries),
.■i!'l>roximately 28.000.
1269
1270 MUNITIONS INDUSTRY
Plants and products
Location of plants, together with products manufactured follows:
Organic chemicals. — Deepwater Point, N. J. ; Carrollville, Wis.; New
Brunswick, N.J.
Smokeless powder. — Carney's Point, N.J.
Explosives. — du Pont, Wash. ; Seneca, 111. ; Repauno, N.J. ; Louviers, Colo. ;
Nemours, W.Va. ; Fairchance, Pa.; Connable, Ala.; Mooar, Iowa; Belin, Pa.;
Consumers, Pa. ; Birmingham, Ala. ; Ashburn, Mo. ; Barksdale, Wis. ; Carl
Junction, Mo.
Fabrikoid. — Newburgh, N.Y.
Rubber goods. — Fairfield, Conn.
Pyralin products. — Arlington, N.J. ; Leominster, Mass.
Film. — Purlin, N.J.
Rayon. — Buffalo, N.Y. ; Richmond, Va. ; Waynesboro, Va.
Explosives laboratory. — Gibbstown, N.J.
Paints and varnishes. — Philadelphia, Pa.; Everett, Mass.; Chicago, III.;'
Flint, Mich.
Experimental laboratory. — Newbridge, Del.
Machine shop. — Wilmington, Del.
Synthetic ammonia. — Belle, W.Va.
Cellophane. — Buffalo, N.Y. ; Richmond, Va. ; Nashville, Tenn.
Caps and fuses. — Pompton Lakes, N.J.
Chem/icals and lacquers. — Parlin, N.J.
Wood p«Zp.— Newhall, Me.
Shooks. — Deeriug Junction, Me.
Alcohol. — Deepwater Point, N.J.
Tetra- ethyl lead. — Deepwater, N.J .
Acids, heavy chemicals, pigments, and colors. — Beaver Falls, Pa.; Birming-
ham, Ala. ; Baltimore, Md. ; Canton, O. ; Cleveland, O. ; Detroit, Mich. ; East
Chicago, Ind. ; Fortville, Ind. ; Grasselli, N.J. ; Lockland, O. ; Me:idowbrook,
W.Va. ; Newark, N.J. ; New Castle, Pa. ; Newport, Del. ; Niles, O. ; Paulsboro,
N.J. ; Philadelphia, Pa. ; Terre Haute, Ind. ; Toledo, O. ; Weirton, W.Va. :
Wurtland, Ky.
Ammonia and ammonia products. — Belle, W.Va. ; Phil.-ulelphia, Pa. ; St.
Louis, Mo.
Chemical specialties. — Nasliville, Tenn.; Perth Amboy, N.J. ; Niagara Falls,
N.Y. ; El Monte, Cal.
Exhibit No. 451
DlBE(7I'0BS OF E. I. DU PONT DB NeMOUKS & COMPANY AND SUBSIDIARY COMPANIES
(Information compile 1 from Poor's Industrial Volume, 1933, and from other
sources where noted)
SUBSIDIARY COMPANIES WHOLLY OWNED
American Glycerin Company.
Associated Securities of Canada, Ltd.
du Pont Building Corp.
du Pont Cellophane Company, Inc.
du Pont, S. A.
du Pont Rayon Company.
du Pont Securities Company.
du Pont Viseoloid Company.
The Pacific R. & H. Chemicals Corp.
The Grasselli Chemical Company.
Hotel du Pont Company.
International Freighting Corp., Inc.
National Ammonia Company, Inc.
Rokeby Realty Company.
I.
MUNITIONS INDUSTRY 1271
SUBSIDIAKY COMPANIES NOT WHOLLY OWNED
Percent of
stock owned
Acetol Products, Inc 72.22
Bayer- yemesa 11 Company, Inc 50. 00
Canadian Industries, Limited- 46.85
Celastic Corporation 50. 00
Compania Mexicana de Explosivos 50.00
Conipania Sud-Americana de Explosivos 42. 43
du Pont Film Mfg. Corp 51.00
Gardinol Coi-p 55. 00
General Mntors Securities Company
Kinetic Chemicals, Inc 51. 00
Krebs Pigment & Color Corp 70. 00
C. G. Bartlett & Cia. Ltda 60.00
Leatlierclotli Proprietary, Limited 49.00
Nobel Chemical Finishes, Ltd 49.00
Old Flickory Chemical Company 50.00
Societe Francaise Duco, S. A 35.00
Societe Fi'aucaise Fabrikoid, S. A 25.00
Remingtcn Arms Company : *
Common stock 56. 00
Series A pfd 91.00
DIRECTORS OF E. I. DU PONT DE NEMOURS & COMPANY
1. P. S. du Pont, chairman of the
board.
2. Irenee de Pout, vice chairman.
3. W. P. Allen.
4. Donaldson Brown.
5. H. Fletcher Brown.
6. J. Thompson Brown.
7. R. R. M. Caiiienter.
8. W. S. Carpenter, Jr.
9. Chas. Copeland.
10. Wm. Coyne.
11. J. E. Crane.
12. F. B. D:ivis, Jr.
13. A. Felix du Pont.
14. Eugene du Pont.
15. Eugene E. du Pont.
16. H. F. du Pont.
17. L. du Pont.
18. Wm. du Pont, Jr.
19. A. B. Echols.
2U. J. B. D. Edge.
21. T. S. Grasselli.
22. W. F. Harrington.
23. H. G. Haskell.
24. J. P. Laffey.
25. C. R. Mudge.
26. F. AV. Pickard.
27. H. M. Pierce.
28. J. J. Raskob.
29. C. L. Reese.
30. Wm. Richter.
31. A. P. Sloan, Jr.
32. Fin Sparre
33. W. C. Spruance. "
34. C. M. A. Stine.
35. F. G. Tallman.
36. L. A. Yerkes.
OFFICERS OF E. I. DU PONT DE NEMOUKS & COMPANY
P. S. du Pont, chairman of board.
Irenee du Pont, vice chairman of board.
Lammot du Pont, president.
H. Fletcher Brown, vice president.
J. Thompson Brown, vice pres,
R. R. M. Carpenter, vice pres.
W. S. Carpenter, jr., vice pres.
Wm. Coyne, vice pres.
Jasper E. Crane, vice pres.
A. Felix du Pont, vice pres.
A. B. Echols, vice pres.
J. B. D. Edge, vice pres.
W. F. Harrington, vice pres.
H. G. Haskell, vice pres.
J. P. Laffey, vice pres.
Moody's Manual of Investments, American & Foreign, 1934,
1272 MUNITIONS INDUSTRY
F. W. Pickard, vice pres.
J. J. Raskob, vice pres.
W. C. iSpruauce, vice pres.
F. G. Tallman, vice pres.
C. M. A. Stiue, vice pres.
J. B. Eliason, treasurer.
W. F. Raskob, asst. treas.
Maxwell Moore, asst. treas.
J. S. Deau, asst. treas.
G. L. Naylor, asst. treas.
Chas. Copelaud, sec'y-
M. D. Fisher, asst. sec'y.
E. A. Howard, asst. sec'y.
DIBECTOESHIPS OF DIKECTORS OF E. I. DU PONT DE NEMOUBS & COMPANT
(Information compiled frcm Poor's Register of Directors, 1934)
1. Pierre Samuel du Pout, chairman of Board :
1. General Motors Corp., director.
2. Bankers Trust Co., director.
3. Philadelphia National Bank, director.
4. Wilmiui-'ton Trust Co., vice president.
2. Irenee du Pont, vice chairman of board :
1. General Motors Corp., mem. fin. comm. & dir.
2. The Reading Co., director.
3. Ethyl Gasoline Corp., director.
3. William P. Allen:
1. Childs Co., N.Y., chairman exec. comm. & dir.
4. Donaldson Brovv'u, director of E. I. du Pout :
1. General Motors Corp., vice pres. & dir.
2. St. Louis-San Francisco Ry., director.
3. National Bank of Detroit, director.
5. H. Fletcher Brown :
1. E. I. du Pont de Nemours & Company, director.
6. J. Thompson Brown, vice president & director:
1. Canadian Industries, Ltd., director.
2. Remin.uton Arms Co., Inc., director.
7. R. R. M. Carpenter, vice pres. & director :
1. Philadelphia National Bank, director.
2. Christiania Securities Co., director.
3. Grasselli Chemical Co., director.
4. Philadelphia National Co., director.
5. Girard Trust Co., director.
8. W. S. Carpenter, Jr., vice pres., chr. fin. com. <S: dir. :
1. Du Pont Rayon Co., chairman.
2. Du Pont Cellophane Co., chairman.
8. General Motors Corp., mem. fin. com. & dir.
4. Wilmington Trust Co., dir.
5. Chase National Bank of N.Y., dir.
6. Bell Telei)lione Co. of Penn., director.
7. Diamond State Telephone Co., director.
9. Chas. Copeland, secretary & director :
1. Wilmington Trust Co., director.
10. Wm. Coyne:
1. E. D. du Pont de Nemours & Company, director.
11. Jasper E. Crane, vice pres. & director :
1. D. Van Nostrand Co., director.
2. Canadian Industries, Ltd., director.
12. Francis B. Davis, Jr., director:
1. U.S. Kul)ber Co., chr., pres., dir., mem. fin. comm. & exec. comm.
2. C(;lum!:us Rubber Co. of Montreal, Ltd., dir.
3. Dispersions Process, Inc., chairman & director.
4. Rubber Regenerating Co., Ltd., director.
5. N.Y. Trust Co., mem. exec. comm. & trustee.
6. Dominion Rubber Co., I^td., chr. of board & dir.
MUNITIONS INDUSTRY 1273
12. Francis B. Davis, Jr., director — Continued
7. Dominion Rubber Co., Ltd. (London), director.
8. General Rubber Co., director.
9. General Rubber Co., Ltd., director.
10. Gilette Rubber Co., mem. exec. comm. & dir.
11. The Sampson Corp., pres. & dir.
12. Rubber Mfrs. Assn., pres. & dir.
13. Malayan American Plantations, Ltd., director.
14. Meyer Rubber Co., director.
15. The Nangatnek Chemical Co.. director.
16. Si Pare' Rubber, Maatschappy, director.
17. U.S. Rubber Products. Inc.. pres. & dir.
18. U.S. Rubber Export Co.. Ltd.. chr. & dir.
19. U.S. Rubber Plantations, Inc., dir.
13. A. FelLx du Pont :
1. E. I. du Pont de Nemours & Company, director.
14. Eugene du Pont :
1. E. T. du Pont de Nemours & Company, director.
15. Eugene E. du Pont :
1. E. I. du Pont de Nemours & Company, director.
16. H. F. du Pont, director:
1. General Motors Corp., director.
17. Lammot du Pont, president and director :
1. General Motors Corp., chairman & director.
2. General Motors Acceptance Corp., director.
3. Chemical Bank & Trust Co.. director.
4. Fidelity-Philadelphia Trust Co., director.
5. Wilmington Trust Co., director.
18. Wm. du Pont, ,Tr. :
1. E. I. du Pont de Nemours & Company, director.
19. Angus B. Echols, vice pres. in charge finance & director:
1. The Grasselli Chemical Co., director.
2. Du Pont Building Corp., director.
3. Hotel du Pont Company, director.
4. Du Pont Viscoloid Co., director.
5. Du Pont Film Mfg. Corp., director.
6. Associated Securities Ltd. of Canada, director.
20. J. B. D. Edge:
1. E. I. du Pont de Nemours & Company, director.
21. Thomas S. Grasselli, director:
1. The Grasselli Chemical Co., president & director.
2. The Wheeling & Lake Erie Railway Co., director.
22. W. F. Harrington:
1. E. I. du Pont de Nemours & Company, director.
23. H. G. Haskell, vice president (& director:
1. Canadian Industries, Ltd., director.
2. Triplex Safety Glass Co. of N. Amer., director.
3. Noranda Mines, Ltd., director.
4. Ecjuitable Trust Co., Wilmington, Delaware, director.
5. International Mining Corp., director.
24. J. P. Lafleey :
1. E. I. (In Pont de Nemoure & Company, director.
25. C. R. Mudge:
1. E. I. du Pont de Nemours & Company, director.
26. F. W. Pickard:
1. E. I. du Pont de Nemours & Company, director.
27. H. M. Pierce:
1. E. I. du Pont de Nemours & Company, director.
28. J. J. Rascob, vice pres. & director :
1. General Motors Corp., director.
2. Bankers Trust Co., director.
3. Lawyers County Trust Co., director.
29. C. L. Reese:
1. E. I. du Pont de Nemours <& Company, director.
30. Wm. Richter:
1. E. I, du Pont de Nemours & Company, director.
1274 MUNITIONS INDUSTRY
31. Alfred Pritchard Sloan, director :
1. General Motors Corp., pres. & dir.
2. Pullman, Inc., director.
3. Waldorf Astoria Corp., director.
4. Johns-Manville Corp., director.
5. Revere Copper & Brass, Inc., director.
6. National Bank of Detroit, director.
32. Fin Sparre.
1. E. I. du Pont de Nemours & Company, director.
33. W. C. Spruance:
1 E. I. du Pont de Nemours & Company, director.
34. C. M. A. Stine:
1 E I du Pont de Nemours & Company, director.
35. Frank Gifford Tallman, vice president & director:
1. Wilmington Trust Co., director.
2. American Manganese Bronze Co, director.
36. Leonard A. Yerkes, director :
1. Du Pont Rayon Co., president & director.
2. Du Pont Cellophane Co, president & director.
3. Seaboard Air Line R.R., director.
DiEECTOBATES OF OFFICERS (NOT DiEECTOBS OP E. I. DXT PONT DE NEMOUKS &
Company) of B. I. du Pont de Nemouks & Company j
1. James Bayard Eliason, treasurer:
1. Du Pont Film Mfg. Co., treasurer.
2. Bayer-Semesan Co., treasurer & director.
3. Kinetic Chemicals Co., director.
4. Remington Arms Co., Inc., the director.
2. J. Simpson Dean, asst. treas. :
1. Wilmington Trust Co., director.
3. MeiTett D. Fisher, asst. sec. of co., sec. of fin. & exec. comm. :
1. Du Pont Film Mfg. Co., sec.
2. Du Pont Viscoloid Co., sec.
3. National Ammonia Co., Inc., sec.
4. International Freighting Corp., Inc., sec.
5. Duco, Inc., secretary.
6. Acetol Products, Inc., sec.
7. Kinetic Chemicals, Inc., sec.
8. General Motors Securities Co., sec.
Directors and OFFiCEins of Acetol Products, Inc.
(Information compiled from Poor's industrial volume, 1933)
E. H. Killheffer, president and director.
Dr. Max Mueller, director.
Otis Glazebrook, Jr., director.
L. M. Blancke, director.
Frederico Lage, director.
George B. Bradshaw, vice president and director.
Wm. F. Raskob, treasurer and director.
M. D. Fisher, secretary.
E. A. Howard, asst. secretary.
William Harris, assistant treasurer.
Directorates of Directors and Officeiis
OF
Acetol Products, Inc.
(Information compiled from Poor's Directory of Directors — 1934)
Max Mueller, chr. of board and director :
1. Technical Equipment Corp., pres., treas. & dir.
2. New Era Specialties Corp., pres. & dir.
MUNITIONS INDUSTRY 1275
Otis Allen Glazebrook, Jr., director :
1. G. M. P. Murphy Co., partner.
2. Aimy & Navy Journal, director.
3. Cowan & Denglar, Inc., director.
4. Chromium Corp. of Amer., mem. exec. comm. & dir.
5. The Examinations Corp., pres., mem. exec. comm. & director.
6. Omnibus Corp., director.
7. Aeronautical Industries, pres., mem. exec. comm. & dir. & chr. of board.
8. National Aviation Corp., mem. exec. comm. & chr. of board.
9. American Hide & Leather Co., mem. exec, comm. & dir.
10. Investors of Washington, director.
11. Amalgamated Leatlier Companies, Inc., mem. exec. comm. & dir.
12. Bank of Manhattan Co., mem. adv. comm.
13. U.S. & General Securities Co., dir.
14. National Distributors Corp., dir.
1.5. Lektophoue Corporation, dir.
16. Tri-Continental Corp., dir.
17. N.Y. Railways Corp., dir.
18. Finance & Trading Corp., pres., mem. exec. comm. & dir.
Leo M. Blancke, Director :
1. Hempill, Noyes & Co., partner.
2. Shur On Properties Co., director.
3. Shur On Standard Optical Co., Inc., mem. exec. comm. & dir.
4. General Optical Co., dir.
5. Columbia Pictures Corp., dir.
6. Brentano's Books Stores, Inc., dir.
7. North American Cement Corp., dir.
Frederico Lage, Director :
1. Tung Sol Lamp Works, Inc., dir.
2. McCoy Laboratories, dir.
3. Bernliard & Lage, partner.
dibbcto'eships of dikectors of subsidiaries controi/.ed by e. i. dtj pont de
Nemo'Urs & Company
(Information compiled from Poor's Directory of Directors — 1934.)
BAYEK-SBMESAN CO., INC. (50% STOCK OWNED BY E. I. DU PONT DB NEMOURS &
COMPANY) DIRECTORSHIPS OF DIRECTOR
William E. Weiss, pres. & dir. :
1. Sterling Products, Inc., chr. of board, gen. mgr. & dir.
2. The Bayer Co., Inc., vice pres. gen. mgr. & dir.
3. American I. G. Chemical Corp., dir.
4. Wells & Pvicbardson Co., Inc., vice pres. & dir.
5. The Chas. H. Phillips Chemical Co., vice pres. & dir.
6. Antidolar Mfg. Co., dir.
7. Cook Laboratories, Inc., dir.
8. H. A. Metz Laboratories, Inc., dir.
9. Three in One Oil Co., dir.
10. Winthrop Chemical co., Inc., dir.
11. The Pepsin Syrup Co., dir.
12. The Centaur Co., dir.
13. Wheeling Dollar Savings & Trust Co., dir.
Directors and Officers of Canadian Industries, Ltd.
Hon. C. C. Ballantyne, director, Montreal.
Winthrop Brainerd, director and vice pres., Montreal,
Sir Charles B. Gordon, director, Montreal.
R. H. McMaster, director, Montreal.
Arthur B. Purvis, pres., mgr. & director, Montreal.
Lieut.-Col. Herbert Molson, director, Montreal.
Sir Harry McGowan, director, London.
J. Thompson Brown, director, United States.
H. G. Haskell, director, United States.
Jasper E. Crane, director, Wilmington, U.S.
1276 MuisriTioNs industry
G. W. White, director, New York, U.S.
G. W. Huggert, secretary and treasurer.
R. C. Dougherty, asst. treasurer.
Russel Smith, asst. secretary.
(Information compiled from Poor's Industrials Volume 1933)
Directorships of Directors and Officers of Canadian Industries, Ltd.
Sir Chai'les Blair Gordon, director :
1. Bank of Montreal, president.
2. The Royal Trust Co., president.
3. Dominion Glass Co., Ltd., president.
4. Montreal Cottons, Ltd., president.
•5. Hillcrest Collieries, Ltd., president.
6. Ritz Carlton Hotel Co., president.
7. Dominion Textile Co., Ltd., chr. of board.
8. Penman's Ltd., chr. of board.
9. Bank of Montreal (France), director.
10. Canadian Pacific Railway, mem, exec. comm. & dir.
11. Ogilvie Flour Mills Co. Ltd., director.
12. Canadian Bronze Co., Ltd.. director.
13. Brinton-Peterboro Carpet Co., director.
14. Dominion Rubber Co., Ltd., director.
15. U.S. Rubber Co.. director.
16. Tuckett Tobacco Co., director.
17. Royal Exchange Assurance, chr. of Canadian Board.
18. Standard Life Assurance Co., director.
19. Guarantee Co. of North America, vice pres.
20. Title Guarantee Co., director.
21. International Mining Corp., director.
22. Montreal Locomotive Works, directoi'.
23. St. Lawrence Corp., director.
24. Drummondville Cotton Co., director.
25. Sherbrooke Cotton Co.. director.
26. Patou Manufacturing Co., director.
27. Bordens Ltd., director.
28. McGill University, governor.
29. Royal Victoria, governor.
30. Montreal Light. Heat & Power Consolidated, dir.
31. Canadian Pacific Express Co., Ltd., director.
32. Canadian Airways Co., director.
33. American Locomotive Co., director.
34. Dominion Steel & Coal Corp., Ltd., director.
Ross Huntington McMaster, director :
1. The Steel Co. of Canada, Ltd., pres. & dir.
2. Canadian Pacific Railway Co., director.
3. Dominion Rubber Co., director.
4. Royal Trust Co., director.
5. Dominion Glass Co., vice pres. & director.
6. Sun Life Assurance Co., director.
7. Canada Steamship Lines, Ltd., director.
8. Consolidated Mining & Smelting Co., director.
9. Canadian Pratt & Whitney Aircraft Co., Ltd., dir.
10. Bank of Montreal, director.
11. American Iron & Steel Inst., dir.
12. Dominion Bridge Co., Ltd., dir.
Arthur Blaikie Purvis, pres. & managing director :
1. Barclay's Bank (Canada) Ltd., vice pres. & dir.
2. Bell Telephone Co. of Canada, Ltd., director.
3. Canadian Safety Fuse Co., Ltd., director.
4. Dunlop Tire & Rul)ber Goods Co. of Can., Ltd., pres. & dir.
5. General Motors Corp., director.
6. Canadian Invest. Trust Co., Ltd., director.
7. Sun Life Assurance Co., Ltd., director.
8. Consolidated Paper Corp., Ltd., director.
9. Liverpool & London & Globe Insurance Co., Ltd., dir.
MUN'ITIOlSrS IXnUSTEY 1277
Herbert Molson, director:
1. Molson's Brewery, Ltd., pres,
2. Bank of Montreal, director.
3. Ro,val Trust Co., director.
4. Montreal City »S: District Savings Bank, dir.
5. Dominion Itubber Co.. Ltd., director.
6. Dominion Oilcloth & Linoleum, Ltd.. dir.
7. St. Lawrence Paper Co., dir.
8. Standard Clay Product. Ltd., pres.
9. Liverpool, London & Globe Assurance Co., dir.
10. Canada Creosoting Co., dir.
11. Bell Telephone Co. of Canada, dir.
12. Shawinigan Water & Power Co.. dir.
13. Canadian Foreign Investment Co., dir.
J. Thompson Brown, director:
1. E. I. du Pont de Nemours Co., vice pres., mem. exec. comm. & dir.
2. Remington Arms Co., Inc., dir.
Harry G. Haskell, directoj-:
1. E. I. du Pont de Nemours Co., vice pres. & dir.
2. Triplex Safety Glass Co. of North America, dir.
3. Noranda Mines, Ltd., dir.
4. Equitablie Trust Co., dir.
.5. International Mining Corp., dir.
Jasper E. Crane, dir. :
1, E. I, du Pont de Nemours & Co., vice pres. & dir.
2. D. Van Nostrand Co., director.
Sir Harry McGowan, director :
1. African Explosives & Industries, Ltd., deputy chr.
2. British Overseas Bk., Ltd., director.
3. Imperial Chemical Industries, Ltd., chr. & managing dir.
4. Cape Explosives Works, Ltd., deputy chr.
5. Finance Company of Gr. Britain & Amer., Ltd., chr.
6. General Motors Corp., N.Y., director.
7. Imperial Chemical Industries (China), Ltd., dir.
8. Imperial Chem. Industries of Australia and New Zealand, Ltd., dir.
9. Imperial Chemicals Insurance, Ltd., chr.
10. International Nickel Co. of Canada, Ltd., dir. & mem. of advisory comm.
11. Midland Bank Limited, dir.
12. Naylor Bros. (London), Ltd., chr.
13. Nobel Chemical Finishes, Ltd., chr.
14. Portland Glass Co., Ltd., chr.
(Information compiled from Directory of Directors for 1934, Thomas Skinner
& Co., London.)
Directorships of Directors of Remington Arms Co., Ino.
(Information compiled from Poor's Directory of Directors, 1934)
DiKEOTORS AND OFFICERS OP REMINGTON ArMS CO., INC.
(Controlled by E. I. du Pont de Nemours & Company)
M. H. Dodge, chairman of board.
George Bingham, director and vice president.
J. T. Brown, director.
Wm. Crawford, director.
C. K. Davis, director, president, and general manager.
J. B. Eliason, director.
F. W. Pickard. director.
S. F. Proyor, director.
Fin Sparre, director.
E. E. Handy, vice president.
W. W. Reisinger, secretary and treasurer.
L. K. Larson, asst. sec. and asst. treas.
M. D. Fisher, assistant secretary.
P. C. Netland, assistant treasurer.
F. H. Carpenter, assistant treasurer.
(Moody's Manual of Investments, American and Foreign, 1934. >
1278
MUNITIONS INDUSTRY
Directorships of DiKECioiis of Remington Arms Co., Inc.
M. Hartley Dodge, chr. board of directors :
1. Keininytou Cash Register Co., director.
2. Delaware, Lackawanna & Western R.R., dir.
3. Columbia University, clerk & trustee
4. Crocker Wheeler, director
George Bingham, vice pres. & sec'y. :
1. Remington Cash Register Co., vice pres., sec'y, and dir.
2. Remington Cutlery Works, vice pres., sec'y, & dir.
3. Plainfield Trust Co., dir.
J. Thompson Brown, director :
1. E. I. du Pont de Nemours & Co., vice pres., mem. exec. c<tmm., iV dir,
2. Canadian Industries, Ltd., dir.
William Crawford, director :
1. William Crawford, Sr., partner
2. Crawford-Bradley Co., pres. & dir.
3. Two Hundred Three W. 77 Corp., treas.
4. Central Hanover Bank & Trust Co., trustee
5. McMillan Realty & Construction Co., vice pres.
6. 580 Park Ave., Inc., dir.
C. K. Davis, i)res., gen'l. mgr.,. & dir :
J. B. Eliason, dir.
1. E. I. du Pont de Nemours & Company, treas.
2. Du Pont Film Mfg. Co., treas.
3. Baker-Seraesan Co., treas. & dir.
4. Kinetic Chemicals, Inc., dir.
5. Delaware Trust Co., dir.
Frederick W. Pickard, dir.:
1. E. I. du Pont de Nemours, vice pres. & dir.
2. Du Pont Viscoloid Co., chr. board of dir.
3. Brookdale Land Co., pres.
Lloyd K. Lawson, treas.. sec. asst.. <fe dir.:
1. Remington Cash Register Co., treas., asst. sec, & dir.
2. Remington II.M.C. of Canada, Ltd., asi?t. sec, treas., & dir.
o. Remington Mfg. Co., asst. sec, treas., & dir.
("Exhibit No. 452" is the annual report of the E. I. du Pont de Nemours &
Co. for the year 1916 and is filed with the committee.)
(There was n > Exhibit marked "No. 453.")
Exhibit No. 454
Relation of bonus to earnings. — The following statistics show the total awards
of " B " bonus in relation to the published earnings (for (lie years 1914 to 1919,
inclusive).
Year
Total pub-
lished earn-
ings
Total B
bonus
Bonus
as per-
cent of
earn-
ings
Year
Total pub-
lished earn-
ings
Total B
bonus
Bonus
as per-
cent of
earn-
ings
»14
$4, 997, 772. 55
' 86,409,424.53
82, 107, 692. 55
$171,526.00
3, 775, 327. 82
6, 514, 615. 36
3.43
4.37
7.93
1917
$49,258,661.58
43, 098, 074. 72
17, 682, 991. 74
$2, 927, 477. 19
3,170,902.07
857, 536. 89
5.94
1915
1918 . -
7.36
J916-.
1919
4.85
' This figure includes profit on "Contracts'
ing to $29,1,52,117.
realized by E. I. du Pont de Nemours Powder Co. amount
MUNITIOiSrS INDUSTRY
1279
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MUNITIONS INDUSTRY
1283
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MUNITIONS INDUSTRY
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E.I.duPontdeNemours & Co.— Con.
General Motors Securities Com-
pany.
General Motors Corp. 2,095,114
.shs. (applicable to G.M.
Sec. Co. "A" shares).
General Motors Corp. 9,843,750
shs. (applicable to G.M.
Sec. Co. common stock).
General Motors Corp.:
156,250 shares
200,000 shares
MUNITIONS INDUSTKY
1285
Exhibit N(i. 4r)7
DiREXJTORS OF GBNEStAL ilO'lORS CORPORATION
(Information compiled from Moody's Manual of Investments — American &
Foreign, 1934.)
1. Lamont du Pont, chairman.
2. G. F. Balier.
3. Donaldson Brown.
4. L. G. Kaufman.
5. J. D. Mooney.
6. J. L. Pratt.
7. Seward Prosser.
8. J. T. Smith.
9. A. P. Sloan. Jr.
10. J. S. Morgan.
11. A. H. Swayne.
12. C. M. Wool ley.
13. George Whitney.
14. O. D. Young.
15. Albert Bradley.
16. Irenee du Pont.
17. W. S. Carpenter, Jr.
18. P. S. du Pont.
19. John J. Raskob.
20. A. G. Bishop.
21. H. F. du Pont.
22. C. F. Kettering.
23. F. J. Fisher.
24. C. T. Fisher.
25. L. P. Fisher.
26. W. A. Fisher.
27. W. S. Knudsen.
28. C. S. Mott.
29. De Witt Page.
30. Sir Harry McGowan (Loudon).
31. R. S. McLaughlin (Oslsawa, Ont.).
32. Fritz Opel, Russelsheim (German.v
33. A. H. Purvis (Montreal. Tanada.)
Officers of General Motors Corporation
(Information compiled from Moody's Manual of Investments — American &
Foreign, 1934.
A. P. Sloan. Jr., president.
W.S. Knudsen, exec, vice president.
J. T. Smith, vice president. New York.
Donaldson Brown, vice president. New York.
A. H. Swayne, vice president. New York.
J. D. Mooney, vice president. New York.
J. L. Pratt, vice president. New York.
Albert Bradley, vice president, Detroit.
C. S. Mott, vice president, Detroit.
C. F. Kettering, vice president, Detroit.
F. J. Fisher, vice president, Detroit.
C. T. Fisher, vice president, Detroit.
L. P. Fisher, vice president, Detroit.
W. A. Fisher, vice president, Detroit.
R. H. Grant, vice president, Detroit.
O. E. Hunt, vice president, Detroit.
C. E. Wilson, vice president, Detroit.
De Witt Page, vice president. Conn.
R. S. IMcLaughlin, vice president, Ontario.
T. S. Merrill, secretary.
M. L. Prentis. treasurer.
E. W. Proctor, comptroller.
Subsidiaries & Affiliated Companies of Gbnkral IMotors Corporation
PASSENGER & COMMERCIAL GROUP
Buiek Motor Division Assets owned by G.il.C.
Cadillac Motor Car Division Do.
Chevrolet Motor Division Do.
Olds Motor Works Division Do.
Pontiac Motor Division Do.
General Motors of Canada, Ltd All stock owned by G.M.C.
Yellow Truck & Coach Mfg. Co Majority of stock owned by (J.M.C
General Motors Fleet Sales .Corp All stock owned by G.M.C.
1286 MUNITIONS INDUSTRY
FISHER BODY GROUP
Fisher Body Division Assets owned by G.M.C.
Fleetwood Body Division Do.
Tenistedt Mfg. Division Do.
Tlie National I'late Glass Co All stock owned by G.M.C.
Fisher Lumber Corp Do.
Fisher Detta Log Co.
ACCESSORY & PARTS GROUP
A C Spark Plug Division Assets owned by G.M.C.
Delco Products Division Do.
Delco-Remy Division Do.
Guide Lamp Division Do.
Harrison Radiator Division Do.
Hyatt Bearings Division Do.
Inland Mfg. Division Do.
The McKinnon Industries, Ltd All stock owned by G.M.C.
Moraine Products Division Assets owned by G.M.C.
New Departure Mfg. Division Do.
Packard Elec. Division Do.
Saginaw Malleable Iron Division Do.
Saginaw Steering Gear Division Do.
Sunlight Elec. Division Do.
United Motors Service, Inc All stock owned by G.M.C.
HOUSEHOLD APPLIANCE GROUP
Delco Appliance Division Assets owned by G.M.C.
Frigidaire Division ^ Do.
AVIAXION GROUP
Allison Engineering Division Assets owned by G.M.C.
AVIATION ENGINES, ENGINEEEING & MECH. EQUIP.
General Aviation Corp Large stock interest owned by
G.M.C.
North American Aviation, Inc Majority of stock owned by General
Aviation Corp. & G.M.C.
General Aviation Mfg. Corp.
B/J Aircraft Corp.
Eastern Air Transport, Inc.
Western Air Express Corp.
Trans. & Western Air, Inc.
MISOEILLANEX)US GROUP
Kinetic Chemicals, Inc Large stock interest owned by
G.M.C.
Ethyl Gasoline Corp One-half interest owned by G.M.C.
Winton Engine Division Assets owned by G.M.C.
FINANCING, INSURANCE, & ACCOUNTING GROUP
General Motors Acceptance Corp of N.Y All stock owned by G.M.C.
* General Motors Acceptance Coit). of
Dela All stock owned by G.M.A.C.
* General Motors Acceptance Corp. of
Indiana, Inc Do.
* General Motors Acceptance Corp. de
Mexico, S.A Do.
* S. Amer., General Motors Accept-
ance Corp Do.
* Continental, and AUgemeine Finan-
zierungs-Gesellschaft m.b.h Do.
* Genei'al Exchange Insurance Corp... Do.
General Motors Acceptance Corp. does not control directors" qualifying sliares.
MUNITIONS INDUSTRY 1287
REAL ESTATE GROUP
■General Motors Building Corp All stock owned by G.M.C.
Argonaut Realty Corp Do.
Modern Dwellings, Ltd.. Oshawa, Ont All stuck owned by G.M.C. of Can-
ada, Ltd.
Modern Housing Corp All stock owned by G.M.C.
RESEARCH & TRAINING
General Motors Researcb Labs.
General Motors Proving Ground.
General Motors Institute.
OVERSEAS OPERATIONS GROUP
General Motors Export Division.
Adam Opel A. G. (German manufacture and distribution of "Opel products"
in Germany).
Vauxliall Motors, Ltd. (English manufacture and distribution of " Vauxhall
products" in British Isles).
OVERSEAS OPERATIONS GROUP — INDIVIDUAL COMPANIES
General Motors Export Co.
General Motors, Argentina, S.A., Buenos Aires.
Distribution in Argentina, Uruguay, and Paraguay.
General Motors Holden's, Ltd., Woodville, Australia.
General Motors do Brazil, S.A., Sao Paulo, Brazil.
General Motors Continental, S.A., Antwerpt, Belgium.
Distrilmtlon of motor cars and trucks in Belgium, France, Austria,
Czechoslovakia, Bulgaria, Crete, Holland, Hungary, Jugoslavia, Roumania,
and Switzerland.
General Motors International, A.S., Copenhagen, Denmark.
Distribution of cars and trucks in Denmark, Norway, Ireland. Latvia,
Lithuania, Poland, and Esfhonia.
General Motors NordLska A/B, Stockholm, Sweden.
Distribution of cars and trucks in Sweden and Finland.
General Motors J.ipan, Ltd., Osaka. Japan.
Distribution of cars and trucks in Japan, Manchukuo, and Korea.
General Motors Near East, S.A., Alexandria, Egypt.
Distribution of cars and trucks in Egypt, Arabia, Hejnz, Iraq, Italian
Africa, Aden, Syria, Persia, Abyssinia. Greece. Palestine, and Turkey.
General Motors New Zealand. Ltd., Wellington, N.Z.
Distriliution of cars and trucks in New Zealand.
General Motors Peninsular S.A., Barcelona. Spain.
Distribution of cars and trucks in Spain, Portugal, Canary Islands, Gi-
braltar, Italy, and French and Spanish Morocco.
General Motors South African, Ltd., Port Elizabeth. South Africa.
Distrilmtion of cars and trucks in Union of South Africa, Rhodesia, Birtish
Southwest Africa, Portugese East Africa, Nyasaland, Bechuanaland. and
the Katanga District of the Belgian Congo.
N. V. General Motors, Java, Batavia, Java.
Distribution of cars and trucks in Dutch Ea>t Indies, Siam, and the Straits
Settlements.
General Motors, India, Ltd., Bombay, India.
Distribution of cars and trucks in British India and Ceylon.
Delco-Remy & Hyatt, Ltd., London, England.
Accessory products in British Isles.
Over.seas Motor Service Corp>, New York, N.Y.
Sales and service overseas on all corporation accessory products.
AC-Sphinx Sparking Plug Co., Ltd., Birmingham. England.
Frigidaire. Ltd., New York. N.Y.
Branches in England, France, Germany (Frigidaire G. m. b. H.).
1288 MUNITIONS INDUSTRY
DlREX)TORSHIPS OF DiRECTOES OF GENERAL MOTORS CORPORATION
(luforiiiation compiled Iroin Ponr's Directory of Directors, 1934, and from
other sources where noted.)
Lamruot du Pout, chairman :
1. E. I. du Pont de Nemours ik Co., pres. & dir,
2. General Motors Acceptance Corp., dir.
3. Chemical Bank & Trust Co., dir.
4. Fidelity Philadelphia Trust Co., dir.
5. Wilmington Trust Co., dir.
George F. Baker, director :
1. First National Bank, chr. & dir.
2. First Security Co. of N.Y., chr. & dir.
3. General Electric Co., dir.
4. Provident Loan Society of N.Y., dir.
5. American Telephone & Telegraph Co., dir.
6. Pullman Company, dir.
7. United States Steel Corp., dir.
8. New Jersey General Security Co., dir.
9. New York Central R.R. Co., dir.
10. Consolidated Gas Co. of N.Y., dir.
11. Lackawanna Securities Co., dir,
12. Mutual Life Insurance Co., trustee.
13. Pullman, Inc., dir.
14. United States Trust Co.. trustee.
15. West Shore Railroad Co., dir.
Donaldson Brown, vice pres. & dir. :
1. E. I. du Pont de Nemours & Co., dir,
2. St. Louis-San Francisco Ry., dir.
3. National Bank of Detroit, dir.
Louis Gravi-raet Kaufman, director :
1. Chicago and Erie R.R. Co.. dir.
2. Empire State Building. Inc.. dir.
3. Manufacturers Trust Co., dir.
James David Mooney, vice pres. «& dir. :
1. General Motors Export Co., pres,
2. Overseas Motor Service Corp., pres. & dir.
3. Vauxhall Motors, Ltd. (Eng.), dir,
4. Investrad Corp., dir.
5. Adam Opel A. G., dir.
6. American Manufacturers Export Assn., pres. & dir.
Seward Pi'osser, mem. fin. comm. & dir. :
1. Bankers Trust Co., chr. managing comm., mem. exec. comm. & dir.
2. American Locomotive Co., dir.
3. American Surety Co. of N.Y., mem. fin. comm. & exec, comm. & trustee.
4. Braden Copper Co., dir.
n. General Electric Co. mem. exec. comm. & dir,
6. General Motors Acceptance Corp., dir.
7. General Motors Acceptance (Mexico), dir.
5. General Motors Acceptance (S.A.), dir.
9. Bankers Safe Deposit Co., dir.
10. Bantrasco Realty Co., dir.
11. Utah Copper Co., dir.
12. The John & Mary R. Markle Foundation, trustee.
13. General Motors Acceptance Corp., Continental, dir,
John Thomas Smith, vice- pres. & gen'l. counsel :
1. Argonaut Mining Co., pres, & dir.
2. White Knob Copper & Dev. Co., Ltd., pres. & dir,
3. Argonaut Consolidated Mining Co,, pres, & dir,
4. General Aviation Coi*p., dir.
Alfred Pritchard Sloan, Jr., pres. & dir. :
1. E. I. du Pont de Nemours & Co., dir.
2. Pullman, Inc., dir.
3. Waldorf-Astoria Corp., dir.
4. Johns-Manville Corp., dir.
5. Revere Copper & Brass, Inc.. dir.
6. National Bank of Detroit, dir.
MUNITIONS INDUSTRY 1289
Junius Spencer Morgan, dir. :
1. J. P. Morgan & Co., partner.
2. N.Y. Stock Exchange, member.
3. U.S. Steel Corp., dir.
4. Cliamber of Commerce, State of N.Y., treas.
5. Drexel & Co., partnei*.
Alfred Idarris Swayne, vice-pre.s. & dir. :
1. General Motors Acceptance Corp., chr. of board.
2. Lehigh Valley R.R. Co., dir.
3. Long Island R.R., dir.
4. C. Tennant Sons & Co., dir.
5. St. Louis Southwestern Ry. Co., dir.
6. Irving Trust Co., dir.
7. General Exchange Insurance Corp., dir.
8. General Motors Export Co., vice pres. & dir.
9. National Automobile Chamber of Commerce, vice pres. & dir.
10. North River Savings Bank, trustee.
11. E. W. Bliss Co., dir.
12. North Star Insurance Co., dir.
13. General Reinsurance Corp.. dir.
14. Genei'al Alliance Corp., dir.
15. Stuyvesaht Insurance Co., dir.
Clarence M. Woolley, director :
1. American Radiator & Standard Sanitary Corp., chr, of board.
2. Atchison, Topeka & Santa Fe Ry. Co., dir.
3. Continental Insurance Co., dir.
4. Federal Reserve Bank, N.Y., dir.
5. General Electric Co., dir.
6. Gold Dust Corp., dir.
7. Johns-Manville Corp., dir.
8. Lackawanna Securities Co., dir.
9. Texas Gulf Sulphur Co., dir.
10. Delaware, Lackawanna & Western R.R. Co., mem. bd. of mgrs.
11. Mutual Life Insurance Co. of N.Y.. trustee.
George Whitney, director :
1. J. P. Morgan & Co., member of firm.
2. Alaska Development & Mineral Co., dir.
3. Bank for Savings, trustee.
4. Braden Copper Co., dir.
5. Copper River & Northwestern Ry. Co., Inc., dir.
6. Guarantee Trust Co. of N.Y., dir.
7. Provident Fire Insurance Co.. dir.
8. Kennecott Copper Corp., dir.
9. Pullman Co., dir.
10. Utah Copper Co., dir.
11. New Jersey & N.Y. R.R. Co., dir.
12. Royal Exchange Assurance, dir.
13. Teachers Insurance & Annuity Assn., trustee.
14. Texas Gulf Sulphur Co.. dir.
15. Johns-Manville Corp., dir.
16. United Corporation, dir.
17. Continental Oil Co., dir.
18. Pullman, Inc.. dir.
19. Consolidated Gas Co. of N.Y.. trustee.
20. Alaska Steamship Co., dir.
21. N.Y. Edison Co., dir.
Owen D. Young, dir. :
1. General Electric Co., chr. of board.
2. National Broadcasting Co., chr. adv. council.
3. Federal Reserve Bank, deputy chr. of board & class C dist.
4. International General Electric Co., dir.
5. American & Foreign Power Corp., dir.
6. National Industrial Conference Board, councillor.
7. National Electrical Mfrs. Assn., exec. rep.
8. Merchants Assn. of N.Y., dir.
9. International Chamber of Commerce, dir.
1290 MUNITIONS INDUSTRY
Owen D. Young, dir.^ — Continued
10. Osram Corporation, Berlin, dir.
11. Allgemeine Elektricitats Gesellschaft, dir. •
12. Societe E'inauciere pour le Development de I'Electricite, mem. exec.
conun.
Albert Bradley, vice-pres., uiem. fin. comm. & dir. :
1. Yellow Truck & Coach Mfg. Co., dir.
2. Bendix Aviation Corp., chr. fin. comm. & dir.
3. Adam Opal, A. G., dir.
4. General Aviation Coi'p., dir.
Irenee du Pont, mem. fin. comm. & dir. :
1. E. I. du Pont de Nemours & Company, vice-chr. of bd.
2. The Reading Co., director.
3. Ethyl Gasoline Corp., director.
W. S. Carpenter, Jr., mem. fin. comm. & dir. :
1. du Pont Rayon Co., chairman.
2. du Pont Cellophane Co., chairman.
3. E. I. du Pont de Nemour.s & Company, vice pres., chr. fin. comm. & dir.
4. Wilmington Trust Co., dir.
5. Chase National Bank of N.Y., dir.
6. Bell Telephone Co. of Penn., dir.
7. Diamond ^State Telephone Co.. dir.
Pierre Samuel du Pont, director :
1. E. I. du Pont de Nemours & Company, chr. of board.
2. Bankers Trust Co., director.
3. Philadelphia National Bank, director.
4. Wilmington Trust Co., vice president.
J. J. Raskob, director :
1. E. I. du Pont de Nemoui-s & Company, vice pres. & dir.
2. Bankers Trust Co., director.
3. Lawyers County Trust Co., director.
Arthur G. Bishop, vice pres. & dir. :
1. First National Bank of Flint, pres.
2. Union Commerce Investment Co., dir.
3. Union Joint Stock Land Bank, (lir.
4. Genesee County Savings Bank, pres. & dir.
H. F. du Pont, director:
1. E. I. du Pont de Nemours & Company, dir.
Charles Franklin Kettering, vice-pres. & dir. :
1. General Motors Research Laboratories, gen. dir.
2. C. F. Kettering, Inc., pres. & dir.
3. Kettering Foundation, Inc., dir.
4. Frigidaire Corp., vice-pres. & dir.
5. Uplands Realty Co., Inc., dir.
6. The Domestic Building Co., dir.
7. The Moraine Development Co., dir.
8. Winters National Bank & Trust Co., chr. of bd. & dir.
9. The Flexible Co., pres. & dir.
10. Moraine Park Co., Inc., dir,
11. The Mead Pulp & Paper Co., dir.
12. United Aircraft & Transport Co., dir.
13. General Aviation Corp., dir.
14. Antioch College, trustee.
Frederick J. Fisher, vice-; ires. iS: dir. :
1. Yellow Truck & Coach Mfg. Co., dir.
2. Fisher & Co., pres. & dir.
3. General Motors Securities, dir.
4. Baldwin Locomotive Works, dir.
5. Michigan Bell Telephone Co., dir.
6. Cleveland, Cincinnati, Chicago & St. Louis R.R., N.Y., dir.
7. Postal Telegraph Co., dir.
8. United Cromium Corp., dir.
9. Senior Investment Corp., pres. & dir.
10. General Aviation Corp., dir,
11. Transcontinental & Western Air, Inc., dir.
12. Udylite Process Co., dir.
1
i
MUNITIONS INDUSTRY
1291
Frederick J. Fisher, vice-pres. & dir. — Continued
13. North American Aviation, dir.
14. Vickers, Inc., pres. & dir.
15. Adam Opel (Germany), dir.
16. General Motors Management Corp., dir.
17. General Chromium Corp., dir.
18. General Motors Holding Corp., dir.
19. General Motors Truck Co., dir.
Lawrence P. Fisher, vice-pres. & dir. :
1. Cadillac Motor Car Co., pres. & Gen'l mgr.
William S. Knudsen. exec, vice-pres. & dir.
Charles Stewart Mott, vice-pres. & dir.
De Witt Page, vice-pres. & dir.
1. New Dopariure Mfg. Co., pres. gen'l mgr. & dir.
R. Samuel McLaugh'in, vice-pres. :
1. General Motors of Canada, Ltd., pres.
2. The Dominion Bank (Canada), vice-pres. & dir.
3. Canadian Pacific Railway Co., dir.
4. Canadian Consolidated Mining & Smelting Co. of Canada, Ltd., dir.
5. International Co. of Canada, Ltd., dir.
Arthur Blaikie Purvis, dir. :
1. Canadian Industries, Ltd., pres. & managing dir.
2. Barclays Bank, Ltd., vice-pres. & dir.
3. Bell Telephone Co., Ltd., dir.
4. Canadian Safety Fuse Co., Ltd., dir.
5. Dunlop Tire & Rubber Goods Co. of Canada, Ltd.. pres. & dir.
6. Canadian Investment Trust, Ltd., dir.
7. Sun Life Assurance Co., Ltd., dir.
8. Consolidated Paper Corp., Ltd., dir.
9. Liverpool & London & Globe Ins. Co., Ltd., dir.
Sir Harry MfGownn, director:
1. African Explosives & Industries. Ltd.. deputy clir.
2. British Overseas Bk., Ltd., director.
3. Imperial Chemical Industries, Ltd., chr. & mannging dir.
4. Cape Explosives Works, Ltd., deputy chr.
5. Finance Company of Gr. Britain & Amer., Ltd., chr.
6. General Motors Corp., N.Y., director.
7. Imperial Chemical Industries (China), Ltd., dir.
8. Imperial Chem. Industries of Australia and New Zealand, Ltd., dir.
9. Imperial Chemicals Insurance, Ltd., chr.
10. luternationnl Nickel Co. of Canada, Ltd., dir. & mem. of advisory comm.
11. Midland Bnnk Limited, dir.
12. Naylor Bros. (London), Ltd., chr.
13. Nobel Chemical Finishes, Ltd., chr.
14. Portland Glass Co., Ltd., chr.
(Infoi'mation compiled from Directory of Directors for 1934, Thomas Skinner
& Co., London.)
Directors and Offtcees of General Motors Acceptance Corp.
(Information compiled from Moody's Manual of Investments — American &
Foreign, 1934.)
A. H. Swayne, chairman.
Donaldson Brown, dir.
A. L. Deane, dir.
Lammot du Pont, dir.
Pierre S. du Pont, dir.
Ira G. McCreery, vice pres. & dir.
J. L. Meyers, vice pres. & dir.
Seward Prosser, dir.
J. J. Schumann, Jr., pres. & dir.
L. L. Short, dir.
A. P. Sloan, Jr., dir.
Glyn Davies, vice pres.
August Freise, vice pres.
G. F. Benkhart, vice pres.
C. P. Fiske. vice pres.
J. H. McMahon. vice pres.
W. H. Leach, vice pres.
C. G. Stradella, vice pres.
J. D. Deane, vice pres.
N. C. Duzendorf. vice pres.
Reune Martin, treas.
G. H. Bartholomew, sec.
J. T. Smith, counsel.
F. S. Parson, compt. & aud.
R. I. Hewitt, gen. asst. treas.
1292 MUNITIONS INDUSTRY
Directorships of Directors of GENsatAx, Motors Acceptance Corp.
(Information compiled froui Poor's Directory of Directors, 1934.)
Alfred Harris Swayne, chr. of bd.
1. Yellow Truck & Coach Mfg. Co., dir.
2. General Motors Corp., vice pres. & dir.
3. Lehigh Valley R.R. Co., dir.
4. C. Tennant Sons & Co., dir.
5. St. Louis Southwestern Ry. Co., dir.
6. Irving Trust Co., dir.
7. General Exchange Insurance Corp., dir.
8. General Motors Export Co., vice pres. & dir.
9. National Automobile Chamber of Commerce, vice pres. & dir.
10. North River Savings Bank, trustee.
11. E. W. Bliss Co., dir.
12. North Star Insurance Co., dir.
13. General Reinsurance Corp., dir.
14. General Alliance Corp.. dir.
15. Stuyvesant Insurance Co., dir.
Donaldson Brown, dir. :
1. E. I. du Pont de Nemours & Company, dir.
2. General Motors Corp., vice pres. & dir.
3. St. Louis-San Francisco Ry., dir.
4. National Bank of Detroit, dir.
Lammot du Pont, dir. :
1. E. I. du Pont de Nemours & Company, pres. & dir.
2. General Motors Corp.. chr. & dir.
3. Chemical Bank & Trust Co., dir.
4. Fidelity-Philadelphia Trust Co., dir.
5. Wilmington Trust Co., dir.
Pierre Samuel du Pont, dir. :
1. E. I. du Pont de Nemours & Co., chr. of bd.
2. General Motors Corp., dir.
3. Bankers Trust Co., dir.
4. Philadelphia National Bank, dir.
5. Wilmington Trust Co., vice pres.
Seward Prosser, dir. :
1. Bankers Trust Co., chr. managing comm., mem. exec. comm. & dir.
2. American Locomotive Co., dir.
3. American Surety Co. of N.Y.. mem. fin. comm. & exec. comm. & trustee.
4. Braden Copper Co., dir.
5. General Electric Co., mem. exec. comm. & dir.
6. General Motors Corp., mem. fin. comm. & dir.
7. General Motors Acceptance (Mexico), dir.
8. General Motors Acceptance (S.A.), dir.
9. Bankers Safe Deposit Co., dir.
10. Bentrasco Realty Co., dir.
11. Utah Copper Co., dir.
12. The John & Mary R. Markle Foundation, trustee.
13. General Motors Acceptance Corp., Continental, dir.
John J. Schumann, Jr., pres. & dir. :
1. General Exchanges Ins. Corp., chr. fin. comm. & dir.
2. General Motors Acceptance Coi'p. of Dela., pres. & dir.
3. Genei'al Motors Acceptance Corp. of Mexico, pres. & dir.
4. General Motors Acceptance Corp. of S.A., pres. & dir.
5. General Motors Holding Corp., dir.
6. General Exchange Corp. of Del., pres. & dir.
7. General Exchange Corp., Ltd., dir.
8. General Motors Acceptance Corp. Continental, pres. & dir.
Livingston Lyman Short, dir. :
1. General Exchange Insurance Corp., pres. & dir.
Alfred Pritchard Sloan, Jr., dir. :
1. E. I. du Pont de Nemours & Co., dir.
2. Pullman, Inc., dir.
3. Waldorf-Astoria Corp., dir.
4. Johhs-Manville Corp., dir.
5. Revere Copper & Brass, Inc., dir.
6. National Bank of Detroit, dir,
7. General Motors Corp., pres. & dir.
MUNITIONS INDUSTRY 1293
DiUEOTOltS AND OFFICEIIS OF McKlNNON IiXDUSTKIES, LtD.
(Controlled by General Motors Corporation)
(Information compiled from Moody's Manual of Investments — American &
Foreign, 1934.)
H. J. Carmichael, Pres., gen'l. mgr. & E. W. Proctor, comptroller.
dir. C. L. Cotton, asst. sec, treas. & dir.
H. A. Brown, vice-president. James McBvoy, dir.
T. S. Merrill, sec. & dir. C. E. Wilson, dir.
M. L. Prentis, treas.
Directorships of Directors and Officers of McKinnon Industries, Ltd.
(Information compiled from Poor's Directory of Directors, 1934.)
Harry John Carmichael, pres. :
1. McKinnon Dash Co., pres. & dir.
2. Conroy Mfg. Co., vice-pres. & dir.
3. National Arbitraries Corp., dir.
4. Toronto, St. Catharine's Transport Co., dir.
5. Marquette Mfg. Co., Ltd., dir.
Thomas S. IMerrill, sec. & dir.
1. General Motors Corp., sec.
2. National Bank of Detroit, cashier.
Hanson Ames Brown, vice-pres. & dir.
1. Cadillac Motor Car Co. of Canada. Ltd., vice-pres. & dir.
2. Chevrolet Motor Co. of Canada, Ltd.. vice-pres. & dir.
3. General Motors Products of Canada. Ltd.. vice-pres. & dir.
4. McLaughlin Motor Car Co., Ltd., vice-pres. & dir.
5. Modern Dwellings, Ltd.. vice-pres. & dir.
6. Olds Motor Works of Canada, Ltd.. vice-] ires. & dir.
7. General Motoi-s Mgt. Service of Canada, I^td., vice-pros. & ('ir.
S. Pontiac Motor Co. of Canada, Ltd., vice-pres. & dir.
Meyer Leon Prentis, treas. :
1. General Motors Corp., treas.
Directors and Officers of Yoviow Tkxtck & Coach Mfg. Co.
(Controlled by General Motors Corporatien)
1. I. B. BaI)co(k, exec, vice pres. &
Treas. & dir.
2. Albert Bradley, dir.
3. F. J. Fisher, dir.
4. G. A. Green, vice pres. & dir.
5. E. R. Breech, dir.
6. P. H. Geiper, dir.
7. J. L. Pratt, dir.
8. P. W. Seiler, chairnum, president
& director
9. A. H. Swayne, dir.
10. T. S. Merrill, sec. & dir.
11. H. C. Grossman, dir.
12 H. M. Hogan, dir.
13. H. E. Listman, dir.
14. V. P. Little, vice pres. & dir.
15. D. L. Tate, comptroller & dir.
(Informat (in compiled from Moody's Manual of Investments, American &
Foreign, 1934.)
Directorships of Directors of Yellow Truck & Coach Mfg. Co.
(Information compiled from Poor's Directory of Directors, 1934, and from
other sources where noted.)
Irving B. Babcock, exec, vice pres. & dir.
1. General Motors Truck Corp., exec, vice pres. & dir.
2. I'ellow Manufacturing Accept. Corp., pres. & dir.
3 Hertz Drivurself Corp., pres. & dir.
4. The Greyhound Corp., dir.
5. Terminal Cab Corp., dir.
1294 MUNITIONS INDUSTRY
Albert Bradley, dir. :
1. General Motors Corp., vice pres.
2. Beudix Aviation Corp., el)r. fin. ('(imm. & dir.
3. Adam Opel A. G., dir.
4. General Motors Corp.. mem. tin. coram. & dir.
5. General Avialidii Corp., dir.
Frederick J. Fisher, dir. :
1. General Motors Corp., vice pres. & dir.
2. Fisher & Co., pres. & dir.
3. General Motors Secur ties, dir.
4. Baldwin Locomotive Works, dir.
5. Michigan Bell Telephone Co., dir.
6. Mich gan Central R. R., dir.
7. Cleveland, Cincinnati, Chicago & St. Louis R.R., N.Y., dir.
8. Postal Telegraph Co., dir.
9. United Chromium Corp., dir.
10. Senior Investment Corp., pres. & dir.
11. General Aviation Corp., dir.
12. Transcontinental & Western Air, Inc., dir.
13. Udylite Process Co., dir.
14. North American Aviation, dir.
15. Vickers, Inc.. pres. & dir.
16. Adam Opel (Germany), dir.
17. General Motors Management Corp., dir.
18. General Chromium C<irp.. dir.
19. General Motors Holding Corp., dir.
20. General Motors Truck Co., dir.
G. A. Green, vice pres. & dir. :
1. General Motors Truck Corp., vice pres.
Ernest R. Breech, dir. ;
1. General Motors Corp., general asst. treas.
2. Transcontinental & Western Air, Inc., dir.
3. General Aviation Corp., dir.
4. North American Aviation Corp., dir.
5. Eastern Air Transport, chr. ot board.
P. H. Geiper:
1. Yellow Truck & Coach Mfg. Co.. dir.
J. L. Pratt :
1. Yellow Truck & Coach Mfg. Co., dir.
Paul Waldo Seller:
1. Yellow Truck & Coach Mfg. Co., dir., chr. of bd., pres. & gen'l mgr.
Alfred Harris Swayne, dir. :
1. General Motors Corp., vice pres. & dir.
2. General Motors Acceptance Corp., chr. of bd.
3. Lehigh Valley R.R. Co., dir.
4. C. Tennant Sons & Co., dir.
5. St. Louis Southwestern Ry. Co., dir.
6. Irving Trust Co., dir.
7. General Exchange Insurance Corp., dir.
8. General Motors Export Co., vice pres. & dir.
9. National Automobile Chamber of Commerce, vice pres. & dir.
10. North River Savings Bank, trustee.
11. E. W. Bliss Co., dir.
12. North Star Insurance Co., dir.
13. General Reinsurance Corp., dir.
14. General Alliance Corp., dir.
15. Stuyvesant Insurance Co., dir.
Thomas S. Merrill, sec. & dir. :
1. General Motors Corp., sec.
Harry C. Grossman, dir. :
1. General Motors Truck Corp., asst. sec. & dir.
2. Yellow Mfg. Accept. Corp., asst. sec. & dir.
3. Yellow Sleeve Valve Engine Works, Inc., asst. sec. & dir.
4. Hertz Drivurself Stations, sec. & dir.
MUNITIONS INDUSTRY 1295
Harry C. Grossman, dir. — Continued
5. Sterrett Operating Service, Inc., as9t. sec.
6. Atlantic Greyhound Lines, Inc., sec. & dir.
7. Canadian Yellow Cab Mfg. Co., Ltd., asst. sec. & div.
8. Yellow Manufacturing Credit Corp., asst. sec. <fe dir.
9. Atlantic Greyliound Lines of N.C., Inc., dir.
H. M. Hogan :
1. Yellow Truck & Coach Mfg. Co., dir.
H. E. Listman :
1. Yellow Truck & Coach Mfg. Co., dir.
V. P. Little:
1. Yellow Truck & Coach Mfg. Co., vice pres. & dir.
D. L. Tate :
1. Yellow Truck & Coach Mfg. Co., comptroller & dir.
DiEEcrroRs and (jFt'icERS OP Vauxhall Motors, Ltd.
(Information compiled from Moody's Manual of Invi stmcnts, American &
Foreign, 1934.)
Leslie Walton, chairman & director. A. VV. Laskey, director.
C. J. Bartlett, managing director. Thomas Mackenzie, secretary & direc-
H. S. Broom, director. tor.
C. G. Griffin, director. J. D. Mooney, director.
L. J. Hartnett, director. A. F. Palmer Phillips, diiector.
W. O. Kennington, director. T. A. Simpson, director.
C. E. King, director.
DiEECTOBSHIPS OF DIRECTORS AXD OfFICKKS OF VaUXHALL MoTOKS, LtD.
(Information compiled from Directory of Direcfrs fur 1934, Thomas Skin-
ner & Co., London.)
Charles John Bartlett, dir. :
1. A. C. Sphinx Sparking Plug Company. Ltd., dir.
2. Delco-Remy & Hyatt, Lt., dir.
3. Vauxhall and General Finance Corp., Ltd., dir.
Harry Skeet Broom, dir. :
1. Broom & Wade, Ltd., chr. & managing dir.
2. B. E. N. Patents, Ltd., dir.
3. Delco-Remy & Hyatt, Ltd., dir.
4. Frigidaire, Ltd., dir.
Cyril G. Gi iffln :
1. Vauxhall Motors, Ltd., asst. mng. dir.
L. J. Hartnett:
1. Vauxhall Motors, Ltd., dir. & export mgr.
W. O. Kennington, dir. :
1. A. C. Sphinx Sparking Plug Co.. Ltd., dir.
2. Delco-Remy & Hyatt, Ltd., dir.
< ". E. King:
1. Vauxhall Motors, Ltd., chief eng.
A. W. Laskey :
1. Vauxhall Motors, Ltd., dir. & gen. supply mgr.
Tiiomas Mackenzie :
1. Vauxhall Motors, Ltd., sec. & dir.
James David Mooney, dir. :
1. General Motors Corp. of Detroit, dir.
2. Delco-Remy & Hyatt, Ltd., dir.
A. F. Palmer Phillips, dir. :
1. Vauxhall and General Finance Corp., Ltd., dir.
Thomas A. Simpson :
1. Vauxhall Motors, Ltd., dir.
1296 MUNITIONS INDUSTRY
Exhibit No. 458
* Ms-51
March 2, 1933.
The E. I. DuPoNT db Nemoubs Co.,
Wilmington, Delaware.
(Attention Mr. W. W. Rhodes.)
Pleased be advised that the following bill has been introduced in the
California Legislature :
California Assembly Joint Resolution #9 — memorializes and petitions Con-
gress to enact legislation to end all patent rights for arms, ammunition, and
other equipment used for war and that the same should be acquired by the
Government and manufactured by governmental establishments.
(S) Denton Jolly, Legal Department.
DJ:H
Exhibit No. 459
Kinetic Chemicals, Inc., DuPont Building, Wilmington, Delaware
* ais-si
77
sp 77
Maboh 6, 1933.
Colonel Aiken Simons,
Smokeless Poivder Department.
I am attaching letter received from Mr. Denton Jolly, of the legal depart-
ment of the General Motors Corporation, Detroit, and have suggested to Mr.
Jolly that all matters pertaining to arms, munitions, etc., be taken up with you.
I presume that this is a complimentary service they are offering us, as they
are constantly watching legislative bills.
(S) W. W. Rhodes,
Sales Manager.
WWR : ETR
End.
Exhibit No. 460
Ms-157
[Copy to Major K. K. V. Casey (Smokeless Pdr. Dept.)]
March 5, 1934.
Mr. E. A. Taylor,
Director, Chemical Department, CfraselU, Cleveland:
WAR department INQUIRY FOR SUPPLY OF CHEMICALS
I talked with Major K. K. V. Casey about your letter of March 28th and
the War Department inquiry attached. Major Casey tells me that this is a
part of a general program of industrial preparedness for war and that the War
Department h:is been making tentative allocations of production of the various
materials required in volume in time of war. Major Casey also indicated
that the du Pont Company has worked closely with the War Department in
this matter and that a very large production of war materials has been tenta-
tively allocated to the Du Pont Company. I understand from him that the
company's policy is to go rather far in c<:operating with the War Department
in this matter, iioth in the way of giving information and in assisting them in
planning. Of course, no promises in connection with prices are made.
The major indicated that he would be interested in receiving copies of cor-
respondence between jou and the War Department on this subject.
Ernest B. Bengeh,
General Asst. Director.
EBB : E.
* Pencil marlving
MUNITIONS INDUSTRY
1297
Exhibit No. 4()1
To : Executive Committee.
From : Chainnan of Foreign Relations Committee.
March 7, 1928.
IMPEKIAL CHEMICAL INDUSTRIES LIMITED
I attach hereto list of subsidiary companies and investment and contratual
interests in world markets of the Imperial Chemical Industries, Limited, as
furnished to me under date of March 6th by this concern.
The wide range of the companies included, as well as the foreign alliances
listed, are extremely interesting and will repay i)erusal.
(S) F. W. PiCKARD,
FWP : JMQ.
Chairnuni Foreign Relations Committee.
Imperial Chemical Industries, Limited, subsidiari/ oompanies, and investment
and contractual interests in world markets
DIRECT I.C.I. COMPANIES
Companies in Great Britain
Manufactures
Percent-
age hold-
ing
Nature of interest
Nobel Industries, Limited
Brunner Mond & Co., Ltd
United Alkali Co., Ltd
British Dyestufls Corporation, Ltd.
British Bergius Syndicate
Cassel Cyanide Co., Ltd
Castner-Kellner Alkali Co., Ltd
I.C.I. Insurance, Ltd
LCI. Estates, Ltd
Union Acid Co
Scottish Dyes, Limited
E.\plosives, etc.
Alkalis, etc
do
Dyestuffs
Cyanides.
Alkalis-..
Properties.
Selling Co-
Dyestufls.,
99.5
99.5
99.5
99.5
100
100
100
100
100
100
100
Mereer Co.
Do.
Do.
Do.
Subsidiary Co.
Do.
Do.
Do.
Do.
Do.
Do.
INDIRECT I.C.I. COMPANIES
Amalgamated Carburetters, Ltd
Arthur & Uinshaw, Ltd
Bickford Smith & Co., Ltd
British Pluviusin Co., Ltd
British Leather Cloth Mfg. Co., Ltd
British Westfalite, Limited
British Copper Manufacturers, Ltd
British Electric Detonator Co
Buxton Lime Firms Co., Ltd
Chance & Hunt, Ltd
Carville Site (1- Power Co
Cleghorn & Bates, Ltd
Curtis' & Ilarvey, Ltd
Cumbran Chemical Co
Electro Bleach & By-Products, Ltd
Eley Bros., Limited
Elterwater Gunpowder Co., Ltd
E.xplosives Industries, Limited
Elliotts Metal Co., Ltd..
Industrial Housing Assoc :
Jack, R. & T. & Co., Ltd
Kynoch Limited
King's Norton Metal Co., Ltd
Lucas & Co., Ltd
Lighting Trades, Limited
Lancashire Explosives, Ltd
Lightning Fasteners, Ltd
Malagash Salt Products
Marston John, Ltd
Nitram, Ltd., agents for British Sulphate of
Ammonia Fed.
Nobel's Explosives Co., Ltd
Nobel Chemical Finishes, Ltd
Naylor Bros., Ltd. (Slough)
Premier Electric Welding Co., Ltd
Patent Elect. Shot Firing Co., Ltd
Paper Goods Manufacturing Co., Ltd
Cycle Carburetters
Agency Co
Safety fuse
Leather cloth
do
Explosives
Metals
Electric
Limestone
.\cids
Foundry iron
Explosives & accessories-
Chemicals
Bleaching powder
Sporting amm
Blasting powder
Agency Co
Metals
Cotton yarns
Metals & amm
do.._-
Accessories & cycles.
Gas mantles
Explosives
Lightning fasteners..
Salt products
Motorcycles
Sales Co
Explosives and accessories.
Lacquers, varnishes
Paints
Electrodes
Electric detonators
Cd. bd. boxes, etc
54
Subsidiary Co
11.8
Investment.
100
Subsidiary.
100
Do.
100
Do.
100
Do.
Do.
88
Do.
100
Do.
90
Do.
50
Investment.
100
Subsidiary.
100
Do.
100
Do.
100
Do.
100
Do.
100
Do.
37.5
Investment.
96
Subsidiary.
93
Do.
100
Do.
99
Do.
100
Do.
13
Investment.
70
Subsidiary.
96
Do.
87.5
Do.
34
Investment.
100
Subsidiary .
100
Do.
100
Do.
51
Do.
51
Do.
92
Do.
100
Do.
100
Do.
1298
MUNITIONS INDUSTRY
Imperial Chemical Industries, Limited, subsidiary companies, and investment
and contractual interests in loorld markets — Continued
INDIRECT I.C.L. COMPANIES
Companies in Great Britain
Manufactures
Percent-
age hold-
ing
Nature of interest
Portland Glass Co., Ltd -
Bottles
57.5
100
99.5
100
100
22.3
96
100
100
Do.
Lime & limestone
Do.
Explosives
Do.
Blasting powder
Do.
Synthetic Ammonia & Nitrate, Ltd
Synthetic nitrogen, etc
Sales Co
Do.
Investment.
Thermit, Ltd
Thermit welding
Subsidiary.
Wakefield, W. H. & Co
Blasting powder
Do.
Walker (Alex) & Co., Ltd -
Salt cake hydrochloric acid..
Do.
FOREIGN INVESTMENTS
Company
Bickford & Co., A.-G.
Cartoufherie Beige
Societe Anonyme d'Aren-
donck.
Vise Co
Cartoucherie Francaise
Companie Continentale du
Pegamoid.
Czecho Slovak Explosives,
Ltd.
Nobel - Bickford A. G.
Trencin.
Dynamit - Action - Gesell-
schaft.
I. G. Farbeuindustrie A.-G
Roumania Explosives Co..
Union Espanola de Ex-
plosives.
Hungarian Explosives Co..
African Explosives & In-
dustries, Ltd.
Magadi Soda Co., lAd
Cartoucheria Orbea Argen-
tina.
Nobel (Australasia), Ltd...
BrunnerMond (Australia),
Ltd.
Standard Ammonia Co.
(o"f Sydney) .
Canadian Industries, Ltd..
Compania Sud Americana
de Explosives.
Brunner Jilond
Ltd.
Brunner Momi
Ltd.
Brunner INlond
Ltd.
E. I. du Pont de Nemours
& Co.
General Motors Corp
Allied Chemical Co., Ltd..
Roessler & Ilasslacber
Chemical Co.
North American Chem. Co.
Dyestufl's Corporation of
.\m erica. ,
(China),
(India),
(Japan),
Manufactures
Fuses. --
Sporting ammunition.
Explosives and powder.
Safety fuse
Sporting ammunition.
Artificial leather
Explosives.
Safety fuse.
Explosives & acces-
sories.
Explosives
Explosives & chemi-
cals.
Explosives
Explosives & fertilis-
ers.
Soda ash
Sporting & revolver
.\mm.
Explosives & Chemi-
cals.
Selling Co..
Explosives & accesso-
ries.
Explosives
Sales Co.
do...
do--_
Country
Austria..
Belgium.
do...
do-
France.
do.
Czechoslovakia.
do
Germany
do
Roumania.
Spain
Hungary.
Africa
do....
Argentina.
Australia.
do....
Australia.
Canada..
Chile
China
India
Japan
U.S. A
do...
.do.
.do.
.do.
.do.
Per-
centage
holding
100
19
42
24
11
32
25
12.5
.S2
20
1
100
60
1 42
2 20. 03
42.5
100
99
.91
5.32
14
ICO
100
Nature of intere.st
Subsidiary.
Investment & trading
arrangement for manu-
facture and sale of
Eley sporting cases in
Belgium.
Investment; limitation of
sales.
Investment.
Do.
Do.
Do.
Do.
Do.
Do.
Do.
Investment;
abstention
ment.
Investment.
Do.
Subsidiary.
Investment.
Subsidiary.
Do.
Investment.
Do.
Do.
Subsidiary.
Do.
Do.
Investment.
Do.
Do.
Do.
Do.
Subsidiary.
reciprocal
arrange-
i CommoD.
J Preferred.
MUNITIONS INDUSTRY
1299
Imperial Chemical Industries, Limited, subsidiary companies, and investment
a/iid contractual interests in world markets — Coutinued
FOREIGN ALLIANCES
Company
Manufacturers
Country
Per-
centage
holding
Name of interest
Barbier Group Explosives. -
Comptoir Beige des En-
grais Azote.
Poudreries Reunies - -
Spciete Anon, de Dyna-
mite de Matagne.
Societe Anon, de la Poud-
rerie de Carnelle.
Societe Beige de la Dyna-
mite Nobel.
Solvay et Cie
Casale Ammonia Co.
Comptoir Francais de
I'Azote.
Davey Bickford Smith &
Co.
Societe Centrale de Dyna-
mite.
Etablissment Kuhlmann.-.
Westfalisch Anhaltische
Sprengstofl A.G.
Poudrerie Royale de Wet-
teren Cooppall.
Deutsche Solvay Works
Rheinisch Westfalische
Sprengsoff A.G.
Montecatini
Societa Italiana Richerche
Industrial.
Norsk Spraengstofindustri
Akieselskab.
Cape E.xplosives Works,
Ltd.
Durant & Huguenin
Explosives
Nitrogenous fertilisers.
Black & sporting pow-
der.
Explosives
Powder
Explosives
Fertilisers & chemi-
cals.
Ammonia-
Nitrogenous fertilisers-
Safety fuse
Explosives
Dyes
Explosives & acces-
sories.
Black & sporting pow-
der.
Chemicals
Detonators, sporting
ammunition, etc.
Synthetic nitrogen
Casale ammonia
Explosives and acces-
sories.
Explosives
Dyestufls
Belgium.
do— .
-do.
-do.
-do.
-do.
.do.
France.
-do.
.do.
.do.
do..-.
Qermany-
Belgium--
Germany-
do
Italy--
do.
Norway
Africa
Switzerland-
Abstention arrangement
Belgium & U.K.
Sales arrangement for
Sulphate of Ammonia.
I/imitation of markets &
sales arrangement.
Do.
Reciprocal abstention
agreement.
Do.
Arrangement limiting
markets and quantities
of soda products.
Agreement re use of
Casale process and
plant in Eng.
Abstention arrangement.
Investment & abstention
arrangement.
Abstention arrangement
covering explosives.
Limitation of trading in
export markets.
Limitation of markets &
sales arrangement.
Investment.
Agreement re Briska
Detonators.
Restriction on nitrogen
exports.
Abstention and alloca-
tion of markets' ar-
rangement for Casale
Ammonia.
Reciprocal abstention ar-
rangement.
Investment.
Agreement relating to
production of dyes.
(There was no Exhibit marked "No. 462.")
Exhibit No. 463
I.e. I. — Meetings & Agree
To: Mr. T. R. Hanley.
From: J. K. Jenney.
August 31, 1934.
SUMMARY OF REIATIONS BETWEEN DU PONT AND I.C.I. I.O.I. PATENTS AND PROCESSES
AGREEMENT
In 1897 the Du Pont Co. and various other American explosives com-
panies entered an agreement with the Nobel group of factories in Europe, which
included several of I.C.I.'s predecessor companies, providing for exchange of
processes, division of territories, and price maintenance. The agreement covered
explosives, and military powders were included.
This agreement was later cancelled as the price provisions were deemed to be
contrary to the Sherman Law. An agreement was drawn up and signed in 1907
covering exchange of inventions and methods of manufacture. This agreement
83876—34 — pt o 19
MUNITIONS INDUSTKY
ovided for exclusive and nonexclusive sales territories, and military pow-
/vere included. It is my recollection that a provision was inserted pro-
g that governmental objection should be an adequate reason for with-
ing any information, although I presume this had always been understood.
his contract was abrogated as of December 31, 1912, and a patents and
,ret processes agreement was prepared but I think never signed due to the
ivent of the war. In any event, from the commencement of and during the
/ar there was no contractual relationship between Du Pont and any of the
iSuropean factories.
In 1919 a patents and processes agreement covering explosives, including mili-
tary explosives, was negotiated (signed 1920) with Explosives Trades, Ltd.
(later Nobel Industries, Ltd.). There was a provision excluding passing of
information contrary to governmental objection.
Under this agreement Nobels were licensed under our I.M.R. patents (1923).
It is my understanding that all of this information was given them mth the
complete approval of our Government during the war and that the licensing was
merely a formal matter giving them the right to continue to use information in
their possession. (The matter had been delayed due to a controversy over
amount of royalties to be paid).
Exhibit No. 464
This agreement made on the first day of July 1928 between E. I. du Pont de
Nemours & Company, a corporation organized and existing under the laws of
the State of Delaware, United States of America, hereinafter called du Pont,
party of the first part, and Imperial Chemical Industries Limited, a corpora-
tion organized and existing under the laws of Great Britain, hereinafter called
Imperial, party of the second part.
WITNESSETH :
Whereas du Pont and Imperial are engaged in the sale of naval and military
propellant powders and explosives throughout various countries on the Euro-
pean Continent, hereinafter more specifically referred to, and
Whereas a sales ofiice and organization is maintained by Imperial at Vienna,
Austria, and du Pont likewise maintains such an oflSce and organization at
Paris, France, and
Whereas the parties hereto have agreed that the aforesaid sales oflSces shall
hereafter offer the products of both parties in the territory hereinafter specified,
and upon the terms and conditions hereinafter set forth.
Now, therefore, du Pont and Imperial have agreed and by these presents
do agree vsdth each other as follows:
1. The terms and conditions of this agreement shall apply solely to the
following products for naval and military purposes only, to wit:
Nitrocellulose powders
Nitroglycerin powders
Trinitrotoluol* and Tetryl
Nitrocellulose for propellant powders
2. From and after the date hereof all sales of the foregoing products made
on behalf of either du Pont or Imperial in France, Belgium, Holland, Den-
mark, Sweden, Finland, Esthonia, Latvia, Lithuania, and Poland shall be under
the supervision of the manager of du Font's Paris ofiice, the expenses of
which ofiice shall be exclusively borne by du Pont, and all such sales made
on behalf of either du Pont or Imperial in Albania, Austria, Czechoslovakia,
Jugoslavia, Roumania, Bulgaria, Greece, and Turkey shall be under the super-
vision of the Manager of Imperial's Vienna Office, the expenses of which office
shall be exclusively borne by Imperial.
3. The aforesaid offices of du Pont and Imperial shall use their best efforts
to apportion the total annual sales of the above products by said offices in
accordance with the following percentages, to wit:
Nitrocellulose powders — du Pont 70% — Imperial 30%.
Nitroglycerin powders — Imperial 100%.
Trinitrotoluol and Tetryl— Imperial 70%— du Pont 30%.
Nitrocellulose for propellant powders— Imperial 100%.
it being the intention hereof that said proportions shall be maintained as nearly
as possible upon the combined sales of both offices.
4. If for any reason sales of the products of the parties hereto, above referred
to, shall fail to conform to the proportions above set forth, then it is agreed
MUNITIONS INDUSTRY 1301
that the party whose products are sold in excess of said proportions shall pay
to the other ten percent (10%) of the average gross receipts arising out of
said excess sales; it being understood and agreed that such adjustment shall
be made between the London office of Imperial and the Wilmington office of
Du Pont, and for the purpose of such adjustment only deliveries actually made
during any year shall be taken into account ; it being further understood that
total deliveries of each of said offices shall be determined as of the 30th day
of June of each year for adjustment purposes.
5. Notwithstanding the proportion of sales above referred to, it is agreed
that the quota of Imperial, with respect to nitrocellulose powders, and that of
Du Pont, with respect to trinitrotoluol, shall not exceed three hundred (300)
tons per annum.
G. The managers for the time being of said Paris oflfice and said Vienna office
shall be provided with such powers of attorney, credentials, and other docu-
ments executed by both parties hereto as shall be necessary or requisite in
oi'der to secure for said managers entree to War offices and other Government
departments to the end that the interests of both of said parties shall be served
in accordance with the spirit and intention hereof ; it being further undei'stood
and agreed that said managers shall be supplied from time to time with direc-
tions concerning prices and credit policies to be adopted with respect to the
territory served by said offices.
7. Orders placed with either party by armament firms (including Kynoch
Limited) shall be excluded from the operation of this agreement.
8. du Pont agrees that any inquiries throughout any of the foregoing terri-
tory wliich it shall receive with respect to industrial explosives shall be referred
to the office of Imperial.
9. It is understood and agreed that if, on account of competitive conditions, or
for any other reasons, either party hereto shall fail or refuse to accept an
order, such order, if accepted by the other party, shall be excluded from the
operation of paragraph 3 hereof in the determination of proportionate sales as
therein provided ; it being further understood and agreed that Czechoslovakia
Explosives Limited shall be dealt with by the parties hereto in the same man-
ner as other comi)etitors with respect to competition in countries outside of
Czechoslovakia.
10. This agreement shall not obligate either party to exchange any informa-
tion whatever with respect to manufacturing costs or sales expense.
11. This agreement shall be reviewed and modified in order to meet any
change of conditions by reason of an outbreak of war in Europe interfering
with the satisfactory operation thereof, or by reason of any change in the
German law relative to the sale of naval and military propellant powders,
explosives, and ammunition.
12. It is the purpose and intention of this agreement to secure through bath
of the offices of each party hereto, herein referred to, the greatest volume of
sales, and to that end and for that purpose the officials for the time being in
charge of said offices shall determine from time to time which party's
products will be offered in the territory served by said office, and close co-
operation shall be developed and maintained between said offices with the view
to increasing the combined sales efficiency of both, and free discussion shall
be had from' time to time on all facts bearing upon or appertaining to the
interests of either party in the proper presentation and sale of the products
herein referred to.
13. This agreement shall take the place of and supersede the agreement
made on November 10, 1926, between the parties hereto with respect to naval
and military powders and explosives, and shall remain in full force and effect
for a period of ten years beginning of the 1st day of July 1928.
In witness whereof the parties hereto by their officers, duly authorized, have
executed this agreement and have caused their respective corporate seals to be
hereunto affixed on the day and year first above written.
E. I. DU Pont de Nemouks & Company,
By (S) H. Fletcher Brown, V.P.,
Imperial Chemical Industries Ltd.
By (S) H. J. Mitchell,
Attest :
(S) E. A. Howard,
Assistant Secretary.
Attest :
(S) P. Martin,
1302 MUNITIONS INDUSTRY
Exhibit No. 465
[This is the final memo G. W. as submitted to I.C.I, for ratification]
Nawil and miUtary explosives
Memorandum (G.W.) covering extent of sales cooperation between I.C.I, and
dn Pont and localities where scheme applies.
A. Principles. —
1. Participation to greater degree in available open markets, by using sales
organization common to both ; the economies thus achieved making possible the
employment of specialist sales staff.
2. Joint organization to offer indiscriminately the subject materials of both
parties, with freedom of choice being left to purchaser.
3. No predetermined division of business is contemplated ; but it is the broad
desire to see the materials furnished from the most economic source. To enable
each party to enjoy benefit of manufacturing experience of all types it is desired
that certain nucleus tonnages should be envisaged ; these are detailed herein-
after.
4. There should be three sales areas, i.e.. South America, Europe, and Asia.
The party with the existing trained sales organization shall operate in each of
the three areas. Thus du Pont will function in Euro^je and South America
and I.C.I, in Asia.
5. The party securing an order shall pay commission to the other party for
assistance rendered.
6. It is understood that neither party shall do anything hereunder incom-
patible with the laws or desires of its respective government.
7. This memorandum supersedes others of earlier date dealing with similar
products.
B. Produets (naval and military types). —
1. Nitrocellulose powders.
2. Cordites.
3. Other nitroglycerine powders.
4. Trinitrotoluene.
5. Other simple and combined explosives for naval and military uses.
6. Nitrocellulose for manufacture of propellant powders.
7. Other chemical accessories for use in manufacture of naval and military
powders ; e.g., centralite, diphenylamine, etc.
C. Definition of sales areas. — ■
1. South America will comprise all countries in the South American Con-
tinent, including Cuba, Haiti, Santo Domingo, Mexico, and Central America.
2. Europe will include all countries currently known as " Europe " with
addition of Turkey and Persia.
3. Asia will cover all countries concurrently known as "Asia " except Turkey
and Persia.
4. It is understood that the United States, its possessions and dependencies,
as well as the British Empire, its possessions and dependencies, are specifically
excluded from the scope of this agreement.
D . 0 rya n iza tion. —
Both companies vdsh to adopt the most efficient method of promoting sales
that can be devised.
It is believed that this will be accomplished by having sales handled as much
as possible by persons entirely devoted to and experienced in military sales.
Therefore, it is proposed to :
Divide the sales area as shown in section C.
Have available for each territory a salesman, assisted if necessary, entirely
'devoted to the sales of these products.
The duties of these salesmen to be :
1. To study carefully the field and make recommendations as to the course
of policy to be followed in his field. These recommendations to be submitted
to the smokeless powder department of E. I. du Pont de Nemours and the
■cordite department of I.C.I, for approval. When approved, the execution will
.be the responsibility of the salesman.
2. The selection and proposal of agents.
MUNITIONS INDUSTRY 1303
3. Once the agents are chosen, to direct them as to their efforts ; to supply
them with prices, specifications, and the special information necessary for this
worli ; to prepare all contracts with the customers and sign them when so
authorized; to obtain for these agents the assistance of specialists if required;
to attend trials and adjudications ; to study all new developments of the
military business, and particularly in the firearms business. In connection
with the agents, suggest new studies and new developments in powder which
may lead to sales.
4. To obtain direct from the smokeless powder department of E. I. du Pont
de Nemours, in Wilmington, and from the cordite section of I.C.I, of Loudon,
prices, specifications, technical information, and the assistance of specialist*
when required.
5. To report to the smokeless powder department of E. I. du Pont de
Nemours, Wilmington, and to the cordite section of I.C.I, all the activities of
the agents ; of competitions and all military developments in the customer's
country. All prices and trade information on military propellants and explo-
sives and such other military materials as may be possible.
6. To decide as to which company's products to offer in a certain case,
bearing in mind the chances of sales, and the customer's desire for the products
of one or the other company. In each territory, the salesman in charge must
make this decision in view of his close knowledge of the field. While the
decision of the salesman will have to be followed in this matter, the smokeless
powder department of E. I. du Pont de Nemours and the cordite department
of I.C.I, reserve the right to change the salesman if his decisions are not
considered by them to be in the best interest of the two companies.
7. I.C.I, will be the normal source for cordite of all types ; and where possible
will supply nitrocellulose powders up to a maximum of 300 tons per annum for
progressive manufacturing experience.
8. Du Pont will furnish nitrocellulose powders ; and where possible will make
cordite to a maximum of 300 tons for manufacturing experience.
The smokeless powder department of E. I. du Pont de Nemours & Company
and the cordite department of I.C.I, are to take the responsibility for —
(a) The establishment of sales prices.
(b) The approval of the plan of activities in the territory.
(c) Specifications.
(d) Manufacture, inspection, and shipping.
(e) Credit terms and contractual conditions.
(f) Providing specialists when necessary.
E. War clause. — In case of a war of major proportions, where it is found
by one or both parties that the continuance of the agreement is an embarrass-
ment, either politically or commercially, the agreement may be suspended dur-
ing such an emergency by mutual consent.
F. Duration. — To end of calendar year 1934; automatically renewable unless
six months' prior notice be given.
10th, OCTOBEE, 1932,
Nexo York, N.Y.
[Memorandum]
EXPLANATORY NOTES ON SAl^S ARRANGEMENT (G.W.) DATED 1 OTH OCTOBEK 1932, FOR
MILITARY EXPLOSIVES
Para. A.2. — The salesmen are to give absolutely equal prominence to the
products of both companies, as it is desired that both shall have an opportunity
of manufacturing all types of military powders and explosives in demand, the
quality of both being equal. Should a purchaser, however, insist on preferring
the manufacture of one of the companies it will be unwise to oppose freedom
of clioice, as the first essential is to get business and, if possible, a greater
proportion than hitherto of the trade available.
Para. A.^. — du Pout will bear the expense of sales organization in South
and Central America and all retaining fees paid to agents for the sale of
military explosives other than commission on specific sales, which will be paid
by the company taking the order. I.C.I, will do likewise for Asia, subject to
1304 MuisriTioNs industry
Mr. Fowler's report on his investigations in China. As regards the cost of
Eui'opean representation, I.C.I, will contribute 50% of the expense but not more
than £2,500 per annum, Du Pont being responsible for retaining fees paid to
agents.
Paras. B.2, B.S, and D.7 and S. — I.C.I, will be the source of supply for
cordite mark 1, cordite M.D., C.S.P.2, Ardeer cordite and ballistite to be
dealt witli under this agreement.
In the event of any change in Governments' requirements which may have
the effect of substantially altering the types of powder in demand, it is recog-
nized by the parties that discussion should take place with a view to so
adjusting the agreement as to bring about an equitable division of trade.
Para. B.l. — Du Pont may, if called upon, offer powder made up into charges,
but in case of an inquiry for I.C.I, material made up into charges that com-
pany must be consulted as to procedure so as to take care of certain domestic
arrangements.
Bearing in mind the desire of both parties to discourage as much as possible
the erection of factories, it is understood that no project of this kind will be
undertaken in South America and China without prior consultation and mutual
agreement depending upon circumstances.
In Europe there will also be collaboration between the parties before any
factory schen;e is proceeded with by either party and it is understood that due
to their various commitments in Europe no factory scheme shall be carried
out without the express agreement of I.C.I.
Para. C. 2. — As regards Spain, Portugal, and Czechoslovakia, it is clearly
understood that there is to be no sales activity without prior con.sent of I.C.I.
so as to take into consideration their relations with the Union Espanola de
Explosives and the Czechoslovak Explosives Company.
Para. D. 1. — The salesmen for Europe and South America should reiwrt any
information and particulars of enquiries for military small arms ammunition
and comiionents to I.C.I, without being concerned directly in that business.
In order to avoid any possibility of their disturbing the general policy of
either of the parties, the salesmen will consult fully with the authorized
representatives of the parties in their respective territories.
Para. D. 2. — While it will be the duty of the salesmen to select and propose
agents, the final decision for the appointment of such agents must rest with the
principals of the two companies, and the agent shall be given, as and where
necessary, separate contracts from both companies. Quotations and contracts
shall, where possible, be signed by the company offering.
London, l-^t Fchruari/ 19S3.
It is agreed by and between E. I. du Pout de Nemours and Company, a cor-
poration organized and existing under the laws of the State of Delaware,
United States of America, and Imperial Chemical Industries Limited, a cor-
poration organized and existing under the laws of Great Britain, that the agree-
ment entered into between them on the first day of July 1928 relative to sales
in certain countries of certain products for naval and military puriwses, be
and the same hereby is terminated and cancelled, this tenth day of October 1932.
E. I. DU Pont de Nemours and Company,
By
Attest :
Imperial Chemical Industries, Limited,
By
Attest :
MUNITIONS INDUSTRY 1305
Exhibit No. 466
* 135-Nobel Indus Ltd.
135— Nobel Indus Ltd.
(Special)
Ms-124
Ms-59
April 8, 1932.
]Mr. A. Felix du Tont,
General Manager.
COMPETTITION IN THE FOREIGN MILITARY FIELD
I.C.I, and du Pout are meeting a considerable growth of competition in
foreign military markets. Our competitors are rapidly improving the quality
of their products and likewise there has been serious price cutting on the part
of Bofors and the Italians.
In addition because of the flux of the political situation in Europe there is
danger from possible new groupings of competitors.
To meet the above situation we feel we must stand very closely with I.C.I.
and organize with them a strong effort to deal with this situation. This
naturally brings up the point as to whether or not our present agreements with
I.C.I, place the two companies in a position to meet the changing situation.
The attached memorandum, prepared by Col. W. N. Taylor, indicates that
the present European agreement is not in fact as originally planned and may
eventually work out to the disadvantage of both companies, particularly
Du Pont.
T'he European agreement was based on a division of business with penalties
for over-proportionate sales.
As a contrast to this type of agreement we have in South America and in
Asia an agreement based on payments of commissions for mutual assistance.
"We have no agreements for either Africa or Central America.
If some arrangement can be made by which the position of I.C.I, and Du
Pont will be strengthened the two companies will then be in a much stronger
position to handle increasing competition when it develops.
We believe that this is an opportune time to take up with I.C.I, the whole
world competitive situation and try to arrive with them at a better solution.
We have talked this matter over with Mr. W. R. Swint as to any possible
effect these conversations with I.C.I, may have on the relations of the two
companies. To this he can see no objection.
I am, therefore, recommending that Military Sales be authorized to discuss
the matter at length with I.C.I, to see if closer and better cooperation can be
developed. If it should come about that any modification of existing agree-
ments or that new agreements are necessary, we will then bring the Foreign
Relations Department into the negotiations.
K. K. V. Casey, Director.
KKVC :MH
[Memorandum 'On Paris Office Smokeless Powder Department]
THE SITUATION TO DATE
During the last ten years the gross sales of the Paris office have averaged
$401,000 a year. Cost, freight and insurance have been $239,000 a year, aver-
age. The sales expenses of the Paris office, including odd charges of somewhat
over $1,000 charged to our account fi'om the Wilmington office, have averaged
$26,400 a year and the net average benefit per year for the last ten years has
been $135,000. To date the total net profits of the Paris office, including cost
and Paris office sales expenses, have been $1,412,801.54.
We liave averaged during these ten years around 700,000 pounds a year and
there is no reason to suppose that during the next ten years we could not av-
erage the same quantities.
The business obtained during the last ten years might all be described as
exceptional business and has appeared unexpectedly, and at irregular intervals.
* Pencil markings.
1
1306 MUNITIONS INDUSTRY
In this territory all the Governments to which we sell, with the exception of
the very small ones, have their own powder factories and manufacture their
own current requirements.
The noumanufacturing countries buy annually altogether about 150,000
pounds and the private loading companies, Kynoch, Fabrique Nationale, Dort-
recht, Sellier and Bellot about 150,000 pounds.
Nevertheless, there are other opportunities. Each of these countries has a
large program for war reserve and in these cases they wish exceptionally good
powder, cheap prices and quick delivery for large orders and long time credits
on which to buy. In this held Du Pont can successfully compete.
The programs for war reserve in this territory, known to be in contemplation,
are about 25,000,000 pounds. We have under discussion at this moment the
following :
Esthonia 650, 000 I
Latvia 700, 000 ^
P. land 8, 800, 000
We could nomially expect to receive, over the next ten years, about one-
third of these war reserve orders, which would average us around 800,000
pounds a year.
There is no reason to suppose that in the future there will not develop sales
opi3ortunities similar to those of the past. These will depend on the amount
of money available and on the development of collateral equipment.
There is also to be considered the usefulness of the Paris office and its
agents in tlie case of an outbreak of war.
War is of uncertain duration ; profiting by it to the utmost means getting
orders at the earliest possible date.
The war of 1914-18 had the peculiarity of being a simultaneous outburst in-
volving nearly all of Europe in a very short time and forcing an immediate
need for powder production simultaneously by all these countries.
The next war will probably not be a general outburst. The political grouping
is very different, and the present mobilization plans suggest a gradual develop-
ment, one counti-y entering into war after another.
There will be an immediate rush to du Pout by the first countries entering
into war but by these countries only. The neutral countries will begin to lay
in supplies. However, they will expect to be sold to, and the contracts will be
made in Europe. Hence the necessity of having an organization able to sell
in the purchasing country and in several countries at once. Otherwise du Pont
will be the last to receive orders and only after the European competitors
have been filled up. Hence a serious loss of profit.
It appears reasonable to consider that the European military powder field
is a territory to be exploited until we have considerably more adverse expe-
rience than w^e have at present.
What are the requirements for the maintenance of our sales in this territory?
1. The I.C.I.-du Pont military sales agreement. This agreement recognizes
du Pont's rights to sell within the territory. Without this agreement I.C.I,
would undoubtedly contest our rights in this field.
This agreement allowed I.C.I, to profit from our sales experience and our
foreign organization in return for not contesting our rights to the European
field. The agreement is at present working satisfactorily, as our Paris office
sells for I.C.I, probably more than they would sell themselves and I.C.I, is
satisfied with its work. A considerable part of the Paris office's time is
devoted to I.C.I, work.
On this occasion it is to be noted that I.C.I, in their territory has not made
a single sale of any du Pont commodity since making this agreement and have
only offered du Pont material in one instance.
Any method of working this territory must be so arranged as to maintain the
du Pont rights under this agreement.
2. The maintenance of a good agent in each country. One familiar with our
business and interested enough to continually work by good times and by bad
times and supported by us so that our customer understands that they cannot
go around him, which is necessary in keeping all the different territories active
at once. If the agent lets up this pressure, the particular type of exceptional
MUNITIONS INDUSTRY 1307
situation on which our business is based will be lost through oversights, and
we are only able to seize these occasions by constant vigilance.
3. An organization capable of selecting agents and keeping them working at
all times and not just waiting for what will happen.
4. Sufficient technical oversight by du Pont to follow all the technical and
tactical developments in Europe and to keep up to the customer's continually
changing requirements and competitive developments.
5. A knowledge of the European credit situation suflicient to insure payment
and to prolit by the employment of du Font's superior financial structure over
that of our competitors.
6. The actual drawing up of contracts must be done by an authorized Du Pont
employee, who knows the policy of the company and who can decide definitely on
the spot the vai'ious phases of the bargaining that goes on in the making of a
European contract.
7. A du Pout employee to handle complaints. If complaints are not handled
promptly, the customers immediately drop the seller, so complaints should not
be allowed to accumulate. Someone residing in Europe must visit the cus-
tomers immediately. This need not be a technical man, the principal require-
ment being tact.
S. du Pont employee capable of handling and following the question of
agreement with competitors, permanent or temporary.
Attached is a letter written to the agent by the Paris office in December 1931
and the agent's answers. Note that Birkman took the letter to mean that we
contemplated giving up the office.
PRESENT DEVELOPMENTS
So far this report covers the situation of the Paris office, provided all external
conditions remain approximately the same.
However, these conditions are changing.
The basis of our continuing in Europe is the I.C.I.-du Pont military sales
agreement. This is working out differently from what was expected. As origi-
nally planned it was expected to result in a division of sales over the whole
territory, but, in fact, it has developed into a division of territory.
The contract left the development of each territory in the hands of the man-
ager of the respective sales offices and in the case of the du Pont office tliey
have kept I.C.I, active in their field but the I.C.I, office has not kept du Pont
active in its tield. They never offer du Pont products and they never invite the
du Pont employees to visit the territory or know the agents.
To all attempts made to change this situation from Paris office, they reply
that there is no sale of nitrocellulose powder in that territory and it is the con-
dition of the territory and not any ill will on their part that brings about this
condition.
The result at this moment is that the du Pont products are unknown in a
large part of Europe and du Pont has no direct contacts in these territories.
This is the beginning of an evacuation of the European territory and to go
unpressed or to diminish our activities would appear to lead inevitably to the
territory falling back into I.C.I. 's hands.
Another matter, which is developing, is the improvement in the manufacture
of powder in a number of our customers' countries and the possibility of more
competition developing. We already have serious price competition on the part
of Bofors and in recent adjudications bids are appearing from Muiden in
Holland, Coopal in Belgium, Bombrini Parodi in Italy and Zagozdzon in
Poland ; also the Finnish factory is beginning to offer in the Baltic States.
The developments which are now taking place in Europe are also tending
towards regional trading agreements and, if the proposed Danubian Cust'jm
Union develops, the Czechoslovakia Explosives Industries, Limited, will un-
doubtedly claim priority in that territory. In this company I.C.I, are interested
to approximately 35%. They also have interests in a Spanish factory, in a
factory in Roumania and indirect interest in Italy.
It was largely to protect these interests that they entered into this agreeiuent
with us claiming the Baltic and Mediterranean countries for themselves.
Under our present agreement, if any of these factories grow strong enough
to handle the export in the other states in the territory, it is possible I.O.I.
1308 MUNITIONS INDUSTRY
will make an arrangement with them and give them the rights in return for
other concessions. Hence there is a considerable pressure from all circumstances
to push us out of Europe.
Therefore, we may be forced to examine whether or not we should get out
or whether or not we should make a struggle to develop the situation to our
advantage.
On the other hand du Pont is expanding into South America and Asia and
there are other fields of interest such as Central America and Africa and it
does not seem quite consistent for us to allow ourselves to be pushed out of
Europe, which is a large and potential military market if we desire to extend
our export sales.
It would seem that the time was ripe for a discussion with I.C.I, on this
agreement, on the basis of the rising competition, to see if a new agreement
could be developed either for Europe alone or including the other territories
whereby to meet this competition, to find some way of working closer and
closer together and forming a strong group which would be able to deal with
comijetitors to a series of temporary arrangements or otherwise and to form
an organization sufiiciently elastic to meet the constantly changing conditions.
It would appear that either we must face the gradual evacuation of Europe
or take steps to consolidate the whole position before competition and new
developments overcome us.
We have nothing in the facts before us that would justify us in accepting
" death " without a struggle and every reason to think we might successfully
work out a more advantageous situation than in the past.
SUGGESTIONS POE DEVELOPMENT
In view of the probability of a Dauubian confederation and in view of
I.C.I. 's stock holdings in powder companies in their territory, a reconsideration
of our European agreement will shortly be forced upon us.
This will undoubtedly start a reconsideration of all our I.C.I, export military
sales agreements.
In such a situation we would desire to hold the directing position. There-
fore, we should begin at once to prepare our plans.
Therefore, recommend that during 1932 we develop with I.C.I, a suitable
world arrangement.
The following points to be considered :
1. To better utilize the present facilities of the two companies and economize,
where possible, the duplication of effort.
2. Keeping both companies in touch with the entire field.
3. To assure that there is no possible market without a constant sales effort.
4. To present a united front to competitors. This should be well under way
before competition gets stronger or better organized and should be the obstacle
against which our conilietitors must struggle, rather than letting the com-
petitors be the obstacle against whom we struggle. The competition is the
same in all the export markets.
5. To be in a position to restrict the activities of the local factories in which
I.C.I, has stock interest to their original national territory or to deal suitably
with their expansion in case of new political territorial arrangements.
Exhibit No. 4G7
PO-105S
November 30, 1932.
A. C. Major, Esq.,
Imperial Chemical Industries, Imperial Chemical House,
MiWbank, London 8.W. 1.
Dear Sir : Regarding the agreement on military materials between Imperial
Chemical Industries, Limited, and E. I. du Pont de Nemours & Co.. I believe I
am right in stating that the memorandum prepared by Mr. White, with some
corrections made by Major Casey, and further corrections made by Mr. Major,
is considered by both sides to be satisfactory and a sufficient text for the
general agreement between the two companies.
I have received, however, a cable from Wilmington with regard to the above,
stating that:
MUNITIONS INDUSTRY 1309
" It is important that a war clause be included in the agreement providing
for some means of suspending scope of the agreement in any or all territories
in the event of the development of hostilities of major proportions."
I, therefore, suggest that an additional clause be added to the White meiuo-
randum as follows :
" In case of a war of major proportions, ^\•here it is found by one or both
parties that the continuance of this agreement is an embarrassment, either
politically or commercially, the agreement be suspended during such an emer-
gency by mutual consent."
I understand that the details of how the above agreement is to be put into
execution are to be arranged between the foreign dept. of Imperial Chem-
ical Industries and the Paris office of E. I. du Pont de Nemours, and that
these details are those mentioned in your memorandum of Sept. 7, under
the paragraph entitled " Plan of Execution."'
In referring to that document I note that the fact that there should be
three sales areas is already covered in the general agreement. It is also
mentioned in the document that the du Pont Co. will function in Europe and
South America and Imperial Chemical Industries in Asia. Therefore, I propose
that the " plan of execution " be covered by a memorandum as follows :
The salesman for Europe will be the manager of tlie du Pont de Nemours
Paris office.
In the execution of his duties he will act in consultation with the
manager of the Paris office of Imperial Chemical Industries, who must be
kept informed of the activities of this territory in detail and who shall
have the duty of coordinating the work of the salesman with the! general
military explosives and propellant sales policy of Imperial Chemical
Industries on the Continent of Europe.
The salesman should, without taking direct part in the sales of military
cartridges, report to the manager of the Paris office of Imperial Chemical
Industries any information he may obtain ahmg these lines and assist
the cartridge salesman in every way in his power.
Imperial Chemical Industries to pay an agreed part (not exceeding
half) of the expense of the Paris office, such part not to exceed the sum
of £2,500 per annum including traveling expenses, unless with the special
consent of Imperial Chemical Industries.
Tlie salesman for South America will be Mr. N. E. Bates, Jr. The
du Pont Co. shall pay all expenses covering his work in South America.
The salesman for Asia is to be determined by Imperial Chemical Indus-
tries, who will, upon having obtained the necessai'y information, give the
du Pont Co. the name of the salesman and the address where all corre-
spondence should be sent. Imperial Chemical Industries shall pay all
expenses covering his work in Asia.
That current questions of cooperation that may arise from day to day
shall be settled between the manager of the foreign dept. of Imperial
Chemical Industries, at London, and the manager of the Paris office of
E. I. du Pont de Nemours who will act as the representative of the military
sales dept. of E. I. du Pont de Nemours & Co.
That the question of reports and letters of instructions to the salesman
shall be prepared as soon as possible by the manager of the foreign dept.
of Imperial Chemical Industries, London, and the manager of the Paris
office of E. I. du Pont de Nemours, and when finally determined upon,
shall be sent out by each company to their own employees concerned in
this matter, setting down in detail their duties and explaining clearly
what is expected from them.
Each company will inform their respective interested foreign representa-
tive of the changes in the working of the sales arrangements and Im-
perial Chemical Industries, in the case of South America and Europe, will
give the above mentioned joint salesmen, proper credentials to permit
them to begin work, and the Du Pont Co. will give the proper credentials
to the salesman for Asia.
If the above is agreed upon by you, it appears to me that we can then set
to work without any further discussion as to principles.
Very truly yours,
William N. Taylor.
WNT/MS. I
1310
MUNITIONS INDUSTRY
Exhibit No. 468
TRANSLATION
(11-11-32)
*135 Nobel Indus.
Ms-80-A
Ms-2-A
135 (Special)
Cipher Word
To Paris Office
Cipher Word
To Paris Office
ADLEJ
KOAWJ
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No. 838
Send the following To
Col. W. N. Taylor
By Telephone
Stop
Replying to your Letter
No. 2511
If
50/50
Arrangement
On
All Sales
decided upon
For Europe
There is
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Setting up
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how-
profits
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determined
Stop
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H. J. Mitchell
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agreed that
we would
do as
We had
in the past
in
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are
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GYNNA
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'Pencil markings.
Exhibit No. 4159
135-Nobel (Special)
E. I. Du Pont de Nemours & Co.,
Dyestuffs Department, Sales Division,
No. SW-MS-35, Deceinhcr 29, 1932.
Private & confidential.
Dyestuffs Department,
Wilmington, Delaware.
EncIoj>ed herewith please find (1st mail only) original signed copy of a
report covering I.C.I.-du I'ont cooperation for the sale of military explosives in
China. An unsigned copy is also enclosed and another one will follow by second
mail. Another signed copy is kept in the Shanghai Military Explosives file.
Very few comments are necessary as I already forwarded you my views on
the subject by last mail. You will note in paragraph two that cables on behalf
of du Pont will presumably be for our account. I take it that you are agreeable
to this.
Please note the fifth paragraph of page one dealing with the arrangements
made between I.C.I, and the Jardine Engineering Corporation. \'ou will note
that I.C.I, do not propose to change their mode of distribution through Jardinej
whom they con.sider entirely satisfactory. You will also note that they desire!
to exchange the present monthly arrangement for one covering a period of 6
months to 1 year. I do not know how this will appeal to you but I take it
that you will have no objection. Regarding the Vickers agency, I.C.I, jxiinted
out to me that they are themselves manufacturers of finished ammuuitionl
through the firm of Kyuoch. This means that Jardine is in the advantageous!
position of playing off Kyuoch against Tickers but, as mentioned in the report,!
I.C.I, and Yickers have a close working arrangement so that no difficultiesj
should arise. You will also note that I.C.I, expect Jardine not to get any new]
competitive agencj' without the consent of I.C.I, and du Pont. Tliis should]
automatically avoid any future difl!iculties.
' MUNITIONS INDUSTRY 1311
You will note also paragraph one of page two in which the advantages of
operating through Jardine are being stressed. The reason therefor is that I was
at first a little bit skeptical about the efficiency of Jardine's which as you
know is an old established and very wealthy firm having a large foreign staff.
It was my feeling that Jardine's was a rather " expensive " firm which is known
through China as the "princely house of Ewo." On the other hand if I.C.I.
who have the experience are satisfied that the services of Jardine's are all they
should be. I have no objection. Mr. Fowler was particularly insistent that the
large foreign staff of Jardine's made it imperative for them to work at top
speed in order to cover their overhead and make profits, an argument which
appears sound.
You will also note the third paragraph of page two in which the possibility
of going to Nanking to introduce the I.C.I, and Jardine people was considered.
I discussed the matter with C. Y. Wang who feels that Jardine's ought to have
sufficient contacts with Nanking but we finally decided that if I.O.I, feel that
such a trip was of interest we shall be very glad to take it.
You will also note that the question of the Jardine Engineering Corporation
being guaranteed by Jardine, Matheson & Co. was discussed. This seems to be
somewhat far-fetched but after all essentially sound.
After having looked into the report you will doubtlessly communicate with
I.C.I.'s headquarters. When you do this please keep in mind that their own
copies of the report will take a week or 10 days more to reach London than this
letter.
Please let me know if the arrangements made meet with your approval.
Shanghai Dyestuffs Office,
Signed F. A. M. NoEa^-TiXG.
Director of Sales for China.
FAMN : AL
enclos.
I.C.I.-du Pont cooperation for sales of military poiod&rs and proijellants in China
China
As arranged in London and in accordance with the cable and memorandum
sent to Mr. Fowler while in Japan, on arrival in China meetings were imme-
diately held with Dr. F. A. M. Noelting on the 8th December and with Mr.
W. H. Way of Jardine Engineering Corporation Ltd. on the 9th Decem])er in
order to discuss the best methods for cooperation between I.C.I, and Dupont
in China for the sales of military powders and propellants. Dr. Noelting had
received from his principals prior to the meeting the same memorandum as was
sent to Mr. Fowler and was fully conversant with the suggested new
arrangements.
The present I.C.I, arrangements in China are that the Jardine Engineering
Corporation are the agents and obtain contracts and owing to their exceptional
position with regard to contact with the Government authorities, they are
remarkably well placed to obtain the business. If enquiries are received by
I.C.I. (China) these are passed on to the J.E.C. I.C.I. (China), however, act
as " go-betweens " between the J.E.C. and I.C.I. London and tlie arrangement
is that the 71/2% commission is divided, 5% to the J.E.C. and 2i^% to I.C.I.
(China). This connnission is reduced in certain circumstances in order to
obtain orders where it is necessary to cut the price. Cable charges are all
for London's account, and in the following proposals cables on behalf of Duponts
would presumably be for the account of Wilmington.
Duponts have no separate organization in China for the sale of explosives,
orders having been secured by Dr. Noelting himself and liis Chinese manager,
Mr. C. Y. Wang. The latter is an American-trained Chinese and though a dyes
technologist and salesman without special experience of munitions business, is
a capable man who has now acquired considerable knowledge of explosives.
Wang also has good contact with Government authorities and owing to Duponts'
dyestuffs selling organization in China having been understaffed by Americans,
Wang has for some period been placed in a position of considerable
responsibility.
It was pointed out to Dr. Noelting that the J.E.C. has given every satisfac-
tion to us here in the handling of the munitions business in the past and further
that after discussion with the board of I.C.I. (China) it had been decided that
it was desirable to continue with the J.E.C. and that better results would be
1312 MUNITIONS INDUSTRY
thus achieved than if any change tooli place, such as the munitions business
being taken over entirely by I.C.I. (China).
Another point which would render any change from the present methods
undesirable is that in the event of the I.C.I, agency being withdrawn from the
J.E.C. it is probable they would retaliate by taking the agency for some com-
petitor, such as Bofors, who are the greatest competitors of both I.C.I, and
du Pout in China. Bofors have already some time ago made tentative approach
to the J.E.C. regarding giving J.E.C. the agency for their products, but without
success, as J.E.C. turned down the proposal. In any new arrangement to be
made with J.E.C. it would be advisable to give a longer period of agreement
tlian the present monthly arrangement, say for six months or one year, and to
make a condition that J.E.C. would not take on any new agency for competitive
products without the consent of I.C.I, and Duponts. The reason for saying
" new " agency is that J.E.C. hold the agency for Vickers Armstrongs, and though
this is not competitive except for cartridges, and I.C.I, and Vickers have close
working arrangements, it is possible that a clause to prohibit any competitive
agency being handled by J.E.C. might cause difficulties if it were attempted to
obtain this.
Bearing in mind all these facts Dr. Noelting was informed that it is the
opinion of I.C.I, representatives in China that the most desirable arrangements
for the cooperation between I.C.I, and du Pont would be for the J.E.C. to
handle the combined sales of I.C.I, and du Pont in China.
Dr. Noelting has not sufficient knowledge of the J.E.C. to be able to form
a personal opinion as to whether they are suitably placed to take over the
combined sales of the two companies, but in view of the fact that the I.C.I.
representatives are of the opinion that no change is desirable and furthermore
are more than satisfied with the service being rendered by the J.E.C. Dr.
Noelting is prepared to abide by the recommendations of the I.C.I, repre-
sentatives which are based on past experience, and in all the circumstances
Dr. Noelting agreed that the best arrangements for the cooperation between
I.C.I, and du Pont in China were for Jardines to take over the agency of
du I'onts and for I.C.I. (China) to act for du Ponts as "go-betweens" in a
similar way as they are acting now for I.C.I.
This agreement having been reached, discussion took place as to whether
various individuals in China could be utilized under the new regime to any
advantage. It was agreed that Mr. Montague-Smith of I.C.I. (China) would
be best placed to act as salesman for China in accordance with the plan laid
down in the minutes of the meeting held in London on September 7, 1932. It
might be advisable for Smith to have available expert technical assistance.
Dr. Noelting indicated that so long as he remained in China he would always
be glad to be called upon in a consultative capacity. Dr. Noelting was asked
what his opinion was regarding Mr. de Fremery and whether de Fremery could
be of use either in a technical or influential capacity. The opinion of Smith
regarding de Fremery's usefulness is not too favourable as he considers that de
Fremery has little or no say in the matter as to which firm should or should
not get business and is only employed in the capacity of technical advisor to
the Nanking Government. Dr. Noelting's opinion was that Mr. de Fremery
was a clever technical man and very conscientious worker but he was unable
to state whether de Fremery is in a position to influence business. The ques-
tion of paying a retaining fee to de Fremery with a view to obtaining his as-
sistance in aiding the joint interests of I.C.I, and du Ponts was considered
and while it was admitted that it might be advantageous to take this step it
was decided to make further enquiries about him before making any definite
approach.
The possibility of obtaining useful assistance from the contact already ob-
tained by Wang was considered. It is quite possible that Wang might be able
to introduce Jardines and Smith to influential people in Nanking now unknown
to them but it was pointed out that as Jardines contact with Nanking is the
best possible one, it is more than probable that Wang would not be able to
introduce Jardines to any new point of contact. On the other hand, in order
to prevent any possibility of Wang prejudicing the interests of I.C.I, and
du Ponts owing to objecting to the new arrangement it was agreed that serious
consideration should be given to the desirability of Wang accompanying Dr.
Noelting, Jardine's representative and Smith to Nanking and explaining the
new arrangement to the individuals with whom du Pont has contact in Nanking,
namely, that Jardines will in future be handling du Pout's sales and that
MUNITIOISrS INDUSTRY 1313
du Fonts would be glad if the individuals tbey know should continue friendly
relations with Jiirdines.
At the meeting with Mr. Way of the J.E.C., the situation was fully ex-
plained and Mr. Way was asked whether J.E.C. would willingly handle
du Fonts' explosives in addition and on similar lines to I.C.I.'s explosives.
Mr. Way replied that his firm would be very glad to accept this proposal.
The question of terms was raised and it was agreed with Mr. Way that it
was desirable to leave this question over for the time being, as recommendations
would have to be put to London and then forwarded to du Fonts for their con-
sideration. The J.E.C. are a separate concern from Jardine, Matheson & Co.
and Mr. Way was asked as to whether Jardine, Matheson would be prepared to
guarantee J.E.C. from a financial point of view, and it was ascertained that
in all probability such a guarantee could be forthcoming. It is very doubtful
if, in the event of J.E.C. failing Jardines would allow anybody to suffer
but it is considered that it would be advisable to obtain a guarantee and at this
juncture this could probably be done without fear of any offence being caused
to J.E.C.
To sum up, the agreed recommendation of the I.C.I, representative and of
Dr. Noelting is tliat du Font's business in China should be handled by J.E.C.
and by I.C.I. (China) in exactly the same way as the present I.C.I, sales
in China are being conducted.
(Signed) Feecy Fowler,
D. M. Stephens,
F. A. M. Noelting,
DMS/BL. Shanghai, December 19, 1932.
Exhibit No. 470
T-2564
* MS-SO-A
MS-140
JANUABY 12th, 1933.
Major K. K. V. Casey,
E. I. du Pont de Nemours & Co.,
Wilmington, Delaware.
Dear Sir:
Revleio of agents' contracts now in force in, the territory of the Paris office of
Smokeless Powder Dept.
Mr. Leon d'Haeyere, II rue des Chartreux, Brussels.
du Pont agency contract, dated December 30th, 1932.
Commission: 5% on all orders of not over 300 tons. If there is an order for
more than 300 tons, the amount of commission is to be agreed upon at the time
of quotation.
Cancellation: Upon six months' notice by the agent. Immediate cancellation
by the company. Agent then receives 1%% on all sales during the one succeed-
ing year, not to exceed $15,000.
I.e. I.: By letter of December 18, 1926, Faris office advised d'Haeyere that the
du Pont Co. had become the agent for I.C.I, military powders and explosives in
Belgium, and that he, as agent for du Font, would be called upon to offer I.C.I,
products for sale. In 1926 we only had a verbal arrangement with the agent,
whereby the question of commissions was to be decided on each specific case.
I.C.I, have verbal cognizance of the terms under which we work with d'Haeyere.
By letter dated Jan. 15, 1929, addressed to the Belgian Ministry of War, I.C.I.
advised that du Pout are their authorized sales agent in Belgium for propellant
powders TNT, and NC, and that consequently du Pont, through their representa-
tive, Mr. Leon d'Haeyere, are fully authorized to conduct negotiations on behalf
of I.C.I.
* Pencil markings.
1314 MUNITIONS INDUSTRY
ESTONIA
Mr. G. Burvikov, Valdemara 1 ela 33, RIGA, Latvia.
Uu Pout agency contract dated July 8th, 1929.
commission: 5% on first $500,000, 2% on next $1,000,000, 1% on next
$1,500,000 ; provided, however, that in the event that the total amount of
commissions payable in any one year shall exceed the sum of $50,000, a special
agreement as to the percentages during the year shall be made.
By addendum, dated July S, 1929, to agency agreement, we agreed to pay
the agent a commission of 7% instead of 5% on the first $500,000 of any one
contract or order during 2 years from date of agent's acceptance of terms of
agency agreement.
Ca)icellatio)i: This agreement to go into effect immediately on receipt of
agent's written acceptance of the terms and conditions, and shall continue in
force until terminated by six months' written notice from either party to the
other.
I.C.I. : du Pont contract of July S, 192S, states: "Whereas we have the
exclusive sales rights in Estonia for the military propellants and explosives
manufactured by I.C.I., it is agreed that this agreement shall cover sales in
Estonia of such products manufactured by I.C.I, under the same conditions
as above set forth so long as we shall continue to have exclusive sales rights
in Estonia for the above-mentioned products manufactured by I.C.I. We
agree to notify you immediately upon the occurrence of any change in the
agreement between I.C.I, and us as aforesaid.
I.C.I, were given a copy of this contract and by letter of Sept. 23rd, 1929,
acknowledged receipt and declared themselves cognizant of the terms.
HOIXAND & ITS COLONIES
Mr. p. F. T. Van Veen, 72 Zeestraat, The Hague, Holland.
du Font agency contract: Mr. Van Veen was appointed agent for both firms
by letter dated July 20, 1927. Contract formerly with the company " Overzee
Handelmaatsappij " for which Van Veen was director. Overzee was liquidated
in 1927, and by letter of July 20, 1927, we agreed to continue with Van Veen as
agent for Du Pont and Nobel ; no conditions mentioned.
Commission: We have agreed to give 7% commission on all orders when
prices permit.
Cancellation: Letter of July 20, 1927, makes no mention of cancellation.
I.e. I.: The letter of July 20th, 1927, and verbal arrangement include military
powders and explosives manufactured by I.C.I. Reported to I.C.I, by letter
of July 20, 1927. I.C.I, acknowledged by letter of July 22nd, 1927.
Mr. P. Birkman, Maskavas ieln 64, Riga, Latvia.
du Pont Agency Contract. March 16th, 1925.
Commission: 5% on each contract or order unless otherwise agreed in specific
cases, provided that in case the total amount of commissions in any one year
would exceed $50,000, a new agreement must be made.
Cancellation: Either party of this agreement may terminate this agreement
after the expiration of six months from the date when he shall have given
notice by registered letter of such intention to the other party.
I.C.I. : Letter of Nov. 18, 1926, fri)m du Pont to Birkman, states: "You, as
du Pont agent, are hereby authorized to offer military propellants and explosives
manufactured by Nobel Industries, Ltd.". Letter of Nov. 19, 1926, states:
" Your commission will be the same as for us." Reported to I.C.I, by letter of
Nov. 19th, 1926 ; acknowledged by I.C.I, by letter dated Nov. 22nd, 1926.
LITHUANIA
Capt. Martinkus, % Graham AutomobiliuAtstovybe, Duouelaicio 42, Pasto
dezute No. 305, Kaunas, Lithuania.
du Pont Agency Contract: Letter dated May 13th, 1932.
Commission: 2l^% on sale of one order only which was being negotiated at
that time, but did not develop.
Cancellation: Letter of May 13th, 1932, makes no mention of cancellation.
Appointment on trial.
J
MUNITIONS INDUSTRY 1315
I.e. I.: This arrangement agreed to verbally by I.C.I. Trial Agency granted
for both du Pont and I.C.I. Reported to Mr. L. W. B. Smith by letter of
May 14th 1932.
Mr. Stefan Klawe, 10 Plac. Sw. Aleksandra, Warsaw.
clu Pont Agency Contract. Nov. 7th, 1922.
Voinmission: Contract of Nov. 7th, 1922: 5% on first $50,000. 2% on next
$100,000, 11/2% on next $100,000. It was later agreed to pay 1% commission.
Cancellation: This contract to be subject to six months' notice of discon-
tinuance by either party.
I.C.C: Letter of Nov. 4, 1926, from du Pont to Klawe, states: "It has been
decided that you will take over the joint agency in Poland." Letter of Nov.
10th 1926, from du Pont to Klawe, states : " Enclosed please find copy of a
letter written by Nobel Industries Ltd. to me wherein I, as du Pont's repre-
sentative am authorized to sell Nobel's military propellants and explosives to
the Government of Poland, therefore, you, as representative of du Pont, are
authorized to conduct negotiations in Poland on behalf of Nobel." Agency
confirmed to Klawe by I.C.I, by letter Nov. ISth 1932.
Col. Hj. Schmidt, Engelbrektsgatan 35 B. Stockholm.
du Pont Agency Contract dated September 29th, 1924.
Commission: Unless otherwise agreed in specific cases: 5% on first $50,000,
2% on next $100,000, 11/2% on all amounts after the first $150,000, provided, that
in case the total amount of commissions in any one year would exceed $50,000,
a new agreement must be made.
Cancellation: Either party may terminate this agreement after the expira-
tion of sis months from the date when he shall have given notice in writing
of such intention to the other party.
I.e. I.: Letter from du Pont to Schmidt of Nov. 1926, advises Schmidt that he
as agent for du Pont is authorized agent in Sweden for Nobel Industries, pro-
pellant powders, T.N.T., and nitrocotton. Situation reported to I.C.I. Oct. 21st,
1926; acknowledged Nov. 19th, 1926.
DENMARK & NORWAY
Col. Hj. Schmidt, Engelbrektagatan 35B, Stockholm.
du Pont Agency Contract: Col. Schmidt was appointed du Pont agent by
letter dated March 25, 1926.
Commission: " We will pay you a commission on all business in these coun-
tries received through you or by your help."
Cancellation: " We must reserve the right to deal directly, and to later estab-
lish an agent of the nationality of the country if the circumstances require it.
We will notify you before making any permanent agency agreement."
I.C.I. Denmark: Letter of Dec. 11th, 1928, from du Pout to Schmidt, enclos-
ing letter from I.C.I, dated Dec. 7th, 1928, addressed to Schmidt, certifying
that he is their authorized agent and fully accredited to conduct negotiations
on their behalf for propellant powders, T.N.T., and N.C. Situation reported to
I.C.I. Dec. 5th, 1928; acknowledged Dec. 7th, 1928.
I.C.I. Norway: I.C.I, have no agency, and have agreed not to sell military
products in Norway.
Of the above conti'acts, all of them seem to me to properly protect the du
Pont Company against excessive commission claims in case of war or extremely
large orders, except those of Holland and Poland, where we have verbal arrange-
ments which have no proper limitation.
All of them have six mouths' cancellation clause, except Belgium. However,
commissions are limited so that undue commitment cannot arise in the case of
Sweden, Norway, Denmark, Estonia, and Latvia. The Lithuanian agency is a
temporary one, carrying commitment on one sale only, which did not mature.
Lithuania is now open for further consideration.
I am now negotiating new contracts for du Pont with our agents for Holland
and Poland, and propose to leave the other contracts as they are.
In every case we have informed the agents, either by writing or verbally,
that they will act for I.C.I, under the same conditions as they are now acting
83876 — 34— PT 0 20
1316 MUNITIONS INDUSTRY
for du Pont. In every case I.C.I, have full cognizance of this fact and of the
conditions under which we are working, and have confirmed the fact to each
agent that tliey will act as I.C.I.'s agents.
However, there are no formal contracts covering the conditions of agency
passed between I.C.I, and the agents.
The agents all take it as implied that I.C.I, accept the same conditions of
agency as those of du Pont, and I.C.I.'s correspondence all tends to confirm
this belief.
I propose to go over each of the contracts with I.O.I, and get the matter clear.
Very truly yours,
William N. Tayloe.
WNT/MS.
Exhibit No. 471
(285 Madison Avenue, New York)
Imperial Chemical House,
Millbank, Westminister, 8.W. 1, 4th July 1933.
Dear Mb. White: Mr. Haley, of I.C.I., China, had a talk with me today with
reference to the difficulty that the Jardine Engineering Corporation have met
in working the new military agreement. They say that it is really a most
difficult thing to go to the buyers and suggest that it is a matter of indif-
ference to them whether our manufacturer or du Pout's is ordered. They indi-
cate that good salesmanship consists in definitely offering one thing or another.
This does not mean that where the buyer has a preference it would not be met,
but assuming he has no particular preference they do want to mention the one
or tlie other. My suggestion is that as regards Cordite they can quite definitely
mention us. In T.N.T. I think a similar policy should apply. As regards
ntrocellulose powder, however, I suppose du Pont should be mentioned, but
always assuming that they are willing to meet the competitive prices. At
present du Pont do not do so and there has been no change intimated to us
in the position. Supposing, however, they were willing to meet the competi-
tive prices then to give us a little nitrocellulose business how would it do to
say that if tubular is wanted then it must be du Font's, if flake, it must be us,
but that for small orders tubular in our manufacture could also be offered.
The matter of small orders being offered in our manufacture might be ex-
plained on the basis that du Pont's capacity is equal to bigger demands and
quicker delivery of bigger quantities. I think you will appreciate the difficulty
and before we write to China we would be glad to have the frank views of
our friends. We must take the difficulties of China in working the agree-
ment seriously into consideration.
Yours very truly.
P.S. This matter is urgent.
G. W. White, Esq.,
New York.
(sgd.) J. Lainq.
Exhibit No. 472
[C/C via air mail]
D-17
Mr. N. E. Bates, Jr.,
% American Consulado, Lima, Peru.
1.35-Nobel (Special)
MS-176-A
151-Kem. Arms Co.
(B-47)
September 25, 1933.
Dear Nick : In reply to your letter of September 11th on the subject of the
du Pont-I.C.I. agreement and the possible effect of our acquisition of Remington.
Our agreement with I.C.I, is limited to military propellants and explosives;
any other products made by either company are entirely outside the scope of
MUNITIONS INDUSTRY 1317
our agreement. The first paragraph of the I.C.I, agency agreement is possible
of misinterpretation, but until such time as there is evidence that products other
than those first contemplated are being included we have very little to argue
about with I.C.I.
I do not believe there will be any arrangement between Remington and I.C.I,
similar to the one we have on military, and therefore you can assume that
Remington and Kynoch will each go their own way. I do not believe there
need be any violation of the spirit of the instructions referred to on the second
page of your letter. For instance, it will be perfectly in order for I.C.I, or
du Pont to request information regarding possible agents for either Kynoch
or Remington, and likewise there would be no harm in your recommending the
products of either Kynoch or Remington or both to an agent prospect.
I believe you can avoid any difliculty by insisting that once the agent has
been appointed that he then communicate with Kynoch or Remington for any
information he desires. While at the same time there is no reason why you
should not assist the agent in establishing the proper connection.
As I see it, Niclj, it is simply a question of our depending on your usual tact
to handle the delicate situation without any difliculty.
I do not believe it advisable at this time for us to include in our agency
proposition a statement similar to that in the first paragraph of I.C.I. 's, because
we would only be developing trouble for other departments of the company
who may and usually do have other agents than those we use, and I think we
will be on safer ground if we simply interpret the first paragraph to mean that
any other products which from time to time would be agreed upon would only
refer to military products connected with propellants and explosives.
Sincerely,
KKVC : MH K. K. V. Casey, Director.
Exhibit No. 473
Nobel Industries, Ltd., license agreement covering patented inventions and secret
inventions between E. I. du Pont de Nemours and Company, party of the first
part, and Nobel Industries, Limited, party of the second part. Dated, January
1, 1928, extended to July 1, 1939
This agreement, made in the city of London, England, as of the 1st day of
January, A.D. 1926, between
E. I. du Pont de Nemours and Company, a corporation organized and exist-
ing under the laws of the State of Delaware, United States of America, herein-
after called " the du Pont Company ", party of the first part, and
Nobel Industries, Limited, a corporation organized and existing under the
laws of Great Britain, hereinafter called " Nobel Industries ", party of the
second part,
WITNESSETH,
Whereas upon the terms and subject to the limitations hereinafter set forth,
the party of the first part and the party of the second part desire to obtain, each
from the other, licenses, as hereinafer provided, relating to inventions, improve-
ments, and secrets in respect of processes, machinery, formulae, and compounds
possessed or acquired by the other party, for the manufacture, production,
transportation, handling, selling, or use of one or more of the following products,
viz : Black powder in all varieties ; smokeless propellants for sporting pur-
poses ; disruptive explosives of all kinds for industrial purposes ; detonators ;
electric detonators ; safety fuses ; powder fuses ; detonating fuses ; electric ignit-
ers, and generally all devices for initial detonation or ignition ; the components
which form the ignition and propellant charges of sporting ammunition; and
the ingredient and component parts of the above insofar as they are applicable
to explosives ; and
Whereas the products referred to in the foregoing recital are hereinafter
called, collectively, " explosives ", and an invention or improvement aforesaid,
for which letters patent shall be obtained, is hereinafter called " patented inven-
tion ". and a patented invention contained in an explosive is hereinafter called
" patented explosive invention ", and a patented invention for the manufacture,
production, transport, handling, selling or use of an explosive is hereinafter
called " patented producing invention ", and a secret invention in respect of a
process, machine, formula, or compound aforesaid is hereinafter called " secret
invention ", and a secret invention contained in an explosive is hereinafter
1318 MUNITIONS INDUSTRY
called " secret explosive invention ", and a secret invention for the maufacture,
production, transport, handling, selling, or use of an explosive is hereinafter
called " secret producing invention " ; and
Whereas each of the parties hereto desire an option to acquire licenses in
respect of the other party's patented inventions and secret inventions, upon
the terms and subject to the conditions hereinafter set forth ;
Now, therefore, in consideration of the mutual agreements herein contained,
and of the sum of one pound sterling and othei good and valuable consideration,
paid by each c>f the parties hereto to the other, the receipt whereof is hereby
acknowledged, the parties hereto have agreed and hereby do agree as follows:
I. Each party agrees to and until the 31st day of December, A.D., 1935,
upon making or obtaining any patented invention or discovering or acquiring
any secret invention, to disclose in writing to the other party immediately, or
in any event within six months thereafter, full particulars in respect thereof,
and thereafter to furnish to the other party, whenever and so often as the
other party shall request, copies of all claims, specifications, applications, and
patents in respect of any such patented invention, and copies of all writings
setting forth any such secret invention and such further information as the
other party shall request in respect of any such patented invention or secret
invention.
II. Each party shall forthwith appoint one or more competent, trustworthy
and experienced persons in its employ for the purpose of receiving such par-
ticulars and information from the other party. Whenever and so often as
the other party shall request and at the expense of such other party, each
party shall supply experienced chemists, engineers, foremen, and other experts
to assist such other party in investigating, testing, applying or using any
patented or secret invention disclosed as aforesaid.
III. Whenever the du Pout Company shall have disclosed a patented or
secret invention to Nobel Industries, as aforesaid, the du Pont Company there-
upon shall serve upon Nobel Industries a notice in writing setting forth the
terms and conditions upon which Nobel Industries may obtain the following
licenses, to wit :
(1) The sole and exclusive license, to the end of the term for which letters
patent shall be granted or extended, in respect of any such patented explosive
Invention, to make, use and employ within the countries of Europe (includ-
ing Great Britain and Ireland), Asia, Africa, and Australasia, and the islands
thereto pertaining, for which such letters patent shall be granted or extended,
excepting however the Republic of Germany, Holland, Poland, Austria, Den-
mark, Bulgaria, and the present and future territories, possessions, colonies
and dependencies of the United States of America, any such patented explosive
invention for explosives, and to sell within said countries, excepting as aforesaid,
any and all explosives containing such invention.
(2) A nonexclusive license, to the end of the term for which letters patent
shall be granted or extended in respect of any such patented explosive inven-
tion, to make, use and employ within the countries of North and South America,
and the islands thereto pertaining, for which such letters patent shall be grantee
or extended, excepting however the United States of America and its present
and future territories, possessions, colonies and dependencies, and the Republics
of Mexico, Guatemala, Honduras, Nicaragua, Costa Rica, and Panama, and the
Dominion of Canada and Newfoundland, any such patented explosive invention
for explosives, and to sell within said countries of North and South America,
and the islands thereto pertaining, excepting as aforesaid, any and all explosives
containing such invention.
(3) The sole and exclusive license to make, use, and employ, within all
the countries of Europe (including Great Britain and Ireland), Asui, Africa,
and Australasia, and the islands thereto pertaining, excepting however the
Republic of Germany, Holland, Poland, Austria, Denmark, Bulgaria, and the
present and future territories, possessions, colonies and dependencies of the
United States of America, any such secret explosive invention for explosives,
and to sell within said countries, excepting as aforesaid, any and all explosives
containing such invention. i
(4) A nonexclusive license to make, use, and employ, within all the countries
of North and South America, and the islands thereto pertaining, excepting how-
ever the United States of America and its present and future territories, pos-'
sessions, colonies and dependencies, and the Republics of Mexico, Guatemala.
Honduras, Nicaragua, Costa Rica, Panama, and the Dominion of Canada and
Newfoundland, any such secret explosive invention for explosives, and to sell
MUNITIONS INDUSTRY 1319
within all the countries of North and South America, and the islands thereto
pertaining, excepting as aforesaid, any and ail explosives containing such
invention.
(5) The sole and exclusive license, to the end of the term for which such
letters patent shall be granted or extended, in res))ect of any such patented
producing invention, to make, use, and employ within the countries of Europe
(including Great Britain and Ireland), Asia, Africa, and Australasia, and
the islands thereto pertaining, for which letters patient shall be granted or
extended, excepting however the Republic of Germany, Holland, Poland, Austria,
Denmark, Bulgaria, and the present and future territories, possessions, colonies
and dependencies of the United States of America, any such patented producing
invention, to the extent and amount specified in such notice.
(6) A nonexclusive license, to the end of the term for which letters patent
shall be granted or extended, in respect of any such patented producing inven-
tion, to make, use, and employ within the countries of North and South America,
and the islands thereto pertaining, for which such letters patent shall be
granted or extended, excepting however the United States of America and its
present and future territories, possessions, colonies, and dependencies, and the
Republics of Mexico, Guatemala, Honduras, Nicaragua, Costa Rica, Panama,
sind the Dominion of Canada and Newfoundland, any such patented producing
invention for explosives, to the extent and amount specified in such notice.
(7) The sole and exclusive license to make, use. and employ within all the
countries of Europe (including Great Britain and Ireland), Asia, Africa, and
Australasia, and the islands thereto pertaining, excepting however the Republic
of Germany, Holland, Poland, Austria, Denmark, Bulgaria, and the present and
future territories, possessions, colonies, and dependencies of the United States
of America, any such secret producing invention, to the extent and amount
specified in such notice.
(8) A nonexclusive license to make, use, and employ within all the countries
of North and South America, and the islands thereto pertaining, excepting
however, the United States of America and its present and future territories,
possessions, colonies, and dependencies, and the Republics of Mexico, Guatemala,
Plonduras, Nicaragua, Costa Rica, I'anama, and the Dominion of Canada and
Newfoundland, any such secret producing invention for explosives, to the extent
and amount specified in such notice.
IV. Whenever Nobel Industries shall have disclosed a patented or secret
invention to the du Pont Company, as aforesaid, Nobel Industries thereupon
shall serve upon the du Pont Company a notice in writing setting forth the
terms and conditions upon which the du Pont Company may obtain the following
licenses, to wit :
(1) The si;le and exclusive license, to the end of the term for which let-
ters patent shall be granted or extended, in respect of any such patented ex-
plosive invention, to make, use and employ, within the countries for which
such letters patent shall be granted or extended, by the United States of
America, or the Republics of Mexico, Guatemala, Honduras, Nicaragua, Costa
Rica or Panama, any such patented explosive invention for explosives, and to
sell within said countries any and all explosives containing such inventions.
(2) A nonexclusive license, to the end of the term for whichs letters patent
shall be granted or extended, in respect of any such patented explosive inven-
tion, to make, use and employ within the countries of North and South
America, and the islands thereto pertaining, for which such letters patent shall
be granted or extended, excepting, however, the Dominion of Canada and
NewfountlL-iud and the countries enumerated in the last preceding paragraph
ntimbered (1) herein, any such patented explosive invention for explosives, and
tc sell within said countries of North and South America, and the Islands
thereto pertaining, excepting as aforesaid, any and all explosives containing
such invention.
(3j The sole and exclusive license to make, use, and employ within the
United States of America and its present and future territories, possessions,
colonies and dependencies, and the Republics of Mexico, Guatemala, Honduras,
Nicaragua, Costa Rica and Panama, any such secret explosive invention for
explosives, and to sell within said countries any and all explosives containing
such invention.
(4) A nonexclusive license to make, use, and employ within all the coun-
tries of North and South America and the islands thereto pertaining, excepting,
however, the Dominion of Canada and Newfoundland and the countries enum-
erated in the last preceding paragraph numbered (3) herein, any such secret
1320 MUNITIONS INDUSTKY
explosive invention for explosives, and to sell within all tlie countries of
Nortla and South America and the islands thereto pertaining, excepting as
aforesaid, any and all explosives containing such invention.
(5) The sole and exclusive license, to the end of the term for which letters
patent shall be granted or extended, in respect of any such patented producing
invention, to make, use, and employ within the countries for which such letters
patent sliall be granted or extended, by the United States of America, or the
Republics of Mexico, Guatemala, Honduras, Nicaragua, Costa Rico, or I'anama.
any such patented-producing invention, to the extent and amount specified in
such notice.
(6) A nonexclusive license, to the end of the term for which letters patimt
shall be granted or extended, in respect of any such patented producing inven-
tion, to make, use, and employ within the countries of North and South America,
and the islands thereto pertaining, fur which sucli letters patent shall be granted
or extended, excepting, liowever, the Dominion of Canada and Newfoundland
and the countries enumerated in the last preceding paragraph numbered (5)
herein, any sucli patented producing invention for explosives, to the extent
and amount specified in sucli notice.
(7) The sole and exclusive license to make, use, and employ within the
United States of America and its present and future territories, possessions,
colonies, and dependencies, and the Republics of Mexico, Guatemala, Honduras,
Nicaragua, Costa Rica, and Panama, any such secret producing invention, to the
extent and amount specified in such notice.
(8) A nonexclusive license to make, use, and employ within all the countries
of North and South America and the islands thereto pertaining, excepting, how-
ever, the Dominion of Canada and Newfoundland and the countries enumerated
in the last preceding paragraph numbered (7) herein, any such secret producing
invention for explosives, to the extent and amount specified in such notice.
V. Each of the parties to whom any license shall have been granted as
herein provided may grant, within the limitations of such license, sublicenses in
respect thereof to any or all of its respective subsidiary companies ; but every
such sublicense shall be subject to all the terms and conditions contained in the
grants of the license so sublicensed and shall also contain terms, conditions, and
obligations requiring such sublicensee to do such acts as may be necessary or
proper to enable the party granting such sublicense to observe all the tenns
and conditions and to perform all the obligations on its part contained in the
grant of the license so sublicensed. No such sublicense in respect of any such
license shall be granted by any sublicensee, nor by any of the parties hereto,
except as hereinbefore provided, without the consent in writing first obtained
from the party that shall have granted the license so sublicensed.
VI. In said notices served as aforesaid, the party disclosing such patented or
secret invention shall request the other party to elect, within a period expiring
twelve months after service of such notice, whether such other party accepts
such licenses or any of them upon the terms and conditions set forth in said
notice, and the other party shall elect within said period whether it accepts
such licenses or any of them. The election to take any such license shall con-
sist in serving, upon the party disclosing such patented or secret invention,
within the period mentioned in said notice, either (1) an acceptance in writing
of any such license upon the terms and conditions set forth in said notice or (2)
an acceptance in writing of any such license upon such other terras and condi-
tions as the parties, within three months thereafter may agree upon ; but if the
parties shall fail so to agree within the said period of three months such license
shall be deemed not to have been accepted.
VII. Each of the parties hereto agrees that if, at any time during the con-
tinuance of this agreement, it shall obtain or acquire a right in or license
under any patented or secret invention, which right or license is so limited that
it can make no grant or license to the other party upon the terms and condi-
tions herein set forth, it shall use its best efforts to assist such other party
to obtain or acquire a right in or under such invention upon the tenns and
conditions herein set forth ; but neither party shall be under any obligation
to purchase or pay for any right or license for the benefit of the other.
VIII. Each of the parties hereto agrees not to make or consent to any dis-
closure or to do or consent to any other act that shall impair or depreciate
the value of any sole and exclusive license granted by it in pursuance of this
agreement, or that shall impair or depreciate the value of the right, title, and
interest in any patented or secret invention not granted to it by the other
party, and to take all reasonable care to prevent any such disclosure or act.
MUNITIONS INDUSTRY 1321
IX. Each of the parties hereto agrees, whenever and so often as requested
by the other party, to execute and deliver all such other instruments in vprit-
ing as may be necessary or proper for the purpose of further assuring and
confirming the grant of any license that shall have been granted as herein
provided, or for the purpose of enabling such grants to be filed or recorded
in any public oflice.
X. Each of the parties hereto agrees, whenever and so often as requested by
the other party, but at the expense of such other party, to assist in defending
any letters patent under which any licenses shall have been granted as herein
provided, and for that purpose to furnish to such other party such information
and evidence as it can.
XI. If any difference or dispute shall arise between the parties hereto in
respect of this agreement or any matter or thing relating thereto, excepting
any term or condition set forth in any notice served as provided in the preced-
ing paragraphs numbered III and IV herein, the name shall be referred to the
chairman of the board, for the time being, of the E. I. du Pont de Nemours
& Co., or his nominee, and the chairman of the board, for the time being,
of Nobel Industries, or his nominee, who shall arbitrate the same and whose
award shall be final. If, however, the said arbitrators shall fail to agree
they shall appoint an umpire whose award shall be final, which umpire, if the
question or matter to be decided relates to a patented or secret invention of
Nobel Industries shall be an American, and if the question or matter to be
decided relates to a patented or secret invention of the Du Pont Company, shall
be an European. If said chairman fail to agree as to the appointment of such
umpire, then such umpire, if required, as hereinbefore provided to be an
European, shall be appointed by the president for the time being, of the
Incorporated Law Society of England, or if required as hereinbefore provided
to be an American, shall be appointed by the president, for the time being,
of the Association of the Bar of the City of New York. The umpire, if not
appointed by the chairman of the respective companies, or their nominees,
shall be a person having no direct or indirect financial interest in the explosive
industry.
XII. The benefits and obligations of this agreement shall inure to and be
binding upon the parties hereto, and their respective legal representatives and
successors, but shall not be assignable by either party without the consent in
writing first obtained from the other party ;
Provided that this agreement shall apply equally to similar licenses relat-
ing to inventions, improvements, and secrets of which the respective parties
have indirect ownership by reason of their direct or indirect control and
ownership of other subsidiary companies by majority shareholding or otherwise.
XIII. It is agreed that patented and secret inventions owned or controlled
by said parties respectively relating to products, their manufacture, and sale,
other than explosives, shall become subject to this agreement if and when said
parties so elect, and to this end either party may from time to time furnish to
the other a schedule of products, other than explosives, manufactured by it with.
an offer that said products be brought under the .scope of this agreement. If
the party receiving such offer consents that the products named in said schedule
shall be brought under the scope of this agreement, it shall endorse its consent
on said schedule, and the offer, schedule, and consent shall be attached to and
become a part of this agreement ; provided, however, that the territorial limi-
tations provided in this agreement with respect to inventions relating to explo-
sives shall not apply to inventions relating to products other than explosives.
Territorial limitations, if any, applying to inventions relating to products other
than exivlosives shall be detennined by the parties at the time of the granting
of licenses and shall be set forth therein.
It is the intent of this article that in respect to products other than explosives
the parties hereto shall be entirely free to weigh all economic or other factors
pei'taining to tlie particular consideration, and to reach conclusions solely upon
the merits of the particular presentation, without prejudice to this agreement in
respect to explosives and without influence thereby.
XIV. That the agreement between the parties hereto, made in the city of
London, England, as of the 1st day of .January 1920 and terminating December
31, 1929, providing for the exchange of patented and secret inventions therein
mentioned, be, and the same hereby is, in all respects cancelled and annulled.
In witness whereof, E. I. du Pont de Nemours and Company has caused its
corporate seal to be hereunto affixed and this agreement to be signed in its
1322 MUNITIONS INDUSTRY
corporate name by its president and secretary, and Nobel Industries, Limited,
has caused its common seal to be hereunto affixed in the presence of and this
agreement to be signed by one of its directors and its secretary at the cityi of
London, England, as of the day and year first above written.
E. I. Du Pont de Nemours and Company.
By Irenee du Pont, President.
Nobel Industries, Limited,
By H. McGowAN, Director.
Attest :
C. CopELAND, Secretary.
Attest :
W. H. Coates, Secretary.
O.K. from J.P.L.
HMH
Exhibit 474
Articles of agreement made as of the 1st day of July 1929, between Imperial
Chemical Industries, Limited, a corporation organized under the laws of Great
Britain (hereinafter called "I.C.I."). r-arty of the first part, and E. I. du Pont
de Nemours & Company, a corporation organized under the laws of Delaware,
United States of America (hereinafter called " du Pont"), party of the second
part.
WITNESSETH,
Whereas both I.C.I, and du Pont are engaged in the development, manufacture,
and sale of a broad line of chemicals and chemical products, both in their
respective home countries and in other countries, and maintain research and
development organizations for the purpose of expanding their present activities
as well as developing new industries ; and
Whereas each of the parties hereto desires the right to acquire licenses in
respect of the patented and secret inventions of the other party, upon and
subject to the conditions hereinafter set forth ;
Now, therefore, in consideration of the premises and of the covenants herein
contained, the parties have agreed as follows :
/. Exchange of information. — (c) Each of the parties shall disclose to the
other as soon as practicable, or in any event within nine months from the date
of this agreement, or fi-om the date of filing application for letters patent
covering patented inventions, or from the time any secret invention becomes
commercially established, information in respect of all patented or secret inven-
tions now or hereafter during the life of this agreement owned or controlled
by it, relating to the products hereinafter specified, sufficient to enable the other
party to determine whether it desires to negotiate for licenses covering any
or all of such inventions.
(&) Each of the parties agrees, whenever and so often as requested by the
other, to furnish copies of all claims, specifications, applications and patents in
respect of any such patented invention, and copies of all writings setting forth
any such secret invention, and such furtlier information as tlie other party
shall request in respect of inventions i-elating to the products specified heroin.
ic) Each of the parties shall forthwith appoint one or more competent, trust-
worthy, and experienced persons in its employ for the purpose of receiving from
the other party the information required to be disclosed under the foregoing
provisions, and shall notify the other party of such appointment. Whenever
and so often as the other party shall request, and at the expense of such other
party, each party shall supply experienced chemists, engineers, foremen, and
other experts to assist such other party in investigating or testing any inven-
tion disclosed as aforesaid, or in applying or nsing any invention covering
which license may have been granted to it liereunder ; provided, however, that
the party called upon for such technical assistance may arrange to furnish
same at such time and in such manner as will not materially impede or inter-
fere with its own activities and operations.
(d) An invention shall be deemed to be controlled, within the meaning of
this agreement, whenever either party shall be able to grant to the other a
license covering such invention within any territory or territories in which
the other party may be entitled to demand exclusive or nonexclusive licenses
under the terms hereof.
MUNITIONS INDUSTEY 1323
(e) Governmental objection or prohibition shall be a valid plea on the part
of either of the parties to decline to reveal or to convey any rights under an
invention which, but for such objection or prohibition, would come within the
operation of this agreement.
//. Rights to acquire licenses. — (a) I.C.I, shall, upon request, grant to du
Pont the sole and exclusive license to make, use, and employ, within the coun-
tries of North America and Central America, exclusive of Canada, Newfound-
land, and British possessions, but otherwise inclusive of the West Indies, and
within all present and future colonies and possessions of the United States of
America, any and all patented and secret inventions now or hereafter, during
the life of this agreement, owned or controlled by I.C.I., relating to the prod-
ucts hereinafter specified, and to sell within said territories any and all of said
products containing such inventions. (As referred to above, Central America
shall be deemed to comprise the region between North and South America, ex-
tending from about north latitude 7° to N. latitude 18° ; that is, from Colombia
to Mexico, between the Caribbean Sea and the Pacific Ocean ; and the West
Indies shall be deemed to comprise those group of islands lying off the south-
east coast of North America and extending from near the coast of Venezuela
northward to the latitude of North Carolina.)
(&) du Pont shall, upon request, grant to I.O.I, the sole and exclusive
license to make, use, and employ, within the countries of the British Empire,
inclusive of Egypt, but exclusive of Canada and Newfoundland, any and all
patented and secret inventions, now or hereafter, during the life of this agree-
ment, owned or controlled by du Pout, relating to the products hereinafter
specified, and to sell within said territories any and all of said products con-
taining such inventions.
(c) Each of the parties shall, upon request, grant to the other a non-
exclusive license to make, use, and employ, within any and all countries, other
than Canada and Newfoundland, not within the exclusive territories specified
above, any and all patented or secret inventions, now or hereafter, during
the life of this agreement owned or controlled by the licensor, relating to
such of the products hereinafter specified as are now manufactured by both
parties, and to sell within said territories any and all of said products con-
taining such inventions.
(cl) Countries and territories not within the exclusive license territory
of either party as defined above, but which may now or hereafter be admin-
istered under mandate by the British Empire or by the United States of
America, or which may become a part of either sovereignty by proper authority,
shall be considered as part of the British Empire or of the United States,
respectively, so long as so administered ; but whenever the respective sovereign
power no longer exercises full political control over or administers any such
country or territory, it shall be considered as nonexclusive territory under
subparagraph (c) above.
(e) It is recognized that each of the parties may have established an
mternal trade in or export trade to a country or countries within the terri-
tory which under this agreement is designated as the exclusive license territory
of the other party, and that in any such instance the other party as licensee
may not be in a position to utilize the license or licenses granted to it with
respect to such country or countries for the time being. It is, therefore, under-
stood and agreed that in granting exclusive license or licenses covering any
territory in which the licensor m'ay have an established business, either in
ternal or export, the licensor m'ay, nevertheless, continue and fully enjoy the
benefits of its operations therein until given reasonable notice by the licensee
that the latter is in a position to utilize adequately its license in such territory.
(f) Licenses granted as aforesaid under any patented invention shall remain
in effect to the end of the term for which such letters patent shall be granted
or extended in the countries covered thereby, and licenses granted as aforesaid
under any secret invention shall remain in effect so long as such invention
shall remain secret, or, in event letters patent are subsequently obtained
covering such invention, to the end of the term for which such letters patent
shall be granted or extended in the countries covered thereby.
(g) Licenses granted as aforesaid shall be subject to adequate and jus-
tifiable conqiensation to be agreed upon by separate negotiations, but it is
understood that such compensation will be determined under broad principles
giving recognition to the mutual benefits secured or to be secured hereunder,
without requiring detailed accounting or an involved system of compensation.
1324 MUNITIONS INDUSTRY
///. Products. — The exchange of information provided in section T, and the
rights to acquire licenses granted in section II, shall apply to all inventions
relating to the following products and industries, subject to the exceptions set
forth below :
(a) Explosives, other than niilitarj' powders.
(&) Compounds of cellulose and its derivatives, including nitrocellulose com-
pounds such as plastics and film, but excluding rayon, cellophane, explosives,
and products covered under subparagraph (c) below; provided, however, that
the activities of Societa Italia Celluloid and Societa Anomina Mazzucchelli (in
which du Pont has substantial stock interests) in this industry within the ex-
clusive license territory of I.C.I, will continue until such time as may be
mutually agreed upon between the parties hereto.
(c) Coated textile products, including components of those covered under
subparagraph (&) hereof; provided, however, that with respect to inventions
relating to such products the countries of Germany, Italy, and France, includ-
ing colonies and possessions thereof, shall be considered as the exclusive license
territory of du Pont, subject to application of subparagraph (e) of section II
to the present activities of I.C.I, in said territories.
((Z) Paints, varnishes, and lacquers, including the cellulose finishes known as
" Duco " and " Belco ", and similar chemical finishes, and inclusive of synthetic
resins and colloiding agents for use in paints, varnishes, and lacquers, and
plastics derived from cellulose ; provided, however, that with respect to inven-
tions relating to such products the countries of German, Italy, and France,
including colonies and possessions thereof, shall be considered as the exclusive
license territory of du Pont, subject to application of subparagraph (e) of
section II to the present activities of I.C.I, in said territories.
(e) Pigments, lakes, and colors.
if) Acids, both organic and inorganic, for both the heavy chemical industry
and special industries.
(g) Chemicals of the general heavy chemical industry, excluding products of
the general alkali industry.
(h) DyestufEs, their intermediates, and other organic chemicals, including
rubber chemicals ; provided, however, that —
(1) While it is recognized that India, as coming within the British Empire,
is the exclusive license territory of I.C.I., nevertheless, as an exception, it is
agreed that, owing to the exceptional conditions obtaining in and the circum-
stances appertaining to that market, the dyestuffs activities of du Pont in India
may continue luitil such time as may be mutually agreed upon by the presidents
of the two companies, and that in determining the amount of compensation to
be paid by I.C.I, under such licenses due consideration shall be given to the
extent of du Font's activities which are thereby terminated in such territoiy;
(2) Tlie provisions of this agreement shall not apply to tetra-ethyl lead, but
licenses with respect to said product may be the subject of separate nego-
tiation :
(3) While inventions relating to dyestuffs and their intermediates are included
in this agreement and subject to the provisions hereof, it is mutually agreed
that, due to the exceptional conditions of said industry and the tentative
negotiations during recent years with I. G. Farl)enindustrie A. G., either party
shall be free at any time to enter into separate agreement or arrangement with
the latter company covering said industry. Upon the execution of such agree-
ment or the entering into of such arrangement this agreement insofar as it re-
lates to the dyestuffs industry shall cease and terminate; provided that all
licenses theretofore granted under the terms of this agreement shall continue
during the period for which granted, but all exclusive licenses so granted by
each shall automatically become nonexclusive. Each of the parties agrees,
however, that in negotiating or upon entering into such an agreement or ar-
rangement with said I. G. Farbonindustrie A. G., it shall use its best efforts
to extend same to include the other party hereto.
(4) While inventions relating to dyestuffs and thei.' intermediates are in-
cluded in this agreement and subject to the prov sions hereof, it is recognized
that existing agreements and arrangements with ether parties may prevent a
full and mutual exchange of information and licenses relating to particular
products of this industry ; and it is therefore agreed that neither party shall
be obliged to disclose information or to grant licenses under inventions relating
to products of this industry whenever in its opinion a full and reciprocal dis-
closure or grant of licenses relating to such products liy tho other party may
be in conflict with existing agreements or relations of the latter.
(0 Synthetic ammonia, synthetic alcohol, and other products and by-
products of the fixed nitrogen industry.
MUNITIONS INDUSTRY 1325
{)) Fertilizers.
(k) Synthetic products from tiie hydrogenation of coal and oil.
(1) Insecticides, fungicides and disinfectants.
()h) Alcohols manufactured by either synthetic or fermentation processes,
other than synthetic alcohol as covered in subparagraph (i) above.
The application of the rights granted hereunder relating to the products
specified above, shall be subject to the terms of all existing relations and
agreements between the parties hereto and between either or both of the
parties hereto and other parties, as provided in section X hereof. For pur-
poses of reference only, a list of sucli agreements is attached hereto, marked
" Schedule A", it being understood, however, that such list is not intended to be
all-inclusive.
IV. Election to accept license. — Whenever the party owning or controlling
an invention relating to the products specified herein shall decide that it is
advisable to utilize such invention or to exploit any product containing same
within the territory which under this agreement is designated as the exclusive
license territory of the other, it shall serve upon the other party a notice
in writing setting forth the terms and conditions upon which the other party
may obtain such exclusive license thereunder. The other party shall elect
within a reasonable time after receipt of said notice whether it accepts such
license upon the terms and conditions set forth in said notice, or upon such
other terms and conditions as the parties may agree upon; but if the parties
shall fail so to agree within a reasonable time, such license shall be deemed
to have been rejected, and the party owning or controlling the invention shall
be free to use same or to exploit the products containing same, and/or to
license otiiers so to use or exploit such invention or products, within such
territory ; provided, however, that no such license shall be granted to others
upon terms and conditions more favorable than those offered to and rejected
by the other party hereto, without giving to the latter a reasonable opportunity
to accept such license upon such other terms.
V. Nonexclusive licenses to other parties. — Each party agrees that it will
not sell, convey, or grant licenses or any other interest in or under any patent
or invention relating to the products specified, to any other pei'son whom-
soever, covering any territory in which a nonexclusive license under such pat-
ent or invention has been or may be obtained by the other party under tliis
agreement, without first advising the other party of its intention to make such
grant or conveyance.
VI. Cooperation in securing new licenses. — Each of the parties agrees that if,
during the continuance of this agreement, it shall obtain, acquire, or possess
a right in or license under any patented or secret invention relating to the
products specified herein, which right or license is so limited that it can
make no grant or license to the other party upon the terms and conditions
herein set forth, it shall use its best efforts to assist such other party to obtain
or acquire a right in or under such invention upon the terms and conditions
herein set forth, but neither party shall be under any obligation to purchase
or pay for any right or license for the benefit of the other.
VII. Aid in protecting licenses. — {a) Each of the parties agree to execute
and deliver all such instruments in writing as may be necessary or proper
for the purpose of further assuring and confirming any license granted pur-
suant to this agreement, or for the purpose of enabling such grants to be filed
or recorded in any public ofiice, and further to do whatever may be reasonably
necessary to carry out the intent of this agreement.
(6) Should it appear at any time that any of the inventions covering which
license has been granted to either party is the proper subject for letters patent
in any territory for which rights have been so granted, the licensor will in
conjunction with the first and true inventor, upon the request and at the
expense of the licensee, apply for and use its best efforts to obtain the grant
of letters patent or similar protection in respect of any of such inventions in
such of said territories as the licensee may require, unless the party disclosing
such invention demands that it be kept secret.
(c) Neither party shall be bound to defend any letters patent under which
anj- license shall have been granted hereunder, but each of the parties agrees,
whenever and so often as requested by the other party, but at the expense of
such other party, to assist to the fullest possible extent in defending or protect-
ing any such letters patent.
(d) Each party shall pay all fees and expenses for the maintenance of any
patents in any territory in which the exclusive right shall have been granted
to such party, and each party shall pay one-half of the fees and expenses for
1326 MUNITIONS INDUSTRY
the maintenance of any patents in any territory in wliicli joint rights exist
under said patents in accordance with this agreement. Maintenance herein
shall be deeme<l to include only payments of official fees, taxes, and incidental
expenses, but shall not include expenses of litigation.
VIII. Duty not to impair rights of other party. — Each of the parties agrees
not to make or consent to any disclosure or to do or consent to any other act
that shall impair or depreciate the value of any license granted by it in pur-
suance of this agreement, or that shall impair or depreciate the value of the
right, title, and interest retained by the other party in any such patented or
secret invention, and to take all reasonable care to prevent any such disclosure
or act, but shall not, in the absence of bad faith or gross negligence, be liable
in damages therefor.
IX. Sublicenses. — Each of the parties to v^^hom any license shall have been
granted as herein provided may grant, within the limitations of such license,
sublicenses in respect thereof to any or all of its respective subsidiary com-
panies ; but every such sublicense shall be subject to all the terms and condi-
tions contained in the grant of the license so sublicensed and sliall also contain
terms, conditions, and obligations requiring such sublicensee to do such acts
as may be necessary or proper to enable the party granting such sublicense to
observe all the terms and conditions and to perform all the obligations on its
part contained in the grant of the license so sublicensed. No sublicense in re-
spect of any such license shall be granted by any sublicensee, nor by either of
the parties hereto, except as hereinbefore provided, without the consent in
writing first obtained from the original licensor.
X. Effect of existing agreements. — It is understood that both parties have
established business relations through stock ownership in affiliated corpora-
tions and under agreements with other companies relating to the products
specified herein, and each of the parties expressly recognizes that the provisions
of this agreement are subordinate and subject to all such existing relations or
agreements wherever it may conflict therewith. Each of the parties agrees,
however, that in negotiating for the renewal of any such relations or agreements
which may expire during the existence of this agreement, it shall endeavor to
effect such renewals on such basis or terms as will hannonize as fully as pos-
sible with the provisions of this agreement.
XI. ArMtration.— Should any difference or dispute arise between the parties
hereto touching this agreement, or any clause, matter, or thing relating thereto,
or as to the rights, duties, or liabilities of either of the parties hereto, the same
shall be referred to the President for the time being of E. I. du Pont de Nemours
& Company and the president for the time being of Imperial Chemical Indiis-
tries. Limited, who shall arbitrate, and their award shall be final. Should they
not agree, they shall appoint an umpire, whose award shall be final, and the
following pi'ovisions shall apply : If the question or matter to be decided is
brought forward by I.G.I., the umpire shall be European ; if, on the contrary,
the question or matter to be decided is brought forward by du Pont, the umpire
shall be an American. Should the presidents disagree as to the appointment of
an umpire, then the umpire if an European, is to be appointed by the president
of the Incorporated Law Society of England, and if an American, to be appointed
by the President of the Association of the Bar of the city of New York.
XII. Parties in interest. — («) The benefits and obligations of this agreement
shall inure to and be binding upon the parties hereto, and their respective
legal representatives and successors, but shall not be assignable by either
party without the consent in writing first obtained from the other party.
(6) The terms and provisions of this agreement shall apply to inventions
owned or controlled by the respective subsidiary companies of each of the
jtarties hereto, and each of said parties undertakes and assumes, for and oi
behalf of its subsidiary companies, all the duties and obligations of this
agreement relating to such inventions.
(c) As used throughout this agreement, the term "subsidiary company"
shall be deemed to mean any corporation in which either party owns or con-
trols a majority of the outstanding voting stock, and any corporation similarly
owned or controlled by any subsidiary or subsidiaries.
XIII. Termination. — This contract shall continue in effect for a period ol
ten years fi-om the date first hereinabove written.
In witness whereof, E. I. du Pont de Nemours & Company has caused its
corporate seal to be hereunto affixed and this agreement to be signed in it
corporate name by its president and secretary, and Imperial Chemical Indus-
tries, Limited, has caused its common seal to be hereunto affixed in the
MUNITIONS INDUSTRY
1327
presence of and this agreement to be signed by one of its directors and its
secretary at the city of London, England, as of the day and year first above
written.
CRM.
E. I. Du Pont de Nemours & Company,
By (Sgd.) L. DU Pont, President.
Attest :
(Signed) M. D. Fisher,
Asst. Secretary.
Imperial Chemical Industries, Limiteh).
By (Sgd.) J. D. McGowAN, President and Director.
Attest :
(Signed) R. A. Kruger, (?)
Asst. Secretary.
Schedule A
EXPLOSIVES
Date
Parties
Subject
Period
1/1/26
I.C.I.-du Pont
E.\ehane:e of licenses under inventions, __
Exchange of licenses under inventions. ._
7/1/39.
1/1/25.
I.C.I.-du Pont-Canadian
Industries, Limited.
15 yrs.
NITROCELLULOSE PLASTICS
12/14/2
4/2/25.
du Pont-Rheinische West-
faelische Sprongstofl A.G.
du Pont-British
Co.
Xylonite
du Pont-Pittsburgh Plate
Glass Company.
du Pont-United Shoe Ma-
chinery Corporation.
Informal exchange of technical informa-
tion on pyroxylin products and the
articles fabricated therefrom.
Informal exchange of technical informa-
tion on pyroxylin products and the
articles fabricated therefrom.
Investment of du Pont Viscoloid Co. in
Soc. Italiana Celluloids and S. A.
Mazzucchelli.
Joint ownership of DuPlate Corpora-
tion, and grant of nonexclusive licenses
covering inventions relating to safety
glass.
Joint ownership of Celastic Corporation
for manufacture of pyroxylin-covered
box-toe material; grant of rights to
patents relating to manufacture of
Celastic; and grant of right to non-
exclusive license under inventions
relating to manufacture of diacetone
alcohol or colloid treated fabrics of the
general character described in such
patents; foreign rights thereunder
being assigned to United Shoe Ma-
chinery Company de France by agree-
ment between Celastic Corporation
and United Shoe Machinery Cor-
poration.
3 mos. cancellation
clause.
FILM
2/3/25.
du Pont-Pathe
Incorporated.
Exchange
Assignment of option from Pathe Cin-
ema S..4. covering right to manufac-
ture moving-picture films, limiting
license and use of information to
North America and certain other
territories.
75 years.
CELLULOSE ACETATE
12/31/27.
du
S.
Pont-Rhone
A.
Poulene
Agreement assigning patents and proc-
esses formerly owned by Usines du
Rhone remanufacture and sale of
cellulose acetate for North America to
du Pont, and providing for exchange
of technical'information.
15 yrs. after con-
struction of
plant.
1328
MUNITIONS INDUSTRY
Schedule A — Continued
COATED TEXTILES
Date
Not yet
signed.
1/1/25..
3/13/28.
10/1928.-.-
Apr. 1921.
3/21/26.-.-
Parties
I.C.I.-du Pont.
I.C.I.-du Pont.
du Pont-Dispersions Proc-
esses, Inc.
du Pont-Prosposed German
Ventube Company.
du Pont-Michel Fontaine..
du Pont-Norman B. Braley.
du Pont-Soc. Francaise
Fabrikoid.
Subject
Agreement reformation of Leather
Cloth Pty., Ltd., for manufacture of
artificial leather and rubber cloth in
Australia.
Agreement whereby du Pont licenses
LCI. to rights under patent to use
tannic acid as a preservative in the
manufacture of artificial leather.
Agreement whereby du Pont is granted
license for U.S. and Canada only
covering dispersions of rubber in the
manufacture of double texture auto
top cloth and prohibiting disclosure of
information secured.
Agreement relative to formation of com-
pany to manufacture and sell Ventube
in Germany only; du Pont does not
have right to sublicense inventions
which may be developed by the new
company.
Agreement whereby du Pont purchased
"know how" for manufacture of
"imitated suede"; use of information
is limited to U.S.
du Pont obtained license to Braley
patents which cover delves for cou-
pling and suspending Ventube for a
royalty payment.
Agreement gives option to S.F.F to con-
struct plants in other European terri-
tories on same conditions as in France
when and if du Pont decides to build
them.
Period
PAINTS, VARNISHES, AND LACQUERS
8/20/26.-.
Being nego-
tiated.
5/31/27
12/8/27
Under nego-
tiation.
Under nego-
tiation.
I.C.I.-du Pont Nobel Chem-
ical Finishes, Limited.
du Pont-Proposed German
Duco Company.
du Pont-General Electric
Company.
du Pont-Flintcote Co.
du Pont-Ambler Asbestos
Company.
du Pont-Okonite Company
du Pont-Penn Standard
Sole Cementing Process,
Inc.
du Pont-du Pont Cello-
phane.
du Pont-A. C. Lawrence
Leather Co.
du Pont-Compo Shoe Ma-
chinery Corp.
Joint ownership of Nobel Chemical
Finishes, Ltd., and grant of exclusive
license to that company covering
manufacture and sale of Duco in
British Empire, all other rights being
retained by du Pont.
Agreement granting new company ex-
clusive Duco rights for Germany only.
Agreement provides that information
developed by new company may be
sublicensed by du Pont to only those'
associated companies whose develop-
ments du Pont is free to pass along to
the Germany Company.
Agreement licensing du Pont to use
Q. E. Company's patents on glyptal
resins in the paint and varnish field.
Rights limited to United States.
Agreement licensing du Pont to use as-
phalt emulsions for "oil pipe line field"
for United States only.
Exchange of licenses covering finishing
materials used in manufacture of wall-
board or wall-tile by Ambler process.
Agreement re joint development and ex-
ploitation of a cellulosic plastic for in-
sulation of wires, cables, etc.
Agreement re exclusive use of #5400
cement.
Agreement re exclusive use of lacquer for
"moisture proof" cellophane.
Understanding relative to exclusive use
of certain leather solutions.
Agreement re exclusive use of Compo
cement.
Unlimited.
15 yrs.
MUNITIONS INDUSTRY
1329
Schedule A — Continued
PIGMENTS AND COLORS
Parties
Subject
Period
J. Zinc Com-
du Pont-N.
party.
Grasselli-Commereial
ments Corporation.
Pig-
License under certain patents owned by
N. J. Zinc Co. relating to manufacture
of lithopone.
Grasselli has license to manufacture and
sell lithopone containing Titanium
Dioxide under patents owned by
Commercial Pigments Corporation.
GENERAL HEAVY CHEMICALS
I. C. I.-Solvay & Cie.
du Pont-E. Merck. -
Grasselli-Federal Phosphor-
us Company.
Grasselli-Calco Chemical
Company.
Grasselli-Duriron Company,
Inc.
Grasselli-Aluminum Com-
pany of America-* Edwin
S. Fickes.
Grasselli-American Vulcan-
ized Fibre Company.
Grasselli-Richard Zeising—
du Pont-Mitsui, Union
Chimique Bolge, Saint
Cobain, Lurgi Newport,
Atlas, Hercules, Chims-
troy.
Agreement relating to general alkali
industry.
du Pont to acquire license to process for
manufacture of C.P. lactic acid for
U.S. and Canada. Agreement in-
volves exchange of information.
Agreement involving exchange of exclu-
sive licenses resprayed disodium and
trisodium phosphate in globular
form.
Both companies assigned patent applica-
tions covering globular bisulphate of
soda to Globular Products, Inc., owned
50% by both.
Grasselli has license to manufacture
under U.S. Patents #1031864 (7-9-12)
and #1074287 (9-30-13) reconcentra-
tion of nitric acid.
Grasselli has a nonexclusive, nontrans-
ferable license to use patented process
for manufacture of hydrofluoric acid.
Grasselli has license to operate under
U.S. Patent #1137871 (5-4-15), Method
of Treating Ferruginous Zinc Chloride
Solutions.
Grasselli has right to use improvements
in furnaces covered by U.S. Patents
#1279486 (9-17-18) and #1523990 (1-20-
25).
Agreements granting nonexplosive
licenses for du Pont ammonia oxida-
tion process in restricted territories,
none of which are in the British Em-
pire, and involving exchange of infor-
mation.
5 yrs.
DYESTUFFS AND OTHER ORGANIC CHEMICALS
I. C. I.-Durand & Huguenin.
I.C.I.-Durand & Huguenin..
I.C.L-Rohner
LC.L-Silesia
Verein.
I.C.I.-Auer..
Chemische
I.C.I.-Newport Chemical
Co.
I.C.I.-Newport Chemical
Co.
I.C.I.-Soledon Company,
Ltd.
I.C.I.-Selden Company
Agreement relating to solubization of
vat dyes.
Agreement relating to gallo-cyanides
Agreement relating to benzidene and
homologues.
License to I.C.I, to operate British patent
#259930.
License to I.C.I, to operate British patent
287943 relating to rubber substitutes.
Agreement relating to anthraquinone
dyes and intermediates thereof.
Agreement re certain types of soluble, or
solubilizable, vat dyes. Under this
contract I.C.I, are free to license one
other party in the United States.
Agreement covering British patents
#247578; 248802; 247787; 251491.
License to operate under Selden's patents
dealing with the manufacture of ptha-
lic anhydride from naphthalene by
catalytic oxidation.
Sept. 1937 or expi-
ration of later
patents, etc.
Tied up with com-
mercial arrange-
ments.
Feb. 1949.
1941.
1/1/35.
After expiration of
patents.
Patents expire
1940.
1330
MUNITIONS INDUSTRY
SchedtUc A — Continued
DYESTUFFS AND OTHER ORGANIC CHEMICALS
Date
Not yet
signed.
6/25/29.
9/7/17.
Parties
I.C.I.-SeldenCo.
du Pont-Guggenheim Co. of
America.
du Pont-American Cyana-
mid-Dew Chemical Co.-
National Aniline Com-
pany—Rubber Service
Laboratories.
du Pont-Rubber Service
Laboratories Company.
du Pont-Rubber Service
Laboratories - Goodrich -
U.S. Rubber Company.
du Pont-U.S. Rubber Com-
pany.
du Pont-Goodyear Tire &
Rubber Company.
du Pont-L'Air Liquids.
du Pont-Ammonia Casale,
S.A.
du Pont Norsk Hydro..
Subject
Agreement relating to production of
benzoic acid from pthalic anhydride
whereby Selden Co. actjuires license
to operate under patent taken out by
Scottish Dyes.
Agreement relating to certain chemicals
for use as flotation reagents.
du Font's rights covering production of
disubstituted guanidines by Cyanogen
Chloride Process subject to determina-
tion of pending applications for letters
patent by four United States pro-
ducers, and is subject to any subse-
quent agreement for adjustment of
conflicting claims.
Cross licenses under patents on acetal-
dehyde-amine accelerators.
Cross licenses under patents on butyral-
dehydes and butylamine aniline ac-
celerators.
License under patents on thionex (tetra-
methylthiurammonosulphide) .
License under patents on antioxidants
of the type represented by phenyl-
alphia-naphthylamine and phenyl-
beta-naphthylamine.
Agreement assigning Claude Ammonia
patents in North America to du Pont,
granting L'Air Liquide non-exclusive
licenses covering by-product methanol
and higher alcohol for France, Spain,
Portugal, Italy, Switzerland, Belgium,
Luxemburg, the Netherlands, Czech-
oslovakia, Poland and Japan, and
granting L'Air Liquide one Year's
option to Lazote's pressure catalytic
hydrogen process for above countries.
Agreement assigning Casale North
American Patent to du Pont; modi-
fication of agreement by correspond-
ence during June and July, 1929, per-
mitting du Pont to exchange informa-
tion regarding the Casale process with
other parties.
Agreement assigning patents on synthet-
ic nitrogen process for Canada and
U.S. todu Pont.
Period
16 jTs. (i.e. date of
expiration of
patents).
FERMENTATION ALCOHOL
11/30/27.
10/29/25.
du Font-United Molasses
Company, Limited.
lu Pont-United Molasses
Company, Limited.
Agreement between du Pont and Na-
tional Distillers Products Corp. (suc-
ceeded by United Molasses Co.) can-
celling prior agreements relating to
process for manufacture of fermenta-
tion glycerine and assigning rights to
process to Eastern Alcohol Corpora-
tion.
(Note. — Prior agreements above re-
ferred to relate to joint development of
the process.)
Agreement between du Pont and Ken-
tucky Alcohol Corporation (succeeded
by United Molasses Co.) relating to
formation and joint ownership of East-
ern Alcohol Corporation, granting li-
censes under inventions relating to de-
velopment of alcohol by fermentation
process, and tacit understanding as to
future inventions relating to said in-
dustry.
MUNITIONS INDUSTRY
1331
Schedule A — Continued
INSECTICIDES, FUNGICIDES, AND SEED DISINFECTANTS
Date
Parties
Subject
Period
7/20/28.
du Pont-Winthrop Chemi-
cal Company.
Grasselli-Eagle Pitcher Lead
Company.
GrasselH-U.S. Smelting, Re-
fining and Mining Com-
pany.
I.C.I.-Cooper McDougall &
Company.
Agreement covering formation and joint
ownership of Bayer-Samesan Com-
pany, granting to latter company ex-
clusive rights for United States and its
Possessions and Canada, covering
present and future inventions, with
tacit understanding that said com-
pany may be entitled to similar rights
covering foreign territories.
Grasselli has license to manufacture ar-
senate of lead under Patent #1172741.
Grasselli has license to manufacture cal-
cium arsenate under Patents #1532577
and #1532578 (4-7-29).
Agreements relating to insecticides and
fungicides.
MISCELLANEOUS
1/1/26.
du Pont - 1. C. I. - Canadian
Explosives Limited.
Exchange of information and licenses
under inventions relating to paints,
coated textiles, sporting ammunition,
pyralin sheeting and articles, insecti-
cides, muriatic acid, sodium sulphate,
etc.
10 years.
Exhibit No. 475
I.C.I. AGEEEME2fT
This agreement, made as of the day of , 1933, between
Imperial Chemical Industries, Limited, a corporation organized and existing
under the laws of Great Britain, hereinafter called " I.C.I."
E. I. du Pont de Nemours & Company, a corporation organized and existing
under the laws of Delaware, United States of America, hereinafter called
" duPont ", and
Canadian Industries Limited, a corporation organized and existing under the
laws of the Dominion of Canada, hereinafter called " C.I.L.",
WITNESSETH :
Whereas I.C.I, and duPont separately own substantial amounts of the
capital stock of C.I.L., and have enteied into two agreements with C.I.L.,
dated January 1, 1925, and January 1, 1926, providing for the free use by
C.I.L. of their resiDective inventions and processes in connection with the
manufacture and sale of certain products within the Dominions of Canada and
Newfoundland ; and
Whereas said agreements have been supplemented and modified by reason
of informal interpretations, understandings, and practices of the parties ; and
Whereas it is desired to redefine and to embody in one instrument the terms
of said contractual relationship;
Now, therefore, in consideration of the premises and of the covenants here-
inafter set forth, the parties have agreed as follows :
1. Definitions. — As used herein—
(1) The term "inventions" shall be deemed to mean inventions, processes,
and technical information, whether patented or secret.
(2) The term "British Empire" shall be deemed to mean all present and
future countries, colonies, possessions, and mandated territories thereof, inclu-
sive of Egypt but exclusive of Canada and Newfoundland.
(3) The term "United States" shall be deemed to mean the United States
of America and all present and future countries, colonies, possessions and
mandated territories thereof.
8:!87G— .'!4— PT 5 21
1332 MUNITIONS INDUSTRY
(4) " Central America " shall be deemed to comprise the region between North
and South America, extending from about N. latitude 7° to N. latitude 18°,
that is, from Colombia to Mexico, between the Caribbean Sea and the Pacific
Ocean.
(5) The "West Indies" shall be deemed to compiise the groups of islands
lying off the southeast coast of North America and extending from near the
coast of Venezuela northward to the latitude of North Carolina, exclusive of
British possession.
(6) An invention shall be deemed to be " controlled by any party hereto,
whenever such party shall be able to grant rights thereunder, as pi'ovided
herein, within the territory or territories of the other parties.
(7) The term " subsidiary company " shall be deemed to mean any company
in which any party hereto owns or controls a majority of the outstanding
voting stock, and any company similarly owned or controlled by any subsidiary
or subsidiaries.
(8) Wherever reference is made to any party hereto it shall be deemed to
include the present and future subsidiary companies of said party, so long as
the latter's ownership or control thereof continues.
(9) The term "principals" means I.C.I, and du Pont.
//. Grant of rights to C.I.L. — (a) I.C.I, shall grant to C.I.L., upon request,
the exclusive right to practice any and all inventions now or during the term
of this agreement owned or controlled by I.C.I., and to make, use, and sell any
and all products embodying such inventions, within the Dominions of Canada
and Newfoundland ; subject, however, to the exceptions permitted under article
V hereof; and subject to the right hereby reserved by I.C.I, to practice such
inventions and to make such products within, but only for the purpose of ex-
port from, said territory.
(6) du Pont shall grant to C.I.L., upon request, the exclusive right to prac-
tice any and all inventions now or during the term of this agreement owned or
controlled by du Pont, and to make, use, and sell any and all products owned or
bodying such inventions, within the Dominions of Canada and Newfoundland;
subject, however, to the exceptions permitted under article V hereof; and
subject to the right hereby reserved by du Pont to practice such inventions
and to make such products within, but only for the purpose of export from,
said territory,
(c) The aforesaid grants by I.C.I, shall confer no right on du Pont, and the
aforesaid grants to du Pont shall confer no right on I.C.I, to practice said
inventions or to make, use, or sell the products embodying the same.
///. Grant of rights to I.C.I. — (a) C.I.L. shall grant to I.C.I., upon request,
the exclusive right to practice any and all inventions now or during the term
of this agreement owned or controlled by C.I.L., and to make, use, and sell
any and all products embodying such inventions, within the British Empire as
hereinabove defined.
(ft) C.I.L. shall grant to I.C.I., upon request, the nonexclusive right to prac-
tice any and all inventions now or during the term of this agreement owned or
controlled by C.I.L., and to make, use, and sell any and all products embody-
ing such inventions, within any and all countries not designated herein as the
exclusive territory of any of the parties hereto, and agrees that during the
term of this agreement it will grant no similar right to any party other than
Du Pont,
IV. Grant of rights to du Pont. — (a) C.I.L. shall grant to du Pont, upon
request, the exclusive right to practice any and all inventions now or during
the term of this agreement owned or controlled by C.I.L., and to make, use,
and sell any and all products embodying such inventions, within the United
States, Mexico, Central America, and the West Indies, as hereinabove defined,
(6) CI.L, shall grant to du Pont, upon request, the nonexclusive right to
practice any and all inventions now or during the term of this agreement owned >
or controlled by C.I.L., and to make, use, and sell any and all pi'oducts em- \
bodying such invention, within any and all countries not designated herein
as the exclusive territory of any of the parties hereto, and agrees that during
the term of this agreement it will grant no similar right to any party other
than I.C.I.
V. Exclusion of rights. — (a) It is hereby declared to be the spirit of this
agreement that the exploitation of the inventions and products of I.C.I, and
du Pont within the Dominions of Canada and Newfoundland shall be conducted
by C.I.L. Nevertheless, it is recognized that in exceptional instances the
interests of said principals may be served more advantageously by other pro- ,
MUNITIONS INDUSTRY 1333
ccilure; and it is agreed that either I.C.I, or Du Pont may exclude from the
operation of this agreement any inventions or products, the exploitation of
which by C.I.L. would be contrary to the best interests of such principal.
( b ) The exclusions permitted under this article shall be subject to the follow-
ing restrictions :
(1) No such exclusion shall be made until all the parties hereto shall have
been given opportunity fully to discuss the procedure contemplated; provided,
however, that notice of pending negotiations with other parties shall be excused
if such disclosure would involve breach of confidence reposed by such other
piirties.
(2) No such exclusion shall be based solely upon the desire of either prin-
cipal to retain the entire profits (rather than the percentage thereof repre-
.'•ented by its stock equity in C.I.L.) to be derived in Canada and Newfoundland
from the exploitation of such invention or product.
(3) No such exclusion shall deprive any party of rights to practice specific
inventions theretofore conveyed hereunder.
in) It is hereby recognized that the provisions of this agreement are sub-
ordinate and subject to all existing agreements wherever it may conflict there-
with. Each of the parties agrees, however, that in negotiating for the renewal
of any of such agreements which may expire during the existence of this agree-
ment, it shall endeavor to effect such renewals on such basis or terms as
will harmonize as fully as possible with the provisions of this agreem'ent.
For purposes of reference only, a list of such agreements is attached hereto,
marked " Schedule A" ; it being understood that such list is not intended to be
all-inclusive.
VI. Compensation. — Recognizing the reasonable probability that during the
term of this agreement the rights granted to and received from C.I.L. by each
of the principals, generally will be of substantially equal value, it is agreed
that no royalties or other compensation shall be paid for such rights except
as follows:
(1) Whenever any party desires to acquire rights hereunder for any in-
vention which has been obtained by the grantor thereof from others, such party
shall reimburse to the grantor such portions of the consideration paid or pay-
alilo for said invention as is reasonably attributable or allocable to the rights
thereunder for the territory of such party. To facilitate the determination of
such compensation, any party hereafter contemplating the purchase of rights
to an invention within the Territory of any otlier party, shall notify the latter
before the conclusion of negotiations therefor, and shall afford to the latter
an opportunity to determine in advance the amount or basis of consideration
for the rights applicable to its territory, unless such disclosures would involve
bleach of confidence reposed by the other party to such negotiations.
(2) Whenever any party desires to acquire rights hereunder for any invention
owned or controlled by a subsidiary company in which one of the other parties
owns less than all of the outstanding common stock, it shall be obligated to pay
a fair and adequate compensation for such rights; and the parent of such
subsidiary shall refund imm'ediately to said party such percentage of said
payment as the amount of common stock of the subsidiary held by the parent
bears to the total outstanding common stock of the subsidiary.
VII. Aid in obtaining rights. — Each of the parties agrees that in acquir-
ing rights to any invention it will endeavor, if practicable, to obtain rights there-
under which may be extended to the other parties in accordance with the
terms hereof ; and agrees that if it acquires rights to an invention which are
so limited as not to permit of such extension, it will use its best efforts to
assist such other party or parties to obtain rights to such invention. No
party shall be obligated, however, to purchase at additional cost any right for
the benefit of another party hereto, unless the amount or basis of considera-
tion therefor shall have been determined in accordance with subparagraph (1)
of article VI hereof.
VIII. Disclosure of information. — (a) Each of the parties hereto, as soon
as practicable and in any case within six months after the commercial
utilization of any invention for which any other party may be entitled to
rights hereunder (other than inventions referred to in subparagraph (1) of
this article), shall disclose to such other party information in respect thereto,
suflicient to enable such other party to determine whether it desires to
utilize the same.
(1) Information concerning inventions or patents relating to an industry in
which C.I.L. is not engaged need not be disclosed to C.I.L. unless, in the judg-
1334 MUNITIONS INDUSTRY
ment of the possessor thereof, the information would be of special interest to
C.I.L., or unless the information is requested by the latter. Information con-
cerning inventions or patents relating to an industry in which C.I.L. is en-
gaged shall be disclosed by C.I.L. to both of the other parties, regardless of
whether either or both of said parties is or are engaged in such industry ;
provided, however, that C.I.L. shall not disclose to either party any confi-
dential information obtained from the other of said parties, without the
hitter's consent.
(?>) Kach of the parties, at the request and expense of such other party,
.«hall supply experienced chemists, engineers, foremen, and other experts to
assist such other party in investigating, testing, applying, or using any inven-
tion disclosed as aforesaid ; provided, however, that the party called upon for
such technical assistance may arrange to furnish same at such time and in
such manner as will not materially impede or interfere with its own activities
and operations.
IX. Patent protection. — (a) Each of the parties hereto, as soon as prac-
ticable and in any case within six months from the date of the filing' of
application for letters patent, in the country under the laws of which it is
organized, covering any invention for which either or both of the other parties
may be entitled to rights hereunder, shall disclose to such other party or
parties (except as otherwise provided in paragraph (a) (1) of article VIII
hereof) Information sufficient to enable it or them to determine whether it is
desirable and practicable to secure patent protection therefor in any country
or countries in which it or they may be entitled to practice said invention.
The party owning the invention shall at the request of the other party or
parties, and may in the absence of such request, cause application or appli-
cations for letters patent thereon to be filed in any country or countries in
which such other party or parties may be entitled to practice the same ; and
at the request of such other party or parties shall assign to the latter all
patent rights covering the invention in any such country or countries.
(6) Neither the grantor nor any grantee of the rights to any invention
hereunder shall be bound to defend any letters patent covering the same, but
each party agrees, at the request and expense of the other, to assist to the
fullest extent in defending or protecting any such letters patent.
(c) Each party shall pay all fees and expenses (not including expenses of
litigation) for filing, securing, and maintaining any patent application or letters
patent which it may elect to acquire or retain, in any country in which it has
been granted the exclusive right to practice the invention covered thereby ; and
I.C.I and du Pont shall pay, in such proportions as they shall mutually deter-
mine, all such fees and expenses in any country in which they have been
granted nonexclusive rights to the invention so covered.
X. Impairment of rights Each of the parties agrees not to make or consent
to any disclosure or to do or consent to any other act that may impair or de-
preciate the value of any right granted to it under this agreement, or that
may impair or depreciate the value of the right, title, and interest retained by
any other party in any invention covered hereby. Each party agrees to take all
reasonable care to prevent any such disclosure or act, but shall not, in the ab-
sence of bad faith or gross negligence, be liable in damages therefor.
XI. Parties in interest. — (a) The terms and provisions of this agreement shall
apply to the respective subsidiary companies of each of the parties hereto, and
each of said parties undertakes and assumes, for and on behalf of its sub-
sidiary companies, all of the duties and obligations of this agreement. To this
end each of the parties shall endeavor to obtain promptly from each subsidiary
company in which it now or hereafter owns less than all of the outstanding
stock, a consent to be bound by the provisions of this agreement.
(6) The benefits and obligations of this agreement shall inure to and be
binding upon the parties hereto and their respective legal representatives and
successors, and shall not be assigned, transferred or licensed to any party with-
out the consent in writing first obtained from the other parties ; provided,
however, that any party may assign or license, within its exclusive or non-
exclusive territory, the rights conveyed hereunder with respect to specific in-
ventions.
XII. Duratimi. — This agreement shall continue in effect until July 1, 1939.
Upon the termination of this agreement the parties hereto shall continue to
have and possess the perpetual right to practice any and all inventions ac-
quired hereunder and to make, use, and sell any and all products embodying
such inventions, within their respective territories.
MUNITIONS INDUSTRY 1335
XIII. Cancellation of existing agreements. — The afoi'esaid agreements between
the parties hereto, dated January 1, 1925, and January 1, 192G, and all amend-
ments and additions thereto, are hereby cancelled and terminated ; but the
parties shall continue to have and possess the perpetual right to practice any
and all inventions acquired thereunder and to malse, use, and sell any and
all products embodying such inventions, within their respective territories.
In witness whereof, the parties hereto liave caused this agreement to be exe-
cuted in triplicate by their offlcei's thereunto duly authorized, and their common
or corpoi-ate seals to be hereunto affixed, as of the day and year tirst above
written.
Impeeial Chemical Industeibs, Ltd.,
By ,
Director.
Attest :
Secretary.
E. I. Du Pont db Nbmoxjrs & Company,
By
President.
Attest :
Secretary.
Canadian Industries Limited,
By ,
President.
Attest :
Secretary.
Exhibit No. 476
Ms-80-A
Ms-8
T-2708
August 2nd, 1933.
Major K. K. V. Casey,
E. I. du Pont de Nctnows & Co., Wilmington, Del.
Dear Sir:
status of negotiations, JULY 1933
I. Negotiations completed. — None.
II. Prospects under negotiation. —
Estonia : 25 tons T.N.T. Offered I.C.I. Material quotation expired July
31st. No news from Bourviliov.
Estonia : 2 tons blank-fire powder. Offered I.C.I, material. Quoted with
the T.N.T.
Greece : 60 tons powder with volatile solvent. 20 tons powder without
volatile solvent, for 75 mm Krupp field gun. The former enquiry for 40 tons
low nitroglycerine content powder for the 75 mm Krupp field gun has been
changed to require 60 tons powder with volatile solvent and 20 tons without
volatile solvent. A complete new set of trials is scheduled to take place in
September, in which all the former competitors are expected to take part, as
well as two additional firms, i.e. : N. V. Nederlandsche Springstoffenfabrik,
Muiden, Holland ; Dynamite Nobel, Avigliana, Italy. In the last competition
the French powder monopoly won first place, I.C.I, second place, and Bofors
third place.
Holland: 80-100 tons powder for the 280 mm Krupp gun CD. 10-15
tons T.N.T. for shells. Inquiry received. Are obtaining prices from Wilming-
ton and London.
Latvia : T.N.T. We are negotiating the sale of T.N.T. to the Cahn group,
who in turn will exchange it for scrap metal from the Latvian Government.
Our agent is also prepared to negotiate an offer for a scrap exchange on
behalf of I.C.I, should the matter develop this way.
III. Prospects for future negotiations. —
England: Powder for 7.62 mm Estonian cai'tridges.
1336 MUNITIONS INDUSTRY
Estonia : 18 tons N.C. powder for 12"/50 cal. CD. gun. 4 tons powder for 18-
pounder gun.
Greece : Powder 6.5 mm rifle, S. P. & C. H.
Holland : 100 tons T.N.T. for Army and Navy. N. C. iwwder lor 75 nun gnu,
Colonial Army.
lA'. Report for July 1933.—
P>ulgaria : I.C.I, lias removed Mr. A. W. Douque, senior partner of A. W.
Douque & Co., their former Bulgarian representative to Belgrade, and will
continue the agency in Bulgaria with Mr. Sirmadjietf, the junior partner.
Mr. Sirmad.Ueff has been informed of the joint arrangement between I.C.I,
and Du Pont, and we shall shortly take up with him the question of sales of
military material and the Du Pont agency.
Greece : After the recent tests in Greece, so much protest was made for
different reasons to the judges of the commission, that the Greeks have de-
cided to reopen the trials in September, and are calling for 20 tons of powder
without volatile solvent and 60 tons of i>owder with volatile, solvent. New
specifications are being prepared by the Greeks, and an entire new set of trials
will be made.
Mr. Singer intends to be present in Greece during the tests and the opening
of the bids.
Holland : When I visited Holland on July 10th, Mr. Vlessing told me that
Bofors do not intend to set up a permanent manufacturing ordnance plant in
Holland ; that the H. I. H. was taken over from him by the Handelsmaatschappij
In liquidation of the indebtedness to the bank; that the Handelsmaatschappij
did not have the intention of going permanently into the ordnance business, but
only had the intention of liquidating the Vlessing account, and that they had
sold to Bofors the stock of machinery which was at P. Smith's, and also certain
patents and processes which were the property of H.I.H. Siderius ; that they
have sold some of the stock of heavy guns to the Frencli Government and
have finally liquidated the account of the bank : hence the mission of H.I.H.
Sideriusis finished and they now intend liquidating H.I.H. Siderius. Bofors is
taking this machinery to AVilton's Machinefabrick to finish the contract which
they have for a battleship, and once this battleship is completed they will
probably take the machinery to Sweden or sell it. But at the present time
there is no idea of Bofors starting a permanent manufacturing establishment!
in Holland.
I believe this information to be more correct than that supplied in previous
notices on this subject.
In connection with this, you will recall that aliout a year ago there was a
great newspaper excitement in France over the 1,500 half finished guns in
Holland in the possession of the H.I.H. which, the French newspaper claimed,
was a secret stock of heavy guns held in Holland by the Germans. The result
of this caused the French Government to buy the most important pieces
It turned out that this whole French newspaper row was originated by Vlessin
and Haegen in order to sell this stock and that it was a vast publicity farce
which the French newspapers fell for due to their desire for anti-German news
Vlessing said that they managed this whole publicity affair without having to
pay a cent to the newspaper. Vlessing and Haegen ai-e extremely proud of this
feat and discussed with me in great detail how they got the French Press
excited on this matter by constantly denying that they knew anything about
it and by making it all very mysterious and leaving the journalistic spirit do
the rest.
Vlessing & Co. bought some time ago 8 280-mm sea-coast guns which the
Dutch government had ordered in 1918 from Krupp. At the end of the war
the guns and cradles were completed, but not the turrets in which they were
to be placed, nor the loading device. Vlessing has developed an opportunity
to sell these guns to Turkey, but he must also provide the loading apparatus
and some 100 charges per gun. He asked for a quotation on complete rounds.
After examination of the information it would appear unwise for us to offer to
furnish the rounds, due among other things to the fact that the loading apparatus
is not yet designed, but we should bid on the powder.
Poland : Poland is still pursuing me for help on the American tank matter.
Portugal : I.C.I, are now reorganizing their agency here. We are awaiting
their final report on this.
Roum.-inia: Mr. Boxshall writes that due to present financial difficulties
nothing can be done before the autumn.
MUNITIONS INDUSTRY 1337
Spain : I.C.I, is feeling out Spain to see if active direct-sales work will be
possible.
Yugoslavia : I.C.I, has made a definite arrangement in Yugoslavia. They
have given an agency contract to Sava Veljovic, but insisted that he keep in
his office Mr. A. W. Douque, who is on the I.C.I, pay roll, and through whom
all correspondence will be sent, and who will keep control over Veljovic. We
shall shortly make an arrangement with these gentlemen for Du Pont.
Argentine: Mr. Antonia Carames arrived on the S.S. Avila-Star at Boulogne
on July 27th. Col. W. N. Taylor met him on the boat and motored him to
Paris, and has entertained him for several days. Mr. Carames appears very
pleased with these attentions and is quite expansive and genial.
He told his story over many times, which has been communicated to London.
On August 3rd, Mr. L. W. B. Smith will come to Paris for a conference.
Mr. Carames says that it is absolutely decided that the Argentine govern-
ment will build a factory, and that it cannot be postponed beyond January
1934 at the latest.
Brazil : The Brazilian Mission of General Leite de Castro has just arrived.
Mr. Nicolettis, of I.C.I., who is a fervent friend of General de Castro, will make
the first contacts,
China : T. V. Soong has been in Europe and is being extremely well taken
care of by I.C.I.
Prices : In spite of the fall of dollar exchange, Du Pont prices are consider-
ably higher than those of the European factories. This difference of price
makes it out of the question for the moment to have Du Pont quotations
accepted. In all our territories it is still a buyer's market, and price dominates
the situation.
Very truly yours,
William N. Taylor.
AK/.
Exhibit No. 477
[Copy to Imperial Chemical Industries, Ltd., Sec. Anon. Commercial e Industrial Tucu-
man 681, Buenos Aires, Argentina, and Imperial Chemical Industries, Ltd., 285 Madison
Avenue, New York]
Ms-176-A-l
184r-Uruguayan Gov't
Colonel William N. Taylor,
Paris Office, Foreign Relations Department,
June 11, 19SIf.
Incorporated with limited liability in the State of Delaware, U.S.A.
H-IOS
Imperial Chemical Industries, Ltd.,
CoKDiTE Section,
Millbank, London, 8.W. 1, England
Dear Sirs : Attached is confirmation copy of our cablegram of 7th June
informing you that Sr. Manuel Ferreira, our agent in Paraguay who is now
in Buenos Aires, asked us for prices c.i.f. Montevideo on 20O kilos Picric acid
and 2,000 kilos Flake TNT. We also informed you in our cablegram that we
could not quote from this end owing to the embargo on munitions and military
propellants decreed by President Roosevelt.
In view of the fact that there is no similar embargo obtaining in England,
we suggested that you quote prices to your office in Buenos Aires, who in turn
would advise Ferreira.
Although the inquiry distinctly states that prices are wanted c.i.f. Montevideo,
we suspect that the material is for Paraguay and since we wish to cooperate
with our Government in observing the embargo, we deemed it best not to quote.
Yours faithfully,
For E. I. DU Pont de Nemours & Company,
N. E. Bateis, Jr.
NEB : AKR.
1338
MUNITIONS INDUSTKY
Exhibit No. 478
Cipher word
Cipher word
AQIOU-
Advise.
Ferreira.
Cannot quote.
Owing to embargo.
Stop.
ICI..__
GJEXE
I.C.I.
FERREIRA -
London.
IWRPU
IXCJE
Will quote.
EDJEC
DSOOX
Direct to you.
MANMU
Cable to I.C.I., Buenos Aires, June 7, 1934.
12)
17)
("Exhibit No. 479"
appears in text on page 13
(" Exhibit No. 480 "
appears in text on page 11
("Exhibit No. 480^A" appears in text on page 1117)
Exhibit No. 481
[H.J. Res. 282, Seventy-second Congress, first session ;
No. 941]
House Calendar No. 160 ; Report
In the House of Representatives. February 9, 1932, Mr. Fish introduced the
following joint resolution ; which was referred to the Committee on Foreign
Affairs and ordered to be printed; March 30, 1932, referred to the House
Calendar and ordered to be printed.
JOINT RESOLUTION To propose a multilateral agreement renouncing the sale or export
of arms, munitions, or implements of war to any foreign nations
Resolved l)y the Senate and House of Representatives of the United States of
America in Congress assembled, That the Ameri-can delegates participating in
the general disarmament conference now being held at Geneva, Switzerland, be
requested to propose a multilateral agreement renouncing the sale or export of
arms, munitions, or implements of war to any foreign nations, in accordance
with the intent and purpose of the Kellogg-Briand pact renouncing war as an
instrument of national policy.
Sec. 2. Nothing contained in this joint resolution shall be construed to inter-
fere with the sale and shipment of foodstuffs, cotton, oil, coal, lumber, wool,
leather, copper, automobiles, or other manufactured articles not commonly or
commercially known as arms, munitions, or implements of war.
("Exhibit No. 482" appears in text on page 1134)
Exhibit No. 483
February 24, 1934.
FOREIGN BEJLATIONS DEPARTMENT
To biing your records to date we are attaching a complete list of military
sales division agents in South America.
It should be remembered that the agents mentioned are also agents for
Imperial Chemical Industries, Limited, for military propellant sales in South
America.
N. E. Bates, Jr.
NEB : AKR
MUNITIONS INDUSTRY
Military/ sales agents, South America
1339
Argentine
Bolivia
Brazil
Chile -
olombia:
Ordinary
mail.
Air mail
Ecuador
Paraguay
Peru -
Uruguay
Venezuela
Street address
Sr. Don Antonio Carames Avenida Alvear #1760, Bue-
nos Aires, Argentina.
Sres. Webster & Ashton, Calle Loayza, 11-15 ,La Paz,
Bolivia; or, Casilla de Correo 144, La Paz, Bolivia.
Casa Mayrink Veiga, S/A, 17-Rua Mayrtnk Veiga-21,
Rio de Janeiro, Brasil.
Sr. Don Thomas C. Sargent, Casilla 240-V, Correo 15,
Santiago, Chile.
Sr. Stuart Hosie, Correo Nacional 418, Bogota, Colom-
bia.
Sr. Stuart Hosie, Correo Aereo 3732, Bogota, Colombia.
Sr. Don Francisco Sefzic, Casilla de Correo Num. 368,
Guayar4uil, Ecuador.
Sr. Don Manuel Ferreira, Casilla de Correo 573, Asun-
cion, Paraguay.
Sr. Don Ernesto de Bossi, Apartado de Correo Num.
1079, Lima, Peru.
Sres. Crocker & Cia, Calle Uruguay 1010, Montevideo,
Uruguay.
Sr. Coronel B. de Santa Ana, Villa Pomarosa, La Flori-
da, Caracas, Venezuela.
Cable address
Carames, Buenos Aires.
Activos, La Paz, Bolivia.
Mayrink, Rio.
Making, Santiago, Chile.
[Hosie, Bogota, Colombia.
Sefzic, Guayaquil, Ecuador.
Nolo, Asuncion, Paraguay.
Edero, Lima, Peru.
Crockerco, Montevideo.
Colbdesa, Caracas.
Exhibit No. 484
♦ MS-80-A
MS-80-D
MS-8
MS-35
Aiinual report on the situation in the territory of the Paris offioe smokeless
powder department on Decemher 31st, 1933
Beginning 1933, the Paris office of E. I. du Pont de Nemours & Co. began
to take over the territory of Southern Europe from the Paris office of Imperial
Chemical Industries, and as I.C.I, had several changes which they wished
to make in their agencies in these countries, we waited until these were com-
pleted and then adapted our arrangements to theirs. As I.C.I, had suitable
agents in the territoiy, we decided that we would simply take the I.C.I, agents
and add to their work the Du Pont representation.
All this is going on smoothly and has been completed, although the agree-
ment with I.C.I, agent for Yugoslavia is for the moment only verbal.
The difficulties encountered by the governments in this territory in obtaining
foreign exchange, have made the export of powder and explosives extremely
small, although all war departments in this territory have announced their
desire for larger quantities than previously considered.
The result has been that while purchases from abroad have not been of
interest, there have been larger orders than usual placed on the government
factories, and considerable funds have been appropriated to the increasing
and development of these factories. It would, therefore, appear that before
long every country in Europe will be provided with a local factory sufficiently
large to completely cover its current needs.
However, each country has plans for mobilization stocks and these plans
call for more and more powder each year, and our opportunity for sales are
restricted to supplying these requirements, which will probably become acute
on any menace of war.
The causes of conflict are plenty and most of the continental people are
seriously afraid that for one reason or another Germany will start a war and
that it will come so suddenly that negotiations to prevent it will be impossible.
On every frontier, Germany has a delicate problem, and Germany is tak-
ing certain steps which the military people agree are destined to make her a
very dangerous adversary in case of war.
The prices in Europe have been up to now going down, as competition for
the small amount of business offered has been extremely severe. The different
♦ Pencil markings.
1340 MUNITIONS INDUSTRY
manufacturers are making tremendous efforts to sell, mainly in view of being
well in with the customers in case of larger requirements, as mentioned above.
It looks, however, as if prices had reached their minimum. The prices of
raw materials are increasing and the manufacturers who have taken orders
at low prices are complaining bitterlv.
Aiistria. — We have made no attempt to sell to Austria, as they are only
permitted to import under license from the Council of Ambassadors.
Austria has been very active in the reorganization and the equipment of their
military establishments.
We understand that their powder is provided by their own factory at Blumau,
which is in a position to furnish all they need.
Belgium. — Belgium has voted a larger military expenditure than usual and
have placed more orders on their own factories than in past years. They have
been urging their local factories to increase their capacity and have given them
a premium over the prices of foreign manufacturers, which amounts to approxi-
mately 20%.
We received a statement from them of quantities of powders and explosives
which would eventually be required.
I received a request to proceed to Belgium to discuss this matter, which was
later postponed.
Bulgaria. — This country can only purchase under license from the Council of
Ambassadors, but is making enquiries for supplies apparently disi'egarding the
peace treaty. However, they have no foreign exchange and wish to pay for
these goods with tobacco and other products.
I.C.I, have made an agency arrangement with Cr. H. Sirmadjieff & Co., I,
Rue Aksakoff, Sofia, and we have also made an agency arrangement with them,
as they appear to be suitable people.
Czechoslovakia. — We have made no attempt to sell to Czechoslovakia.
Denmark. — Denmark has reduced its army to a few thousand men and are
making no plans whatsoever for strengthening their military position.
Estonia. — The Estonians are buying all they can and prefer to purchase from
England, with whom they hope to negotiate a tariff treaty.
Finland. — Finland, as a result of a commercial treaty, has decided to buy all
her military requirements from England.
The Finns have a factory where they manufacture rifle powder of an excel-
lent quality and they are stocking raw materials instead of finished supplies.
They are also planning to stock TNT, which they hope to buy as fast as they
can get the money. During the year we sold them a fair order.
I.C.I, completed an agency with Messrs. de Jersey & Co. (Finland) Ltd.,
Mikonkatu 9, Helsingfors, and we have contracted with them to be Du Pont
agents.
For a while and at the request of the War Dept., we endeavored to get
along without an agent in this country, but it appeared thoroughly unprac-
tical, as we never got requests for supplies and our offei's were never
promptly handled. The appointment of an agent brought immediate results.
France. — We, of course, do not sell to France, but the French are making
extensive studies and experiments on new explosives and on nitroglycerin
powders. I believe it will be of the greatest interest to follow closely the
studies of the French laboratories.
Greece. — Greece has been engaged this year in testing samples of powder in
view of future purchases. There have been a number of trials and nearly all
the powder manufacturers submitted samples.
They offer in payment drachmas, which can only be used to purchase Greek
products, which limits seriously the amount of business that can be done with
them.
In the various trials of powder the products of I.C.I, have shown extremely
well.
The Greeks wish to increase the capacity of their powder factory and have
asked for offers to enlarge their factory from the principal manufacturers.
Holland. — Holland has reduced her purchases, due to her financial situation,
and has made practically no purchase abroad. On the other hand, she has
placed more orders than usual with her local factories.
Hungary. — We do not attempt to sell to Hungary ; but, contrarily to the peace
treaty, the Hungarians, who have a powder factory known as " Nitrocliemie
MUNITIONS INDUSTRY 1341
Industrieanlagen A.G.", have reorganized their powder industry and have
corne out bodly into the export tield. The French have made a protest against
this, but apparently there is no one to protest to now, as tlie Council of Am-
bassadors, which was charged with the maintenance of the military clauses
of peace treaties, appears to have no more real existence.
Latvia. — Purchases are restricted due to the lack of foreign exchange.
Lithuania. — This country is unable to buy due to her having no money.
Noncaij. — The Norwegian Army has been extremely reduced and no money is
being spent abx-oad.
Poland. — Poland has bought no powder or explosives abroad this year. We
understand that they have increased Zagozdzon by four times the original
capacity and are considering the erection of another factory, and it looks as if
this country were lost as a customer.
Portugal. — Portugal is discussing with I.C.I, the question of enlarging their
local factory at Chelas.
Ronniania. — Roumania has had so many scandals in her army this 3^ear that,
according to cur agent, there is no immediate possibility of business, although
he hopes that when the matter is straightened out, there will be some.
We have appointed Mr. F. G. Boxshall, 107 Gales Victoriei, Bucarest, agent
for Du Pont. He is the agent for I.C.I, in that territory.
^paiii. — We have done no business with Spain, as I.C.I, have an arrangement
with " Union Espanola de Explosivos."
It is our understanding that the Spanish Army buys some powder from
abroad.
Spain is having its powder factories entirely renewed and reorganized by the
Germans.
Sioitzerland. — This country has voted an extremely large military budget this
year. As Switzerland must of necessity buy considerable material abroad, there
is a great deal of excitement among the military suppliers as to whom will get
the orders.
We are looking into this matter of powder and explosives and will shortly
know whether it is possible to sell them or not.
Turkey. — Turkey is a possible market, but they wish to pay with Turkish
goods. At the recent adjudication held for made up charges, Bofors took the
order at a price which appears a loss.
We hear that the Turks have made a contract with Nitrochemie of Hungary
to build a TNT plant, in return for which they placed their orders for TNT
with the Hungarians.
Yugoslavia. — Yugoslavia has been spending money to develop her local mili-
tary industry and her powder factory. She is, however, short of raw materials
and has tangled up her factories through insufficient facilities, She recently
erected a TNT plant, but could not get toluene and she is very perplexed as
to what to do. She would like to lay up a stock of toluene and various raw
materials for her factories.
Up to a certain point, the development of her local factories went on all
right, but it has now gotten beyond the general industrial development of the
country, and the Yugoslavians are now beginning to wonder whether they were
right in doing this or whether they should not get supplies of finished materials.
Yugoslavia is also short of foreign exchange and wishes to pay for these
materials in barter.
Prospects for 193Jf. — The prospects for obtaining orders for current military
supplies in Europe are practically out of the question. The only countries in
our territory which are unable to supply their requirements are : Estonia,
Latvia, Lithuania & Denmark, and their current needs are very small.
However, as mentioned above, all these countries desire large reserve stocks
and our prospects for sales lay largely in getting these orders, which is a very
possible undertaking. It will probably mean some financing on our part, and
as these are extra-budgetary operations, they must be handled with different
methods than those used in meeting ordinary adjudications.
William N. Taylor.
WNT/MS
1342
MUNITIONS INDUSTRY
Paris office, smokeless powder department, military sales division, chart no. 1,
forecast no. 1, 1st quarter 193^
NITR0CE1,LUL0SB PONDER
Forecast
Country
1934
1935
1929
1930
1931
1932
1933
1st Qt.
2nd Qt.
3rd Qt.
4th Qt.
1st Qt.
Belgium
1.5
30
Bulgaria....
Denmark ...
England
10
4
5
6
3
20
Estonia
18
Finland..
Greece
25
Holland...
5
9
1.5
Latvia
20
Lithuania
4
5
21
20
Poland
Roumania ...
0.30
30
Sweden..
Turkey
10
Yugoslavia ...
Total
28
14
10.5
21
1.5
38
40
.30
40
55
Paris office, smokeless powder department, military sales division, chart no. g,
forecast no. 1, 1st quarter 1934
TNT
Forecast
Country
1934
1935
1929
1930
1931
1932
1933
1st Qt.
2nd Qt.
3rd Qt.
4th Qt.
1st Qt.
100
12
10
28
is
50
400
200
Holland . .
100
45
Poland .
40
60
50
100
95
120
100
Total
135
62
130
78
418
45
260
200
100
100
MUNITIONS INDUSTBY
1343
Paris office, smokeless powder department, military sales division, chart no. S,
forecast no. 1, 1st quarter 1934
NITROGLYCERINE POWDER
T
r T snips
Forecast
Country
1934
1935
1929
1930
1931
1932
1933
1st qt.
2nd qt.
3rd qt.
4th qt.
Belgium
Bulgaria
Denmark..
England
Estonia .
1.5
Finland
Greece
1
40
Holland. .-
Latvia
Norway.. . ..
Poland
Rumania
Sweden
30
:o
20
Yugoslavia
Total
1
1.5
40
30
20
20
1344
MUNITIONS INDUSTRY
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Imperial Chemical Industries, Ltd
Bofors-Nobelkrut
Purdrerie Royale de "Wetteren, Caulille,
Belgium.
Czechoslovak Explosives, Ltd., Czechoslo-
vakia.
Service des Poudres, France
Nederlandsche Springstoffindustrie, Hol-
land.
Bombrini Parodi, Delfino, Italy
Dynamite Nobel, Italy
S.I.A.T.A.M., Italy
Finnish Government Factory, Finland
Norske Springstoff Industrie, Norway
Schweizerische Sprengstoff Fabrik Dotti-
kon, Switzerland.
Societe Selve Thoune, Switzerland
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MUNITIONS INDUSTRY
1345
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E. I. du Pont de Nemours & Co
Imperial Chemical Industries. Ltd
Bofors Nobelkrut
Purdrerie Royale de Wetteren, Caulille,
Belgium.
Czechoslovakia Explosives, Ltd., Czechoslo-
vakia.
Service des Poudres, France
Nederlandsche SpringstolTindustrie, Hol-
land.
Bombrini Parodi Delflno, Italy
Dynamite Nobel, Italy
S.I.A.T.A.M., Italy
Finnish Oovernraent Factory, Finland
Norske Springstoff Industrie, Norway
Schweizerische Sprengstoff Fabrik Dotti-
kon. Switzerland.
Societe Selve Thoune, Switzerland
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1346 MUNITIONS INDUSTEY
Exhibit No 485
* MS-144
OCTOBEB 13, 1931.
Major K. K. V. Case^y,
Director of Sales, Smokeless Powder Department:
Please advise what steps have been taken to secure military sales business
in the unhappy event of hostilities between China and Japan.
F. W. PiCKARD,
FWP : JMQ Vice President.
Discussed with
F. W. Pickard. 10/19/31.
KKVC.
Exhibit No. 486
[Copy]
135-Nobel Ind. Ltd. Spec.
MS-80-A
135-Nobel Ind.
34-Chinese Gov's
MS-64
London Office, Bush House,
Aldicijch, W.C. 2, August U, 1933.
E. I. Du Pont de Nemours & Co.,
Wilmmgton, Delaware.
Major K. K. V. Casey,
Smokeless Powder Depariment.
FAB EASTERN TERRITORY — YOUR LETTER I)-2 897
Dr. Noelting arrived in London on Saturday, and I met him' Sunday after-
noon. This morning we had a conference at I.C.I.'s office, at which were present :
Messrs. Laing, Cox, Hawkins, and Thornhill, of Imperial Chemical Industries,
and Dr. Noelting, Mr. Ewing, and myself, of du Ponts.
The memorandum dated July 22, 1933, written by Mr. White on the meeting in
Wilmington July 20 was received with considerable surprise, because it appeared
to say in effect that I.C.I, has not played the game in accordance with the memo-
randum of October 10, 1932, when in fact they feel a great deal of care and
thought has been given to this situation.
However, we took up this matter in accordance with the memorandum, and
with Dr. Noelting's familiarity with the point of view of Wilmington, the whole
matter was discussed.
The steps which I.C.I, have taken to develop this territory are as follows :
The first thing I.C.I, did was to take advantage of Mr. P. Fowler's trip to the
Far East to have him talk over this matter with Dr. Noelting and I.C.I, staff
in China and to organize the position. Mr. Fowler is experienced in China and
his duty is organization and not that of a salesman. After consultation with
I.C.I, in China and with Dr. Noelting, it was decided that I.C.I, would use as
their agents in China the Jardine Engineering Corp. Jardine Engineering Corp.
are an established company in China and have been extremely successful in the
military business, having been agents for a great number of British houses, in-
cluding Vickers, and having up until the year 1933 done a very large business in
military work with the Chinese Government, and have apparently shown them-
selves to be competent military agents in the Far East. Through them, I.C.I,
has received constant and very large orders for cartridges. Furthermore, Jar-
dine takes the complete credit risk by taking the contracts in their own name
and paying I.C.I, for the merchandise. Jardine. therefore, appeared to them
the best agents they could find. I.C.I, feel it advisable in view of their non-
military business in certain provinces which are not in sympathy with the Nan-
king Government not to handle the military business directly through I.C.I.,
Shanghai.
I.C.I. , London, write directly to I.C.I., China, whose business is to check on
Jardine very much as I check on the Eui'opean agents and to receive and pro-
vide Jardine with technical assistance and everything they wish. Notice has
been given to Jardine that if at any moment an expert technician of any type
is required, he will be provided. For the moment, Jardine have told them thev
* Pencil markings
MUNITIONS INDUSTEY 1347
felt there was no necessity for this, as they, themselves, have on their staff a
number of military people. None the less, during the month of May I.C.C. sent
to China Colonel Cresswell, who is still there. Colonel Cresswell is probably
the most experienced military man in I.C.I., having been for many years at
Woolwich Arsenal and having commanded a battalion of heavy artillery during
the war. He is now the managing director of the ammunition section of
Kynochs. I.C.I., Shanghai, have for the moment given the handling of mili-
tary powders to Mr. Montagu Smith and have seriously considered bringing
Mr. Montagu Smith back to England for a degree of technical instruction. How-
ever, China notifies them that this is not for the moment necessary and they
think it would be a waste of time, particularly because of the fact that Colonel
Cresswell is on the spot and the fact that Jardine have apparently sufficient
military people.
Mr. Killery of I.C.I, is about to leave for China, and has been very carefully
posted on all the military business. He is going to remain there permanently
as head of the China organization.
The Chinese business is very complicated because work on this business
must be carried on, not only in China, but also in England and in Germany.
The Chinese have a purchasing commission in Berlin, with whom I.C.I, are in
constant touch, to my knowledge, and as you know, Mr. T. V. Soong, who holds
the purse strings of China, has been in Europe. Confidentially, Sir Harry
McGowan has been in touch very closely with T. V. Soong during his whole
visit and is going himself early in September to China to see T. V. Soong on
the spot to try to make the most out of the connection started in England.
It may be that the method employed by us in Europe and South America is
not exactly that which I.C.I, are pursuing in the Far East. I.C.I, are trying
to solve the far eastern question to the best of their ability and are trying
to find a method of working, not so much based on the memorandum of October
10 as on the facts of the oriental situation.
In the memorandum, Japan is mentioned. They handle Japan in a different
way and believe it should not be handled by the same people as are handling
China. Japan offers no possibility of business except for specialties, of which
I.C.I, gets their share. All standard military material is manufactured in the
coiuitry, and there have been no purchases of powder or explosives abroad.
The only purchases made in Siam are guncotton. So far, I.C.I, have got
their Siamese business through their Siam agents, and they recently appointed
new agents, which they hope will be better.
Regarding the Dutch East Indies, that whole business is handled through
Holland and is in my territory. As you know, I am offering cannon powder
in the Dutch East Indies, and samples have gone forward. Dutch East Indies
also buy T.N.T., which I offer in Holland. So far we have not sold any, as
both our prices and I.C.I.'s have been too high.
I.C.I, admit that they have been negligent in reporting all of these move-
ments to you, but it has taken them a good while to get this thing under way,
and I have in hand a letter from I.C.I., Shanghai, dated June 19, saying that
they are preparing now to send monthly reports to Wilmington.
There has actually been very little business, and they will send you a list
of all comparatively recent activities. About the time tliat this agreement
of Oct. 10, 1932, went into effect the urgent military operations ceased, and
there has been a let-down in the purchasing. I believe the only purchases made
since that time have been 8 tons of cordite, which was sold by I.C.I., and 200
tons of T.N.T., which was sold by Bofors to China through the Chinese-Berlin
office. There is also an inquiry for 20 tons of nitrocellulose powder.
I think it is right to say that Dr. Noelting, Mr. Ewing, and myself feel
satisfied that everything has been taken care of in accordance with the inten-
tions of the agreement of October 10 and that I.C.I, have been making a
serious effort to organize this territory and promote sales.
The question of price plays an important part in business, and the duPont
prices have been so out of line with the world prices for powder and T.N.T.
that often it appears inadvisable to quote duPont material for fear of giving
a bad impression. Mr. Haley, one of I.C.I., China, staff, home on leave, has
as you know, raised the difficulty of offering both companies' products. It
seems to me that this difficulty is meantime solved by duPont's prices being
out of line, as, in spite of tlie fall in the dollar, the dollar-paper prices are
still higher than the European prices, and either the dollar must fall lower
or duPont must come down on the prices before duPont will be again in
8.3876— 34— PT 5 22
1348
MUNITIONS INDUSTRY
the market, and I.C.I. 's problem seems to be what to do about offering duPont
goods under these circumstances. I have suggested to them that they do the
same thing that I do, i.e., to get prices from both companies and decide before
making the offer which company has the chance of getting the business and
push that one. As far as my experience has gone, in every case there is a
perfectly clear reason for quoting one company's goods instead of the other,
either for price, credit, quantities, or special desires of the customer. I there-
fore suggested to I.C.I, that the way to handle this in Cliina was to have
them judge each offer on its merits and do the best that can be done in the
circumstances.
W. N, Taylor.
Exhibit No. 487
Cipher word:
YBIMO I.C.I. Ltd. London.
AGIOU advise
YAZAL Hercules Powder Co.
OIGBW Rotterdam, Holland
FAOKY inquiring (about)
IPHOX prices
DIBJU delivery (of)
RUTJA 50 tons
AYREH Diphenylamine
KYLIT for shipment to
OHYBD New York, N.Y.
MANMU stop
YBIMO I.C.I. London
HINJE naturally
ANCBU anxious
CIWIZ (to) consummate
AYHZY business
MIUTD suspecting
FAOZN inquiry
IMINR placed
AUFWT because of your
KYKAS inability
MIBIL (to) supply
MANMU stop
EVSOV However
MS— 2
88 — Hercules Powder Co.
34— Chinese Gov't.
ODGRI do not wish to
DXYAE disturb
GUTAD your market
AMEMB and before
lAFTO offering
JNIEJ request you to
AGJAF advise if
lYJBQ any reason
OFIMC you
lOMXA prefer
MUWKE thev do not
IWQEK quote
AMCOG and
KEIIC secondly
IPOBC at which price
NAYUQ per ton c.i.f.
OHYVD New York, N.Y.
OFIMC you
CHOGE consider
YBIMO I.C.I. London
FUFWO justified (in)
IWQEK quoting
MANMU stop
BACUZ cable immediately
Cable from London office, February ^9, 1934.
MUNITIONS INDUSTRY 1349
Exhibit No. 488
Shanghai, 1st August 1933.
May, June, and July
I. NBGOiaATIONS COMPLETED
Chinese Maritime Customs, Shanghai. 20,000 lbs. R.F.G. 2 powder. Con-
tract dated 20th June 1933. Price sold at £4.17.0 per 100 lbs.
II. PROSPECTS UNDER NEGOTIATIONS
Ministry of Navy : We have very gi-eat hopes of obtaining an order for C.S.P. 2
cordite for 6", 4", 4.7" and 3" guns, complete with charges. We have quoted
on the lines indicated in London's cable of 24th June 1933, i.e. 5/10 14 per kilo,
packed loose, and for priming powder R.F.G. 2 at £4.12.0. per 100 lbs.
We are assured by Jardines that confirmation or otherwise of this order will
be to hand within the week.
Bureau of Military Administration, Nanking: We have quoted through
Jardines for nitrocellulose powder for 7.92 mm. rifles 5/10 per kilo, 15 tons, and
6/3^ per kilo for ballistite ordnance, 4 tons. Quotations for this business have
been received from Berlin, and in this respect we requested London to quote
likewise. This quotation was submitted on 24th June.
In view, however, of London's cable to us of 11th July, indicating that their
quotation to the Berlin Embassy of 5/6% per kilo f.o.b. for rifle powder was
approximately 8% higher tlian Bofers, and that we could reduce to 5/4 per kilo
f.o.b., and in view of a further cable dated 17th July, confirming that London
had quoted this, we passed this information on to Jardines, who advised the
Bureau of Ordnance accordingly.
As confirmed in our cable of 14th July, should the business be concluded
in Berlin, Jardines in Shanghai agree to take del credere providing documents
are sent direct to them, and that it is stated on the contract between suppliers
and the Embassy in Berlin that Jardines are acting on suppliers' behalf in the
event of nonpayment in Berlin, and that they have authority to collect here.
As no further news has been received by you, we have requested Jardines to
make further enquiries in Nanking to ascertain whether the business has gone
past us, or whether negotiations are merely postponed.
III. PROSPECTS FOR FUTURE NEGOTIATIONS
Direct contact : As already advised London, the authorities in Nanking have
been favouring the system of conducting business direct with the manufacturers
through their purcliasing commission in Berlin. We are, however, confi-
dentially informed that this system may revert to previous methods in that,
though prices might be confirmed through their Berlin purchasing commission,
business will in all probability be done locally.
We have been receiving very few inquiries during the last 6 months for
TNT, and repeated representation to the Nanking authorities has produced no
definite information as to whether the Bureau of Ordance \\ill be in the market
for TNT during the next 6 months. Their normal requirements amount to
approximately 300/400 tons per year, and we cannot trace any substantial
orders having gone home during the last 2 or 3 months. This also applies to
nitrocellulose powder, as, but for the inquiry enumerated above, business ap-
pears small. It is more than probable that the authorities are awaiting the
return of the Finance Minister, Mr. T. V. Soong, before deciding or committing
themselves.
Amatol : Owing to continued competition from Bofors in TNT, we are pro-
posing to offer Amatol 80/20 as an alternative. Details as to this material
have not yet reached us from London.
IV. 6ENEKAL REPORT ON TERRITORY
Very little of interest to report.
Both Canton and Nanking have been for some considerable time past pur-
chasing ammunition from various manufacturers. The Munition Works in
China are doing very little, and, in this respect, for your interest, we attach
1350 MUNITIONS INDUSTRY
hereto copy of a memorandum given to Colonel Creswell of I.C.I. Metals. Ltd.,
on the various munition works in China.
There would appear to be no doubt that the Chinese have found it better at
the present time to import the complete ammunition rather than manufacture
the cases and bullets in China and buying the powder to load. There is still
a certain amount of loading being done at tlie Han Yang Arsenal, but generally
speaking, arsenals are concentrating on repair work and shell loading. As
stated above, very little activity can be expected until the return of the Finance
Minister.
Canton : It is expected that the Canton Arsenal will be in the market for
powder for shell bombs and hand grenade fillings in the future, as they are
studying the matter very carefully. We are definitely handicapped in this
business on account of the fact that the British Government require export
permits before they allow the expoit of any munitions into China. This export
permit cannot be obtained until after the Chinese Minister in London has seen
the Huchao, which has to be approved by the Naiiking authorities, and the
Cantonese naturally do not favour any arrangement which necessitates their
applying to the Central Government for permission to export into their
territory.
In the past Jardines have managed to i^ersuade the Cantonese authorities to
write to Nanking for a i>ermit, but it must be understood that the only reason
why the Cantonese accede to this request is because they have no alternative
either because prices submitted were under those of continental firms or they
could not obtain the material elsewhere. The above also applies to shipments
from America.
It would be a great help to conducting business if these restrictions could
be lifted, and we suggest that representations be made to the British Foreign
Office and the State Department in Washington in this respect. It could be
stated in this representation that on no account would military munitions be
supplied to the Cantonese Government if a state of war existed between them
and the Central Government.
R. Montague Smith.
Exhibit No. 489
Mitsui
CC : Mr. J. K. Jenney.
July 2, 1930.
mf #2862 ammonia oxidation f.n.
Mr. F. NoBU,
Mitsui d Co., Ltd., 65 Broadway, New York City, N.Y.
Deiar Mr. Nobu: This will acknowledge receipt of your letter of July 1st,
from which we regret to note that the prospective clients in Japan have not
as yet made any definite move towards the purchase of our ammonia-oxidation
process.
As stated previously we are receiving from time to time inquiries from
Japanese concerns, and in view of our happy relations with Mitsui »& Co. we
think it preferable to refer such matters to your concern because we feel that
it would be of mutual benefit for all of these inquiries to pass through one
central office. We further feel that from the prospective clients' standpoint
you are perhaps in a better position to handle these inquiries because of your
general knowledge of chemical industries in Japan, the local conditions, etc.,
but we quite naturally hesitate to refer these inquiries to you until we have
been definitely advised as to your wishes regarding the proposed contract.
It can be readily seen that we are in a somewliat embarrassing situation as
the matter now stands, and we would therefore be very much pleased to have
your company come to some conclusion in the matter.
The terms of this proposed contract are very similar to those made with
other concerns and seem to be vei^j' specific and entirely clear.
Yours very truly,
H. G. Chickeking,
Development Departm ent.
HGC/vod.
MUNITIONS INDUSTRY 1351
Exhibit No. 490
Nitrogen — Japan '2S-'31
N — Japan
Mitsui
Copy to Mr. F. A. Wardenburg, Du Pont Ammonia Corp. Buil'g
Apbil 23, 1931,
To: Messrs. F. W. Pickard, Vice Pres.
J. E. Crane, Vice Pres.
From : Foreign Eelations Department.
I attacli lierewitli copy of a report from Mr. F. A. Wardenburg to the board
of directors of tlie du Pont Anuuonia Corporation relative to the proposed sale
of contact conversion process riglits to Mitsui in Japan. Mr. Wardenburg
endeavored to discuss this subject with tlie foreign relations committee before
the meeting of his board, but we were unable to arrange a meeting, and it will
be necessary to discuss it after the ammonia board has acted.
Presumably, if we are to sell the process in Japan at all, we would prefer
to sell it to the Mitsui interests, not only because they are linked up with the
Claude interests, but also because it is a matter of general company interest to
keep as friendly relations with this company as possible. The point for the
foreign relations committee to decide bears on the I.C.L. relationship involved.
The I.C.I.-dn Pont agreement provides (par. 5) that neither party will sell
a process to a third party in nonexclusive territory without first advising the
other party of its intention to do so.
This subject was also discussed at meeting with Lord Melchett and Sir
Harry McGowan on August 27th, 1930. " It was agreed to consult in advance
of action with respect to the sale of any process covered by the agreement
in nonexclusive territory, subject to the right of either party to initiate pre-
liminary discussions under exceptional circumstances."
I believe this obligates us to take the matter up with I.C.I, before making
an offer or carrying on any further negotiations with Mitsui. We have no
contractual obligations which would prevent us from concluding the deal with
Mitsui, even though such a deal might hurt I.C.I. 's interests considerably,
Japan being one of their two or three most important export markets.
Mr. Wardenburg, of course, quite justly points out that Mitsui seems resolved
to go ahead with their expansion program, and it is hard to see how I.C.I, can
be much worse off whether we sell them our process or whether they go ahead
on their own, or with some third party.
As this seems to be a matter that the foreign relations committee should
discuss, there will be a meeting in Mr, Pickard's ofiice at 9:00 a.m. Saturday
morning, April 25th.
J. K. Jenney, Ass't Director.
jk j /ems
Exhibit No. 491
Mitsui
For rel. com. action N. Japan, I.C.I. P. & P. agree.*
Copv to Mr. H. H. Ewing, London office.
April 24, 1931,
To : Mr. F. A. Wardenburg, Pres. du Pont Ammonia Corporation.
From : Foreign relations department.
At a meeting of the foreign relations committee held in Mr. Pickard's office
April 24, Messrs. Pickard, Crane, and yourself being present, the subject of
the sale of contact conversion process rights to Mitsui for Japan was discussed.
It was agreed that it would be necessary to advise I.C.I, before making a
definite offer, and it was also agreed that you would write a letter to Col.
Pollitt in the near future,
J. K. Jenney, Assf. Director.
JKJ/EMS.
P.S. — Mr. EwiNG : The Mitsui people, who are Claude licensees in Japan,
have heard through [Air Liquide]* of our part in the development of a
contact conversion process and seem to be desirous of purchasing rights for
Pencil markiiiE
1352 MUNITIONS INDUSTRY
use of this process in Japan. No definite offer has been made, but one will be
in the near future. In the meantime, Mitsui has asked us to keep this matter
strictly confidential, as they have to clear up certain commitments they have
made with Air Liquide.
Exhibit No. 492
Mejmobandum Coveeing Relations Between Mitsui & du Pont with Respect
TO Hydrogen Process
(To Ass't. Sec'y. of State Rodgers, 3/28/32)*
The original contract arose from the fact that Mitsui and du Pont were both
licensees under the Claude ammonia process, Mitsui for Japan and du Pont for
America. The exchange of operating experiences between licensees brought
Mitsui and du Pont representatives together.
The Claude process covered the production by hydrogen by the liquefaction of
coke-oven gas. du Pont found that this method of hydrogen production was
not as economical in America as the production of hydrogen from coke, and
du Pont proceeded to develop a process for this manufacture of hydrogen.
Through the exchange of operating experiences referred to above, Mitsui learned
of this development by du Pout and were interested because Mitsui had also
found that the manufacture of hydrogen in Japan could be done more eco-
nomically from coke than from coke-oven gas. Mitsui accordingly expressed a
desire to negotiate for the Japanese rights to the du Pont hydrogen process,
if and when successfully developed.
In May 1931 a representative of Mitsui called on du Pont and opened
negotiations for license and du Pont gave Mitsui an option on the Japanese
rights. In January 1932, that option having expired, Mitsui advised du Pont
that they would like to reopen the negotiations and that has been done. There
have been several conversations, and Mitsui representatives state that they
desire to acquire the Japanese rights for the du Pont hydrogen process, al-
though they state they have no intention of immediately proceeding with the
construction of a plant to utilize this process.
The amount of money involved in this matter is something of the order of
one-half million dollars. It is, therefore, an important piece of business and
one which would tend to improve the already friendly relations existing be-
tween Mitsui, the leading industrial concern in Japan, and du Pont, one of the
leading chemical companies of America.
The existing ammonia-plant capacity in Japan is estimated at 124,000 tons
of nitrogen, equivalent to 450 tons of ammonia per day, which is about double
the capacity of the du Pont plant in America. In Japan amm'onia is quite
largely made from electrolytic hydrogen and is practically all absorbed in
agriculture. Japan does not make its nitric acid from ammonia but makes it
from imported nitrate of soda.
The importance of Mitsui and to Japan of the acquisition of the du Pout
hydrogen process does not lie in the resulting ability to manufacture ammonia,
because Japan already has that ability, but rather in the economy of the du
Pont hydrogen process as compared with the manufacture of hydrogen from
coke-over gas, or by electrolytic process ; i.e., the advantage seems to be in the
commercial economy, and this economy is great enough to warrant Mitsui in
paying the very considerable sum involved.
March 25, 1932.
LduP/WH
ExHimT No. 493
MITSUI MINING COMPANY
This agreement dated this 26th day of July 1932, by and between Mitsui
Mining Company, Ltd., a corporation of Japan, party of the first part, herein-
after called Mitsui, and E. I. du Pont de Nemours & Company, a corporation of
Delaware, hereinafter called du Pont, a party of the second part, witnesseth :
♦ Inserted by pencil.
MUNITIONS INDUSTRY 1353
Whereas Mitsui has a license for the operation of tlie Claude process for the
manufacture of ammonia for Japan, and is operating a unit or units of that
process at its plants in Japan ; and
Whereas du Pont has developed a process for the manufacture of a hydrogen-
nitrogen mixture from water gas, which process operates to react carbon
monoxide witli steam under a pressure of approximately 25 atmospheres,
giving a mixed gas suitable for synthetic ammonia manufacture, hereinafter
referred to as pressure contact conversion process, and has built and is op-
erating a unit or units of that process, each unit having a rated capacity for
the production of hydrogen sufr.cient for the manufacture of 85 tons of 2,000
pounds of synthetic ammonia per day of 24 hours ; and
Whereas Mitsui is proposing to install additional ammonia manufacturing
capacity and for such installation desires to manufacture the hydrogen in
connection therewith by the pressure contact conversion process.
Now, therefore, in consideration of the payments and mutual covenants here-
inafter outlined, the parties hereto agree as follows :
1. du Pont agrees to furnish, upon the signing of this agreement, drawings
and information sufficient to enable Mitsui to build, or have built, the special
equipment, and to enable Mitsui to install all equipment and piping in con-
nection with one 85-ton presisure contact conversion unit, including manufacture
of catalyst for same, du Pont agrees also to furnish upon signing of this
agreement information which would assist Mitsui in constructing such unit
including catalyst manufacture and placing same in operation.
2. Mitsui agrees to pay du Pont at Wilmington, Delaware, in United States
gold coin of the present weight and fineness, or its equivalent, the sum of
$300,000 payable $100,000 upon the signing of the contract, a further $100,000
one year thereafter, and the remaining sum of $100,000 two years after date
hereof.
3. In the event that Mitsui, its subsidiary or subsidiaries, install additional
capacity for the manufacture of hydrogen by the reaction of carbon monoxide
with steam at a pressure greater than five atmospheres, such additional capacity
shall be considered as using the du Pont pressure contact conversion process
and Mitsui shall make additional payment to du Pont of $_00,000 for each
additional unit having a capacity of 85 tons per day. Such payments shall be
made in the following manner : One-half of $200,000 upon decision by Mitsui
for the construction of each such additional unit ; remaining one-half of $200,000
in one year thereafter. When, however, the total of all payments made under
this agreement shall have amounted to $900,000, exclusive of payments for
services as covered by paragraph 10 hereof, no further payments shall be
required from Mitsui, regardless of the amount of hydrogen manufacturing
capacity installed for ammonia manufacture. If any units after the first unit
shall be of any other capacity than for the manufacture of 85 tons of ammonia
per day, payments hereunder shall be at the rate of $2,350 per ton of rated
ammonia manufacturing capacity per day, and shall be made in the following
manner : One-half upon decision by Mitsui for the construction of such units ;
remaining one-half in one year thereafter.
4. Subject to a right which Imperial Chemical Industries has already secured
from du Pont to obtain a nonexclusive, nontransferable license for pressure
contact conversion process, and to receive information relative thereto, Du Pont
agrees that it will not, directly or indirectly, for a period of three years from
date hereof, give to any others than Mitsui information with reference to the
pressure contact conversion process for use in the territory herein covered.
After the expiration of such three-year period du Pont shall be free to give to
any others in such teiTitory information with reference to such process and
license to use same, unless Mitsui shall by that time have paid to Du Pont the
amounts herein specified for additional unit or units, each of which units of
85 tons shall extend this period of exclusive information to Mitsui for a period
of two years, except that payment by Mitsui of a total of $900,000 shall make
Mitsui's rights hereunder exclusive except as aforesaid for a period of seventeen
years from date hereof, du Pont shall not, however, during the period of five
years from date hereof offer to anyone other than Imperial Chemical Industries
for the territory herein information with reference to such process and license
to use same upon terms more favorable than the terms herein granted to Mitsui,
nor during the next five years thereafter shall it oifer better terms to other than
Imperial Chemical Industries without having first offered such better terms to
Mitsui.
5. The hydrogen produced by the pressure contact conversion process here-
under shall be used by Mitsui or its subsidiary or subsidiaries for the manu-
1354 MUNITIONS INDUSTRY
facture of ammonia only and for tlie manufacture of methanol produced as a
puriflcation step in the manufacture of ammonia.
The hydrogen thus produced may be used by Mitsui, its subsidiary or sub-
sidiaries for other purposes than the manufacture of ammonia and the manu-
facture of methanol produced as a purification step in the manufacture of
ammonia, subject to such terms and conditions as will be mutually agreed
upon.
6. Mitsui agrees that it will not give to anyone else except its subsidiary or
subsidiaries, information with reference to the pressure contact conversion
Ijrocess.
7. du Pont agrees that it will, for a period of seven years from date hereof,
give to Mitsui all information which it may develop with reference to all im-
provements of the pressure contact conversion process, which will enable
Mitsui or its subsidiary or subsidiaries to improve the operation of the pressure
contact conversion process.
8. If, within seven years from date hereof, du Pont applies for any patents
on the pressure-contact conversion process, it agrees to notify Mitsui immedi-
ately of such patent applications. At the request of and at the expense of
Mitsui, similar applications shall be made in Japan. Such patents, if grunted
in Japan, will be owned by du Pont, but licenses thereunder shall be given to
Mitsui or its subsidiary or sul)sidiaries to the extent of and with the restric-
tions of this agreement.
9. Mitsui or its subsidiary or subsidiaries may use the information furnished
hereunder for the manufacture of hydrogen in the territory including Japan,
Sakhalin, Korea, Formosa, and Manchuria, all as geographically constituted
as of the date hereof, as per exhibit A, but not otherwise.
10. du Pont agrees to furnish not to exceed three men, for a period of not
to exceed two years each, to assist Mitsui or its subsidiary or subsidiaries with
the design, construction, and placing in operation of its first unit of pressure-
contact conversion. Mitsui shall reimburse du Pont for the salaries, traveling
expenses, and living expenses of such men when away from Wilmington, Dela-
ware. It is recognized that there might be a possibility that conditions where
these men would be required by Mitsui or its subsidiary or subsidiaries might
be of a disturbed nature, and du Pont reserves the right to refuse to send men,
or to withdraw m'en already sent, as long as du Pont considers such conditions
unsatisfactory.
11. du Pont agrees that it will, during the period of seven years from date
hereof, permit four visits, not exceeding four months each, by not more than
three employees of Mitsui during each visit, to du Pont's ammonia plant for
the purpose of study and training on those subjects, information relative to
which is given hereunder, but on those subjects only, and du Pont further
agrees to give every reasonable assistance to such employees of Mitsui.
12. du Pont agrees to furnish to Mitsui, without additional charge, informa-
tion with reference to the manufacture of methanol in the purification of the
hydrogen manufactured hereunder, as a step in ammonia manufacture, du
Pont also agrees to give to Mitsui information, as of the date hereof, on the
state of the art of manufacture of ammonia by the Claude process as practiced
by du Pont, including manufacture of cataly.st for ammonia synthesis and for
the Claude purification step, preliminary thereto, and also, similarly, such in-
formation as du Pont shall have a right to give on the manufacture of water
gas, the compression of gas to the pressure required by the ])ressure-contact
conversion process, the further compression of the hydrogen-nitrogen mixture
to the pressure required by the Claude process for the manufacture of am-
monia and the piping in connection therewith. All of such information shall
be given only to the extent that Mitsui shall have a right to receive it under the
terms of any other agreements which Mitsui or its subsidiary or subsidiaries
may have with others, as for example L'Air Liquide, from whom Mitsui has a
license for the Claude process in Japan.
13. Inasmuch as the pressure-contact conversion process is proposed to be
operated by Mitsui or its subsidiary or subsidiaries on a water gas higher
in sulpluir content than any similar gas with which du Pont has had experi-
ence, and also inasmuch as it is impossible for du Pont to determine the
conditions under which such process would be operated by Mitsui or its sub-
sidiary or subsidiaries, it is expressly agreed that du Pont does not warrant,
in any respect, the operation of any units of contact conversion process in-
stalled hereunder, du Pont shall use all reasonable endeavors to furnish to
Mitsui such information as will enable INIitsui to achieve the results obtained
by du Pont in the manufacture of hydrogen-nitx'ogen nrixture by this process.
MUNITIONS INDUSTRY 1355
14. dii Pont makes this agreement without knowledge of the patent situa-
tion in the territory hereunder, as it would affect the pressure contact con-
version process and Mitsui agrees to hold du Pont harmless against any
claims made by others with respect to the use by Mitsui or its subsidiary or
subsidiaries of information secured from du Pont.
15. This agreement shall be binding upon the successors and assigns of the
parties hereto.
In witness whereof the parties hereto have caused this agreement to be
executed by their properly authorized officers.
E. I. DU PoNT DE Nemours & Company,
• By (S.) Jasper E. Crane, V.P.
Attest :
(S.) M. D. FiSHEK, Ass't Sec'y.
Mitsui Mining Company, Limited,
By (S.) Rehsukb Ishida,
Attorney and Manager New York Branch, Mitsui d Co., Ltd.
SLA
CRM
FAWARDENBURG
Witness :
(?).
Exhibit No. 494
Mitsui — Nitrogen — Japan.
April 21, 1931.
To : Board of directors, du Pont Ammonia Corporation.
From : F. A. Wardenburg, president du Pont Ammonia Corporation.
PROPOSED sale of cx)ntact:' conveksion process rights to japan
Several months ago we were approached by the representatives of Mitsui and
Company, the Claude licensees in Japan, who had heard, through L'Air Liquide
in Paris, of our development of the pressure contact conversion process. They
wished to purchase the rights for the use of this process in Japan. The state
of our deveUipment at that time was such that we did not feel justified in dis-
cussing the matter. However, tlieir interest in the acquisition of the Japanese
rights for this process has continued, until last week we were visited by
Mr. Isobe, the head of the nitrogen interests of Mitsui and Company, who had
apparently come to America for the purpose of this discussion. He afterward
visited Belle and then came to Wilmington, accompanied by Mr. Ishidi, the
manager of the Mitsui New York office. In conversation a tentative proposition
was outlined, with, however, no commitment on our part.
status of nitrogen industry in japan
Exact information on the amount of synthetic nitrogen productive capacity in
Japan is not available. The following are our most accurate figures :
Mitsui & Company, 2 plants using Claude process (tons per day) 50
Mitsubishi, 3 plants operating the Casale process (there is some question
about this much Casale capacity being actually available) (tons per
day) 236
K. K. Sumikomo Hiryo Seizojo, 1 plant using process of the Nitrogen
Engineering Corporation (tons per day) 22
The production and consumption of nitrogen compounds, expressed as short
tons of ammonia, is approximately as follows :
Tons
Total yearlv consumption 233,000
Tons
Deduct cyanamide 25, 000
Nitrate of soda imports 18- OW
Imports — other materials 20, 000
Production of byproduct sulphate of ammonia 20, 000
83,000
Net market available to synthetic production 150, 000
Of the market available for sj'nthetic production about half has been taken
care of by their own production and half by imports.
1356 MUNITIONS INDUSTKY
RECOMMENDATION
We appreciate that any increasing capacity in nitrogen manufacture in any
part of the world has its effect upon our lousiness, but we believe that our
interests would not be hurt by the installation of additional capacity in Japan
to the extent of the payments that could be secured for the sale of the Japanese
rights.
We recommend, therefore, subject to the approval of the executive and finance
committees of the du Pont Company, that we offer to Mitsui and Company,
under the terms outlined above, the pressure contact conversion process with
accompanying technique. This would be subject to their giving proper guaran-
tees for the payments to which they would obligate themselves.
F. A. Waedenbueg, President.
[Taken from "Proposed Sale of Contract Conversion Process Rights to Japan"]
Mitsui and Company now has two plants, one a very small plant using coke
oven gas and a larger one at Miiki making about 45 tons per day of ammonia
using coke-oven gas and utilizing, of course, the Claude process. They propose
to increase the Miiki plant, for which increase coke-oven gas is not available
and they propose, therefore, to make this increase using coke as a raw material,
which leads to their interest in the contact conversion process.
The present large overproduction of nitrogen in the world makes construction
of any nitrogen plant a dubious undertaking, but there seems more justifica-
tion for additional capacity in Japan than in any other country, perhaps, in
view of their large imports and their desire to be self-supporting in nitrogen
supply for military purposes, as well as for agriculture. However that may
be, Mitsui say that they are determined to increase their plant, and the ques-
tion, then, is, Shall we aid and abet them by offering to them what we consider
the most economical hydrogen process known today?
Exhibit No. 495
[Translation]
BuENOS Aires, March 28, 1930.
* 14- Argentine Govt.
32-Crocker & Co.
14-B-Argentine Govt.
My Dear Friend Bates : I am writing to Mr. Casey hurriedly and to you to
advise you that I have obtained confirmation from the present government for
the sale I had made of 50 tons' of F.N.H. powder.
You are doubtless aware of the telegrams I despatched, asking you to send
samples for making tests before the contract is duly signed by the Government.
I have been assured that if the tests to be made prove satisfactory — that is,
if the powder is really nonhygroscopic and flashless — the same will be pur-
chased and declared standard powder for use in the Argentine Army.
You can, therefore, realize how important it is that the tests be satisfactory.
I have been notified of the decree issued by the Government ordering that tests
be made to check the characteristics of the powder to be sold, and I have been
instructed to send 20 kgs. of powder to the Purchasing Commission in Europe,
presided over by General Manual Costa, Avenue Midi 62, Brussels, Belgium, and
10 kilos to the Arsenal de Guerra, Buenos Aires. Tests will be made in Brus-
sels with a 75 m/ra gun, Argentine model— that is to say, the model being used
in the arms' — to check the flashlessness. Tests will be made in Brussels also
for nonhygroscopicity. The same tests will be made in Buenos Aires by the
technicians of the Arsenal de Guerra. Will you please explain this clearly so
that there will be no misunderstanding?
I am also sending details of what has been decided lately by the Government,
with reference to the powder factory. You must regard this as strictly con-
fidential. In view of the very confidential nature of the matter, and that it
is urgent, I am sending it by air mail, and promise to send you further details
later on regarding exiilosives. I have been promised further details of a very
confidential nature as additions to the proposal.
It has been decided now to install a factory complete with buildings and
installations and even a library is included in the project. I am almost certain
that we shall obtain the business if we present the proposal in due form.
MUNITIONS INDUSTRY 1357
Study well the data I am sending you, which is the essential thing to do in
order to save time, as the presentation of the proposal is very urgent. My
friends will give me all the details which may be necessary for said presenta-
tion. This, of course, is understood.
Acknowledge receipt of this letter by telegram as soon as it reaches you,
advising me of your decisions. The airplane is leaving in 2 hours.
Your faithful friend.
Pencil markings.
Carames.
Exhibit No. 496
14-B.
135-Special file.
135-Nobel general.
lAiPERiAL Chemical Industries (New York), Limited,
19 West Uth Street, New York, February^ Jf, 1931.
E. I. Du Pont db Neimoues & Co.,
Military Sales Div.,
Wilmington, Del.
Dear Sir: Mr. Swint mentioned to the writer last week that the position
was not clear between us in regard to the Argentine factory project. The object
of the present is to state our understanding that, as mentioned in yours of 29th
November, the broad du Pont-I.C.I. partnership scheme is still in operation.
We are in agreement with you that there should be no ambiguity between us
on this matter and as we understand you are not clear as to what the position
would be should a loss be incurred on the contract, we will deal with that
point specifically.
You will remember the I.C.I, were not desirous of committing themselves
to a definite figure unless and until their technicians had had an opportunity
of inspecting the site. The offer contemplated by I.C.I., you will recollect,
included the construction of the factory and was not merely for factory equip-
ment. It was to be a tentative bid subject to possible revision after the tech-
nicians had examined the site. Our object was to avoid making a contract
based on insufficient data and incurring the risk of a loss. We should not,
I am sure, accept a contract which would cause us a monetary loss, at least
not unless it were done as the result of a set policy and after consultation
with you. Therefore, we do not think it proper or fitting at this juncture
to decide what should be done in the event of a loss.
Our estimates have been carefully prepared and so far as is humanly
possible to determine, they will not net us a loss but a profit.
Yours very truly,
G. W. White.
gww.k
YIII H 1 Pencil markings.
Exhibit No 497
Imperial Chemical Industries (New York), Limited,
19 West Uth St., New York, August 5, 1932.
32-Crocker & Co.*
13o-Nobel Ind.
E. I. DU Pont de Nemours & Co.,
Smokeless Powder Dept., Military Sales Div.,
Wilmington, Del.
ANTONIO carames
Dear Sirs : Further to my letter of June 15th, I.C.I., have now had an oppor-
tunity Of discussing the value of Sr. Carames' services with one of their Buenos
Aires representatives. The latter speaks very highly of the work done by Sr.
Carames in connection with the Government powder factory and has recom-
* Pencil markings.
1358 MUNITIONS INDUSTRY
mended that I.C.I, continue to retain this gentleman. In view of this you
might consider it desirable to make a payment to Sr. Carames and I should
like to know what you decide In this connection.
Yours very truly,
G. W. White.
jws.h
cc JCP
300f per year. Advised G. White
verbally we would not allow Carames
anything other than commissions on
actual powder contracts.
NEB.
Exhibit No. 498
June 22, 1933.
Came No. S
Antonio Carames indignant our offer $1,500. Claim cancellation he obtained
competitors powder plant contract and contact maintained for several years past
without any remuneration has been very valuable to E. I. du Pont de Nemours
& Co., Imperial Chemical Industries. Ltd., and merits much higher consideration.
Antonio Carames has great influence on present administration. On the
$1,500 offered Antonio Carames absolutely refuses agency and will become very
dangerous enemy our business next few years as well as business of E. I. du
Pont de Nemours & Co., Argentine, S. A. du Pont Argentina-Buenos Aires,
which must be avoided.
Have discussed the matter with E. I. du Pont de Nemours & Co., Argentine,
S.A., du Pont Argentina-Buenos Aires who agree with me suggesting that we
offer Antonio Carames $6,000 in cash for services rendered and yearly retainer
of $3,000, payable monthly, to cease at our discretion, thus avoiding any possible
damage our interest.
You must consider company's interest as well as military sales division.
Prospects are 2,100 charges 35 millimeter, 50 tons du Pont FNH powder 100
tons Pyro cannon powder, 100 tons rifle powder, and possible Argentine powder
factory. Cable reply by Saturday. If you wish to telephone, advise by cable.
Forward all letters.
(Cable from N. E. Bates, Buenos Aires, June 22.)
(Copy to Foreign Relations Department)
June 22, 1933.
* 135-NoWe Indus. Ltd.
32^Crocker & Co.
MS.-140
Mr. Geoeoe W. White,
Imperial Chemical Industries, Ltd.
285 Madison Avenue, Neio York.
Dear Mr. White : Confirming our telephone conversation of today, we attach
hereto a copy of Mr. N. E. Bates' cable no. 8, dated Buenos Aires, June 22,
in reference to Mr. Carames' attitude towards our offer of $1,500 per annum as
a retaining fee for his services.
We understood that it is your desire to postpone a decision on this matter
until you have had a chance to visit Wilmington and discuss the situation with
us, which will be early in the week commencing June 26. In the meantime you
will consult Mr. James Laing in London and get his views of the situation.
It may be well to mention that our offer of $1,500 to Mr. Carames was that
this was to be payable in monthly installments and would represent total pay-
ments from both du Pont and I.C.I.
Very truly yours,
K. K. V. Casey, Director.
By
AS : AKR
* Pencil marking.
MUNITIONS INDUSTRY 1359
Exhibit No. 499
June 26, 1933.
CABLE NO. 9
Referring to your cable no. 4, Antonio Carames leaving here for Europe
July 6th, returning by way of New York, N.Y., presumably sent by President,
secret mission. Imperial Chemical Industries, Ltd., Buenos Aires, Argentine,
agrees with me suggesting that we offer Antonio Carames $250.00 per month
to be cancelled at any time by paj^ment $6,000 in monthly installments.
Remuneration, if any (for) services rendered cancellation of powder plant
to be discussed in Loudon and/or AVilmiugton, Delaware, with Antonio Carames.
Have not advised Antonio Carames this plan. Imperial Chemical Industries,
Ltd., Buenos Aires, Argentine, cabling Imperial Chemical Industries, London
office, similar suggestion.
If you agree to $250.00 think I.C.I. , London, should pay us half. Cable
instructions.
(Cable from N. E. Bates, Buenos Aires, June 26.)
Exhibit No. 500
[Copy]
June 30, 1933.
* 135-Nobel Ind^is. Ltd.
Orig.— Ms-lOO
30-Crooker & Co.
(Memo, for file)
TELEPHONE CONVERSATION WITH N. E. BATES
Had telephone conversation with N. E. Bates and advised him, as a result
of a conference with Mr. G. W. White, of I.C.I., we decided it best to have
him make a temporary contract with Carames on the basis of $1,500 a year
until such time as Carames has discussed the matter with the principals in
London and Wilmington. As Carames leaves for Europe on July 6th this will
make the temporary arrangement one of a few months before we come to a
final decision. In the meantime N. E. Bates will send us by mail the complete
story of Carames' position and any arguments he may have used to justify
his demands.
K. K. V. Casey, Director.
KKVC : MH
Exhibit No. 501
[Postal telegraph]
135-Nobel Indus.*
Ms-176-A. ^
32-Crocker & Co.
PI 57/56 Cable-N Baires 828P.
July 2, 1933.
Nit Casy,
du Pont, Wilmington, Del.:
Ten Carames accepts temporary arrangement pending interviews London
Wilmington hundred twenty-five dollars monthly. Ready sign contract Carames
similar Veiga duration three years with six months' cancellation clause. Wive
immediately if satisfactory. Suggest don't send White or London my letter
numbered 13. Writing you fully also London air mail this week.
Nick.
(" Exhibit No. 502" appears in text on p. 1179)
* Pencil marking.
1360 MUNITIONS INDUSTRY
Exhibit No. 503
32 — Crocker & Company
Imperial Chemical Industeies (New YofKK), Limited,
19 West Uth Street, New York.
(Confirmation of incoming cable)
London; August 4, 1033.
Received Aug. 5, 1933, 9 a.m.
White, ImpTcemiw, New York:
191. Have interviewed Carames, who will accept whatever arranged with
Crocker. He will not visit "Wilmington (stop) His claim, and we cannot seri-
ously question it, is that over the years expense has been 2,000 pounds (stop)
We are willing to pay half or lesser amounts (stop) Bates, who we suggest
should handle matter for his prestige, might satisfy Crocker with 1,500 pounds
(stop) Building of factory question reopens December and we are preparing
accordingly (stop) For interim period existing contract continues.
Laing.
Exhibit No. 504
[Copy]
London Oetice, Bush House,
AUUmjch, W.G. 2, August 15, 1933.
Major K. K. V. Casey,
Smokeless Powder Dept.
*31
32— Crocker & Co.
ANTONIO CABAMES — ARGENTINE
I met Mr. Carames on his steamer on his arrival at Boulogne, and motored
him to Paris. I did my best to make his stay agreeable, which he seemed to
appreciate.
Regarding Carames' business in Europe, he has come here for his health, to
attend some private investments, and to make arrangements with the Argentine
military missions in Europe, who according to Argentine law sign all contracts
made with Europeans, and he wants to come to a proper understanding with
them, so that if a suggestion comes from the Argentine that they should sign a
contract they will not oppose it. I gathered that is what his secret mission con-
sists of. He also is talking about agencies for naval supplies. He says he is
nor taking German agents, but would take either Italian or English.
I first tried to arrange with him a visit to London and later to Wilmington,
both of which he positively refused to undertake, saying that, knowing no Eng-
lish, it would be of no possible interest and that he was not willing to undertake
any further expenses on this matter. So I arranged an interview with Mr. L.
B. W. Smith, of I.C.I., to take place in Paris on August 8rd.
Carames told me his story, which you know from Mr. Bates' reports. His
principal claim was that, in spite of the fact that it did not seem to him prob-
ably that stopping the factory could have meant a very large monetary gain
to us, none the less both Wilmington and London urged him to stop it, a matter
which cost him considerable money, the outlay of which at the time was known
to both companies. That having spent this money at our request and having not
been given an opportunity to earn commissions, he was entitled to reimburse-
ment.
Carames explained that having cancelled the contract with the Germans three
times he could not continue to do it any longer, and that at the end of Decem-
ber or the first part of January, if we did not put in an offer for the factory, a
contract would finally be signed with the Germans, which would be final. In
view of this, I.C.I, has agreed to make a serious endeavor to get this contract,
and are preparing an offer and prices which they feel will compete favorably
with the German proposal.
In our meeting in Paris with Mr. L. Smith, he said that he would be satisfied
if the present interim agency contract was continued and If a payment of $10,000
* Pencil marking.
MUNITIONS INDUSTRY 1361
was made to Crocker & Co. He said he did not wishi to settle this matter, as
his partner, Crocker, was the person to be satisfied. Mr. Smith and I discussed
with him different phases of his story, but we did not make any promises of any
kind. We told him settlement would be made through Bates with Crocker &
Co., and to this he agreed.
After this conversation, Mr. Smith talked this over in London and then sent
me a copy of their cable to Mr. White, under date of August 4th, in which
they will agreet to pay half of the $10,000, and request Wilmington to make the
final arrangements on this matter, and suggest that this thing be handled
through Bates with Crocker & Co. From our conversation with Carames, it
appeared clear to us that it was wise to have this done through Mr. Bates,
because Carames appeared to think that Mr. Bates had no authority and could
make no decisions, and we felt it was advisable to force Mr. Carames to accept
Mr. Bates' authority.
It would be wise to have the settlement made with Crocker & Co. before
Carames leaves Europe, which will be early in November, as I.C.I, would like
to go into details of the factory proposal with him before he leaves, and they
hesitate to discuss this matter in detail until this other matter has been settled.
I tried to keep you informed by cables nos. 1032, 1033, and 1034 as these
matters developed, but I did not write before for fear that it would confuse
matters.
Carames has now left France to take a cure in Germany and will probably be
back in Paris in September.
W. N. Taylor.
("Exhibit No. 505" appears in text on p. 1195)
("Exhibit No. 506" appears in text on p. 1197)
("Exhibit No. 507" appears in text on p. 1197)
("Exhibit No. 508" appears in text on p. 1199)
("Exhibit No. 509" appears in text on p. 1199)
Exhibit No. 510
[Copy]
(I.G. Explosives)
Remington Arms Company, Inc.,
25 Broadway, New York, N.Y.,
Octoher 22, 1934.
Mr. C. K. Davis,
President Remington Arms Co., Inc.,
Bridgeport, Conn.
Dear Mr. Davis : We are in receipt of a letter from Mr. von Herze of Koln-
Dellbruck, dated October 6th, 1933, a copy of which in German is attached
hereto.
My translation of this letter is as follows :
" The du Pont Company has advised me through the Dynamit-Actien-
Gesellschaft, Troisdorf. that it is contemplating securing from j^our company a
license for the use of leadtrinitroresorcinate in the manufacture of detonators.
In accordance with the provisions of the agreement between your company and
me, made in 1927, and the right therein reserved by me for the independent
exploitation of leadtrinitroresorcinate for these special purposes, the arrange-
1362 MUNITIONS INDUSTRY
ment of such a license could only be effected with my approval and with due
consideration to my rights.
•' In order that, for the present, the entire situation may be made clear
and the scope of the license desired by the du Pont Company be known, I
would request you to kindly give me in some detail the desires expressed by the
du Pont Company in this connection, as well as the Kemiugton Company's
attitude thereto.
" Your early response will be appreciated."
As you undoubtedly know, Mr, von Herz is the inventor of the material
referred to above, which we employ in the priming mixtures, utilized in prac-
tically all of our ammunition.
I visited Mr. von Herz in Berlin in the fall of 1927 and negotiated the ar-
rangement pursuant to which the title to the United States patent was trans-
ferred to Remington. I have not seen a copy of this agreement lately, therefore
I do not know its exact wording. But I do recall that I attempted to purchase
the patent outright so that we might be able to sell a license to Du Pont
Company for the utilization of this material in detonators. Even at that time
it was used very extensively in detonators in Germany, Great Britain, and
South Africa, and I think also in France. Subsequently it was adopted in
Canada. I was unable to make the desired arrangement because Mr. von
Herz wanted to reserve the right to deal with the du Pont Company. Just
how this was taken care of in the contract I don't recall. Shortly after the
1927 agreement, Mr. von Herz joined the R.W.S. as consulting chemist, and
we had further dealings with him, as a result of which Mr. von Herz induced
Mr. Mueller to consent to the licensing of Remington under the Tetrazene
patents of R.W.S. As a result of this Mr. von Herz and several other gentle-
men of R.W.S. came to this country in 1928, which was followed by my visit
to Cologne, Troisdorf, and Nuremberg in the spring of 1929, and Dr. Mueller
returned the visit to New York and Bridgeport late in 1929.
As a result of these various visits, a rather friendly relationship was estab-
lished between the German company and Remington Arms Company, which
has resulted in the interchange of considerable technical information and the
working out of a rather informal patent interchange agreement. In all of
this Mr. von Herz has been very active. The arrangements worked out were
effected against the opposition of others in the R.W.S. organization.
On account of my rather intimate acquaintance with Mr. von Herz, Dr.
Mueller and many others in the R.W.S. (now the D.A.G.) organization, practi-
cally all correspondence between the two companies was handled through me,
and I have continued in this relationship even after my resignation as vice
president of the Remington Arms Company, Inc. This is the reason why the
letter referred to was sent to me.
I will be glad to have your instructions as to the nature of the reply to be
made to Mr. von Herz, or better still I think we should get together to discuss
this matter at your convenience.
Very truly yours,
A. A. DiCKB.
Exhibit No. ,^11
[Translation]
Dynamit-Actien-Gesellschaft, formerly Alfred Nobel & Co., in Troisdorf (Bez.
Cologne).
Reports of the management and the board of directors for the financial year
1933.
Ordinary general meeting to be held on Monday, May 28th, 1934, at 11 a.m.,
in Hamburg, Alterwall 37, in the ofiices of the Deutsche Bank and Disconto-
Gesellschaft, Filiale Hamburg.
ORDEB OF THE DAY
1. Presentation of the annual balance and the report for the financial year
1933, and taking of resolution on the annual balance.
2. Distribution of the net profit.
3. Release of the management and the board of directors.
4. Election of directors.
5. Appointment of auditors for the financial year 1934.
MUNITIONS INDUSTRY 1363
Board of directors
D. Max von Schinckel, Hamburg, chairman.
•Geheimer Kommerzienrat Professor Dr. C. Bosch, Heidelberg.
Geheimer Regierungsrat Professor Dr. C. Duisberg, Leverkusen.
Dr. M. Duttenhofer, Neunthauseii (Wrttbg.).
Generaldirektor Dr. W. Fahrenhorst, Berlin.
Generaldirektor Bergassessor A. D. E. Fickler, Dortmund.
Professor Dr. J. Flechtheim, Berlin.
Generaldirektor Dr. F. Flick, Berlin.
Generaldirektor Bergrat Dr. F. Funcke, Hagen l./w-Eppenhausen.
Bankier Otto Hauck, Frankfurt a.M.
Geheimer Kommerzienrat Dr. P. Kloeckner, Duisburg.
Generaldirektor Dr. G. Knepper, Essen.
Rechtsanwalt Dr. A. Lutteroth, Hamburg.
Generaldirektor E. Philipp, "Vienna.
Geheimer Kommerzienrat R. Roechling, Munich.
Geheimer Kommerzienrat Dr. H. Schmitz, Heidelberg.
Justizrat E. Schniewind, Cologne.
Geheimer Kommerzienrat Dr. R. von Schnitzler, Cologne.
J. Rudolph Freiherr von Schroeder, Hamburg.
Generaldirektor Dr. E. Tengelmann, Essen.
Bankier Dr. Max M. Warburg, Hamburg.
Goeheimer Regierungsrat M. Wessig, Berlin.
Generaldirektor Bergrat Dr. H. Zirkler, Kassel.
Willy Zweiffel, Berlin-Charlottenburg.
Monagement
Dr. Paul Mueller, Cologne, chairman.
Dr. jur. Rudolf Schmidt, Cologne.
Dr. Wilhelm Pungs. Cologne, assistant manager.
The deputy chairman of our board of directors, Herr Geheimer Hofrat Dr.
phil. Dr.-Ing. e.h. Gustav Aufschliiger passed away on the 9th April 1934 in
his 82nd year. He had been in the explosives industry since 1882, and in
1889 he took over the management of our concern, an office which he held
uninterruptedly until 192G. From 1926 until his death he was deputy chairman
of our board of directors and member of the executive committee. In Geheim-
rat Aufschlager we have lost a personality of rare charm. He combined
great spiritual nobility and human kindness with scientific thoroughness and
commercial ability, and it was during his thirty-seven years of systematic and
energetic rule that our company developed to the position of importance
which it holds today. In spite of all his success, Herr Aufscliliiger always
remained very modest and kindly and was respected and honoured by all who
worked with him and under him.
We mourn his passing very deeply and will always hold in grateful memory.
Report of managers on the 58th financial year (1933)
Our concern, like so many others, has felt the benefit this year of the
confidence inspired by our strong Government and of the measures undertaken
by the Government for the creation of fresh employment. Domestic sales have
risen in all departments. Export trade has maintained the level of last year,
as far as quantities are concerned, but the value has fallen somewhat as a
result of the ever-growing difficulties on the world market.
Apart from some little fluctuation at the beginning of 1933, our business
in explosives, blasting caps, and primers has increased steadily, owing largely
to the greater activity in ore mining and quarrying during 1933. Quantities
exported were approximately the same as in the previous year.
Our sales of hunting and sport ammunition within Germany have increased,
and sales abroad have been Avell maintained.
The hopes we placed on the development of business in synthetic materials
have been realised, and turn-over has risen very considerably. Our products
have met with great success on the market, and we intend shortly to bring
out several new materials.
Our business in celluloid has been maintained at last year's level, but the
prices, especially for export trade, are still unsatisfactory.
83876— 34— PT 5 23
1364
MUNITIONS INDUSTRY
We have community of interests agreements with the following firms : Car-
bonit Aktiengesellschaf t ; Gustav Gensohow & Co. A.-G. ; Koln-Rottwell A.-G. ;
Rheinische Gummi and Celluloid Fabrik ; Sprengstoffworke Dr. R. Nasnsen &
Co. A.-G.
We belong to the following unions, conventions, and similar syndicates gov-
erning price and sales : Deutsche Sprengstoff-Konvention, Sprengstoff-Verkaufs-
Gesellschaft m. b. H., Zundschnur-Verkaufs-Gesellsehaft m. m. H., Sprengkapsel-
Syndikat, Celluloid-Verkaufs-Gesellschaft m. b. H.. Munitions-Verband, Vereini-
gung deutscher Kunstharzfabriken.
Remarks on the balance sheet. — The balance sheet and the profit and loss ac-
count are based on our community of interests agreement with the I. G. Farben-
industrie A.-G.
ASSETS
Additions to our fixed assets, after deduction of withdrawals,
amounted to - RM._ 660, 451. 53
Write-downs amount to " -- 3,159,780.69
so that fixed assets are shown on the books at 2,499,329. 16
lower than last year.
The book value of our investments, on the day the balance was
taken, was RM.. 12,573, 588. 75
The increase as compared with last year, i.e " __ 930,840.02
is due both to the increase of our holding of various shares, and to
the acquisition of nominal 720,000 marks of shares (of a total
capital of nominal RM. 1,200, 000) in the Patronen-, Zund-
hutchen-und Metal 1-warenfabrik A.-G., formerly Sellier & Bellot,
Schonebeck.
The most important of our old holdings of shares are the following:
Firm
Carbonit Aktiengesellschaft ---
G. C. Dornheim Aktiengesellschaft —
Deutsche Celluloid-Fabrik Eilenburg
Fabrik elektrischer Ziinder Gesellschaft m.b.H
Selve-Kronbiegel-Dornheim A.-Q
Sprengstoffwerke Dr. R. Nahnsen & Co. Aktiengesellschaft.
SpregstolJwerke Kieselbach-Kunigunde, Q. m.b.H
Rheinische Gummi und Celluloid Fabrik
Aktiengesellschaft Dynamit-Nobel, Bratislava (Pressbuxg)..
Nominal stock
inRM.
1, 500, 000
500, 000
8, 000, 000
3, 000, 000
900, 000
700, 000
600, 000
1,000,000
Kc. 13, 200, 000
Nominal hold-
ing in RM.
417, 500
482, 000
2,211,500
2, 820, 000
615, 000
351, 600
300, 000
600, 000
Kc. 6, 745, 200
923, 678. 44
1, 008, 203. 00
1, 838, 700. 00
882, 576. 00
Our stocks have once more been prudently estimated ; they have
fallen further by RM—
Our holding of securities has been shown in accordance with par.
261 no. 2 HGB, at RM__
Our holding of our own ordinary shares has remained the same,
i.e., nominally RM
and is therefore shown on the books at " —
as at the end of 1932.
Accounts due amounted on 31.12.1933 to " — 11, 072, 503. 97
This sum does not include accounts of managers of our company
or other persons mentioned in par. 261a, section 1, A IV, no.
lOHGB.
Accounts arising from current business with our aflBliated
companies are once more included under accounts for goods
supplied and work done.
On 31.12.1983 our liquid assets included :
Bills and cheques RM-- 1, 104, 103. 03
Cash in hand " — 28, 246. 11
Reichsbank account and postal cheque
account RM__ 150, 114. 88
Banking accounts " 19, 705, 560. 57
The bank debts shown under obligations
amounted on the 31.12.1933 to RM__
RM— 20,988,024.59
5, 386, 737. 42
MUNITIONS INDUSTRY 1365
LIABILITIES
Our common share capital has undergone no
change, and stands at nominally-RM__ 47, OOO, 000
Of this capital we hold nominally__RM__ 1, 838, 700
so that dividend is payable on, nominally RM__ 45, 161, 300. GO
Our preference share capital, special reserve fund and re-
serve fund, and reserves, have undergone no change since last
year. ,
We have not shown a separate item for adjustment of values ;
this has been taken into consideration for each separate item.
On 31.12.1933 the sum of our obligations was RM__ 9, 686, 034. 15
Our guarantee obligations were as follows :
From the negotiation of bills and cheques RM__ 552, 724. 00
From sureties " __ 691,301.00
Emoluments paid to the managers amounted to RM 269,826.00
and directors' fees amounted to " 104, 285. 75
Based on the agreement with the I. G. Farbenindustrie
A.-G., our net profit amounts to RM1,679,199.95.
With the approval of the directors we propose that this profit
be applied as follows :
6% dividend on nominal RM125,0O0 Pref. Sh RM__ 7, 500. 00
3.5% dividend on nominal RM45,161,300 Com. Sh " __ 1, 580, 645. 50
Carry forward on new account " 91, 054. 45
As provided by tlie statutes of our company, lots have been drawn and the
following directors will retire at the end of the forthcoming general meeting:
Geheimer Konimerzienrat Dr. P. Klockner.
Geheimer Kommerzienrat R. Kochling.
Justizraf E. Schniewind.
Willy Zweiffel.
They are open for reelection.
The improvement which has made itself felt in domestic trade has been main-
tained during the first few months of the current year, but there has been a
slight falling off in export trade.
Troisdorf, April 1934.
The Management.
Report of directors on the financial year 1933
Besides the loss which we have suffered in the death of the deputy chairman
of our board, Geheimrat Dr. G. Aufschlager, we have also to deplore the death
of another member of our board.
Herr Generaldirektor Dr. Inc. Jakob Kleynmans passed away on 12th
November 1933.
He had been a member of our board since 1925, and during this time he had
rendered valuable service to our company through the richness of his ex-
perience. We shall hold his memory in all honour.
We are entirely in agreement with the report of our managers for the
financial year 1933, and with their proposals as to the distribution of the profits.
The annual balance has lieen audited by the Chemie Revisions- und Treuhand-
Gesellschaft m.b.H., elected to this purpose at the last general meeting, who
have also examined the books and the annual report.
The written rejiort has been submitted to us. According to the final result
the examination gave rise to no objections. We on our part have no remarks to
make in connection with the report.
Troisdorf, May 1934.
The Board of Directobs.
1366
MUNITIONS INDUSTRY
Balance sheet as at 31st December 1933
ASSETS •
I. Arrears of payments on share capital RM.
II. Fixed assets: RM. RM.
nrmnriH /Brt. fwd 4,004,186.97 Withdrl. 10,935.52 4,032,153.21
'^'^°"°'^- --- ---"lAddition 38,901.76 Write-dn
T!p.5irtftntifll hldfrc /Brt. fwd. 1,865,814.80 Withdrl. 36,463.00 1,751, 356.40
Kesiaentiai Diags..- --\Addition 2.00 Write-dn. 77,997.40
Factory bldgs. railway & other I Brt. fwd. 6, 136, 333. 93 Withdrl. 25, 061. 00 5, 249, 317. 79
bldgs. lAddition 61,365.71 Write-dn. 923,320.85
Equipment, machinery & me- /Brt. fwd. 5,263,664.55 Withdrl. 40,984.00 3,776,037.49
chanical plant. \Addition 640, 438. 04 Wr.-dn. 2, 087, 081. 10
FflPtnrv nnH nffiPA fittings /Brt. fwd. 122,554.20 Withdrl. 237.00 84,360.40
Factory and office flttmgs— ^Addition 33,424.54 Wr.-dn. 71,381.34
Concessions, patents, licenses, /Brt. fwd. 1.00 Withdrl. 0.00 1.00
trade-mark and other rights. \Addition 0. 00 Wr.-dn. 0. 00
Brt. fwd. 17, 392, 555. 45 Withdrl. 113,680.52 14,893,226.29
Addition 774, 132. 05 Wr.-dn. ■ 3, 159, 780. 69
III. Investments 12,575,388.75
IV. Movable assets:
Stocks:
Raw, auxiliary and operating materials 2,652,730.92
Semi-finished products 1,257,344.36
Finished products and commercial goods - .- 4,498,711.15
8,408,786.43
Securities..- _ 1,008,203.00
Own common shares to nominal value of 1,838,700.00 882,576.00
Accounts:
On account of mortgages 467,921.05
On account of advance payments made 301,265.82
On account of goods supplied and work done 9, 157, 332. 80
With dependent and affiliated Cos 951, 647. 21
Other accounts 194 337.09
11,072,503.97
Bills 1,102,736.93
Cheques 1,366.10
Cash in hand, including accounts with issuing banks and postal cheque accounts 178, 360. 99
Other bank accounts _ 19,705,560.57
V. Items which round oil the account 609, 131. 75
Counter-claims arising from Guarantee obligns 691,302.00
70, 338, 040. 78
LIABIUTIES
I. Share capital: RM. RM.
Common shares 47,000,000.00
Voting right 470,000 votes.
Preference shares 125,000.00
Voting right 150,000 votes.
47, 125, 000. 00
II. Eeserve fund:
Legal reserve fund 7,077,708.43
Special reserve fund 2,220,507.78
9,298,216.21
III. Reserves 800,000.00
IV. Items of adjustment of values 0.00
V. Obligations:
Mortgages on land 0.00
Customers' payments on a/c 37,892.96
Obligations on account of goods supplied and work done 1, 129, 413. 73
Obligations towards dependent and affiliated Cos 2, 135,981.93
Obligations towards banks 5, 386, 737. 42
Other obligations 996, 008. 11
9,686,034.15
VI. Items which round off the account 1, 749,590.47
VII. Profit:
Brought forward from 1932 91,054.45
Netroflt in 1933 1, 588, 145. 50
Guarantee obligations RM. 691,302.00.
70, 338, 040. 78
MUNITIONS INDUSTRY 1367
Profit and loss account for 1933
EXPENDITURES
RM.
Wages and salaries 10, 514, 780. 00
Compulsory social services 691, 296. 30
Written down on plant 3,159,780.69
Other write-downs 508, 706. 49
Property taxes, inclusive of corporation tax and business tax 1, 741, 842. 76
All other expenditure, with the exception of expenditure on raw, auxiliary,
and operating materials, and commercial materials 5, 099, 733. 93
Profit :
Brought forward from 1932 RM__ 91,054.45
Net profit in 1933 RM— 1,588,145.50
1, 679, 199. 95
23, 395, 340. 12
RECEIPTS
RM.
Profit brought forward from 19.32 91, 054. 45
Gross profits, after deduction of expenditure on raw, auxiliary, and
operating materials, and commercial materials 21, 936, 365. 02
Proceeds from investments 388,806.69
Interest and other capital proceeds 634, 980. 89
Extraordinary profits 344, 133. 07
23, 395, 340. 12
DyNAMIT-ACTIEN-GESE3i,S0HAFT
(Formerly Alfred Nobel & Co.)
Dr. P. Mueller Dr. Schmidt Dr. W. Pungs
After duly auditing the bookkeeping, the annual balance and the annual
report on the basis of the books and writings of the company, and of liie
statements and proofs furnished by the management, we confirm that they
are all in proper legal order.
Troisdorf, April 1934.
Chemie Revisions-xind Treuhand-Geseixsohaft m.b.H..
ppa. HB31MANN,
Dr. Beichert,
Publio Auditors.
Exhibit No. 512
[IG explosives]
Du Pont-German Companies Lice:nsb Agreement
(* Unsigned, in effect as gentleman's agreement)
explosives
Patented invention : Patented explosive invention. Patented producin,u in-
vention.
Secret invention : Secret explosive invention. Secret producing invention.
A countries : Germany, Holland, Poland, Austria, Denmark, and Bulgaria.
B countries: U.S.A. and possessions, Mexico, Guatemala, Honduras, Nicaragua,
Costa Rica, and Panama.
C countries : Dominion of Canada and Newfoundland.
(of pat. explo. inventions ] Exclusive in A countries,
of pat. produc. inventions I Nonexclusive in N.A.
of secret explo. inventions j and S.A. excepting B
of secret prod, inventions J and C countries.
(of pat. explo. inventions 1 Exclusive in B countries,
of pat. produc. inventions I Nonexclusive in N.A.
of secret explo. inventions ( and S.A. excepting B
of secret prod, inventions J and C countries.
' Pencil markings.
^368 MUNITIONS INDUSTRY
License Agkeemext Covering Patented InvT':ntions and Secret Inventions
Between E. I. du Pont de Nemours and Company, Party of the First Part,
AND THE VEKEINIGTE KoLN-ROTTWEILEIt PULVERFABRIKEN AND DyNAMIT ACTIEN
. Gbseillschaft, Party of the Second Part. Dated : Januart 1, 1926
• This agreement, made in the city of Hamburg, Republic of Germanj-, as of
the 1st day of January. A.D. 1926, between E. I. du Pont de Nemours and Com-
jpany, a corporation organized and existing under the laws of the State of
Delaware, United States of America, hereinafter called " the Du Pont Com-
pany", party of the first part, and the Vereinigte Koln-Rottweiler Pulverfab-
riken. a corporation of Berlin, Republic of Germany, and Dynamit Actien
Gesellschaft, a corporation of Hamburg, Republic of Germany, hereinafter re-
ferred to collectively as " the German Companies ", party of the second part
Witnesseth :
Whereas upon the terms and subject to the limitations hereinafter set forth,
the party of the first part and the party of the second part desire to obtain, each
from the other, licenses, as hereinafter provided, relating to inventions, im-
provements, and secrets in respect of processes, machinery, formulae, and
compounds possessed or acquired by the other party, for the manufacture, pro-
duction, transportation, handling, selling, or use of one or more of the following
products ; viz, black powder in all varieties ; smokeless proiJellants for sporting
purposes; disruptive explosives of all kinds for industrial purposes; detonators;
electric detonators, safety fuses ; powder fuses ; detonating fuses ; electric ig-
niters, and generally all devices for initial detonation or ignition ; the com-
ponents which form the ignition and propellant charges of sporting ammuni-
tion ; and the ingredients and component parts of the above, insofar as they
are applicable to explosives ; and
Whereas the products referred to in the foregoing recital are hereinafter
called, collectively, " explosives ", and an invention or improvement aforesaid,
for which letters patent shall be obtained, is hereinafter called " patented inven-
tion ", and a patented invention contained in an explosive is hereinafter called
" patented explosive invention ", and a patented invention for the manufacture,
production, transport, handling, selling, or use of an explosive is hereinafter
-called " patented producing invention ", and a secret invention in respect of a
process, machine, formula, or compound aforesaid is hereinafter called " seci-et
invention ", and a secret invention contained in an explosive is hereinafter
■called " secret explosive invention ". and a secret invention for the manufacture,
production, transport, handling, selling, or use of an explosive is hereinafter
called " secret producing invention " ; and
Whereas each of the ]iarties hereto desires an option to acquire licenses in
respect of the other party's patented inventions and secret inventions, upon
the terms and subject to the conditions hereinafter set forth ;
Now, therefore, in consideration of the mutual agreements herein contained,
and of the sum of five dollars, lawful money of the United States of America,
and other good and valuable consideration, paid by each of the parties hereto
to the other, the receipt whereof is hereby acknowledged, the parties hereto
have agreed and hereby do agree as follows :
I. Each i>arty agrees to and until the 31st day of Dei'ember. A.D. 19f55.
upon making or obtaining any patented invention or discovering or acquiring
any secret invention, to disclose in writing to the other party immediately, or
in any event within six months thereafter, full particulars in respect thereof,
and thereafter to furnish to the other party, whenever and so often as the
other party shall request, copies of all claims, specifications, applications, and
patents in respect of any such patented invention, and copies of all writings
setting forth any such secret invention and such further information as the
other party shall request in respect of any such patented invention or secret
invention.
II. Each party shall forthwith appoint one or more competent, trustworthy,
and experienced persons in its employ for the pui^pose of receiving such particu-
lars and information from the other party. Whenever and so often as the
other party shall request and at the expense of such other party, each party
shall supply experienced chemists, engineers, foremen, and other experts to
assist such other party in investigating, testing, applying, or using any pat-
ented or secret invention disclosed as aforesaid.
III. Whenever the du Pont Company shall have disclosed a patented or
secret invention to the German companies, as aforesaid, the du Pont Company
thereupon shall serve upon the German companies a notice in writing setting
MUNITIONS INDUSTRY 1369
forth the terms ,and conditions upon which the German companies may obtain
the following licenses, to wit :
(1) The sole and exclusive license, to the end of the term for which letters
patent shall be granted or extended, in respect of any such patented ex-
plosive invention, to make, use, and employ within the Republic of Germany,
Holland, Poland, Austria, Denmark, and Bulgaria, for which such letters pat-
ent shall be granted or extended, any such patented explosive invention for
explosives, and to sell within said countries any and all explosives containing
such invention,
(2) A nonexclusive license, to the end of the term for which letters patent
shall be granted or extended, in respect of any such patented explosive inven-
tion, to make, use, and employ within the countries of North and South Amer-
ica and the islands thereto pertaining for which such letters patent shall be
granted or extended, excepting, however, the United States of America and
its present and future territories, possessions, colonies, and dependencies, and
the Republics of Mexico, Guatemala, Honduras, Nicaragua, Costa Rica, and
Panama, and the Dominion of Canada, and Newfoundland, any such patented
explosive invention for explosives, and to sell within said countries of North
and South America, and the islands thereto pertaining, excepting as aforesaid,
any and all explosives containing such invention.
(3) The sole and exclusive license to make, use, and employ within the
Republic of Germany, Holland, Poland, Austria, Denmark, and Bulgaria any
such secret explosive invention for explosives, and to sell within sa-id coun-
tries any and all explosives containing such invention.
(4) A nonexclusive license to make, use, and employ, within all the countries
of North and South America, and the islands thereto pertaining, excepting,
however, the United States of America and its present and future territories,
possessions, colonies, and dependencies, and the Republics of Mexico, Guatemala,
Honduras, Nicaragua, Costa Rica, Panama, and the Dominion of Canada and
Newfoundland, any such secret explosive invention for explosives, and to sell
within all the countries v.f North and South America, and the islands thereto
pertaining, excepting as aforesaid, any and all explosives containing such
invention.
(5) The sole and exclusive license, to the end of the term for which letters
patent shall be granted or extended, in respect of any such patented producing
invention, to make, use, and employ within the Republic of Germany, Holland,
Poland, Austria, Denmark, and Bulgaria, for which letters patent shall be
granted or extended, any such patented producing invention, to the extent
and amount specified in such notice.
(6) A nonexclusive license, to the end of the term for which letters patent
shall be granted or extended, in respect of any such patented producing in-
vention, to make, use, and employ within the countries of North and South
America, and the islands thereto pertaining, for which such letters patent shall
be granted or extended, excepting, however, the United States of America and
its present and future territories, possessions, colonies, and dependencies, and
the Republics of Mexico, Guatemala, Honduras, Nicaragua, Costa Rica, Panama,
and the Dominion of Canada and Newfoundland, any such patented producing
invention for explosives, to the extent and amount specified in such notice.
(7) The sole and exclusive license to make, use, and employ within the
Republic of Germany, Holland, Poland, Austria, Denmark, and Bulgaria any
such secret producing invention to the extent and amount specified in such
notice.
(8) A nonexclusive license to make, use, and employ within all the countries
of North and South America, and the islands thereto pertaining, excepting,
however, the United States of America and its present and future territories,
possessions, colonies, and dependencies, and the Republics of Mexico, Guate-
mala, Honduras, Nicaragua, Costa Rica, Panama, and the Dominion of Canada
and Newfoundland, any such secret producing invention for explosives, to the
extent and amount specified in such notice.
IV. Whenever the German companies shall have disclosed a patented or
secret invention to the du Pont Company, as aforesaid, the German companies
thereupon shall serve upon the du Pont Company a notice in writing setting
forth the terms and conditions upon which the du Pont Company may obtain
the following licenses, to wit :
(1) The sole and exclusive license, to the end of the term for which letters
patent shall be granted or extended, in respect of any such patented explosive
invention, to make, use, and employ, within the counti-ies for which such letters
1370 MUNITIONS INDUSTRY
patent shall be granted or extended, by the United States of America, or the
Republics of Mexico, Guatemala, Honduras, Nicaragua, Costa Rica, or Panama,
any such patented explosive invention for explosives, and to sell within said
countries any and all explosives containing such invention.
(2) A nonexclusive license, to the end of the term for which letters patent
shall be granted or extended, in respect of any such patented explosive inven-
tion, to make, use, and employ within the countries of North and South
America, and the islands thereto pertaining, for which such letters patent shall
be granted or extended, excepting, however, the Dominion of Canada and New-
foundland and the countries enumerated in the last preceding paragraph num-
bered (1) herein, any such patented explosive invention for explosives, and to
sell within said countries of North and South America, and the islands thereto
pertaining, excepting as aforesaid, any and all explosives containing such,
invention.
(3) The sole and exclusive license to make, use, and employ within the
United States of America and its present and future territories, possessions,
colonies, and dependencies, and the Republics of Mexico, Guatemala, Honduras,
Nicaragua, Costa Rica, and Panama, any such seci'et explosive invention for
explosives, and to sell within said countries any and all explosives containing
such invention.
(4) A nonexclusive license to make, use, and employ within all the countries
of North and South America, and the islands thereto pertaining, excepting,
however, the Dominion of Canada and Newfoundland and the countries
enumerated in the last preceding paragrapli numbered (3) herein, any such,
secret explosive invention for explosives, and to sell within all the countries
of North and South America, and the islands thereto pertaining, excepting a&
aforesaid, any and all explosives containing such invention.
(5) The sole and exclusive license, to the end of the term for which lettei*s
patent shall be granted or extended, in respect of any such patented producing
invention, to make, use, and employ within tlie countries for which such
letters patent shall be granted or extended, by the United States of America,
or the Republics of Mexico, Guatemala, Honduras, Nicaragua, Costa Rica, or
Panama, any such patented producing invention, to the extent and amount
specified in such notice.
(6) A nonexclusive license, to the end of the term for which letters patent
shall be granted or extended, in respect of any such patented producing inven-
tion, to make, use, and employ within the countries of North and South
America, and the islands thereto pertaining, for which such letters patent shall
be granted or extended, excepting, however, the Dominion of Canada and
Newfoundland and the countries enumerated in the last preceding paragraph
numbered (5) herein, any such patented producing invention for explosives,,
to the extent and amount specified in such notice.
(7) The sole and exclusive license to make, use, and employ within the Unitetl
States of America and its present and future territories, possessions, colonies,.
and dependencies and the Republics of Mexico. Guatemala, Honduras, Nica-
ragua, Costa Rica, and Panama, any such secret producing invention, to the
extent and amount specified in such notice.
(8) A nonexclusive license to make, use. and employ within all the coun-
tries of North and South America and the islands thereto pertaining, excepting,
however, the Dominion of Canada and Newfoundland and the countries
enumerated in the last preceding paragraph numbered (7) herein, any such
secret producing invention for explosives, to the extent and amount specified
in such notice.
V. Each of the parties to whom any license shall have been granted as
herein provided may grant, within the limitations of such license, sublicenses
in respect thereof to any or all of its respective subsidiary companies; but
every such sublicense shall be subject to all the terms and conditions contained
in the grants of the license so sublicensed and shall also contain terms, condi-
tions, and obligations requiring such sublicensee to do such acts as may be nec-
essary or proper to enable the party granting such sublicense to observe all the
terms and conditions and to perform all the obligations on its part contained in
the grant of the license so sublicensed. No such sublicense in respect of any such
license shall be granted by any sublicensee nor by any of the parties hereto,,
except as hereinbefore provided, without the consent in writing first obtained
from the party that shall have gi-anted the license so sublicensed.
MUNITIONS INDUSTRY 1371
VI. In said notices served as aforestiid, the party disclosing such ]»atented or
secret invention shall request the other party to elect, within a period expiring
twelve months after service of such notice, whether such other party accepts
such licenses or any of them upon the terms and conditions set forth in said no-
tice, and the other party shall elect within said period whether it accepts such
licenses or any of them. The election to take any such license shall consist
in serving, upon the party disclosing such patented or secret invention, within
the period mentioned in said notice, either (1) an acceptance in writing of
any such license upon the terms and conditions set forth in said notice or (2)
an acceptance in writing of any such license upon such other terms and condi-
tions as the parties, within three months thereafter may agree upon; but if
the parties shall fail so to agree within the said period of three months such
license shall be deemed not to have been accepted.
VII. Each of the parties hereto agrees that if, at any time during the
continuance of this agreement, it shall obtain or acquire a right in or license
under any patented or secret invention, which right or license is so limited
that it can make no grant or license to the other party upon the terms and
conditions herein set forth, it shall use its best efforts to assist such other
party to obtain or acquire a right in or under such invention upon the terms
and conditions herein set forth ; but neither party shall be under any obliga-
tion to purchase or pay for any right or license for the benefit of the other.
VIII. Each of the parties hereto agrees not to make or consent to any dis-
^'losure or to do or consent to any other act that shall impair or depreciate
the value of any sole and exclusive license granted by it in pursuance of this
agreement, or that shall impair or depreciate the value of the right, title, and
interest in any patented or secret invention not granted to it by the other party,
and to take all reasonable care to prevent any such disclosure or act.
IX. Each of the parties hereto agrees, whenever and so often as requested
by the other party, to execute and deliver all such other instruments in writing
as may be necessary or proper for the purpose of further assuring and confirm-
ing the grant of any license that shall have been granted as herein provided,
or for the purpose of enabling such grants to be filed or recorded in .any
public office.
X. Each of the parties hereto agrees, whenever and so often as requested
by the other party, but at the expense of such other party, to assist in defend-
ing any letters patent under which any licenses shall have been granted as
herein provided, and for that purpose to furnish to such other party such
information and evidence as it can.
XI. If any difference or dispute shall arise between the parties hereto in
respect of this agreement or any matter or thing relating thereto, excepting
any term or condition set forth in any notice served as provided in the preced-
ing paragraphs numbered III and IV herein, the same shall be referred to the
chairman of the board, for the time being, of E. I. du Pont de Nemours and
Company, or his nominee, and the chairman of the board, for the time being,
of Dynamit Actien Gesellschaft, or his nominee, who shall arbitrate the same
and whose award shall be final. If, however, the said arbitrators shall fail
to agree they shall appoint an umpire whose award shall be final, whirh umpire,
if the question or matter to be decided relates to a patented or secret invention
of the German companies shall be an American, and if the question or matter
to be decided relates to a patented or secret invention of the du Pont Company,
shall be a German. If said chairmen fail to agree as to the appointment of
such umpire, then such umpire, if required, as hereinbefore provided to be a
■German, shall be appointed by the president for the time being, of the Law
Association of the city of Hamburg, Republic of Germany, or if required as
Jiereinbefore provided to be an American, shall be appointed by the president,
for the time being, of the Law Association of the city of New York. The
umpire, if not appointed by the chairman of the resi)ective companies, or their
nominees,shall be a person having no direct or indirect financial interest in the
explosives industry.
XII. The benefits and obligations of this agreement shall inure to and
be binding upon the parties hereto, and their respective legal representatives
and successors, but shall not be assignable by either party without the consent
in writing first obtained from the other party : Provided, That this agreement
■shall apply equally to similar licenses relating to inventions, improvements, and
secrets of ■which the respective parties have indirect ownership by reason
of their direct or indirect control and ownership of other subsidiary companies
by majority shareholding or otherwise.
1372 MUNITIONS INDUSTRY
XIII. It is agreed that patented and secret inventions owned or controlled
by said parties respectively relating to products, their manufacture and sale,
other than explosives, shall become subject to this agreement if and when said
parties so elect, and to this end either party may from time to time furnish
to the other a schedule of products other than explosives, manufactured by it,
with an offer that said products be brought under the scope of this agreement.
If the party receiving such offer consents that the products named in said
schedule shall be brought under the scope of this agreement, it shall endorse
its consent on said schedule, and the offer, schedule, and consent shall he
attached to and become a part of this agreement ; Promded, however, That the
territorial limitations provided in this agreement with respect to inventions
relating to explosives shall not apply to inventions relating to products other
than explosives. Territorial limitations, if any. applying to inventions relating
to products other than explosives shall be determined by the parties at the
time of the granting of licenses and shall be set forth therein.
It is the intent of this article that in respect to products other than explosives
the parties hereto shall be entirely free to weigh all economic or other factors
pertaining to the particular consideration, and to reach conclusions solely upon
the merits of the particular presentation, without prejudice to this agreement in
respect to explosives and without influence thereby.
XIV. Any notice provided by this .igreement to be served upon the German
companies, party of the second part, shall be served on the Dynamit Actien
Gesellschaft. of the city of Hamburg, Republic of Germany.
In witness whereof. E. I. du Pont de Nemours and Company has caused its
corporate seal to be hereunto afiixed and this agreement to be signed in its
corporate name by its president and secretary, and the Vereinigte Koln-Rott-
weiler Pulverfabriken has caused its common seal to be hereunto affixed in tlie
presence of and this agreement to be signed by one of its directors and its
secretary at the city of Berlin, Republic of Germany, and Dynamit Actien
Gesellschaft has caused its common seal to be hereunto nffixed in the presence
of and this agreement to be signed by one of its directors and its secretary at
the city of Hamburg, Republic of Germany, all as of the day and year first
above written.
E. I. DU Pont de Nemours and Company,
By , President.
Attest :
, Secretary.
The Vereiniute Koln-Rottweileb Pulverfabriken,
By . Director.
Attest :
, Secrctarii.
Dynamit Actien Gesellschaft,
By , Director.
Attest :
-, Secret a r I/.
Exhibit No. 513
March 23, 1927.
To : Executive committee.
From : J. Thompson Brown.
Copy to : H. G. Haskell, V.P.
REPORT OF conference IN FEBRUARY AND MARCH WITH BRITISH AND GERMAN
EXPLOSIVES INTEKBSTS
On account of difference of opinion as to the extent to which du Pont and
Nobel should share with the D.A.G. the compensation which the D.A.G. had
agreed to pay other German explosives companies for withdrawing from and
limiting their activities in the export markets, and also because of a threatened
resignation of the manager of Explosives Industries, Ltd., it was thought well
that the writer should visit London, Hamburg, and Cologne for discussion of
these, as well as other live subjects, with oflicials of the British and German
explosives companies. Consequently, the writer sailed for England on February
5 and returned to Wilmington on March 15.
There is attached hereto as exhibit A copy of minutes of meeting held at
Nobel House, London, on February 16. It will be noted from these minutes
MUNITIONS INDUSTRY 1373
that it was agreed between du Pont and Nobel that du Font's share of the
compensation to the German competitive companies, known as " Coswig,
Lignose, and Gnaschwitz ", should rightly be placed at £937-10 annually,
whereas it had been contended by Nobel that du Font's share should be £3,000
annually. The D.A.G. group had entered into agreements to pay annually to
Coswig for a period of 10 years the sum of £5,000 in consideration of Coswig
limiting its shipments of high explosives to the export markets to 250 tons per
annum, and had made similar arrangements with Lignose and Gnaschwitz to
pay to each of them £2,000 per annum to abstain from shipping explosives to the
export markets. The writer agreed with Nobel that it would be proper to
allocate to Chile and Bolivia lOO tons of the 250 tons accorded Coswig in the
export markets, the balance to be delivered to the Dutch East Indies, and con-
tended that it would be proper that one-half of the cash compensation to be
paid Coswig should be considered as payable by the South American market,
but that as neither Lignose nor Gnaschwitz had entered the export markets, and
therefore had not been competitors of du Font, du Font should not share in
the compensation to them. These points were conceded by Nobel and were later
agreed to by Dr. Muller on behalf of the D.A.G. while the writer was in
Cologne.
On account of the British income tax having proved more burdensome than
had been expected, Mr. Robert Salmon, du Pont appointee, and manager of
Explosives Industries, Ltd., had asked for an increase in compensation of £200
per annum, and as both Nobel and D.A.G. hud indicated that his request would
not be approved, he had decided to leave the employ of Explosives Industries,
Ltd., on May 1st of this year. The writer discussed this matter privately with
Mr. H. J. Mitchell, pointing out to him that it would be difficult to replace Mr.
Salmon with anyone so familiar with the South American explosives market,
and particularly du Pout's relationship to that market, and that as the Amer-
ican mining companies are such an important factor in the South American
market, the Nobel and D.A.G. interests in E.I.L.. as well us Du Font's, would
suffer through the loss of Mr. Salmon's services. Mr. Mitchell agreed that under
the circumstances the increased compensation was in order, and this was later
agree to by Mr. Marquardt on behalf of the D.A.G. Formal record of this will
be made in the minutes of the next meeting of the board of Explosives Indus-
tries, Ltd. It was also agreed by Mr. Mitchell, and later by Mr. Marquardt,.
that more responsibility should be placed on the manager of E.I.L. than thereto-
fore, and the board of directors (on which Mr. Swint is Du Font's representa-
tive) should be relieved of the many minor questions that it has been the
practice to place before it.
There is attached as exhibit B copy of minutes of meeting also held in London
on February 16 relative to purchases of glycerin on the Continental market.
While in Hamburg on February 28 it developed that German deliveries of
high explosives to Mexico have been made in 25-kilo cases, i.e., 55 lbs. net
weight, and that deliveries under the Du Popt-Hercules-D.A.G. agreement to
date, including a shipment going forward on March 2, have amounted to 6,600,000
lbs., leaving 4,400,000 lbs. of German high explosives still to be delivered.
Mr. Marquardt agreed that D.A.G. would accept cash compensation for its
under-sales of the E.I.L. quota during the fifteen months ending December 31,
1926, on the same basis as arranged with Nobel early in 1926, viz :
£10 per ton of high explosives,
8 s. per thousand detonators,
6 s. per hundre^l electric detonators,
6 d. Iter thousand feet of safety fuse.
In conference with Dr. Paul Muller in Cologne on March 4th he agreed to the
distribution of the compensation to the outside German explosives companies,
as already stated, and approved the arrangements made in Explosives Industries,
Ltd.
In view of the very excellent type of delay action electric blasting cap pro-
duced at the Troisdorf fuct(jry of the Rheinsch-Westfalixche-Sprengstoff A. G.,
and the desiralulity of du Font putting out u similar article, the writer ar-
ranged with Dr. Muller to purchase the Eschbach U.S. patent 1,570,733 for
$7,500.00, to be paid in three annual installments. Assignment agreement will
be drawn and sent to Cologne at an early date.
It was also arranged with Dr. Muller that Mr. William Eschbach, manager
of the detonator factory at Troisdorf, will come to America during this year,
and that there will be discussed with him while here the subject of leud-azide-
tetryl-aluminum-shell detonators, now manufactured almost exclusively at Trois-
1374 MUNITIONS INDUSTRY
dorf ; and that subsequently du Pont would send one or more men to Troisdorf
to make an exhaustive study of the manufacture of this product. Dr. Muller
made assurances that the processes involved in the manufacture of these deton-
ators would not be offered to other American explosives manufacturers pending
a decision by du Pont. He indicated that slaould we eventually decide to adopt
this type of detonator he would expect Du Pont to pay for the process a lump
sum of 100,000 marks, and to agree to a royalty payment to be applied from the
start of manufacture, the 100,000 marks originally paid to be credited to the
royalty payments.
In addition to the foregoing, many minor matters were discussed while in
London, Hamburg, and Cologne, memoranda in regard to which are in the
writer's files. While in Europe the writer took advantage of the opportunity to
call on Mr. Le Play, of the Societe Generale pour la Fabrication de la Dynamite,
and Messrs. Hyde and Davey, of the Davey-Bickford, Smith & Cie., with whom
he discussed explosives matters of mutual interest.
Respectfully submitted.
J. Thompson Brown.
Exhibit No. 514
EXHIBIT "a" MINUTEIS OF MKETTING HELD AT NOBEL HOUSE ON lfi/2/2 7
Present : Mr. J. Thompson Brown, Mr. Wendell R. Swint, E. I. du Pont de
Nemours & Co. ; Mr. H. J. Mitchell, Mr. J. Laing, Mr. A. G. Major, Nobel
Industries, Ltd.
Norwegian competition, Chile. — The effect of Norwegian competition on the
Chile Explosives Company was discussed and consideration was given to the
best policy to be adopted for the next half year. It was the feeling of those
present that the policy of watchful inactivity raised in Mr. Gilliland's letter of
26th August 1926 (C. 6, No. 900) and advocated in the trustees' letter to the
Chile company of 5th Januai-y 1927, should be adhered to for the present.
Liquid oxygen, Chuquicamata. — Mr. Brown stated that he was satisfied that
good progress was being made Avith Lox at Chuquicamata but did not antici-
pate any considerable extension of its uses in Chile or Bolivia. In this con-
nection Mr. Brown said du Pont liad a great deal of information on liquid
oxygen which was available to Nobels on application.
Explosives Industries, ltd. — Atlas and Hercules actwities. — The activities
of these two companies, particularly in Colombia, were discussed, and Mr.
Brown stated that in conversations he had had with tlieir representatives he
had been informed that neither comiiany intended to institute more aggressive
measures, and that he felt they would i)e content with a share of the market
not in excess of their present proportions. Mr. Brown during his forthcoming
visit will explain the situation to the Germans.
Liason tetwcen E. I. L. London and the American convpanics. — Mr. Brown
was emphatic that Mr. White of New York should continue to act in the ca-
pacity of liaison and agreed tliat to enable him properly to carry out his
duties it was essential that he be fully posted on all matters connected with
Explosives Industries" operations. It was agreed to instruct E. I. L. accord-
ingly.
Cosfig, Qnasolin-itz, Lignosc. — ^After discussion it was agreed that du Ponts
could not 1)0 expected to participate in the financial obligations entered into
by the Germans with Gnaschwitz and Lignose. As regards Coswig, it was
decided tliat du Pout's share should be confined to a participation in that swm
properly applicable to the South American markets, the balance to fall to the
British and German companies in such shares as may be agreed. Mr. Brown
agreed to an equal sharing of the sum between South America (excluding Chile
and Bolivia) and the rest of the world. Accordingly it was agreed that the
£2,500 applicable to South America should be paid through the intermediary
of Explosives Industries Limited, which will result in the following apportion-
ment of that sum :
£ R. d.
Du Pont share, 3714 percent 937 10 0
Nobel share, 371/2 percent 987 10 0
D. A. G. share, 25 percent 625 0 0
Total 2,500 0 0
MUNITIONS INDUSTRY 1375
In the event of Coswig not shipping the whole or any part of the 100 tons
allocated to Chile and Bolivia, and that market having to compensate them
on the shortage, the payment to be borne as follows : 75% by Chile Explosives
Co., 25% by D. A. G.
Military factory, Chile. — The recent proposal put forward by the Chile Co.
was discussed and, whilst it was recognized that the scheme presented many
difficulties, it was considered politic on the part of the Chile Co. to keep these
negotiations open as long as possible. *A cable was agreed, copy of which is
attached, and as a reply would probably be received before Mr. Brown returned
on the U.S., the matter to be discussed further on the 7th or 8th of March.
*( Copies of the cables referred to are in the writer's files — J.T.B.)
18th February 1927.
Exhibit No. 515
exhibit " 15 ", minutes of a mejetitng held at nobei. house, london, 8.w. 1, on
16th february 1927 at 10 : 45 a.m.
Present : Mr. J. Thompson Brown, Mr. Wendell R. Swint, Mr. P. H. Chase,
representing du Ponts ; Mr. H. J. Mitchell, Mr. E. D. Metcalf. representing
Nobels
Mr. Metcalfe said that from reports so far received from Mr. Clark a total
of 705 tons crude glycerine has been acquired as a result of his visit to Paris
and Marseilles ; although no knowledge was to hand of the exact prices paid,
stated that the figure would probably work out at about £69 jyer ton for crude.
Mr. Chase referred to conversations with Mr. Metcalfe and Mr. Clark in
regard to the right of the du Pont Co. to call for participation in these pur-
chases, and, as it appeared to be clear that some misapprehension existed as
to what course the parties were expected to follow as the result of the previous
meetings, it was decided to lay down definite guiding principles to be followed
in all future operations on the continental glycerine market, as follows:
(1) The parties .shall keep each other informed as to whether and to what
extent they are interested in continental purchases, and a mutual under-
standing shall be arrived at from time to time to leave the market free to each
other for such time as may be arranged.
(2) In no circumstances shall it be permissible for both parties to operate
on the market simultaneously, and, in the event of both desiring to purchase,
an understanding must be arrived at as to whicli party shall carry out the
business and in what proportions any quantities purchased shall lie allocated.
(3) Whenever either party desires to operate on the continental market,
due notice of their intention to institute operations .shall be given to the other
party before any action is taken. Such other party shall have the right to
declare the extent of its interest in any new purchases made at the time of
such approach, which declaration shall entitle it to take over such proportion
of the purchases as is represented by its declared interest, but not more than
50% at the price of purchase.
(4) Should either party declare that it is not interested, then such party
shall have no title to call for any participation in purchases made as a result
of operations by the other part.y.
The ;hi Pont representatives indicated that they had no interest in the pur-
chase which Mr. Clark was now effecting on the continental market.
("Exhibit No. 516" appears in text on p. 1243)
Exhibit No. 517
Legal Department.
September 7th, 1934,
T. R. Hanley,
Bldg.
I enclose herewith copy of my letter of January 23rd to Major Casey, together
with copies of three drafts of agency agreements with D. F. Giera.
The draft marked "A" was the one enclosed with my letter of January 23rd.
I believe this draft was revised before execution.
1376 MUNITIONS INDUSTRY
To the best of my recollection the draft marked " B " was the agreement
executed under date of February 1, 1933.
I believe the draft marked " C " was drawn at the time of Captain Giera's
return on February 2nd but was never executed.
The above explanation represents my best recollection of the status of these
three drafts but it is possible that any one of them was the one executed on
February 1st.
S. L. Abeams.
I
Exhibit No. 518
This agreement, made this — day of January 1933, by and between E. I.
du Pont de Nemours «& Company, a corporation organized and existing under
the laws of the State of Delaware, United States of America (hereinafter
referred to as the " Company "), and D. F. Giera, of Pelham, State of New York,
United States of America (hereinafter referred to as the "Agent"),
Witnesseth, that for and in consideration of the premises and of the covenants
contained herein, the parties hereto have agreed as follows :
1. The company hereby appoints and constitutes the agent to act as its special
agent for the Kingdom of Holland and as its exclusive agent for the Republic of
Germany, to negotiate the sale of military propellants and military explosives
to purchasers (other than the Government of Holland and its colonies) located in
said territories.
2. The agent accepts such appointment and agrees that at all times during
the continuance of this agreement he will use his best endeavors to promote
the sale by the company of military propellants and explosives within the
aforesaid territories.
3. The agent shall bear all expenses and assume sole responsibility in con-
nection with such negotiations, and shall not make any representation, submit
or accept any tender, enter into any contract, or execute any document on behalf
of the company, except with the approval of the proper oflBcers or other author-
ized representatives of the company ; it being further understood that no obliga-
tion on the part of the company, either to the agent or to third parties, shall
arise in connection with orders not so accepted.
4. The company shall furnish, without charge to the agent, its duly accred-
ited representative or representatives to assist and advise the agent on tech-
nical, financial, and legal matters incident to the completion of any negotiations
undertaken by the agent hereunder.
5. The agent shall receive as full compensation for his services hereunder a
commission equal to 10 percent (10%) of the gross selling price of the mili-
tary propellants and explosives sold to customers within said territories under
orders negotiated by the agent during the life of this agreement. Any commis-
sion due hereunder shall be payable to the agent promptly upon receipt by the
company of the selling price rpon which such commission is based. Such
commissions shall be paid in United States currency at such place as shall
be designated in each instance by the agent, unless prevented by war, act of
governmental authority, or other circumstance beyond the control of the
company.
6. The company shall have the right to terminate this agreement upon written
notice to the agent; provided, however, that the company shall remain liable
for all commissions payable hereunder on orders obtained as a direct result of
negotiations commenced prior to such termination.
7. The agent shall have the right to terminate this agreement upon six (6)
months previous notice in writing to the company. Upon termination by the
agent, no commissions shall be payable hereunder on orders thereafter accepted.
8. Unless otherwise terminated in accordance with paragraph 6 or paragraph
7 hereof, this agreement shall continue in full force and effect for the period
of three (3) years from the date hereof.
In witness whereof the company has caused this agreement to be executed
by its officers duly authorized and its corporate seal to be hereunto affixed, and
the agent has hereunto set his hand and seal the day and year first hereinabove
written.
E. I. DU Pont de Nemours & Company,
By , Vice president.
Attest :
[seal] — — , Secretary.
1
MUNITIONS INDUSTRY 1377
State of Delaware,
County of N&w Castle, ss.
On this day of January 1933, before me personally came
, to me known, who being by me duly sworn did depose and say that
he resides in that he is vice president of E. I. du Pont
de Nemours & Company, the corporation described in and which executed the
above instrument ; that he knows the seal of said cori)oration ; 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
thereto by like order ; and he acknowledged the said instrument to be the free
act and deed of the said corporation.
, Notary Public.
Exhibit No. Sl^
This agreement, made this day of February, 1933, by and between E. I. du
Pont de Nemours & Company, a corporation organized and existing under the
laws of the State of Delaware, United States of America (hereinafter referred
to as the "Company"), and D. F. Giera. of Pelham, State of New York, United
States of America (hereinafter referred to as the "Agent"), witnesseth :
That for and in consideration of the premises and of the covenants contained
herein, the parties hereto have agreed as follows :
1. The company hereby appoints and constitutes the Agent to act as its
special agent for the Kingdom of Holland and as Us exclusive agent for the
Republic of Germany, to negotiate the sale of military propellants and military
explosives to purchasers (other than the Government of Holland and its colo-
nies) located in said territories. The agent accepts such appointment and
agrees that at all times during the continuance of this agreement he will use
his best endeavors to promote the sale by the company of military propellants
and explosives within the aforesaid territories.
2. The agent shall not, during the continuance of this agreement without the
written consent of the company, act as agent for any other company, corpora-
tion, individual or collection of individuals engaged in the manufacture and/or
sale of goods of a natui'e similar to or competing with the said pi'oducts covered
by this agreement, nor sliall he be concerned, engaged, or interested, either
directly or indirectly, in the business of any company, corporation, individual, or
collection of individuals engaged in the manufacture and/or sale of goods of a
nature similar to or competing with the products covered by this said agreement.
3. The agent shall bear all expenses and assume sole responsibility in con-
nection with such negotiations, and shall not make any representation, submit
or accept any tender, enter into any contract, or execute any document on
behalf of the comjiany, except with the approval of the proper officers or other
authorized representative or representatives of the company ; it being further
understood that no obligation on the part of the company, either to the agent
or to third parties, shall arise in connection with orders not so accepted.
4. The company shall furnish, without charge to the agent, its duly accredited
representative or representatives to assist and advise the agent on technical,
financial, and legal matters incident to the completion of any negotiations
undertaken by the agent hereunder.
5. The agent shall receive as full compensation for his services hereunder
a commission as shown on schedule "A" attached hereto and made a part
hereof. Any commission due hereunder shall be payable to the Agent promptly
upon receipt by the company of tlie selling price upon which such commission
is based. Such commissions shall be paid in United States currency at such
place as shall be designated in each instance by the agent, unless prevented
by war, act of governmental authority, or other circumstance beyond the con-
trol of the company.
6. If. in the reasonable opinion of the company after consultation with the
agent, it appears at any time to the company that the agent is not in a
position to negotiate successfully with any prospective customer or customers
within said territories, the company, after notice to the agent in writing, may
appoint a special representative to obtain orders from such customer or
customers ; and no commission shall be pa.Yable to the agent hereunder with
respect to orders negotiated by such special representative.
7. The company shall have the right to terminate this agreement upon
written notice to the agent, should the agent breach any of the provisions of
1378 MUNITIONS INDUSTRY
this agreement or become incapacitated, by illness or otherwise, from performing
his obligations hereunder for a period of six consecutive months. No commis-
sion shall be payable hereunder on orders accepted after such termination.
8. The agent shall have the right to terminate this agreement upon six (6)
months previous notice in writing to the company. No commission shall be
payable hereunder on orders accepted after such termination.
9. Unless otherwise terminated in accordance with paragraph 7 or 8 hereof,
this agreement shall continue in full force and efEect for the period of three
(3) years from the date hereof.
In witness whereof the company has caused this agreement to be executed
in duplicate by its officers duly authorized and its corporate seal to be hereunto
affixed, and the agent has hereunto set his hand and seal the day and year
first hereinabove written.
E. I. DU Pont de Nemours & Company,
By , Vice President.
Attest :
[SEAL] . Secretary.
State of Delaware,
County of Neic Castle, ss:
On this day of February 1933 before me personally came , to me
known, who, being by me duly sworn, did depose and say that he resides
in ; that he is vice president of E. I. du Pont de Nemours & Company,
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 signetl his name thereto by like order; and
he acknowledged the said instrument to be the free act and deed of the said
corporation.
, Notary Public.
State of Delawaeb,
County of New Castle, ss:
On this day of February 1933 before me personally came D. F. Giera,
to me known, who, being by me duly sworn, did depose and say that he resides
in Pelham, county of Westchester, State of New York, and that he is the
D. F. Giera described in and who executed the above instrument.
, Notary Public.
Schedule A
This schedule is a part of and subject to all the conditions of the agreement
made this day of February 1933 between E. I. du Pont de Nemours &
Company, a corporation organized and existing under the laws of the State of
Delaware, United States of America (referred to in the above-mentioned agree-
ment as the "Company"), and D. F. Giera, of Pelham, State of New York,
United States of America (referred to in the above-mentioned agreement as the
"Agent").
Supplementing paragraph 5 of said agreement, the Agent shall receive as full
compensation for his services a commission equal to ten per cent (10%) of the
c.i.f. price of all military propellants and military explosives sold to customers
(other than the Government of Holland and its colonies) located within the
Kingdom of Holland and the Republic of Germany, under orders negotiated by
the agent and accepted by the company during the life of saitl agreement.
Such commissions shall be payable in accordance with the provisions of said
agreement.
In witness whereof tlie company has caused this schedule to be executed in
duplicate by its officers duly authorized and its corporate seal to be hereunto
affixed, and the agent has hereunto set his hand and seal the day and year
first hereinabove written.
E. I. DU Pont de Nemoubs & Company,
By , Vice President.
Attest :
[seal] , Secretary.
Witness :
MUNITIONS INDUSTRY 1379
Exhibit No. 520
This agreement, made this 2nd day of February, 1933, by and between E. I.
du Pont de Nemours & Compiiny, a corporation organized and existing under
the laws of the State of Delaware, United States of America (hereinafter
referred to as the " Company " , and D. F. Giera, of Pelham, State of New
York, United States of America (hereinafter referred to as tlie "Agent"),
witnesseth :
That for and in consideration of tlie pi-emises and of the covenants contained
herein, the parties hereto have agi-eed as foll(nvs :
1. Tlie company hereby appoints and constitutes the agent to act as its
special agent for the Kingdom of Holland and as its exclusive agent for the
Republic of Germany, to negotiate the sale of military propellants and military
explosives to purchasers (other than the Government of Holland and its
colonies) located in said territories. The agent accepts such appointment
and agrees that at all times during the continuance of this agreement he
will use his best endeavors to promote the sale by the company of military
propellants and explosives within the aforesaid territories.
2. The agent shall not, during the continuance of this agreement without the
written consent of the company, act as agent for any other company, corpora-
tion, individual or collection of individuals engaged in the manufacture and/or
sale of goods of a nature similar to or competing with the said products
covered by this agreement, nor shall he be concerned, engaged or interested
either directly or indirectly in the Inisiness of any company, corporation, indi-
vidual or collection of individuals engaged in the manufacture and/or sale of
goods of a nature similar to or competing with the products covered by tiiis
said agreement.
3. The agent shall bear all expenses and assume sole responsibility in con-
nection with such negotiations, and shall not make any representation, submit
or accept any tender, enter into any contract, or execute any document on
behalf of the company, except with the approval of the proper officers or other
authorized representative or representatives of the company ; it being further
understood that no obligation on the part of the company, either to the agent
or to third parties, shall arise in connection with orders not so accepted.
4. The company shall furnish, without charge to the agent, its duly accredited
representative or representatives to assist and advise the agent on technical,
financial, and legal matters incident to the completion of any negotiations
undertaken by the agent hereunder.
5. The agent shall receive as full compensation for his services hereunder a
commission as shown on schedule "A" attached hereto and made a part hereof.
Any commission due hereunder shall be payable to the agent promptly upon
receipt by the company of the selling price upon which such commission is
based. Such commissions shall be paid in United States currency at such place
as shall be designated in each instance by the agent, unless prevented by war,
act of governmental authority, or other circumstance beyond the control of
the company.
6. The company shall have the right to terminate this agreement upon
written notice to the agent, should the agent breach any of the provisions of
this agreement, or become incapacitated, by illness or otherwise, or be pre-
vented by any cause from performing his obligations hereunder for a period
of six consecutive months. No commission shall be payable hereunder on
orders accepted after such termination.
7. The agent shall have the right to tenninate this agreement upon six (6)
months previous notice in writing to the company. No commission shall be
payable hereunder on orders accepted after such termination.
8. Unless otherwise terminated in accordance with paragraph 6 or paragraph
7 hereof, this agreement shall continue in full force and efCect for the period
of three (3) years from the date hereof.
In witness whereof the company has caused this agreement to be executed
in duplicate by its officers duly authorized and its corporate seal to be hereunto
affixed, and the agent has hereunto set his hand and seal the day and year
first hereinabove written.
E. I. DU Pont de Nemours & Company,
By , Vice President.
Attest ;
[SEAL] , Secretary.
83876— 34— PT 5 24
1380 MUNITIONS INDUSTRY
State op Delaware,
County of New Castle, ss:
On this 2nd day of February 1933 before me personally came ,
to me known, who being by me duly sworn did depose and say that he resides
in ; that he is vice president of E. I. du Pont de Nemours & Com-
pany, the corporation described in and which executed the above instrument ;
that he knows the seal of said corporation : that the seal affixed to said instru-
ment is such corporate *;eal ; that it was so affixed by order of the board of
directors of said corporation, and that he signed his name thereto by like
order ; and he acknowledged the said instrument to be the free act and deed of
the said corporation.
, Notary Public.
State of Delaware,
County of New Castle, ss:
On this 2nd day of February 1933 before me personally came U. F. Giera,
to me known, who being by me duly sworn did depose and say that he re-
sides in Pelham, County of Westchester, State of New York, and that he is
the D. F. Ciera described in and who executed the above instrument.
, Notary PuMic.
SCHEDITLE A
This schedule is a part of and subject to all the conditions of the agree-
ment made this 2nd day of February 1933 between E. I. du Pont de Nemours &
Company, a corporation organized and existing under the laws of the State
of Delaware, United States of America (referred to in the above-mentioned
agreement as the "company"), and D. F. Giera, of Pelham, State of New York,
United States of America (referred to in the above-mentioned agreement as the
"agent").
Supplementing paragraph 5 of said agreement, the agent shall receive as
full compensation for his services a commission equal to ten percent (10%)
of the c.i.f. price of all military propellants and militai'y explosives sold to
customers (other than the Government of Holland and its colonies) located
within the Kingdom of Holland and the Republic of Germany, under orders
negotiated by the agent and accepted by the company! during the life of said
agreement. Such commissions shall be payable in accordance with the pro-
visions of said agreement.
In witness whereof the company has caused this schedule to be executed
in duplicate by its officers duly authorized and its corporate seal to be here-
unto affixed, and the agent has hereunto set his hand and seal the day and year
first hereinabove written.
[seal] E. I. DU Pont de Nemotibs & Company,
By , Vice President.
Attest :
, Secretary.
Witness :
Exhibit No. 521
This agreement made this 15th day of February 1933 by and between E. I.
du Pont de Nemours & Company, a corporation organized and existing under
the laws of the State of Delaware, United States of America (hereinafter
referred to as the "company"), and D. F. Giera, of Pelham, State of New
York, United States of America (hereinafter referred to as the "agent"), wit-
nesseth :
Whereas it is understood to be the desire and expectation of Germany to be
relieved in the near future of the prohibitions and limitations upon the im-
portation of arms and ammunition to which it is subjected under the terms
of the Treaty of Versailles ; and
Whereas it is the desire of the company to be in a position to furnish such
requirements of military powders as Germany may be in the market for a.-
the result of such relief;
Now, therefore, in consideration of the premises and of the covenants con-
tained herein, the parties hereto have agreed as follows :
MUNITIONS INDUSTRY 1381
1. The company hereby appoints and constitutes the agent to act as its
-exclusive agent to negotiate the sale of military propellants and military ex-
plosives to the Government of Germany. The agent accepts such appointment
and agrees that at all times during the continuance of this agreement he will
use his best endeavors to promote the sale of military propellants and ex-
plosives by the company.
2. The agent shall not, during the continuance of this agreement without
the written consent of the company, act as agent for any other company, corpo-
ration, individual, or collection of individuals engaged in the manufacture
and/or sale of goods of a nature similar to or competing with the said products
covered by this agreement, nor shall he be concerned, engaged, or interested
either directly or indirectly in the business of any company, coi^poration, indi-
vidual, or collection of individuals engaged in the manufacture and/or sale of
goods of a nature similar to or competing with the products covered by this
said agreement.
3. The agent shall bear all expenses and assume sole responsibility in con-
nection with such negotiations, and shall not make any representation, submit
or accept any tender, enter into any contract, or execute any document on be-
half of the company, except with the approval of the proper officers or other
authorized representative or representatives of the company ; it being further
understood that no obligation on the part of the company, either to the agent
or to third parties, shall arise in connection with orders not so accepted.
4. It is expressly understood that the company will not enter into any con-
tract for the sale of military propellants or explosives to the German Govern-
ment without first obtaining the approval or consent of the United States
<jOvernment.
5. The company shall furnish, without charge to the agent, its duly accredited
representative or representatives to assist and advise the agent on technical,
financial, and legal matters incident to the completion of any negotiations
undertaken by the agent hereunder.
6. The agent shall receive as full compensation for his services hereunder a
commission -as shown on schedule A attached hereto and made a part hereof.
Any commission due hereunder shall be payable to the agent promptly upon
receipt by the company of the selling price upon which such commission is
based. Such commissions shall be paid in United States currency at such
place as shall be designated in each instance by the agent, unless prevented
by war, act of governmental authority, or other circumstance beyond the con-
trol of the company.
7. Either party shall have the right to terminate this agreement upon six
(6) months' previous notice in writing to the other. No commission shall be
payable hereunder on orders accepted after such termination.
8. Unless otherwise terminated in accordance with paragraph 7 hereof, this
agreement shall continue in full force and effect for the period of three (3)
years from the date hereof.
In witness whereof the company has caused this agreement to be executed
in duplicate by its officers duly authorized and its corporate seal to be hereunto
afiixed, and the agent has hereunto set his hand and seal the day and year
first hereinabove written.
[SEAi.] E. I. Du Pont i>e Nemours & Company,
By A. Felix du Pont, Vice President.
Attest
Witness:
K. K. V. Casey.
C. CopELAND, Secretm-y.
D. F. GiERA. [seal]
State of Dex-awarb,
County of New Castle, ss:
On this 15th day of February 1933 before me personally came A. Felix du
Pont, to me known, who being by me duly sworn did depose and say that he
resides in Wilmington, Delaware ; that he is vice president of E. I. du Pont de
Nemours & Company, 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
thereto by like order ; and he acknowledged the said instrument to be the free
act and deed of the said corporation.
[seal] J. H. Cassidy, Notary PtiWc.
1382 MUNITIONS INDUSTRY
State of Dexawarb.
County of Nero Castle, ss:
On this 15tli day of February lf>33 before me personally came D. F. Giera..
to me known, who being by me dnly sworn did deixise and say that he resides-
in Pelham, county of Westchester, State of New York, and that he is the D. F.
Giera described in and who executed the above instrument.
[seal] J. H. Cassidy, Notary Puhlic.
SCHEDULE A
This schedule is a part of and subject to all the conditions of the agreement
made this 15th day of Febrnrary 1933 between E. I. du Pont de Nemours &
Company, a corporation organized and existing under the laws of the State of
Delaware. United States of Amerirca (referred to in the above-mentioned agree-
ment as the "company"), and D. F. Giera, of Pelham, State of New York,
United States of America (referred to in the above-mentioned agreement as
the " agent " ) .
Supplementing paragraph 6 of said agreement, the agent shall receive as
full compensation for his services a commission equal to ten percent (10%) of
the selling price, f.o.b. plant, of all military propellants and military explo-
sives sold to the Gterman Government under orders accepted by the company
during the life of said agreement. Such commissions shall be payable in
accordance with the provisions of said agreement.
In witness whereof the company has caused this schedule to be executed in
duplicate by its officers duly authorized and its corporate seal to be hereunto
affixed, and the agent has hereunto set his hand and seal the day and year
first hereinabove written.
[seal] E. I. DU Pont db Nemours & Company.
By A. Ff-Lix du Pont, Vice President.
Attest :
C. Copeiland, Secretary.
D. F. Giera. [seal.1
Witness :
K. K. V. Casey.
("Exhibit No. 522 " appears in text on page 1237)
(" Exhibit No. 523 " appears in text on page 1244)
Exhibit No. 524
June 30, 1933.
Confidential.
*Ms-SO-A
7S-P. D. F. Giera
Colonel W. N. Taylor, Ms-140
16 Place Vendome, Paris, France.
Dear Taylor: Because of uncertainties regarding possible flare-back, it is
decided best to cancel our agency arrangement with Giera and the same has
now been arranged, this cancellation taking effect immediately.
With kindest regards to the family and yourself, I am
Sincerely yours.
K. K. V. Casey, Director.
KKVC : MH
Exhibit No. 525
(T-2629)
April 10th. 1933.
*Ms-80-A
Major K. K. V. Casey, Ms-8
E. I. du Pont de Nemours & Co.,
Wilmington, Delaivare.
Dear Sir : Status of negotiations March 1933 :
Pencil markings.
MUNITIONS INDUSTRY 1383
I. NEGOTIATIONS COMPLETED
Poland: 20 tons graphite. As negotiations on this material remain in abey-
.ance, the subject will be dropped from future reports.
Belgium : 60 tons powder for 7.92 Mauser cartridges not subject to inspection.
-Offer for newly made powder from I.C.I, expired. Offer for du Pont IMR 17
subject to prior sale canceled. The Fabriqaie Nationale have requested an
option on 15 tons old IMR 17, which has also been refused, there being no
stock on hand.
Latvia: 10 tons NC powder for .303 cartridges. The Latvian War Depart-
ment sent out their annual inquiry as to price of 10 tons NC rifle powder for
.303 cartridges, as the price of powder governs the price the Government pays
to Sellier & Bellot for finished ammunition. We quoted $1.60 per kilo, as we
know no real order will be placed.
Yugoslavia : 15 tons TNT for boosters. Order received by Bofors during
February, price believed to be around 2 s. 2d. per kilo delivered.
II. PROSPECTS UNDER NEGOTIATION
Austria : 15-30 tons NC powder for 7.92 cartridges. To be ordered by Hirten-
herg for delivery to Dordrecht.
Bulgaria : 5 tons TNT.
Finland: 400-1,000 tons TNT 80.5° C. Negotiations for an order for TNT
started the latter part of March, while Col. Taylor was in Helsingfors. Prices
were obtained by telephone from London and by cable from Wilmington.
Greece: 40 tons low NG content powder for 75 mm Krupp F. G. Ofticial
report of tests made in March expected shortly. Bids were put in on March 20,
but are to be opened at a later date which is not yet known.
III. PROSPECTS FOR FUTURE NEGOTIATIONS
Belgium : Cannon powder.
England : Powder for 7.62 mm Estonian cartridges.
Estonia: 18 tons NC powder for r2"/50 cal. C. D. gun; 28 tons TNT 80° C. ;
4 tons powder for 18 pdr. gun.
France : Powder for 25 mm Hotchkiss machine gun ; powder for 37 mm.
Hotchkiss machine gun.
Greece : Powder for 75 mm Schneider mountain gun Mod. 1919 ; powder for
120 nun 50 cal. navy gun ; powder for 6.5 mm rifle S.P. & C.H.
Holland: 100 tons TNT for Army and Navy; NC Powder for 75 mm gun
■Colonial Army.
Lithuania : Powder for 7.92 mm rifle cartridges.
Poland : 1,000 tons rifle and cannon powder.
Roumania (Resita) : 60 tons TNT.
Yugoslavia : TNT.
IV. REPORT FOR MARCH 1933
Austria : There continues to be much political unrest in Austria, where it
is feared that thei-e will be a Hitlerite invasion in the foinn of a local internal
upheaval in favor of Hitlerisni, immediately followed by a voluntary joining
up with Germany, thereby forming the An.schluss and eliminating Austria as
an independent nation.
Belgium : Our agent reports the possibility of negotiating with the Belgian
Government during April for the supply of cannon powder.
Bulgaria: Mr. Douque, I.C.I.'s agent for Bulgaria, having been in London
and Paris most of last month, we have no further details on what was reported
last month, except that the order for the erection of a powder plant is under-
stood to involve 37 million levas, and that payment will be made in the form
of tobacco of the 1928-1929 and 1930 crops.
Denmark: There will be an adjudication in June for 10-20 tons TNT and
10-20 tons cannon powder. We have received an enquiry on the subject and
will quote through our agent.
Estonia: Col. Taylor started for Estonia this month but was unable to
get there due to having to reach Finland rapidly. Our agent does not foresee
an immediate order for powder, as the expenditures for this year are expected
to be entirely on cartridges. Mr. Lutyens, of I.C.I., has been to Estonia and
is returning the first week of April. Apparently, the problem is first to sell
cartridges, and then take up the powder question.
1384 MUNITIONS INDUSTRY
Finland: Col. Taylor visited Finland this month and arranged with Messrs.
de Jersey & Co. (Finland), Ltd., Mikaelsgaten 9, Helsingfors, for them to act as
agents for Du Pont and I.C.I, in Finland. He also negotiated an order for 400
tons of TNT, which order was signed on April 1st. He also visited the Govern-
ment powder factory at Vihtavuori and sent a report on it. There appears to be
a possibility of selling cannon powder later on. The Finns have a large stock
of Russian and American powders obtained from Russia at the end of the
war, and they are now engaged in going over their entire powder question and
reorganizing the old materials they have on hand. Their guns are Russian
guns, on which they have very little data, and it is presumed that the Du Pont
Co. has considerable information about these guns as the powder used in them
is Du Pont powder furnished to Russia during the war. We would like you
to look into this question of Russian guns with American powder. Col. Taylor
is expecting further information from Finland. The Finns are anxious to buy
from England on account of the fact that they have a favorable pound balance.
The general economic situation in Finland does not appear to be too bad, and
the Finns appear to be adjusting themselves to the economic level. Col. Taylor
saw a number of Government officials and got the impression that the financial
situation of the country was in fairly good condition.
France : There is no particular military news to report on France.
Germany : Col. Taylor visited Germany twice this month and got the im-
pression that there is so much internal strain caused by the political changes
that, even with the belligerent and threatening attitude of the present govern-
ment, there is no probability of Germany starting a war for the time being.
However, the whole population is extremely nervous and jumpy. It is not
possible to tell what is going to happen.
Greece : The chemical tests on the samples of NG powder submitted for the
Krupp 75 mm field gun have been proceeding during the month with sliglit
retard, due to the political events which occurred this month after the elections,
which were held on March 4th. Unofficially, we hear that the Hungarian and
Polish samples have not given very satisfactory stability results. We under-
stand that the final reports of the Greek Artillery Technical Section ought to
be completed sometime during April, after which the question of placing an
order will no doubt be considered. The tests of samples for the 75 mm
Schneider mountain gun and the 120 mm Italian Navy gun are still ex-
pected to begin at the beginning of INIay. The two 6.5 Mannlicher rifles, which
we have ordered for the Du Pont Co. for experimental purposes, have not yet
been actually delivered to our agent in Athens on account of complicated red-
tape required by the Government before these rifles are released. As soon as
received, they will be shipped with the bullets and primed cartridge cases, which
have already been received by our agent from the S. P. »& C. H.
Holland : The Dutch have refused our .50 cal. powder in favor of Bofors.
This is not really because our powder is not satisfactory, but it comes from a
bad feeling they got over the delivery of our lot N. 19, on which they were
counting on loading a certain number of cartridges. That particular lot not
only arrived too late but did not give satisfaction, and it gave Bofors an
opportunity to come in. This dissatisfaction affects our relations for small-
ai'ms powder, but does not affect our relations for cannon powder, and high
explosives, but will be difficult to overcome.
Hungary: Hungary continues to draw the attention of the European powers
on account of its political restlessness and re])orte(l arming due to the situations
developing among its neighbors. This country considered that it had a good
chance of counter-acting the potential force of the " Petite Entente " federa-
tion, (Yugo-Slavia, Roumania, and Czecho-Slovakia) by tying up once more
with Austria under the rule of a Hapsburg. The chances of this seem to be
disappearing due to the Hitlerite movement in Austria, tetnding towards a
tie up with Germany. Hungary is, therefore, feeling terribly isolated and
would seem somewhat ready to do anything desperate to break up these
movements before they are to well organized.
The continued movement of armament from Italy to Hungary has again
been brought in the limelight by statements made on March 10th in the
French Chamber of Deputies regarding the delivery of 60 airplanes as follows :
12 single-seated Fiat fighting planes of 450 H.P. model CC. 20, 30 two-seated
Fiat observation and bombing planes of 650 H.P. model CC. 22, 12 large
Caproni bombing planes flown to destination in eight squadrons as follows :
May 29, 1932, 1 squadron from Tolmezzo, Italy, to Szombatheli, Hungary ;
Dec. 19, 1932, 1 squadron from Undine, Italy, to Varpalota, Hungary; Jan. 4,.
MUNITIONS INDUSTRY 1386
1933, 2 squadrons from Tolniezzo, Italy, to Szobog. Hungary; Jan. 19, 1933, 2
squadrons from Tolmezzo, to Szebeg; Jan. 20, 1933, 2 squadrons of Capronia
from Tolmezzo to Szombatheli. All bombing planes equipped with full load
of bombs and complete gas equipment.
In over ten months, Italy is reported to have recently delivered 195,000
kgs. of gas by rail through Austria without anyone noticing the shipments.
We have endeavored to obtain information on the Hungarian powder plant :
Nitrochemie Industricanlagen A.G. — whose competition has been met in the
present negotiations in Greece. We learn from reliable sources that this
company is a fusion of the Ungariscbe Pulvei-fabrilcs Betriebs A.G. and the
Peter Nitrogen Artificial Menure Factory Ltd. The company has been taken
over by the government and the directors consist solely of State functionaries.
The powder plant is not far from Veszprem ; employs 100-150 workmen. It
manufactures both nitrocellulose and nitroglycerin powders and its capacity
is estimates! at 10,W0 kgs. per day. At present, the production is vei-y low,
being estimated at 35,000 kgs. per annum. The technical manager, Helwig, is
very highly spoken of and he was one of the staff of the old Austrian Imperial
Propellant Factory at Blumau.
Latvia: Col. Taylor expected to visit Latvia, but was unable to arrive there.
Mr. Lutyens, of I.C.I., is visiting Latvia the first week of April and will look
into the possibility of powder business.
Lithuania : The Lithuanians behaved so badly on the cartridge order de-
livered by I.C.I, and the question of payment and acceptance of the material
was so badly conducted, that we have decided that there is not much profit
to be made out of this territory and that they are rather bad people to deal
with. We have a little doubt yet whetlier or not we should appoint Capt.
Martinkus or General Velykis as agent, but we are waiting to see the result
of the trials of the sample of rifle powder we have sent to Martinkus, to see
whether or not he handles this in a better way than Velykis handled the
cartridge order. We have decided not to bother liim and see what he can
do, and later, go into the matter.
Poland : Our agent reports that the Poles are maintaining their attitude
that tiiey will not ])uy outside of Poland and that Zagozd.son is i^ufFicient to
take care of their needs. They do not seemed to be alarmed by Hitler's
threats on the Corridor for the immediate future. However, they expect that
there will be unavoidably a war with Germany on this matter. Col. Taylor
will visit this territory early next month to see what can be done.
Roumania : We have arranged with Mr. E. G. Boxshall, 107, Galea Victoriei,
Bucharest, to act for our agent in Roumania. It looks as if we may be able to
do some businesss direct with Resita factory, whicli is expecting some orders
for shells and ammunition. It is not advisable to attempt to deal direct with
the Government as the financial situation is extremely bad and the Govern-
ment defaulted on a payment of a cartridge order in 1932, but finally came to a
new arrangement agreeing to pay over 8 years.
Recently, there has been a scandal concerning a contract placed with Skoda
for shells amounting to 31 million leis and cannons for 6 billion leis. On
March lOth, 1933, two tax inspectors examined the books of Mr. Seletzki, agent
of Skoda, on the basis that he had made a false tax declaration, and they
found among his papers a great number of documents and letters between
Skoda and various Roumanian officials, showing that the Skoda agent had dis-
tributed a large sum of money among them in order to ol)tain the contract.
This caused considerable comment in the Chamber of Deputies and suddenly
General Popescu committed suicide. General Popescu was a retired officer
and had signed the contract with Skoda. Immediately afterward.s, some re-
ports say that Mr. Seletzki was arrested, others not, and at this moment
everything is in a great state of agitation.
Turkey : We have taken no steps to do anything in Turkey as the financial
conditions appear very bad.
Yugoslavia : We are now debating the question of an agency for Yugoslavia.
Mr. L. W. B. Smith and Mr. Major of I.C.I, visited Belgrade and are studying
the matter of reorganizing the I.C.I, work there, and we are waiting to find out
what they have decided to do before taking any further steps about an agency,
for powder and explosives, as there is no immediate possibility of selling powder
there, and we wi.sh to harmonize with the general plans of I.C.I.
General : There is a certain activity beginning to show in the military world
and tentative enquiries are coming out. No important orders have been placed
anywhere yet, but it looks as if before long there might be something coming.
1386 MUNITIONS INDUSTKY
Tlie question of price for the moment is determining all purchases. The gov-
ernments are extremely poor and every cent counts.
The prices are very low. Cannon and rifle powders are selling at $1.10 to
^1.25 a kilo C.I.F. and TNT is selling between 30 and 34 cents a kilo C.I.F.
At these prices it is possible to sell I.C.I.'s products, but it is not possible for
the moment to sell Du Pont products, as Du Pont prices are too high. The only
opportunity of selling Du Pont materials will be after the European competitors
have reached their capacity, and the question of quick deliveries of a large
volume might arise. So far, this is not the case.
Vei\v truly yours,
William N. Taylor.
AK/MS
Exhibit No. 526
(T-2581)
February 6th, 1933.
*Ms-80-A
Orig-Ms-S
Ms-64
Ms-140
Ms— 199
Major K. K. V. Casey,
E. I. dAi Pont de Nemours d Co., Wilmington, Delaware.
Dear Sir: Status of negotiations January 1933.
I. NBGOTIATIOXS COMPLEnED
Poland : 2,000 kilos centrallite. I.C.I, received an order from Zagozdzon at
5s.4d. per kilo c.i.f. Gdynia.
Roumania : 5 tons TNT (pyrotechnic). I.C.I, report as follows: "As a result
of the adjudication held on December 10th, Bofors got the order at Lei 100 per
kg. cif. Pyrotechnie, Bucarest, duty excluded ; inspection and acceptance to
take place at Bucarest. Temns : 30% with order, 70% after successful termi-
nation of all acceptance tests. Although the price is comparatively high, Bofors
are no doubt running a risk which is rather out of proportion with the value
of the order."
II. PROSPECTS UNDER NEiGOTIATIONS
I.CI. territory
Austria : 15-30 tons NC powder for 7.92-mm. cartridges. Ordered by Hirten-
berg for delivery to their factory at Dordrecht. See last report. No further
developments.
Bulgaria : 5 tons TNT. I.C.I, report no further news received.
Greece : 40 tons low NG content powder for 75-mm. Krupp F.G. Mr. Cowie
of I.C.I, and Mr. Singer left for Greece on Jan. 21st to take part in the firings
which are expected to take place on Feb. 6th, and to prepare and submit an
offer on behalf of I.C.I. It is presumed that the Dutch, the Swedes, the Poles,
the Italians, and the Nitrokemie of Hungary will also compete.
PBOSPEcrrs under nbgottatioxs
du Pont territory
Belgium (F.N.) : 60 tons powder for 7.92 Mauser carti-idges. Powder not
subject to inspection, and to be delivered in 5-ton lots. Have quoted on old du
Pont IMR 17 and I.C.I, newly made powder. Sample of I.M.R. 17 has been sent
to the F.N.
Poland : 1,000 tons rifle & cannon powder. The opportunity for this order
seems to have passed, so we are dropping this to future prospects. See letter
no. T-2541.
Poland : 20 tons graphite. No decision yet reached, pending trials of samples.
* Pencil markings.
MUNITIONS INDUSTRY 1387
III. PROSPECTS FOB FUTURE NEGOTIATIONS
1.0.1, territory
Greece : Powder for 75-mm. Schneider Mountain Gun mod. 1919 and for
120-mm. 50-caI. navy gun.
Roumania (Resita) : 60 tons TNT.
PROSPECTS FOR FUTURE NEGOTIATIONS
du Pont teri'itory
England : Powder for 7.62-mm. Estonian cartridges.
Estonia: 18 tons NC powder for 12" /50 cal. CD. gun; 28 tons TNT 80° C. ;
4 tons powder for 18 pdr. gun.
France : Powder for 25-mni. Hotchkiss machine gun ; powder for 37-mm,
Hotchkiss machine gun.
Holland : 100 tons TNT for army and navy.
Lithuania : Powder for 7.92 -mm rifle cartridges.
IV. REPORT FOR JANUARY 1933
I.C.I, territory
Austria : A most interesting case of contraband of arms has developed in
connection with the Hirtenberg factory in Austria. As you know, the Hirten-
berg factory is owned by Fritz Mandl, who is also the owner of the Dordrecht
factory.
Hirtenberg is not allowed to manufacture cartridges in Austria other than
a certain limited production for the Austrian Army. But they manufacture
the metal parts in Austria and deliver them to Dordrecht, where they are
assembled and loaded.
On the morning of Jan. 8th, the " Wiener Arbeiterzeitung " published the
news that 40 carloads of rifles and machine guns had been smuggled from
Austria into Hungary during the month of December. This news caused con-
siderable excitement and the French Ambassador at Vienna immediately took
the matter up with the Austrian Government.
It appears that an Italian at Verona, I believe his name is Cesare, obtained
30,000 rifles and 200 machine guns, which are part of the Austrian material
seized by Italy during the War, and shipi)ed this material to Hirtenberg in
Austria, obtaining a permit through the frontier on the basis of sending these
arms to be repaired by the original manufacturer in Austria who was Steyer.
This material arrived at the Hirtenberg factory, was sorted, and the material
in good order was immediately shipped in automobile trucks to Hungary ; the
rest was repaired at Steyer's and shipped to Hungary during the night of the
30th and 31st of December last.
This has caused considerable agitation in the Austrian Parliament between
the Socialists and Nationalists. The Austrian Government defended them-
selves on the question of import permit into Austria on the basis that it was
legitimate business to allow material to come into Austria to be repaired and
to give work to Austrian labor and return the material to Italy. The matter
was quieted down, and somehow or other it was arranged that the French
should not make any official trouble about it.
However, the " Petite Entente ", who are the natural enemies of Hungary,
was not satisfied and brought this matter before the League of Nations, de-
manding that the material be delivered up and destroyed, and that sanctions
should be taken against the people involved. There seems to be an attitude on
the part of certain English, French, and Italian delegates at Geneva to hush
the matter up, and the " Petite Entente " are having a hard time to get action.
This is the first contraband case which has happened in recent year:?. It is
understood that Hirtenberg undertook this matter in return for a large car-
tridge order from Hungary.
Bulgaria (proposed powder plant) : I.C.I, did not quote. It has not yet been
ascertained whether the adjudication really took place in December or not.
Greece : Messrs. Cowie, of I.C.I., and Singer, of this office, left for Greece on.
Jan. 21st. On his return Mr. Singer will report on the entire situation ia
Greece.
1388 MUNITIONS INDUSTRY
Hungary : Hungary is apparently trying seriously to obtain more arms, etc.,
than the treaties allow. They are hoping to profit by trouble in Jugoslavia
between the Croats and the Slavs. They believe that there will be a rebel-
lion in Jugoslavia in the summer and hope to profit by it.
Jugoslavia : Mr. Singer will visit this territory on his way back from Greece.
He will visit Mr. May, of I.C.I., there and ascertain conditions in this territory.
Roumania : I.C.I, report as follows : " Calonel Petrescu and Mr. Popp, of the
Resita Company, visited our works at Witton and Ardeer. We understand
from them that, apart from these 60 tons TNT,' Resita will probably require
the necessary tetryl for the manufacture of primer pellets, and also the
appropriate submarine-mine detonators, payment to be spread over three to
four years ; we had to increase prices."
Turkey : We know of no sales to Turkey for powder or ammunition for a
long time.
REPORT FOR JANUARY 1933
du Pont territory
Belgium : The 3-kilo sample of IMR 17 for the Fabrique Nationale is being
shipped on Feb. 1st from' America. The F. N. has been advised of the name
of steamer and date of sailing, and requested to make the necessary arrange-
ments for reception on arrival of steamer.
Denmark: No activity during the month.
Finland : On January 11th the press reported that an explosion took place
at the naval port of Mac Eliott. situated on an island about 22 miles from
Helsingfors. A fire propagated to an ammunition depot caused the explosion,
which destroyed seven barracks and a portion of the * defence fortifications.
No lives were reported lost, but it is believed that a large supply of ammunition
was lost.
We have sent an offer to the Finnish War Ministry to supply powder and
TNT produced by I.C.I. We quoted in English currency. The prices were
equivalent to approximately the following in dollars :
Rifle powder, $1.10 ; cannon powder, $0.987 ; TNT, 80.5° C, $0,308.
We doubt that business will result, but thought it politic to offer.
Agency. — It may be necessary to consider appointing an agent in Finland in
the near future, as the arrangement between Col. Huuri, of the War Dept., and
Mr. Singer, whereby all business was to be handled by this oflfice through the
Finnish military attach^ here does not appear to be adhered to by Col. Huuri,
as an enquiry from Finland for a quotation on 1,000 kilos teti-yl was received
by I.C.I, through their agent in Finland for Metals, Ltd. We would prefer to
have an active agent in Finland and unless Col. Huuri's promise that he will
work through the military attache's office here is kept by him, we shall insist
that an agent be appointed.
Holland: Col. Taylor visited Holland and arranged for a counter test of the
500 kilos of .50 cal. powder to be made during February. He will return to
Holland to witness the counter test, presumably during February.
Mr. "Van Veen visited Paris on Jan. 27th, and the new agency contract is
being discussed with him.
At the request of the Dutch authorities, on Jan. 13th, 1933, we authorized the
destruction of the sample of cannon powder du Pont Ex-1502 for the Dutch
field gun 75 mm/L. 30.
Latvia : Latvia is at the moment not buying powder or ammunition from
abroad, but have placed orders with Sellier & Bellot for cartridges.
Lithuania : It will shortly be decided whether we shall definitely apiwint
Capt. Martiukus as agent in Lithuania, or whether we shall revert back to Col.
Velykis who is now agent for I.C.I. Metals. Our decision will be based on
recommendations from the Lithuanian Minister of War,
Norway : No activity.
Poland : I.C.I, got a small order for centrallite. The opportunity to force a
sale of powder which came up some 8 months ago, seems to have gone by and
we are preparing new proposals to take advantage of any new opiwrtunity
which may come up.
Sweden : Our only enquiries for Sweden are supplies of some chemical in-
gredients from Bofors.
♦ Pencil markings.
MUNITIONS INDUSTRY 1389
GENERAL REMARKS
Italy : Production of explosives, according to " Die Cheniische Industries " of
-Jan. 1% 1933, page 34, for the fiscal year 1931/32, amounted to 8,079 metric
tons compared with 8,980 tons the previous year. Details of the production are
as follows :
1931-32
Mining powder
Other explosives
Propellant powder
Other propellant materials.
tc tons
Metric tons
2,039
1,707
4,777
3,291
221
173
1,943
2,838
The consumption of explosives amounted to 7,962 metric tons as compared
with 7,519 tons in the previous year.
Prices : The prices on powder have gone down to such an extent that it is
not possible to hope that we will succeed in selling du Pont products at the
prices now required. The European manufacturers appear willing to sell
powder at any price they can get for it, and in order to compete our prices for
nitro cellulose powder, rifle powder, and cannon powder should lay between
$1 and $1.20 c.i.f.
We beg to call your attention to the following rpiotations :
Bofors rifle powder, 83 cents per kilo c.i.f.
I.C.I. NC rifle powder, $1.10 per kilo c.i.f.
I.C.I. NC cannon powder, 0.987 per kilo c.i.f.
I.C.I. TNT 80.5° C, 0.307 per kilo c.i.f.
On account of our high prices, it now occurs that we are not invited to take
part in adjudications on the basis that we always bid so high ; that it is a waste
of time to ask us. This morning the head of the Argentine Mission told us
that he had not invited us to bid on orders because our prices had been so high
that it was of no use.
Very truly yours,
William N. Taylor.
Exhibit No. 527
Approved Code No. 275. Registry No. 699 — 1 — 11
National Recovery Administration Code of Fair Competition for the Chemi-
cal Manufacturing Industky as Approved on February 10, 1934, by
President Roosevelt
This publication is for sale by the Superintendent of Documents, Government
Printing Office. Washington. D.C., and by district offices of the Bureau of Foreign
and Domestic Commerce.
DISTRICT OFFICES OF THE DEPARTMENT OF COMMERCE
Atlanta. Ga. : 504 Post Office Building.
Birmingham, Ala. : 257 Federal Building.
Boston,. Mass. : 1801 Customhouse.
Buffalo, N.Y. : Chamber of Commerce Building.
Charleston, S.C. : Chamber of Commerce Building.
Chicago, 111. : Suite 1706, 201 North Wells Street.
Cleveland, Ohio : Chamber of Commerce.
Dallas, Tex. : Chamber of Commerce Building.
Detroit. Mich. : 801 First National Bank Building.
Houston, Tex. : Chamber of Commerce Building.
Indianapolis, Ind. : Chamber of Commerce Building.
Jacksonville, Fla. : Chamber of Commerce Building.
Kansas City, Mo. : 1028 Baltimore Avenue.
Los Angeles, Calif. : 1163 South Broadway.
Louisville. Ky. : 408 Federal Building.
1390 MUNITIONS INDUSTRY
Memphis, Tenn. : 229 Federal Building.
Minneapolis, Minn. : 213 Federal Building.
New Orleans, La. : Room 225-A, Customhouse.
New York, N.Y. : 734 Customhouse.
Norfolk, Va. : 406 East Plume Street.
Philadelphia, Pa. : 422 Commercial Trust Building.
Pittsburgh, Pa. : Chamber of Commerce Building.
Portland, Oreg. : 215 New Post Office Building.
St. Louis, Mo. : 506 Olive Street.
San Francisco, Calif. : 310 Customhouse.
Seattle, Wash. : 809 Federal Office Building.
Approved Code No. 275. Code of Fair Compehition fok the Chemical.
Manufacturing Industry as Approved on February 10, 1934, by President
Roosevelt
EXECUTIVE ORDER
Code of Fair Competition for the Chemical Manufacturing Industry
An application having been duly made, pursuant to and in full compliance-
with the provisions of Title I of the National Industrial Recovery Act,
approved June 16, 1933, for my approval of a Code of Fair Competition for
the Chemical Manufacturing Industry, and hearing having been held thereon
and the Administrator having rendered his report containing an analysis of the
said Code of Fair Competition together with his recommendations and findings
with respect thereto, and the Administrator having found that the said Code
of Fair Competition complies in all respects with the pertinent provisions of
Title I of said Act, and that the requirements of clauses (.1) and (2) of
subsection ( a ) of Section 3 of the said Act have been met :
NOW, THEREFORE, I, Franklin D. Roosevelt, President of the United
States, pursuant to the authority vested in me by Title I of the National
Industrial Recovery Act, approved June 16, 1933, and otherwise, do adopt
and approve the reiwrt, recommendations, and findings of the Administrator,,
and do order that the said Code of Fair Competition be, and it is hereby,,
approved.
FRANKLIN D. ROOSEVELT.
Approval recommended :
Hugh S. Johnson,
Administrator.
The White House,
February 10, 1931,.
LETTER OF TRANSMITTAL
The President.
The White House.
Sir: This is a report of the hearing on the Code of Fair Competition for
the Chemical Manufacturing Industry conducted in Washington on the 14th
of September, 1933, in accordance with the provisions of the National Industrial
Recovery Act.
The Chemical Manufacturing Industry in its various branches and sub-
divisions is one whose welfare is very closely interlocked with that of our
country. We rely upon it to keep abreast of the world in development of new
agents of National Defense and we look tQ it to produce them in quantity in
time of need. Its laboratories and factories supply us with the chemical
and bacteriological aids for increasing the standards of our public health. In
the past the chemical industry has accepted this burden and, I believe, per-
formed its duties in an honest fashion.
No organization including all of the industry existed in June of 1933.
The Chemical Alliance, Incorporated, an outgrowth of the war organization
of the industry, was formed for the purpose of carrying out the purposes of
the National Industrial Recovery Act. This new organization which repre-
sents a substantial majority of the industry has presented and fostered their
code.
1
MUNITIONS INDUSTRY 1391
The products of the industry cover a very broad field ranging from serums
for use on humans and animals through fine chemicals and explosives to
heavy industrial chemicals such as sulphuric acid. In nearly the whole range
purity is a matter of the greatest importance not only to the quality of the
final product but also to the safety of the makers and consumers. Carefully
trained employees with a well-developed sense of responsibility are essential
in many phases and the rule in most phases of the industry. As a conse-
■quence it is an industry which, as a whole, has been fair to its employers and
practically free from the accusations and troubles of others.
The scale of wages paid in the industry has been relatively high as is
evidenced by the fact that the average hourly rates fell from 57.2^ per hour in
1929 only to 5U.30 per hour in June of 1933, a decline much less than the in-
crease in purchasing power, and less than that of most other industries.
It is believed that the increase in wages brought about by the code will restore
them to the 1929 level or better.
The maximum hours of labor provided in the code probably will result
in an average of between 40 and 42 hours per week. This results even at
the existing rate of operation in an increase of from 7 to 10 percent in the
number of employees. With increasing activity of industry the need for new
employees will be even greater.
Even the voluntary adoptions of the provisions of this code by many units
in the industry resulted in pay-roll increases of over 14%. The application
of the code to all units in the industry will increase pay rolls still further.
The Division Administrator in his final report to me on said Code having
found as herein set forth and on the basis of all the proceedings in this matter ;
I find that :
(a) Said Code is well designed to promote the policies and purposes of Title I
of the National Industrial Recovery Act, including removal of obstructions to
the free flow of interstate and foreign comerce which tend to diminish the
amount thereof and will provide for the general welfare by promoting the
organization of industry for the purpose of cooperative action among the trade
groups, by inducing and maintaining united action of labor and management
under adequate governmental sanctions and supex-vision, by eliminating unfair
competitive practices, by promoting the fullest possible utilization of the present
productive capacity of industries, by avoiding undue restriction of production
(except as may be temporarily required), by increasing the consumption of
industrial and agricultural products through increasing purchasing power, by
reducing and relieving unemployment, by improving standards of labor, and by
otherwise rehabilitating industry.
(b) The Code as approved complies in all respects with the pertinent pro-
visions of said Title of said Act, including without limitation Subsection (a)
of Section 3, Subsection (a) of Section 7, and Subsection (b) of Section 10
thereof; and that the applicant association is an industrial association truly
representative of the aforesaid Industry ; and that said association imposes no
inequitable restrictions on admission to membership therein.
(c) The Code is not designed to and will not permit monopolies or monopo-
listic practices.
(d) The Code is not designed to and will not eliminate or oppress small
enteiprises and will not operate to discriminate against them.
(e) Those engaged in other steps of the economic process have not been
deprived of the right to be heard prior to approval of said Code.
It is recommended, therefore, that this Code be immediately adopted.
Respectfully,
Hugh S. Johnson,
Administrator.
February 10, 1934.
CODE OF FAIR COMPETITION FOR THE CHEMICAL MANUFACTURING
INDUSTRY
To effectuate the policy of Title I of the National Industrial Recovery Act,
the following provisions are established as a Code of Fair Competition for the
Chemical Manufacturing Industry.
1392 MUNITIONS INDUSTRY
Article I — DE5^NITIONS
(a) The term " President " as used herein means the President of the Uuitedi
States.
(b) The term "Administrator" as used herein means the duly appointed-
representative of the President to administer the National Industrial Recovery
Act.
(c) The term " Chemical Industry " as used herein and covered by this Code,
shall be defined to mean the production and sale by the producer of heavy,
industrial, and fine chemicals, and their byproducts, unless separate codes
not supplementary to tliis Code are submitted by any division or subdivision
of this Industry and approved by the President.
(d) The term "Alliance " as used herein means The Chemical Alliance, Inc., a
nonprofit sharing corporation organized and existing under the laws of the-
State of Connecticut.
(e) The term "employees" as used herein means all persons employed
in any phase of the Chemical Industry covered by this Cotle.
(f) The term "effective date", as used herein means the tenth day after
this Code has been api) roved by the President of the United States.
Article II — Hours of Labor
On and after the effective date, no person, including accounting, clerical^
ofiice and sales employees, employed within tlae Chemical Industry shall be
permitted to work more than an average of forty hours per week during any
period of four months nor more than forty-eight hours during any week, but
such limitations shall not apply to :
(a) Any person employed in an executive, administrative, supervisory and/or
technical (not to include skilled operating labor nor nonprofessionally trained
laboratory workers) capacity, or as an outside salesman.
(b) Any person employed as repairman, engineer, electrician, loader, truck
driver, cleaner or watchman ; provided that, no person specified in this subpara-
graph (b) shall be permitted to work during any three months' period more
than an average of forty-four hours per week nor more than forty-eight hour&
in any one week.
(c) Those departments or divisions of the Chemical Industry in which
season or peak demand places an unusual and temporary requirement for
production upon such departments or divisions, except that in such cases no-
employee shall be permitted to work during any three months' period more
than an average of forty-four hours per week nor more than forty-eight hours
in any one week.
(d) Employees engaged on continuous operation at places where adequate
supply of qualified labor is not available and cannot reasonably be made avail-
able and where restriction of hours of such employees would unavoidably re-
duce production. In such cases the average weekly hours may not be in
excess of forty-eight hours per week and at the end of each calendar month
any such employer in the Chemical Industry shall report to the Alliance, in
such detail as may be required by the Executive Committee or the Adminis-
trator, tlie number of man-hours so worked, giving the reasons therefor, and
the ratio which such man-hours bear to the total number of man-hours during
said month.
(e) Cases of emergency, provided that at the end of each calendar month
any such employer in the Chemical Industry shall report to the Alliance, in
such detail as may be required by the Executive Committee or the Adminis-
trator, the number of man-hours so worked, giving the emergency reasons
therefor, and the ratio which such emergency man-hours bear to the total
number of man-hours during said month.
Articjle III — Minimum Wages
On and after the effective date the minimum wages paid by any employer
in the Chemical Industry to any employee, including accounting, clerical, office
and sales employees, shall be not less than thirty-five cents per hour when
employed in the Southern District as defined below, nor less than forty cents
per hour when employed elsewhere in the United States ; provided, however,
that if the hourly rate for the same class of work on July 15. 1929, was less
than thirty-five cents per hour in the Southern District or less than forty
MUNITIONS INDUSTRY 1393
cents per hour elsewhere in the United States, then in that case the minimum
wages paid hereunder shall be not less than the hourly rate paid on July 15.
1929, and in no event less than twenty-five cents per hour in the Southern
District and thirty cents per hour elsewhere in the United States; provided,
however, that where a State law provides a higher minimum wage, no person
employed within that State shall be paid a wage below that required by such
State law. The above provisions shall apply In all cases except that — •
(a) Apprentices and learners for not more than the first six months of
employment shall be paid not less than eighty percent of the minimum wages
above provided and the total number of apprentices and learners shall not
exceed five percent of the total number of employees employed by any employer
subject to this Code.
(b) Employees who because of age or infirmities are employed in such posi-
tions as watchmen, gatemen, caretakers, etc., shall be paid not less than eighty
percent of the minimum wages hereinabove provided and the total number of
such employees shall not exceed five percent of the total number of employees
employed by any employer subject to the Code.
In the case of any employee whose compensation is paid on other than an
hourly basis or is based upon a measure other than time, tlie total compensation
paid shall be no less than such employee would be entitled to receive if his
compensation were determined on an hourly basis.
For the purposes of this Article " Southern District " shall be defined as
that territory south of the States of Maryland, West Virginia, Kentucky,
and Missouri, and including the States of Oklahoma and Texas.
Article IV — Child Labor
On and after the effective date, no employer in the Chemical Industry shall
employ any person under the age of sixteen years ; provided, however, that
where a State law provides a higlier minimum age, no person below the age
specified by such State law shall be employed within that State.
Article V — Administration
The Alliance is hereby appointed an agency for the following purposes :
(a) To collect from the memljers of the Industry all data and statistics in
relation to number of employees, hours of lal)or, and rates of pay necessary
for the administration of the provisions of this Code which may be called for
by the Administrator. Any data and/or statistics of a confidential nature shall
be collected and compiled by a firm of Certified Accountants or other suitable
agents selected by the Alliance and not a member or connected with a member
of the Chemical Alliance. The data and/or statistics so collected by such agents
shall be furnished to the Alliance only in combination with other information
of the same type and in such form as will not disclose the individual data or
statistics furnished by any single employer. No officer or director of tlie
Alliance or any other person or agency shall at any time have access to or be
furnished in any manner ^^'ith any information by said agents wliich would
disclose the individual data or statistics furnished by any single employer.
(b) To represent the Chemical Industry in conferring with the Administra-
tor with respect to the application of this Code and of said Act, and any regu-
lations issued thereunder, and receive complaints, and if possible adjust the
same, and to coordinate the administration of this Code with such codes, if
any, as may affect any subdivision of the Chemical Industry, with a view to
providing joint and harmonious action upon all matters of common interest,
and to receive any proposals for supplementary provisions or amendments of
this Code and transmit the same to the Administrator ; provided, however, that
as regards all matters mentioned in this paragraph (b) said Alliance shall not
have the power in any way to bind tlie Chemical Industry or any subdivision
thereof.
(c) The duties of the Alliance above enumerated shall be performed by its
Executive Committee. The Administrator may name three representatives
who, without expense to the Alliance or the Industry, shall have the right to
attend all meetings of said Executive Committee dealing with questions con-
cerning the administration of this Code but such representatives shall have
no vote.
(d) Nothing contained in this Code shall constitute the members of the Alli-
ance partners for any purpose. Nor shall any member of the Alliance be liable
1394 MUNITIONS INDUSTRY
in any manner to anyone fox* any act of any other member officer, asent, or
employee of the Alliance. Nor shall any memlter of the Alliance exercising
reasonable diligence in the conduct of his duties hereunder be liable to anyone
for any actions or omissions to act under this Code except for his own willful
misfeasance of nonfeasance.
(e) Tlie Chemical Alliance shall: (1) Impose no inequitable restrictions on
membership and (2) Submit to the Administrator true copies of its Articles of
Association. By-Laws, regulations, and any amendment when made thereto.
Articlh "VI
All members of the Chemical Industry shall be entitled to participate in and
share the benefits of the activities of the Chemical Alliance by becoming a
member of the Alliance, or by complying with the requirements of this Code and
sustaining their reasonable share of the expenses of its administration. The
reasonable share of the expenses of administration of each member of the In-
dustry shall be determined by the Alliance on the basis of the total number of
employees covered by this Code, as provided in the Constitution and By-Laws of
the Alliance or. subject to the approval of the Administrator, on such other
equitable basis as the Alliance from time to time may determine.
Article VII
If any employer in the Chemical Industry is also an employer in any other
industry, the provisions of this Code shall apply to and affect only that part of
the business of such employer which is a part of the Chemical Industry.
Articile VIII— Employee Organization and Bargaining
(a) Employees shall have the right to organize and bargain collectively
through representatives of their own choosing, and shall be free from the inter-
ference, restraint, or coercion of employers of labor, or their agents, in the
designation of such I'epresentatives or in self-organization or in other concerted
activities for the purpose of collective bargaining or other mutual aid or pro-
tection.
(b) No employee and no one seeking employment shall be required as a con-
dition of employment to join any company union or to refrain from joining, or-
ganizing, or assisting a labor organization of his own choosing.
(c) Employers shall comply with the maximum hours of labor, minimum rates
of pay, and other conditions of employment, approved or prescribed by the
President.
Articjlb IX
In all activities under this Code, the peculiar relation of the Chemical
Industry to national defense, national health, national industry, and national
agriculture must be constantly borne in mind by its employers, stockholders,
directors, executives, and employees. The present products of this industry
should be regarded as only byproducts ; its main product and purpose the
extension of chemical knowledge in the public interest. It is recognized that
the Chemical Industry, if it is to keep abreast of chemical progress in the
world, requires employees capable of constant advancement in their technical
skill and of high and loyal character. Therefore, conscious of the great pur-
pose of the industry, by presenting this Code the employers in this industry
shall not be deemed to have waived any of their constitutional and legal
rights to engage, promote, or release employees, and the members of the industry
shall not be deemed to have waived any other constitutional rights.
Article X
The President may from time to time, cancel or modify any order, approval,
license, rule, or regulation issued under Title I of the National Industrial
Recovery Act.
Article XI
Supplementary provisions covering fair trade practice rules, applicable to
subdivisions of the Chemical Industry, may from time to time be submitted
by the agency designated herein, or by an agency named by any subdivision,
for the approval of the President. Notwithstanding any provisions of Article
MUNITIONS INDUSTRY 1395
V, or any authority conferred thereby, any subdivision shall have the right
to and shall be entitled to submit in its own behalf, direct to the National
Recovery Administration, and to administer, such supplementary provisions
concerning fair trade practice rules, providing that no such supplementary
provisions shall be inconsistent with the purposes and provisions of this Code.
Article XII
Subject to the approval of the President any subdivision of the Chemical
Industry operating under the provisions of this Code may elect to sell any
of its products only upon open prices and/or terms and conditions publicly
announced by each member of such subdivision. Any changes in prices and/or
terms and conditions by any member of such subdivision shall be announced
by such member inmiediately to all other members of the subdivision through
such Agency as the subdivision may determine. Variations from such open
and publicly announced prices tmd/or terms and conditions shall not be
allowed.
Article XIII
By presenting this Code, and the specific provisions of Articles II and III
hereof, those who have assented hereto do not thereby consent to any modifi-
cation thereof, except as each shall thereto subsequently agree.
Article XIV
Except as to temporary exemptions or stays arising by reason of the opera-
tion of the Executive Order of July 1.5, 1933. any exemption or stay of appli-
cation from the provisions of this Code shall be granted by the Administration
only after submission of the application to the Alliance and the expiration
of a reasonable time within which to permit the Alliance to submit recom-
mendations thereon. It shall be the policy of the Administration in granting
any exemption or stay of application that no distinction shall be made between
the person or persons requesting sut'h exemptinn or stay of application and
other persons similarly situated in the Chemical Industry.
Article XV
The Code shall continue in effect for a period of ninety days after the
effective date thereof, subject, however, to amendment at any time as here-
inbefore provided, and also subject to the reserved power of the President to
cancel or modify his approval thereof. The Code shall continue in effect
after the expiration of said period of ninety days in the absence of such
reserved power on the part of the Pre.sident, or in the absence of the exercise
by members of the Alliance of tlie pov.er which they hereby reserve, to ter-
minate the Code at any time after the expiration of the said period of ninety
days. Such cancellation shall be proposed l)y the Executive Committee of the
Alliance by vote of the majority of members thereof at the time in otflce.
The proposal to cancel shall then be submitted to all members of the Chemical
Alliance who shall be given a right to vote thereon. If at least two thirds
of the votes entitled to be case by the members of the Chemical Alliance, in
accordance with the provision of Article VIII, Section 5, of the Constitution
and By-Laws of the Chemical Alliance, shall be in favor of cancellation, the
Chemical Alliance shall have the power, after service of a thirty-day notice
on the Administration, to terminate said Code. When so terminated, all
subsequent liabilities and obligations hereunder shall cease. Notwithstanding
such action by the Alliance, any subdivision of the industry may elect to
continue the Code in effect as to itself.
Approved Code No. 275.
Registry No. 699-1-11.
The followino; correction by Dr. Sparre was entered diirino; the
proceedinojs of September 18, 1934, immediately preceding the noon
recess. (See pt, VII.)
83876— 34— PT 5- 25
1396 MUNITIONS INDUSTRY
Exhibit No. 598
E. I. DU Pont de Nemouus & Company, Incorporated,
Wilmington, Delaware, September 17, 193.'t.
Mr. Stbiphen Raushenbush,
Secretary Special Senate Committee Invest ifiat inn
the Munitions Industry,
JfOS Senate Office Building, Washington, D.C.
Dear Mr. Ratshenbush : Yoii will remember that before the committee in
connection with the munitions investigation in Washinfrton on Friday, the 14th,
certain inquiries were made with respect to glycerin. I gave at that time some
figures on glycerin based on my recollection, but stated afterwards to you that
it would be necessary for me to cheek the figures because I couldn't safely trust
my memory. I have looked into this situation and find it to be as follows, the
figures in all cases applying to the full calendar year of 1933 :
Tons
U.S. production of glycerin 59, 000
Foreign production of glycerin 62,. 000
Total glycerin production 121,000
du Pont consumption of glycerin 7, 750
Accordingly, the du Pont consumption of glycerin in 1933 is indicated to
have been about 6.4% of the world ])roduction. Du Pont purchases of glycerin
from Europe were 475 tons and therefore a negligible percentage. The bulk
of our purchases are in the United States.
At the Washington hearing I underestimated our consumption because I was
thinking in terms of explosives and overlooked that we use glycerin also in the
manufacture of lacquers and cellophane, the consumption for these other pur-
poses being almost as large as for explosives.
During the first six months of 1934 we purchased 1,575 tons of glycerin from
Europe, which is an unusually large percentaue from abroad, but nevertheless
very much smaller than purchases in this country and, of course, a very small
percentage of the European production. However, the figures vary consider-
ably from year to year.
With respect to the I.C.I, consumption and purchase of glycerin, we have no
accurate figures. In discussing the situation in Washington I had in mind only
the English consumption of glycerin, but on further reflection I suppose that
you wou^d want to ascertain I.C.I.'s world consumption, which would include
consumption, for instance, in South Africa and Australia.
It has been suggested by our foreign relations department that the total
I.C.I, consumption of glycerin in 1933 might have been as high as 10,000 tons.
This estimate, I understand, is on the basis of crude glycerin.
Adding together the du Pont and I.C.I, consumption for the year 1933, we
arrive at approximately 17,750 tons, which includes for our company not only
explosives but glycerin for all purposes, and includes for I.C.I, not only Gi*eat
Britain but total consumption of their affiliated companies.
Against this we have an estimated world production of 121,000 tons, so that
du Pont and I.C.I, consumed last year probably less than 15% of the world's
production. Furthermore, as shown above, our company's purchases in Europe
were negligible.
Statistical data for the year 1934 are, of course, not available as yet. The
figures given above are based on accurate figures, as far as our own consumption
and purchases are concerned, but, of course, are the best estimates which we
can make with respect to the other figures.
Hoping that this gives you a sufficiently clear explanation of this situation,
I am
Very truly yours,
F. Sparbb, Director.
MUNITIONS INDUSTRY 1397
The following information showing holdings of certain members
of the du Pont Co., in Atlas and Hercules stock, was requested by the
committee during the proceedings (see text, p. 1019.)
Wilmington, Del., September 28, 1934.
Hon. Stephen Raushenbush,
Secretary Special Committee Investigating the Munitions Industry,
United States Senate, Washington, D. C
Dear Mr. RAUf-HENBUsn: During the munitions hearings the chairman
asked me to give a statement of mj^ holdings of Hercules Powder Co. and Atlas
Powder Co. stock at the present time, and also as of 1913, the time these com-
panies were formed.
The information as to my holdings is as follows:
February 28, 1913 (first acquisition): 606 shares Atlas common stock; 1,313
shares Hercules common stock.
In each case this represents about 2 percent of the outstanding stock at that
time. My stock in both companies was voting stock.
I now hold, and have held since January 1, 1934: 3,828 shares Atlas common
stock; 7,650 shares Hercules common stock.
These holdings represent about 1.6 percent and 1.3 percent respectively, of
the stock outstanding.
Yours very truly,
Lammot du Pont.
Wilmington, Del., October 9, 1934.
Hon. Stephen Raushenbush,
Secretary Special Committee
Investigating the Munitions Industry,
Washington, D.C.
Dear Mr. Raushenbush: It was requested during the examination of the
du Pont people that certain ones of us make a statement of our holding of
Hercules and Atlas stock. In compliance with this request I herewith send you
attached, a statement which I think gives you the information you desire.
Very truly yours,
A. Felix du Pont.
HERCULES POWDER CO. COMMON
Received from the dissolution January 15, 1913, on account of owning 1,737
shares of E. I. du Pont de Nemours Powder Co. stock, 383 shares of Hercules
Powder Co. common stock and $19,100 in 10-year 6-percent registered income
bonds.
May 21, 1919, received from estate of Francis G. du Pont, 297 shares of Her-
cules Powder Co. common.
November 25, 1922, received 100 percent stock dividend.
1928, exchanged Hercules Powder Co., 4 for 1.
1914, sold all bonds.
1920, sold 100 shares Hercules Powder Co. common.
1933, sold 200 shares Hercules Powder Co. common.
From year 1914 to 1934 made donations amounting to 330 shares, leaving a
balance of 2,000 shares.
atlas POWDER CO. COMMON
Received from the dissolution January 15, 1913, 176 shares of Atlas Powder
Co. common stock and $8,800 6-percent registered income 10-year bonds.
July 26, 1919, received 79 shares from estate of Francis G. du Pont.
July 26, 1919, received 100 shares from estate of Elise W. du Pont.
From year 1914 to 1934 made donations of all common stock.
1914, sold all bonds.
atlas POWDER CO. PREFERRED
May 26, 1915, purchased 51 shares.
June 15, 1915, purchased 100 shares.
July 26, 1919, received 20 shares, estate of Elise W. du Pont.
July 26, 1919, received 77 shares, estate of Francis G. du Pont.
From year 1915 to 1934 made donations of all preferred stock.
1398 MUNITIONS INDUSTRY
Wilmington, Del., October 2, 1934.
[Received October 3, 1934.]
Hon. Stephen Raushenbush,
Secretary Special Senate Committee Investigating Munitions Industry,
Washington, D. C.
Dear Sir: I have just received word that it is you to whom I should send the
attached letter under date of September 28 to the Hon. Gerald P. Nye, stating
my holdings of stock in the Atlas Powder Co. and Hercules Powder Co.
Yours very trul}-,
Ir^n^ie du Pont.
Wilmington, Del., September 28, 1934-
Hon. Gerald P. Nye,
United States Senate, Washington, D. C.
Dear Senator: I can give you the following information concerning my stock
holdings in the Atlas Powder Co. and the Hercules Powder Co.
I received on February 28, 1913, 613 shares of Atlas Powder Co. common
stock. This has all been sold and I now have none.
I received on February 28, 1913, 1,329 shares of Hercules Powder Co. common
stock. This was increased to 1,533 shares by purchases up to September 1921,
when it was doubled by the 100 percent stock dividend in November 1922, to
3,066 shares. These in turn were exchanged in the 4 to 1 split-up in January
1929, so that it now represents 12,264 shares, all of which I have.
Yours very truly,
Irenee du Pont.
Wilmington, Del., September 17, 1934.
Hon. Gerald P. Nye,
United States Senate, Washington, D. C.
Dear Sir: I find that I have not fulfilled my promise to enter into the record
of your hearing my holdings in stock of the Hercules and Atlas Powder Cos.,
which are as follows:
Hercules Powder Co., 2,000 shares common stock.
Atlas Powder Co., 1,500 shares common stock.
I also hold pledged under a certain trust: Hercules Powder Co., 1,625 shares
preferred stock, 16 shares common stock; Atlas Powder Co., 100 shares pre-
ferred stock, 6 shares common stock.
I believe that the preferred stock of Hercules Powder Co. is nonvoting unless
dividends have been in default for 1 year, which contingency has not occurred.
I believe the preferred stuck of Atlas Powder Co. is similar to that of Hercules
Powder Co., but I have not verified this statement.
Sincerely yours,
Pierre S. du Pont.
The following statements, showing a record of acquisitions made
during and after the war out of profits, and out of new stock and hond
issues, were requested by the committee during the i3roceedings,
(See text, p. 1077.)
E. I. du Pont de Nemours & Co., Inc.,
Wilmington, Del., November 6, 1934-
Hon. Gerald P. Nye,
Chairman Special Committee Investigating Munitions Industry,
Washington, D.C.
Dear Senator Nye: At the time of the appearance of the du Pont Co.'s repre-
sentatives before your committee you requested that we prepare a statement
showing the company's expansion in new industries during and since the war, and
also the source of funds which went into these new industries.
MUNITIONS INDUSTRY 1399
I am attaching hereto three tabulations containing the information which you
have requested. Owing to the complexity and magnitude of the problem in-
volved maybe a word of explanation could be of some value.
The full period has been divided into two parts, one corresponding to what
might be called the war period, and dating from the organization of the present
company on October 1, 191.5, to December 31, 1918; and the other period carrying
on from December 31, 1918, to December 31, 1933.
The first sheet shows the balance sheet of the company for the three dates
mentioned, and the accompanying sheet shows a break-down of the investment in
new industries into two different categories; one showing our investments in
those companies in which we have invested over $200,000 and companies in which
we own less than 100 percent, and the other, our fixed investment in other
industries.
Your second request, namely, that we endeavor to show the source of funds
which went into these new developments, is rather more difficult.
You will appreciate that a company's assets are increased from time to time,
as the result of increase in its liabilities, its undistributed earnings, its new capital,
its reserves and a great many other sources. There is, of course, also the constant
shifting of these funds among different assets, and different liabilities, so that it
is quite impossible to identify the funds which went into any particular invest-
ment with any particular source of funds. This statement does, however, show
on the first page the total increase of resources which flowed into the company,
and a break-down of the sources of such increases. Maybe a word of explanation
of these items would be helpful.
Earnings made by the company and not distributed to its stockholders
furnish one source of new funds available to the company for investment in the
expansion of its various enterprises. These uridistriJauted earnings for the full
period of some 18 years amounted to $111,501,216.19. A subdivision of this
figure is shown on the attached schedule which shows that the undistributed
earnings corresponding to the so-called "war period" amounted to $66,411,043.15;
the balance corresponding to the period subsequent to the war.
During the course of the period from October 1, 1915, to December 31, 1933,
the company received from the sale of its own securities a total of $160,937,824.57.
Of this total it received $63,134,598.91 in cash and the balance in the form of other
assets such as plant, working capital, etc.
From the above it is seen that the company over the full period has been the
recipient of nev/ funds from outside of the companv amounting to $272,439,040.76,
about $111,000,000 of which resulted from earnings and about $161,000,000 of
which was put in in the form of new capital, substantially all since the war.
There is a further item which appears in the attached statement and which is
reflected in an increase of the company's surplus, namely, $108,819,686.14. It
has been the company's practice to adjust the value at which it carried its per-
manent investment in the General Motors Corporation on its books to correspond
to the net asset value of tliose holdings on the books of the General Motors Cor-
poration. The above figure corresponds to the cumulative adjustment of this
investment over the period indicated, together with a slight adjustment in our
investment in Canadian Industries, Ltd.
Trusting that the information conveyed herein is that desired by you, I remain
Yours sincerely,
L. DU Pont, President.
1400
MUNITIONS INDUSTRY
Schedule A
Increase of investment in seciirities of E. I. du Pont de Nemours & Co., other than
■permanent investment in General Motors Corporation
Percent
of voting
stock
owned
Increase Dec.
31, 1918 over
Oct. 1, 1915
Increase Dec.
31, 1933 over
Dec. 31, 1918
Increase Dec.
31, 1933 over
Oct. 1, 1915
Miscellaneous readily marl:etable securities. .
Acetol Products, Inc
Compania Sud-Americana de Explosivos,
S. A
Duco, A. G
Du Pont Film Manafacturing Corporation...
K. I. du Pont de Nemours & Cia Argentina,
S. A. (Now known as Industrias Quimicas
Argentinas du Perial S. A. Industrial y
Commercial)...
Leatherclotli Proprietary, Ltd
Nobel Chemical Finishes, Ltd
Remington Arms Co., Inc
Compania Mexicana de E.xplosivos, S. A
Societe Francaise Duco, S. A
Canadian Industries, Ltd
Old Hickory Chemical Co
Societa Amonima Mazzucchelli
Societa Italians della Celluloide
Niacet Chemicals Corporation
Krebs Pigment & Color Corporation
Bakelite Corporation '_ _ _
Deutsche Gold und Silber Scheideanstalt
General Motors Corporation _..
I. G. Farbenindustrie, A. G
Dynamit Actien-Gesellschaft
Net increase.
62.9
42.4
49.0
51.0
50.0
49.0
49.0
56.0
50.0
35.0
46.8
50.0
90.0
70.0
33.3
70.0
4.0
3.5
.5
.4
7.9
$3, 770, 799. 31
$(8,221,343.77)
375, 001. 00
789, 914. 86
393, 297. 75
344, 603. 19
788,
819,
846,
5, 722,
312,
313,
10, 180,
250,
776,
468,
2, 000,
5, 832,
834,
439,
4, 800,
1, 159,
892,
150. 03
345. 50
342. 55
741.14
500. 00
261. 20
762. 46
000. 00
134. 26
889. 95
000. 00
470. 00
138.00
066. 18
000. 00
904. 93
671. 16
$(4, 450, 544. 46)
375, 001. 00
789, 914. 86
393, 297. 75
344, 603. 19
819,
846,
5, 722,
312,
313,
10, 180,
250,
776,
468,
2, 000,
5, 832,
834,
439,
4, 800,
1, 159,
892,
150.03
345. 50
342. 55
741. 14
500. 00
261. 20
762. 46
000. 00
134. 26
889. 95
000. 00
470.00
138.00
066. 18
000. 00
904. 93
671. 16
3,770,799.31
30,117,850.39
33, 888, 649. 70
Schedule B
Increase of investment of E. I.
du Pont de Nemours & Co. in commercial properties
and equipment
Dec. 31, 1918,
over Oct. 1,
1915
Dec. 31, 1933,
over Dec. 31,
1918
Dec. 31, 1933,
over Oct. 1,
1915
Commercial e.xplosives and blasting accessories
Pyroxylin and acetate plastics and articles fabricated
therefrom
Paints, varnishes, lacquers, and other finishes
Dyestuffs, tetra-ethyl lead, ethyl alcohol, duprene, and
other organic chemicals...
Fabrikoid and rubber-coated fabrics
Nitrate property and production of nitrate therefrom...
Machine shops, experimental and research laboratory,
etc. "..
OflSce building, etc
Miscellaneous, patents, etc
Synthetic ammonia, ammonia products, methanol and
higher alcohols, etc
Electro-chemicals and chemical specialties
Inorganic heavy chemicals, acids, zinc, etc
Viscose and acetate rayon, cellulose acetate, cellophane,
etc
Total.
$5, 558, 864. 54
5, 391, 884. 47
7, 991, 106. 09
2, 893, 927. 36
1, 080, 553. 79
2, 460, 343. 08
2,759,587.15
1,144,383.42
430, 799. 91
$7, 904, 107. 52
4, 478, 777. 37
4, 946, 590. 41
36, 786. 961. 60
1,098,094.76
(4, 205, 768. 66)
(1,525,875.45)
7, 406, 630. 43
4, 573, 318. 62
21, 478, 100. 35
8, 342, 108. 87
35, 672, 872. 00
62, 230, 961. 22
$13, 462, 972. 06
9,870,661.84
12, 937, 696. 50
39, 680, 888. 96
2, 178, 648. 55
(1, 745, 425. 58)
1,233,711.70
8, 551, 013. 85
5,004,118.53
21,478,100.35
8,342, 108.87
35, 672, 872. 00
62, 230, 961. 22
9, 711, 449. 81
189, 186, 879. 04
218. 898, 328. 85
MUNITIONS INDUSTRY
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MUNITIONS INDUSTRY 1403
The following information regarding campaign contributions to
political parties from 1919 to the present of all directors and officers
of the du Pont Co., was requested by the committee during the
proceedings. (See text, p. 1265.) ^
Wilmington, Del.,
September 17, 1934.
Hon. Gerald P. Nye,
United States Senate, Washington, D.C.
Dear Sir: I enclose herewith statement of national political contributions
made by me since 1919.
Very truly yours,
Pierre S. du Pont.
NATIONAL political CONTRIBUTIONS
1933, nothing; 1932, Democratic National Committee, $15,000; 1931, Demo-
cratic National Committee, $12,500; 1930, Democratic congressional campaign
committee, $5,000; 1929, Democratic National Committee, $25,100; 1928,
Democratic national campaign, $50,000; 1927, nothing; 1926, nothing; 1925,
nothing; 1924, nothing; 1923, nothing; 1922, nothing; 1921, nothing; 1920,
Republican campaign, $12,378; 1919, nothing.
Pierre S. du Pont.
Wilmington, Del., September 26, 1934.
Mr. Stephen Raushenbush,
Secretary Special Senate Committee
Investigating the Munitions Industry,
Washington, D. C.
Dear Sir: Referring to your request for donations to political parties for
years 1919 to date, I beg to state that I made no donations prior to 1928. I give
below the aihounts since that time.
To Republican Party: 1928, $15,000; 1929, $6,750; 1930, $8,500; 1932, $19,600;
1933, $286; 1934, $4,600.
Respectfully submitted.
R. R. M. Carpenter.
Wilmington, Del., September 28, 1934-
[Received. Sept. 29, 1934.]
Hon. Stephen Raushenbush,
Secretary Special Committee Investigating the Munitions Industry,
United States Senate, Washington, D.C.
Dear Mr. Raushenbush: During the hearings, the chairman requested a
statement from each of the members of the board of directors of the du Pont Co.
listing their personal contributions to political parties from the period 1919 to
date. I give you below a list of my contributions, which were all to the Republi-
can Partv:
1919, nothing; 1920, nothing; 1921, nothing; 1922, $4,200; 1923, $1,000;
1924, $15,500; 1925, $3,250; 1926, nothing; 1927, $1,600; 1928, $42,300; 1929,
$3,000; 1930, $25,000; 1931, $6,000; 1932, $30,050; 1933, $1,500; 1934, $15,250.
I have requested each member of the board to send you a similar statement.
Yours very truly,
Lammot du Pont.
E. I. DU Pont de Nemours & Co., Inc.,
Wilmington, Del., October 1, 1934-
[Received October 4, 1934.]
Hon. Stephen Raushenbush,
Secretary Special Committee Investigating the Munitions Industry,
Washington, D. C.
Dear Mr. Raushenbush: The Special Committee Investigating the Muni-
tions Industry has requested that the directors of E. I. du Pont de Nemours &
Co. give a list of their personal campaign contributions to political parties for the
period from 1919 to date, inclusive.
^ At the (late of publication of this volume the committee was not in receipt of the
entire list.
1404 MUNITIONS INDUSTRY
In accordance with this request, I can advise you that I have never been a
regular contributor but have only infrequently donated comparatively minor
amounts for political purposes. I have not kept a record of these small con-
tributions but recollect that the largest contribution I have ever made in any
1 year was $50 to the Association Against the Eighteenth Amendment and this
year a contribution of $25 to the Republican campaign fund. I do not recall
my other contributions, but in any event they are few and smaller than those
mentioned above.
Very truly yours,
F. Sparre, Director.
E. I. Du Pont de Nemours & Co., Inc.,
Wilmington, Del., October 1, 1934-
[Received October 3, 1934.]
Hon. Stephen Raushenbtjsh,
Secretary Special Senate Committee Investigating the Munitions Industry,
Washington, D. C.
Dear Sir: In reply to the request of the Senate munitions committee for
information as to campaign contributions to political parties for the period 1919,
to date, made by directors of E. I. du Pont de Nemours & Co.:
My contributions for the period in question were made to the Republican
Party, amounting to the sum of $540.
Respectfully submitted.
C. R. MUDGE.
E. I. DU Pont de Nemours & Co., Inc.,
Wilmington, Del., October 2, 1934.
[Received October 3, 1934.]
Hon. Stephen Raushenbush,
Secretary Special Committee Investigating the Munitions Industry,
Washington, D. C.
Dear Sir: In answer to your committee's request for a statement of donations
to political parties for the period from 1919 to date, inclusive, I quote below list
of my personal contributions to the Republican National Committee: De-
cember 17, 1920, $20; September 29, 1932, $50; August 22, 1934, $50.
Very truly yours,
F. W. PiCKARD,
Vice President and Director.
Wilmington, Del., October 2, 1934-
[Received October 3, 1934.]
Hon. Stephen Raushenbush,
Secretary Special Committee Investigating the Munitions Industry,
Washington, D. C.
Dear Mr. Raushenbush: In accordance with the request of your committee,
I attach hereto a list of my contributions to the Republican National and
State campaigns since the year 1919 to date.
Very truly yours,
A. Felix du Pont.
October 2, 1934.
List of contributions to the Republican National and State campaigns since the year
1919 to date, by A. Felix du Pont
1919: Nov. 11, Republican campaign $309.84
1920:
Sept. 8, Republican finance committee 250. 00
Dec. 23, Republican National Committee 100. 00
1921: Feb. 10, Republican finance committee 100. 00
1922:
Oct. 19, Republican Party, T. C. du Pont Club 349. 25
Oct. 23, Delaware Republican finance committee 1, 000. 00
MUNITIONS INDUSTRY 1405
1924:
Apr. 1, Republican State committee $25.00
Oct. 13, Republican State committee 25. 00
Oct. 14, Republican National Committee 10. 00
Oct. 31, Republican campaign committee, 22 shares Du Pont
debentures 1,036. 64
1926
1928
1932
Oct. 22, Republican committee headquarters 25. 00
Oct. 18, Republican campaign 1,000.00
Sept. 20, Republican National Committee 200. 00
Sept. 20, Republican Radio League 10. 00
4, 440. 73
Philadelphia, Pa., October 2, 1934-
[October 4, 1934.]
Hon. Stephen Ratjshenbush,
Secretary Special Committee Investigating the Munitions Industry,
Washington, D. C.
(Re E. S. du Pont de Nemours & Co., Wilmington, Del.)
My Dear Sir^ As a director of the above company, I advise that I have not
made any personal campaign contributions to political parties from the period
1919 to date, inclusive.
Very truly yours,
Wm. Richter
E. I. DU Pont de Nemours & Co., Inc.,
Wihnmgton, Del, October 2, 1934.
Hon. Stephen Raushenbush,
Secretary Special Committee Investigating Munitions Industry,
Washington, D. C.
Sir: In February 1927 I was elected a director of this company; and I give you
below data with respect to campaign contributions to political parties since that
time, viz:
Year 1928, Republican National Committee, $300; Republican State (Del.)
Committee, $500— $800.
Year 1930, Republican National Committee, $200; Republican State (Del.)
Committee, $200— $400.
Year 1932, Republican National Committee, $1,000; Repubhcan State (Del.)
Committee, $90; Better Government League, Delaware, $200 — $1,290.
Year 1934, Republican National Committee, $700; Delaware State and County
Republican Committee, $300; American Liberty League of Delaware, $25 —
$1,025.
My records fail to disclose anv contributions made for this purpose during the
years 1927, 1929, 1931, or 1933.'
Yours very truly,
W. F. Harrington,
Vice President.
J. B. D. Edge,
Kennett Square, Pa., October 2, 1934-
[Received October 4, 1934.]
Hon. Stephen Raushenbush,
Secretary, Special Committee Investigating the Munitions Industry,
Washington, D. C.
Dear Sir: We understand that you have requested the directors of the E. I.
du Pont de Nemours and Co., Wilmington, Del., to list their personal campaign
contributions to political parties for the period from 1919 to date.
We, therefore, respectfully submit the following:
July 2, 1920, Delaware Republican finance committee, $100; November 26, 1920,
Delaware Repubhcan finance committee, $50; November 2, 1922, Delaware
Republican finance committe,$50; August 20, 1934, Republican campaign fund,
$25; October 24, 1924, Republican campaign fund, $50; November 2, 1934, Repub-
1406
MUNITIONS INDUSTRY
lican campaign fund, $50; September 7, 1928, Delaware Republican campaign, $500;
October 3, 1928, Republican National campaign, $500; November 7, 1928, Dela-
ware State Republican campaign, $250; August 15, 1934, Republican National
campaign, $100; September 4, 1934, Delaware Republican campaign, $50.
Trusting this is the information you desire.
Yours very truly,
E. E. Griffith,
Secretary to J. B. D. Edge
(Director of E. I. du Pont de Nemours & Co.).
Wilmington, Del., October 2, 1934-
[Received October 3. 1934.]
Hon. Stephen Raushenbush,
Secretary Special Committee Investigation the Munitions Industry,
Washington, D. C.
Dear Sir: In reply to your request that the directors of E. I. du Pont de
Nemours & Co. file with you a statement of their personal contributions to
political parties, I beg to advise that I know of but one such contribution made
by me. That was $500 to the Republican Party on October 15, 1928.
Yours very truly,
Charles Copeland.
Wilmington, Del., October 2, 1934.
[Received October 3, 1934.]
Hon. Stephen Raushenbush,
Secretary Special Senate Committee Investigating Munitions Industry,
Washington, D. C.
Dear Sir: Attached you will find statement of campaign contributions to
political parties during the period 1919 to date, inclusive, made by me; this in
accordance with the request of the committee.
Yours very truly,
Ir^inee du Pont.
Campaign contributions to political parties during the period 1919 to date, inclusive,
made by IrSnie du Pont
Party benefiting by contribution
Republican,
Do
Do
Do
None
Republican.
None-
Republican.
Do
Do
None.
Democratic
Liberal Republican, supporting Democratic candidate to the Senate — local officials,
Republican
Liberal Republican, supporting Democratic candidate to the Senate — other State
officials, Republican
Republican
Democratic National Committee .-
Republican— local State
Republican
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
$8,110.00
14, 722. 00
150. 00
2, 300. 00
17, 000. 00
37, 500. 00
25.00
22, 000. 00
8, 000. 00
13, 200. 00
645. 21
10, 200. 00
5, 000. 00
4, 500. 00
35, 249. 00
MUNITIONS INDUSTRY
1407
Wilmington, Del., October 3, 1934.
[Received October 4, 1934.]
Hon. Stephen Raushenbush,
Secretary Special Committee Investigating the Munitions Industry,
Washington, D. C.
Dear Sir: Following is a list of personal campaign contributions to political
parties from 1919 to 1934, inclusive:
1919 none (Republican), 1920 none, 1921 none, 1922 none, 1923 none, 1924
none, 1925 none, 1926 none, 1927 none, 1928 $25, 1929 none, 1930 none, 1931
none, 1932 $25, 1933 none, 1934 $150.
Very truly yours, Charles L. Reese,
Director E. I. du Pont de Nemours & Co.
Winterthur, Del., October 3, 1934-
[Received October 5, 1934.]
Hon. Stephen Raushenbush,
Secretary Special Committee Investigating the Munitions Industry,
Washington, D. C.
Dear Sir: In accordance with the request of your committee for a list of per-
sonal campaign Qontributions to political parties for the period from 1919 to date,
inclusive, made by the directors of E. I. du Pont de Nemours & Co., I give j'ou
below, as one of said directors, a list of my own personal contributions:
September 5, 1928, Delaware Republican State Committee, $1,000; October
30, 1928, Delaware RepubHcan State Committee, $4,000; July 5, 1932, Better
Government League of Delaware, $100; September 22, 1932, Republican National
Committee, $100; September 28, 1932, Delaware Republican State Committee
$25; May 26, 1933, Better Government League of Delaware, $100.
Yours very truly,
H. F. DU Pont.
E. L DU Pont de Nemours & Co., Inc.,
Wihningion, Del., October 5, 1934-
Hon. Stephen Raushenbush,
Secretary Special Committee Investigating the Munitions Industry,
Washington, D. C.
Dear Sir: You will find attached a statement of my contributions to political
parties and organizations from January 1, 1927, during which year I was elected
to the board of directors of E. I. du Pont de Nemours & Co., down to the present
time.
Yours sincerely, A. B. Echols, Vice President.
Political contributions since Jan. 1, 1927 by A. B. Echols, director of E. I. du Pont
de Memours & Co. {elected to board of directors Feb. I4, 1927)
state National Other
1927: None.
1928: Republican State committee, Oct. 31, 1928
1929: None.
1930: Republican State committee, Oct. 27, 1930
1931: None.
1932:
Republican State committee, Apr. 15, 1932 _-
Republican National Committee, Sept. 27, 1932
Better Government League (between July 11 and Dec. 27).
Total for the year, $275.
1933: Better Government League, May 9, 1933
1934:
Republican State committee, Aug. 24, 1934
Republican National Committee, July 9, 1934
Republican National Committee, Aug. 24, 1934
The Crusaders, Inc., July 9, 1934
National Republican Club, July 10, 1934
American Liberty League, Sept. 12, 1934
Total for the year, $700.
Total contributions to Republican State committee.
Total contributions to Republican National Committee
Total other political contributions
$50
200
$50
$200
25
100
100
50
100
250
Total all political contributions.
1,250
1408 MUNITIONS INDUSTRY
Wilmington, Del., October 8, 1934-
Hon. Stephen Raushenbush,
Secretary, Special Committee Investigating the Munitions Industry,
Washington, D. C.
Dear Sir: In accordance with the form letter from Mr. Lammot du Pont,
president of E. I. du Pont de Nemours & Co., to the directors of said company
dated September 27, 1934, there is listed below my personal campaign contribu-
tions to political parties for the period from 1919 to date.
Political party
Year
Amount
1928
1930
1932
1934
$2, 500
Do -
1,000
Do - . - - -
5,500
Do -
fiOO
Very truly yours,
Wm. du Pont, Jr.
New York, October 9, 1934.
[Received October 10, 1934.]
Hon. Stephen Raushenbush,
Secretary Special Committee Investigating the Munitions Industry,
Washington, D. C.
Dear Sir: As a director of E. I. du Pont de Nemours & Co. I am advised that
the Special Committee Investigating the Munitions Industry has requested
from me a list of my personal campaign contributions to political parties for the
period from 1919 to date inclusive, and I beg to advise that the only contribu-
tions I have made during this period is $200 in October 1932 to the campaign
fund of the Republican National Committee and the New York Republican
State committee.
Yours very truly.
F. B. Davis, Jr.
E. I. DU Pont de Nemours & Co., Inc.,
Wilmington, Del., October 13, 1934.
Hon. Stephen Raushenbush,
Secretary Special Committee Investigating the Munitions Industry,
Washington, D.C.
Dear Sir: I am advised by Mr. Lammot du Pont that you desire me, as a
director of the du Pont Co., to send you a list of my personal campaign con-
tributions to political parties for the period from 1919 to date, inclusive. To the
best of my knowledge, and so far as I have been able to determine from my
records, such contributions by me have been only as follows:
August 30, 1932, to Better Government League, $250 (this league was organ-
ized to further the reelection of C. D. Buck as Governor of Delaware and may be
construed as a contribution to the State Republican Party).
October 10, 1932, to Republican radio program, $10.
July 12, 1934, account of Republican National Committee deficit, $50.
August 13, 1934, Republican National Committee, $250.
Very truly yours,
J. Thompson Brown.
E. I. DU Pont de Nemours & Co., Inc.,
Wilmington, Del., October 15, 1934-
Hon. Stephen Raushenbush,
Secretary Special Committee Investigating the Munitions Industry,
Washington, D. C.
Dear Sir: I give below a list of my personal campaign contributions to
political parties for the period from 1919 to date, inclusive, as requested by your
committee. This list includes both local and National contributions and was
all made to the Republican Party.
MUNITIONS INDUSTRY 1409
1919, none; 1920, $1,000; 1921, $1,000; 1922, $510; 1923, $700; 1924, $250;
1925, $25; 1926, $25; 1927, none; 1928, $2,000; 1929, none; 1930, $1,500; 1931,
$100; 1932, $750; 1933, none; 1934, $250.
Respectfully,
H. G. Tallman, Vice President.
Wilmington, Del., October 16, 1934.
Hon. Stephen Raushenbush,
Secretary Special Committee Investigating the Munitions Industry,
Washington, D. C.
Dear Sir: I am attaching a statement herewith showing such of those con-
tributions to political organizations as I am able to locate in my records. While
the record of the contributions on this statement only goes back to 1928, the
records which I have available covering periods prior to that date do not show
these contributions specifically. I am quite sure, however, that the amounts
for the years prior to 1928 were quite inconsequential.
Yours sincerely,
W. S. Carpenter, Jr.
Republican State Committee:
Sept. 7, 1928_.- — - $500
Nov. 2, 1928 1,500
Oct. 22, 1930 - - — - 500
Nov. 4, 1932 — 1,000
Republican National Committee:
Oct. 3, 1928 1,000
Oct. 8, 1930 - - 500
Sept. 26, 1932 1,000
July 10, 1934 — 250
Aug. 8, 1934 1, 500
Better Government League of Delaware:
Julv 1, 1932 900
Aug. 1, 1932 800
Sept. 7, 1932 -— 800
Dec. 5, 1932 100
May 5, 1933 - - — - - 200
Wilmington, Del., October 17, 1934-
Hon. Stephen Raushenbush,
Secretary Special Committee Investigating the Munitions Industry,
Washington, D. C.
Dear Sir: Referring to your recent request for a memorandum of the personal
campaign contributions of the directors of E. I. du Pont de Memours & Co.,
please be advised that I was elected a member of the board of directors of the
du Pont Co. the latter part of 1928, since which time I have made the follow-
ing contributions to the Republican National Committee: 1928, $2,000; 1930,
$2,500; 1932, $1,250; 1934, $500.
Yours very truly, T. S. Grasselli.
E. I. DU Pont de Nemours & Co., Inc.,
Wilmington, Del., October 19, 1934-
Mr. Stephen Raushenbush,
Secretary Special Committee Investigating the Munitions Industry,
Washington, D. C.
Dear Mr. Raushenbush: In response to the request of the special committee,
I advise you herewith of all the subscriptions that I have made to political parties
from 1919 to date: October 17, 1932, Republican senatorial committee, $1,000;
October 21, 1932, Republican National Committee, $100; October 24, 1932,
Republican Radio League, $10; June 21, 1934, National Republican Club, $50;
July 10, 1934, Republican National Committee for 1932 campaign deficit, $50;
August 6, 1934, Republican National Committee, $200; October 10, 1934, Dela-
ware Republican State committee, $100; October 10, 1934, New Jersey Republican
State committee, $100.
Yours very truly,
Jasper E. Crane.
1410 MUNITIONS INDUSTRY
E. I. DU Pont de Nemours & Co., Inc.,
Wilmington, Del, October 22, 1934.
Hon. Stephen Raushenbush,
Secretary Special Committee Investigating the Munitions Industry,
Washington, D. C.
Dear Sir: Undei* date of September 27, Mr. Lammot du Pont requested rae
to furnish you with a Ust of my personal campaign contiibutions to political
parties for the period from 1919 to date inclusive. Accordingly I advise vou of
the following amounts: 1920, $100; 1922, $200; 1924, $200; 1928, $200;" 1930,
$100; 1932, $1,000; 1934, $500.
These contributions were all made to the Republican Party either through
the National Committee or the Delaware State committee. I have since con-
tributed $500 to the Delaware State committee.
Yours very truly,
H. G. Haskell,
Member of the Board of Directors.
E. I. DU Pont de Nemours & Co., Inc.,
Wilmington, Del., October 25, 1934-
Hon. Stephen Raushenbush,
Secretary Special Committee Investigating the Munitions Industry,
Washington, D. C.
Dear Sir: In compliance with your request to the president of the du Pont
Co. that each director report to the committee their personal campaign contribu-
tions to political parties for the period from 1919 to date, inclusive, I advise you
I have made no contributions to any political party during this period.
Very truly yours,
W. P. Allen,
Director, E. I. du Pont de Nemours & Co.
E. I. DU Pont de Nemours & Co., Inc.,
Wilmington, Del., October 25, 1934.
Hon. Stephen Raushenbush,
Secretary Special Committee Investigating the Munitions Industry,
Washington, D. C.
Dear Sir: I wish to report the following contribution made to a political party
by me since May 1930, at which time I was elected a director of the du Pont Co.:
August 7, 1934, contribution to Republican National Committee, $100.
According to my records this is the only contribution which I have made to
any political party.
Yours very truly,
C. M. A. Stine, Vice President.
Greenville, Del., October 26, 1934-
Hon. Stephen Raushenbush,
Secretary Special Committee Investigating the Munitiotis Industry,
Washington, D. C.
Dear Sir: This is to advise that I have made no subscription to national
campaign funds since 1919.
Yours very truly.
E. E. DU Pont.
E. I. DU Pont de Nemours & Co., Inc.,
Wilmington, Del, October 29, 1934.
Hon. Stephen Raushenbush,
Secretary Special Committee Investigating the Munitions Industry,
Washington, D. C.
Dear Sir: Referring to your request that the directors of this company submit ,
a list of their personal campaign contributions to political parties for the period
from 1919 to date, inclusive, search of my records reveals tlie following:
MUNITIONS INDUSTRY 1411
Nov. 29, 1920, Republican finance committee campaign $100
October 1 932, Repul)lican Radio League 26
October 1932, Republican National Committee 100
November 1932, Organization expenses, Republican State committee 50
Do . 1 50
July 1932, Better Government League of Delaware. _j 250
December 1 932, Better Government League of Delaware 50
625
Trusting this is the information you dcsirej I am,
Very truly yours,
W. C. Spruance,
Vice President and Director.
Du Pont Rayon Co., Inc.,
New York, N.Y., October 29, 1934. '
Hon. Stephen Raushenbush,
Secretari/ Special Committee Investigating the Munitions Industry,
Washington, D.C.
Dear Sir: Shortly before sailing for Europe a few weeks ago, Mr. Yerkes was
advised by Mr. Lammot du Pont, i)resident of E. I. du Pont de Nemours & Coiy
that the Special Committee Investigating the Munitions Industry had requested
from the directors of the du Pont Co. a list of their personal campaign contribu-
tions to political parties for the period from 1919 to date, inclusive. Mr. Yerkies
asked me to ascertain and forward to you a list of such contributions made by
him.
I have gone over Mr. Yerkes' records for the years mentioned and find that his
contributions to political parties were as follows:
1928, $100 to the Republican National Committee; 1930, $50 to the Republican
State Committee.
Yours very truly,
Marian C. Lepper, (S'ecre^ari/.
Greenville, Del., October 30, 1934-
Hon. Stephen Raushenbush,
Secretary Special Committee Investigating the Munitions Industry,
Washington, D.C.
Dear Sir: As requested by your committee I list herewith the personal cam-
paign contributions to political parties from 1919 to 1934 inclusive, all of which
were made for the Republican State campaigns, viz:
October 28, 1920, $200; January 20, 1928, $100; October 19, 1928, $200;
November 1, 1928, $100; July 11, 1932, $250; May 12, 1933, $50.
Yours very truly,
Eugene du Pont.
The following memorandum was requested by, the committee and
submitted bv Lammot du Pout on November 14, 1934. (See text,
p. 1260.)
November 14, 1934.
The Hon. Gebald P. Nye,
Chairman Special Committee Investigating the Munitions Industry,
United States Senate, Washington, D. C.
My Dear Senator Nye : You have Invited us to submit a memorandum for
the consideration of your committee as it undertakes the formulation of a
sound national policy with respect to munitions for presentation to the Con-
gress. ^^V welcome this opportunity to be of service. The subject is a very
difficult one, having occupied the thoughtful attention of many minds over a
long period of time, and ^^•e do not profess to be able to offer a complete
.solution for every question involved. We shall endeavor, however, to deal
specifically and practically with some of the major questions as they are set
forth in Senate Resolution #206.
83876— 34— PT 5 26
1412 MUNITIONS INDUSTRY
We believe that two cousideiatioiis must be paramount in any satisfactory
national policy on munitions.
3. Adeijuate national defense must be assured.
2. The maintenance of peace must be encouraged and fostered.
Our thinking on each of the questions under discussi<m takes these two
aims into ;ici-ouiii ; answer to every (piestion niusi be in hai'm ny v.itli l>oth
considerations: On the one hand llu- defense of the nation if it is attacked;
on the otiier, the protection of the American people from the danger of war,
with all its horrors and its malign consequences. There is no conflict here ; a
strong but forbearing America is the greatest guarantor of peace.
NECESSITY OF PROVISION FOB THE NATIONAL DEFENSE
No prudent nation can afford to be unarmed in the world today. Moreover,
as m'odern wars are increasingly liable to l)e won or lost befori- the actual
outlireak of hostilities, this country's preparation for defense needs to lie wise
and thorough. Its execution should l)e efficient, it must be effective.
The vital importance of your committee's investigations and reconnnendations
must appeal to all thoughtful Americans, who are familiar with their country's
history. In every one of its major conflicts the United States has sent its
young men into battle without proper equipment, supplies, or support. Each
war has been prolonged unnecessarily ; each has cost thousands of lives that
ought never to have Ijeen lost. The bravest, who volunteered first, have been
sacrificed in the struggle to hold the line while the nation went throngli tlie
slow, laborious, and terribl.v costly process of marshalling its resources.
INADEQUACY OF GOVERNMENT MONOPOLY
The attempt to limit this preparation to government monopoly in peace time
and to confine the manufacture of munitions or ordnance to government plants
and facilities in war time would, in our opinion, weaken and if carried far
enough cripple our national defense. We are convinced that the problem
requires maximum effort both by the Government and American industry.
Neither one by Itself can be relied upon to meet all requirements.
Munitions include all articles of every kind required for the supply of the
Army and Navy; not only ordnance but unifornis, shoes, shelter, mess equip-
ment, tools, fuel, automobiles, shipping, food, medicines, miscellaneous sup-
plies. It is inconceivable that the government should undertake so vast a
field of production either in peace or in war. All the resources of the country
both public and private must be available for the productions essential to
national defense.
Ordnance itself is also a field of tremendous .scope. A partial list of imple-
ments of war as set forth by the Geneva Convention includes rifles, machine
guns, ammunition, gun-sighting apparatus, cannon, projectiles, bombs, torpe-
does, depth charges, grenades, mines, bayonets, tanks, armored cars, pistols,
swords, warships and arms and ammunition therefor, aircraft, aircraft en-
gines, gun powder, and explosives. The Ordnance Department of the Tuitod
States Army had to deal in the World War with the production of ov-er
200,000 separate components, among these some individual articles of ordnance
comprising as high as 6,000 separate pieces. Nearly 8,000 industrial plants,
including manufacturers of sewing machines, typewriters, boilers, radiators,
electrical equipment, airln-akes, hardware, snfes, etc., were engaged in the
manufacture of ordnance in 1918; over 25,000 in all munitions. A modern
nation fighting for its life requires practically all of its manufacturers to
become munition makers.
It is estimated that private plants produced 95% and goverimient arsenals
5% of ths country's ordnance in the Great War. For example, the total output
of the two long-estal)lished and well-equipped government smokeless powder
plants during our participation in the World War, April 6th, 1917, to November
tlth, 1918, was less than 2% of the powder made in the United States during
liuit period; it would have sustained the fire of the American troops during
ithe fall of 1918 for only nine days. Government cannot undertake the tasks
^enumerated above in time of war. It has then too much else to do. All the
productive capacity of the nation must be called upon.
S::?inee the Wnr, government arsenals, although operating at only one-tenth
of their capacities, have been supplying about 95% of Army ordnance, jirivate
nianufiicturers only 5%. Rut in the event of a major emergency exi>erts
MUNITIONS INDUSTRY 1413
estimate that government facilities would again only be able to furnish
about 5% of the ordnance required. For adequate preparation for the defense
of our country a policy of nationalization would thus call for the expansion
of government arsenals forthwith to twenty times their present capacities.
That would be a monstrous undertaking, advocated by no one. The cost would
be colossal, ordnance appropriations would have to be increased over a
hundred fold, operation would be extremely difficult if not impractical, the
effect might be provocative.
If, kicking such facilities, we attempt to supply them after we are attacked
we but court disaster. We were almost defenseless in some of these respects
when we entered the World War in 1917. Every one who knows the facts
will recall that over a year after our entrance into the War our troops had
to be supplied throughout with British and French machine guns, cannons,
and airplanes. Not until the autumn of 1918, just before the Armistice, was
our production of ordnance becoming adequate. That experience which might
have cost us so dear must not be disregarded and forgotten. The actual
and potential facilities then revealed must not now be abandoned.
THE SOUND PLAN FOB NATIONAL DEFENSE
We consider, therefore, that the only wise solution of the problem is just
what has already been undertaken : the preparation of plans of defense, the
survey and charting of industrial resources, the provisional enlistment of in-
dustry, so as to be ready to marshal the entire plant and personnel of the
country immediately when the hour of danger arrives. This cooperation be-
tween government and industry for the defense of our country must be con-
tinued. And the maintenance in the fabric of American industry of effective
nuclei for the rapid expansion of munitions production in an emergency is
of vital importance.
OBJECTIONS TO PRIVATE MANUFACTURE OF MUNITIONS
Two objections to private manufacture of munitions in general and ordnance
in particular are raised; excess war profits, and abuses attending the traffic
in arms. These we shall try to deal with in turn.
WAR PROFITS
We subscribe to the view that excess war profits should be eliminated.
There is a popular demand, which is sound and just, that in the event of any
such future national crisis as a major war the entire capital and productive
resources of our country should be subjected to the national need without the
prospect of extraordinaiT compensation. The national policy should be based
on the principle that in a time of national emergency, when the country's man
power is being mobilized, its material resources should be mobilized also.
A plan for carrying out this policy must consist of practical measures. It
must be sure to succeed. It must harness every effort, employ every motive
to insure speed, efficient operation, low costs, elimination of waste, conservation
of materials, saving of labor. Further, it must be all inclusive in scope, ex-
tended throughout the whole fabric of our economic structure. Elimination
of excessive earnings must apply to every business and every individual.
The formulation of a comprehensive and practical plan is a problem of
tremendous difficulty. The Committee will appreciate that the elimination or
recapture of profits in excess of peace-time earnings contemplates a new and
drastic measure. The dangers of such a radical departure from normal
economic habits may not be appreciated. We should be negligent if we failed
to emphasize the national perils which would lurk in a supeiiicial or unsound
attempt at its solution. It can only be solved by able and exhaustive study.
There is still available for this study the experienced judgment of the men
who successfully conducted America's effort in the World War. To it should
be applied the wisest minds of financiers, business executives, military experts,
statesmen.
The time to make this study and elaborate a plan is now, when no immediate
danger threatens our country. It would be too late when hostilities are
imminent, for impromptu measures would surely be ineffective.
1414 MUNITIONS INDUSTRY
We recommeml. therefore, that a thorough and detailed study of the prob-
lem be made by such a,iiency as the Congress may determine with the view of
developing a practical and effective plan of industrial mobilizati<ui for the
national defense without excess profits to coi-poration or individual.
INTEENATIONAL TRADE IX MUNITIONS
We believe that international trade in arms can be done away with, if that
is a desirable aim. only by international agreement between all the producing
nations, about twelve in number, to prohibit exports. Whether the cessation
of thi.s trade, which would tend towards the fixation of the status quo of
oppressed and unarmed peoples, is desiraltle. is a question upon which we do
not venture an opinion. It would seem likely that one prompt result would be
the erection for their own defense of ordnance plants throughout the other
countries of the world, imposing through excessive costs additional burdens
upon them, and that a new competition in armament would thus spring up.
If the United States alone were to forbid the export of munitions, our national
defense would be impaired because such a policy of isolation might prompt
reprisals and make it difficult or impossible in an emergency for this country
to obtain essential materials from abroad.
In any case the question would arise, what constitutes munitions of war?
Numerous harmless articles of peace-time commerce, the trade in which should
not be inhibited, assume in war time greater military significance and strategic
importance than many articles of ordnance. Prohilntion of the traffic in arms
might not be elTectlve. and it would encourage illicit dealings.
Rather we feel that the international trade in arnts should be subjected to
strict governmental control, preferably by international agreement. At any
rate the United States can immediately initiate its own policies in this respect.
We suggest legislation permitting the export of arm^ from this country only
after the vise of orders by a Federal Government bureau or commission as
the Congress may determine. If this Commission made objeation. shipment
would not be permitted. Moreover, such legislation should require that upon
consummation of an order full information must be reported to the Commis-
sion, including the amount and description of goods, their destination, and the
complete financial settlement of the tran!=action.
Such a system of control, while permitting legitimate sales of arms for in-
dispensible demands, would eliminate any abuses that may exist in the business,
and would prevent improper sales where arms are desired for unlawful purposes.
We think it fundamental to distinguish between the causes and effects of
war. Armament does not originate war ; warfare brings forth arms. War is
caused by economic and political rivalries. It is fomented by fanaticism, bad
temper, suspicion of other people, criticism of their actions, sensational press
dispatches, fraudulent or covetous practices. It is minimized by good-will,
forl)earance, self-control, honest statement, fair dealing. Fire-fighting ap-
paratus is necessary, but it does not cause the fire; care and vigilance are
required to prevent an outbreak of fire. International trade in any kind of
material or product, if unwisely directed and improperly prosecuted, creates
friction, animosity, hostility. On the other hand, international trade wisely
and fairly conducted promotes closer association with other people, under-
derstanding and friendliness, a spirit of co-operation, good-will, peace.
Respectfully yours,
E. I. Du PoNi' DE Nemours & Company,
Lam MOT DtrpoNT, President.
MUNITIONS INDUSTRY
HEARINGS
BEFORE THE
SPECIAL COMMITTEE
INVESTIGATING THE MUNITIONS INDUSTEY
UNITED STATES SENATE
SEVENTY-THIRD CONGRESS
PURSUANT TO
S.Res. 206
A RESOLUTION TO MAKE CERTAIN INVESTIGATIONS
CONCERNING THE MANUFACTURE AND SALE
OF ARMS AND OTHER WAR MUNITIONS
PART 6
SEPTEMBER 17 and 18, 1934
PRATT & WHITNEY AIRCRAFT CO.
AND
UNITED AIRCRAFT EXPORTS, INC.
Printed for the use of the
Special Committee Investigating the Munitions Industry
UNITED STAT-ES
GOVERNMENT PRINTING OFFICE
83876 WASHINGTON : 1934
MUNITIONS INDUSTRY
HEARINGS
BEFOBE THE
SPECIAL COMMITTEE
INVESTIGATING THE MUNITIONS INDUSTRY
UNITED STATES SENATE
9 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 6
SEPTEMBER 17 and 18, 1934
PRATT & WHITNEY AIRCRAFT CO.
AND
UNITED AIRCRAFT EXPORTS, INC.
Printed for the use of the
Special Committee Investigating the Munitions Industry
UNITED STATES
GOVERNMENT PRINTING OFFICE
83870 "WASHINGTON : 1934
Mft 18 1935
/di^fe.
SPECIAL COMMITTEE INVESTIGATING THE MUNITIONS INDUSTRY
GERALD P. NYE, North Dakota, Chairman
WALTER F. GEORGE, Georgia ARTHUR H. VANDENBERG, Michigan
BENNETT CHAMP CLARK, Missouri W. WARREN BARBOUR, New Jersey
HOMER T. BONE, Washington
JAMES P. POPE, Idaho
Stephen Radshenbush, Secretary
n
Cbarged to credit acct.
wNhSHpLtiDocuniOTts
CONTENTS
iTestimony of — Page
Brown, Donald L., president, Pratt & Whitney Aircraft Co 1415
r^ ^ r.^. . r.r ■ 1^23, 1463, 1488, 1501, 1514, 1525
Deeds, Charles W., vice president and treasurer, Pratt & Whitney
Aircraft Co 1415, 1417, 1442, 1496, 1510, 1517, 1533
Love, Francis H., director. United Aircraft Exports, Inc_ ._ 1415
„ ^. , ,. , , 1434, 1445, 1465, 1489, 1504
Formation, early history, and profits of the Pratt & Whitney Aircraft Co. 1417
United Aircraft companies' policy with regard to commissions in connec-
tion with foreign sales 1433
Participation of United States citizens, officials, and branches of Govern- gM
ment in field of foreign military aviation 1439
Sales of United Aircraft companies in countries engaged in war or fearful
of war 14g3
Contract between United Aircraft Exports and Peru for the sale of guano ' 1574
sales and other business operations of United Aircraft companies in Ger-
many in recent years 1494
''■'.. m
1]N\^ESTIGAT10N OF MUNITIONS INDUSTRT
MONDAY, SEPTEMBER 17, 1934
United States Senate,
Special Committee to Investigate
the Munitions Industry,
Washington, D.C.
The hearing was resumed at 10 a.m., in room 310, Senate Office
Building, pursuant to the taking of recess. Senator Gerald P. Nye
presiding.
Present: Senators Nye (chairman), George, Clark, Bone, and
Vandenberg.
Present also : Alger Hiss, investigator.
The Chairman. The committee will come to order.
Will Mr. Love, Mr. Brown, and Mr. Deeds please come forward.
TESTIMONY OF FRANCIS H. LOVE, DONALD L. BROWN, AND
CHARLES W. DEEDS
I (The witnesses were duly sworn by the chairman.)
The Chairman. Will you give your full name and your official
capacity to the stenographer, Mr. Love?
Mr. Love. My name is Francis H. Love, director of the United
Aircraft Exports, Inc.
The Chairman. And your residence and office address is what ?
Mr. Love. Eesidence, 48 Ocean Boulevard, Monmouth Beach, N.J. ;
office, 230 Park Avenue, New York.
The Chairman. Will you give your full name and connection, Mr.
Brown ?
Mr. Brown. My name is Donald L. Brown; residence, 29 Colony
Eoad, West Hartford, Conn. ; president of Pratt & Whitney Aircraft
Co.
The Chairman. Have you any official connection with the Export
Co.?
Mr. Brown. Director.
The Chairman. That is the United Aircraft Exports, Inc. ?
Mr, Brown. Yes.
The Chairman. Will you give your full name, Mr. Deeds?
Mr. Deeds. My full name is Charles W. Deeds; vice president and
treasurer of Pratt & Whitney Aircraft Co. ; address, 17 Colony Koad,
I West Hartford, Conn.
The Chairman. Have you any connection with the Export Co. ?
Mr. Deeds. None.
1415
1416 MUNITIONS INDUSTRY
Mr. Hiss. Mr. Chairman, before beginning with the witnesses here
now, there are three or four exhibits I would like to put in the record
relating to the testimony of Mr. Allard, president of the Curtiss-
Wright Co., who testified early last week. Just prior to the close of
his testimony, I asked Mr. Allard if the 4-barrel carburetor had
been released by the Army and Navy for export sales abroad at the
time of a letter written by him in 1933. Mr. Allard was of the
impression that the carburetor had been released at that time. I
believe he was in error, and I should like to introduce into the record
four or five letters from the files of the Wright Aeronautical Co.
^hich is the engine subsidiary of the Curtiss-Wright Corporation.
The Chairman, That will, be so ordered. Could you introduce
them in their numerical order so that they will appear among the
exhibits relating to the Wright Co. ?
Mr. Hiss. We will mark them " Exhibits A to E ", inclusive, as
there are five of the letters, I believe.
The Chairman. That may be done.
Mr. Hiss. May I summarize these exhibits at this time, Mr.
Chairman ?
The Chairman. I think it would be well to do that.
Mr. Hiss. On November 2, 1933, Maj. C. W. Howard, chief of the
engineering section of the Army Air Corps wrote to the Wright
Aeronautical Corporation that certain material could be released, and
there is a pencil notation at the bottom of the letter, " Not included
four-bbl. carburetors."
Also in the files of the Wright Aeronautical Co. was found a pencil
memorandum which bore no date, but which was filed between letters
dated the 31st of October and the 2d of November, and which referred
to the letter of November 2 which has just been entered in evidence,
and therefore must have been written some time after that. This
memorandum refers to Major Howard's letter and also says,
" Excluded are 4-bbl. carburetor ", and various other items-
Then there is another pencil memorandum found in the files of the
Wright Aeronautical Co. bearing the initials " T. M. L.", who is
believed to be Mr. Lucas, one of the officials of the Wright Aeronau-
tical Co., which also bears no date at the head, but in the middle bears
a date November 9, 1933. There is a postscript to that memoran-
dum which says :
No. 4-bbl. carbs. or 16/11 gears have as yet been shipi)ed abroad although
complete data has been given.
On April 3, 1934, Acting Secretary of the Navy, Mr. Koosevelt,
wrote to the Wright Aeronautical Co. among other things, the
following :
It shall be further understood that this release does not extend to provision
for four-barreled carburetor or two-speed supercharger, upon which items the
views of the departments have been previously expressed.
Then finally, under date of May 4, 1934, the Wright Aeronautical
Co. replied by Mr. Lucas to the letter from the Assistant Secretary
of the Navy dated April 24, 1934. Mr. Lucas is the man to whom
reference has previously been made as having said that they had not
shipped any carburetors before they had received word from the
Army that they should not export them. The second page of the
letter I am now ref errino; to is as follows :
MUNITIONS INDUSTEY 1417
' In connection with the release of the four-barrel Stromberg carburetor,
) attention is invited to the fact that this carburetor was exported before this
company was advised of the Government's new policy applying to foreign
h releases.
f In view of the fact that the Stromberg four-barrel carburetor has now become
i a standard commercial article, since it is the only type of carburetor used by
j this company, and since it was exported prior to this company's knowledge that
i such export would not be approved by the Government, it is respectfully
j requested that the decision given in referenced letter be reconsidered and that
j approval be given for the foreign shipment of engines equipped with four-
i barrel carburetor and for the manufacturing under foreign license of engines,
I equipped with the four-barrel carburetor.
I At the time of Mr. Allard's letter, I feel sure permission had not
I been given and none had actually been shipped, if the letters put in
evidence are to be relied on.
I now offer the five letters and memoranda just referred to in
evidence as Exhibits No. 449, A, B, C, D, and E.
(The letters referred to were marked " Exhibits No. 449, A, B, C,
D, and E ", respectively, and are included in the appendix of Part IV
on pp. 1010, 1011, and 1012.)
FORMATION, EARLY HISTORY, AND PROFITS OF THE PRATT & WHITNEY
AIRCRAFT CO.
Mr. Hiss. I will now proceed with the examination of the wit-
nesses.
Mr. Deeds, are you familiar with the original organization and
the formation of the Pratt & Whitney Aircraft Co. ?
Mr. Deeds. I was not there at that time. I cannot speak from my
own knowledge.
Mr. Hiss. To refresh your recollection, I hand you a copy of the
financial history of the Pratt & Whitney Aircraft Co., which was
prepared by the company and submitted to the Black committee,
and at the same time a copy of the financial history of the United
Aircraft & Transport Co., also filed with the Black committee, which
documents I ask to be filed in evidence as Exhibits No. 528 and No.
529.
(The documents referred to were marked " Exhibits No. 528 and
No. 529 ", respectively, the financial history of the Pratt & Whitney
Co. being " Exhibit No. 528 " and the financial history of the United
Aircraft & Transport Corporation being " Exhibit No. 529," and both
lare included in the appendix on pp. 1537 and 1539.)
Mr. Hiss. According to these statements, " Exhibits Nos. 528 and
529 ", the first of which statements also appears in the record of the
hearing before the Subcommittee on Aeronautics of the Committee
on Naval Affairs of the House of Kepresentatives, Seventy-third
Congress, page 901, the Pratt & Whitney Aircraft Co. was incorpo-
rated on July 22, 1925, pursuant to a contract of July 14, 1925, be-
tween Pratt & Whitney — which was a subsidiary of Niles-Bement-
Pond Co. — and F. B. Rentschler and G. J. Mead. Mr. Rentschler
became an ofiicer of Pratt & Whitney Aircraft Co. ?
Mr. Deeds. He did.
Mr. Hiss, Do you know what his position was with the Aircraft
Co.?
Mr. Deeds. He was the president.
1418 MUNITIONS INDUSTRY
Mr. Hiss. He was the first president?
Mr. Deeds. Yes, sir.
Mr. Hiss. And Mr. G. J. Mead also became an officer of the Pratt
& Whitney Aircraft Co.?
Mr. Deeds. Yes ; he was the first vice president.
Mr. Hiss. Do you remember what Mr. Mead's duties were?
Mr. Deeds. They related primarily to engineering. He was the
engineering leader of the group.
Mr. Hiss. Further, according to this statement of the Pratt &
Whitney Co., Pratt & Whitney, the subsidiary of the Niles-Bement-
Pond Co., furnished cash, facilities, and materials represented by the
issuance of preferred stock which was redeemed in full out of the
earnings, and was redeemed sometime prior to February 11, 1929.
Can you explain how you received your stock in the Pratt & Whitney
Aircraft Co.?
Mr. Deeds. My personal stock?
Mr. Hiss. Yes.
Mr. Deeds. By purchase from Mr. F. B. Rentschler and Mr. G. J.
Mead.
Mr. Hiss. Did you purchase any from Pratt & Whitney?
Mr. Deeds. I did not.
Mr. Hiss. There is one place in that exhibit which to me is not
clear, and I wonder if you can clear it up for me. On page 2 there
is a paragraph with reference to the common stock, of which 5,000
shares were originally issued August 5, 1925, and the records of the
company reflect the transfer to C. W. Deeds on June 6, 1927, of 200
shares, 110 shares, and 90 shares being transferred from F. B.
Rentschler and G. J. Mead, respectively^, so that your total acqui-
sition at that time was 200 shares, of which 110 shares came from
Mr. Rentschler by purchase and 90 shares came from Mr. Mead by
purchase. Is that correct?
Mr. Deeds. That is correct.
Mr. Hiss. A stock dividend of 395,000 shares was issued to the
common-stock holders of record November 1, 1928, including at that
time Pratt & Whitney, Mr. Rentschler, Mr. Mead, and yourself. Is
that correct, Mr. Deeds?
Mr. Deeds. That is correct.
Mr. Hiss. When did you first join Pratt & Whitney Aircraft Co.?
Mr. Deeds. May 1, 1926.
Mr. Hiss. In what capacity?
Mr. Deeds. As assistant treasurer.
Senator Bone. When was this stock dividend?
Mr. Hiss. The stock dividend was to the stockholders of record
November 1, 1928, and the company was formed in 1925, and the
common-stock issue was 5,000 shares at 20 cents per share. Is that
correct, Mr. Deeds?
Mr. Deeds. That is correct.
Mr. Hiss. Making a total common-stock investment of $1,000?
Mr. Deeds. Correct.
Mr. Hiss, There was a stock dividend of 395,000 shares issued to
stockholders of record November 1, 1928, which went to four stock-
holders as I said before, Pratt & Whitney, a subsidiary of Niles-
MUNITIONS INDUSTRY 1419
Bement-Pond, Mr. Kentschler, Mr. Mead, and yourself, Mr. Deeds,
according to this statement?
Mr. Deeds. That is correct. Of course, as far as the stockholders
of Pratt & Whitney Co. were concerned, they were widely spread
through stock ownership of Niles-Bement-Pond, which was a public
corporation.
Senator Clark. What was the date of the formation of this cor-
poration ?
Mr. Hiss. The corporation was formed in July 1925. ^
Senator Clark. And what was the date of the stock dividend ?
Mr. Hiss. The date of the stock dividend was November 1, 1928.
Senator Clark. The original stock issued was 5,000 shares at 20
cents a share?
Mr. Hiss. Yes.
Senator Clark. And what did you say the stock dividend was?
Mr. Hiss. Three hundred ninety-five thousand shares also at 20
cents per share. During the year 1930 surplus was transferred to
capital stock account by resolution of the board of directors together
with the sum of $3,319,678.41, representing dividends from subse-
quent earnings, \vhich totaled $5,424,000, and the amount of that
$5,424,000 which could be allocated to the 395,000 shares was $4,958,-
250. representing the companj^'s own valuation therefore of this
395,000 shares.
Senator Clark. That could be allocated to stock dividend?
Mr. Hiss. Yes. Of the total amount plus surplus and capital, the
part that could be allocated to the 395,000 shares would come to that
amount. In addition, cash dividends aggregating a total of $6,400,-
000 were issued on the common stock during the years 1929 to 1932,
inclusive. That makes a total return in 8 years of $11,437,250 on
$1,000 invested, and using cash dividends and stock dividends, the
latter at the company's value, not the market value, which was con-
siderably higher, stated in terms of percentage, would be 1,143,725
percent on the original investment.
The .Chairman. State that again, please.
Mr. Hiss. Stated in terms of percentage, the return on the orig-
inal $1,000 investment would be 1,143,725 percent.
I would like to offer in evidence a chart showing that growth.
This chart does not represent the capital growth of the $1,000,
because the figures given relate only to the stock dividends and the
cash dividends. This represents the returns solely in the form of
cash dividends and stock dividends on that amount.
(The chart referred to was marked " Exhibit No. 530 " and is
included in the appendix on p. 1540.)
Senator Clark. So that whatever accretion there had been to cap-
ital in the meantime, should be added to that figure ?
Mr. Hiss. That is correct.
Mr. Deeds, what relation is Col. E. A. Deeds to you ?
Mr. Deeds. He is m}^ father.
Mr. Hiss. What position did he hold with the Niles-Bement-Pond
Co.?
Mr. Deeds. I believe he was a director.
Mr. Hiss. He was a director of the Niles-Bement-Pond Co. at the
time Pratt & Whitney Aircraft Co. was formed?
1420 MUNITIONS INDUSTRY
Mr. Deeds. I believe he was.
Mr. Hiss. I now offer this organization chart of the United Air-
craft & Transport Corporation and ask that it be marked as an
exhibit.
(The chart referred to was marked " Exhibit No. 531 " and is
included in the appendix facing p. 1540.)
Mr. Hiss. During the winter of 1928-29 Pratt & Whitney Air-
craft Co. was taken over by United Aircraft & Transport Corpora-
tion, which had formerly been known as the " Boeing Aircraft Co.",
and which included the Boeing Aircraft Co.
At the same time Chance-Vought Corporation and the Hamilton
Aero Co., which had been organized into the Hamilton Propeller
Co., were also acquired by the United Aircraft & Transport Cor-
poration. And during 1929 this corporation also acquired interests in
the Sikorsky Aviation Corporation, a plane-manufacturing company,
and the Northrop Aircraft Corporation, also a plane-manufacturing
company, and the Stearman Aircraft Co. Is that correct, Mr. Deeds?
Mr. Deeds. I believe it is.
Mr. Hiss. So that in 1930 the United Aircraft & Transport Cor-
poration owned 100 percent of the stock of the Boeing Airplane Co.,
of Seattle, Wash., a manufacturer of airplanes; the Hamilton Stand-
ard Propeller Co., of Hartford, Conn., which manufactured aero-
nautical propellers; the Pratt & Whitney Aircraft Co., of Hart-
ford, Conn., which manufactured engines; (the original Pratt &
Whitney we have been talking about had become a part of the
United Aircraft & Transport Co.) and 99.68 percent of the Sikorsky
Aviation Corporation, of Bridgeport, Conn., manufacturers of
planes ; and 100 percent of the Stearman Aircraft Co. ; and 100 per-
cent of the Chance-Vought Corporation, of Hartford, Coun., also
manufacturers of planes.
Mr. Brown, by 1933 you were chairman of the board of all of those
subsidiaries excepting the Boeing Aircraft Co. Is that correct?
Mr. Brown. That is correct.
Mr. Hiss. You were also president of Pratt & Whitney Aircraft
Co. by July 1933 ? * •
Mr. Brown. Your statement is correct.
Mr. Hiss. Either Mr. Love, Mr. Brown, or Mr. Deeds please an-
swer this question: Can you explain the formation of United Air-
craft Exports, Inc., what time was it formed, and for what purpose?
Mr. Deeds. That was formed about May 1929, and formed to
handle the export business of the various subsidiaries.
Mr. Hiss. The exclusive export business of the subsidiaries ?
Mr. Deeds. Yes.
^ Mr Hiss. In addition, the United Aircraft & Transport Corpora-
tion also owned a considerable number of airline properties, did it
not?
Mr. Brown. Yes; it did.
Mr. Hiss. Mr. Deeds, have the relations of the Pratt & Whitney
Aircraft Co. to Niles-Bement-Pond remained close ones? Perhaps
I had better phrase it this way : I will ask you to explain the rela-
tions that do exist between the two companies.
Mr. Deeds. The relations that now exist are primarily and simply
that between a purchaser and a vendor. We do purchase from Pratt
MUNITIONS INDUSTRY 1421
& Whitney Co. certain parts that they are capable of producing more
economically than we. We do make such purchases from them.
I am also a director of the Pratt & Whitney Co.
Mr. Hiss. Are any other of the officials — that is, either the directors
of the Aircraft Co., the parent company, or any of the subsidiaries,
or any of the officials of the parent company or the subsidiaries, a
director or an official of the Niles-Bement-Pond Co. or any of its
subsidiaries ?
Mr. Deeds. Yes. F. B. Rentschler, I believe, is a director of Niles-
Bement-Pond. I am not and I cannot speak certainly. My father,
E. A. Deeds, is also a director.
Mr. Hiss. May I call your attention to a letter of September 18,
1933, written by Mr. McClellan to Mr. Carr, which I will offer as
"Exhibit No. 532"?
(The letter referred to was marked " Exhibit No. 532 " and is
included in the appendix on p. 1541.)
Mr. Hiss. Mr. McClellan in September 1933 was assistant to you,
Mr. Love?
Mr. Love. Yes.
Mr. Hiss. And you were president of the Export Co.?
Mr. LiOVE. Yes.
Mr. Hiss. And Mr. Carr was the South American representative
of the Export Co. ?
Mr. Love. Yes.
Mr. Hiss. This letter refers to an enclosed letter from Mr. Derby,
of the Niles-Bement-Pond Co. Can you identify Mr. Derby, Mr.
Deeds?
Mr. Deeds. I have met him ; yes.
Mr. Hiss. Do you know what office he holds with Niles-Bement-
Pond?
Mr. Deeds. No, I do not; except he is their Export man.
Mr. Hiss. Mr. Derby's letter is quoted by Mr. McClellan in part
as follows:
Referring to your letter of the 12th instant, and our letter of today in reply,
I might mention confidentially that for almost a year our company * * *,
That is the Niles-Bement-Pond Co.?
Mr. Deeds. Yes.
Mr. Hiss (reading) :
* * * has been working with the Brazilian War Department on a plan for
making projectiles, bombs, etc., etc. As a matter of fact, we have practically
engineered the proposition for them.
Referring now to the last paragraph of the quoted letter he says :
I would suggest that you send Mayrink Veiga the letter which we are send-
ing you in quadruplicate, stating that while there are close relations between
your company and ours, the export business in handled entirely separately, but
that you have given us a strong recommendation in their favor.
Mayrink Veiga were your agents in Brazil at that time?
Mr. Love. Yes.
Mr. Hiss. The Export Company's agents?
Mr. Lo\'E. Yes.
Mr. Hiss. Pratt & Whitney — that is, the subsidiary of Niles-
Bement-Pond — made the original advances to the Pratt & Whitney
Aircraft Co., which made possible the expansion that is indicated
by the chart that has been introduced ; is that not correct, Mr. Deeds ?
1422 MUNITIONS INDUSTRY
Mr. Deeds, That is correct.
Mr. Hiss. And as stated in this letter, the relations have remained
close and certain members of the board of directors of the United
Aircraft Corporation are on the board of directors of either Niles-
Bement-Pond or Pratt & Whitney Co., its subsidiary?
-Mr. Deeds. Yes.
Senator Bone. Does it appear in the record just what the business
of Niles-Bement-Pond is?
Mr. Hiss. Mr. Deeds, can you state that for the record ?
Mr. Deeds. I can state in general that Niles-Bement-Pond is en-
gaged in the manufacture of heavy machinery. Its only operating,
subsidiary at the present time is the Pratt & Whitney Co., whose
product is a line of lathes, tool-room equipment, grinders, and
machinery that would be usable in any manufacturing shop.
Mr. Hiss. The Pratt & Whitney Co., the Niles-Bement-Pond sub-
sidiary, makes tools, does it not? .
Mr. Deeds. It does. I
Mr. Hiss. In addition to the returns on the stock described in the
chart, when you and Mr. Kentschler and Mr. Mead were the three
individual stockholders in the early days of the company, you were
also officers, were you not?
Mr. Deeds. Yes.
Mr. Hiss. And received salaries and bonuses from the Pratt &
Whitney Aircraft Co. and later from the United Aircraft & Trans-
port Corporation?
Mr. Deeds. Yes.
Mr. Hiss. I have here a statement of salaries, which statement you
furnished to the Black Committee, which I will offer as " Exhibit
No. 533." J
(The statement referred to was marked " Exhibit No. 533 " and is "
included in the appendix on p. 1541.)
Mr. Hiss. You show there that from 1926 to the 30th of November
1933 you had received as salaries a gross amount of $142,613.07; is
that correct, Mr. Deeds?
Mr. Deeds. Yes; I assume that it is, if there are no typographical
errors.
Mr. Hiss. And the bonuses which you received during the same
time amount to $151,176.81.
Mr. Deeds. That is correct. That is an average of $19,000 a year,
approximately.
. Mr. Hiss. I will offer as " Exhibit No. 534 " a statement of salaries
and bonuses and directors' fees received by George J. Mead from
Pratt & Whitney Aircraft and United Aircraft & Transport Cor-
poration.
(The statement referred to was marked " Exhibit No. 534 " and is
included in the appendix on p. 1542.)
Mr. Hiss. This shows that during the period 1925 to 1933 Mr. Mead
received a total salary of $280,786.32, and a total of bonuses of
$241,699.97.
I offer as " Exhibit No. 535 " a similar statement of salaries,
bonuses, and directors' fees received by F. B. Rentschler from United
Aircraft & Transport Corporation and/or its subsidiaries or prede-
cessors.
MUNITIONS INDUSTRY 1423
(The statement referred to was marked " Exhibit No. 535 " and is
included in the appendix on p. 1542.)
Mr. Hiss. This shows a total of salaries received from the period
1925 to 1933 up to December 1 of that year of $783,521.12 and total
bonuses over the same period of $770,238.86.
Are you familiar with the original technical staff of the Pratt &
Whitney Aircraft as set up in 1925-26 ?
Mr. Deeds. I think Mr. Brown can answer that.
Mr. Brown. I can answer all the questions in connection with that.
Mr. Hiss. Mr. Deeds has already said Mr. Mead was the chief
engineer of the company.
Mr. Bkown. He was the vice president and spent most of his time
on engineering matters.
Mr. Hiss. And Mr. F. B. Rentschler was the first president?
Mr. Brown. He was the president.
Mr. Hiss. And what was your first position ?
Mr. Brown. I was the factory manager.
Mr. Hiss. Can you identify Mr. Andrew V. D. Willgoos?
Mr. Brown. Very well. Mr. Andrew Willgoos was the chief
engineer of the company.
Mr. Hiss. Do you know when ?
Mr. Brown. He first came with the company — we all went up to
Hartford together. It was August 1, 1 believe, 1925.
Mr. Hiss. And you first joined the company at the same time,
Mr. Brown?
Mr. Brown. Yes; I did.
Mr. Hiss. And Mr. Rentschler and Mr. Mead also ?
Mr. Brown. That is right.
Mr. Hiss. Can you identify Mr. Edwin H. Godfrey ?
Mr. Brown. Mr. Godfrey was, I believe, our chief draftsman.
Mr. Hiss. And when did he first join the company ?
Mr. Brown. He went to Hartford with us on August 1, 1925.
Mr. Hiss. And Mr. John J. Borrup ?
Mr. Brown. Mr. Borrup was our general superintendent.
Mr. Hiss. He came to the company at about the same time?
Mr. Brown. The same time.
Mr. Hiss. And William A. Willgoos ?
Mr. Brown. He joined us a little later. He did not go up with
the original group.
Mr. Hiss. Do you remember about when?
Mr. Brown. I would say it was prior to January 1, 1926.
Mr. Hiss. And Mr. Phillip Treffert?
Mr. Brown. He was one of the draftsmen,
Mr. Hiss. Do you remember when he joined?
Mr. Brown. He came with us — he was one of the original group —
I think August 31, 1925.
Mr, Hiss. All of those men, including yourself, had had consider-
able experience with aeronautical engines already, had you not?
Mr. Brown. Yes; indeed.
Mr. Hiss, With the Wright Aeronautical Co. ?
Mr. Brown. We date back further than that. This gronp first
met perhaps back around 1912 or 1913 in the Simplex Automobile
Co.
1424 MUNITIONS INDUSTRY
Mr. Hiss. Had all of the men whose names have been mentioned
been emplo3^ed by the Wright Aeronautical Corporation prior to
going witli the l*ratt & Whitney Aircraft Co.?
Mr. Brown. Yes; they had.
Mr, Hiss. Had they been employed by the Wright Aeronautical
Corporation practically up to the date that they went with the
Pratt & Whitney Aircraft Co. ?
Mr. Brown. What men are you speaking of now?
Mr. Hiss. Mr. Andrew Willgoos, Mr. Mead, Mr. Kentschler, Mr.
Godfrey, Mr. Borrup?
Mr. Brown. No. Mr. Rentschler left Wright Aeronautical about —
well, it might have been a year and a half before we started the
Pratt & Whitney Corporation in Hartford.
Mr. Hiss. May I show you a report which I will offer as " Exhibit
No. 536 ", in the form of a letter from Mr. Vaughan, president of
the Wright Aeronautical Corporation, addressed to this committee,
dated September 12, 1934.
(The report referred to was marked " Exhibit No. 536 " and is
included in the appendix on p. 1542.)
This report states that Mr. Andrew V. D. Willgoos had been chief
draftsman of the Wright Aeronautical Corporation; that he was
paid a salary until the 15th of August 1925, and left the Wright plant
on the 5th of August 1925; that Mr. George J. Mead, who had been
chief engineer of Wright Aeronautical, was paid to the 30th of June
1925, and left there on the 7th of July 1925 ; that Mr. F. B. Kent-
schler, general manager, was paid to December 31, 1924, and he left
their employ on August 30, 1924; that was a little less than a year
before the Pratt & Whitney Co. was first started.
Mr. Edwin H. Godfrey, an engineer of the Wright Aeronautical
Corporation, had left the Wright Aeronautical Corporation on the
15th of August 1925 ; that Mr. John J. Borrup, who had been super-
intendent of their experimental machine shop, had left the Wright
Aeronautical Corporation on July 31, 1925; that you had been their
materials superintendent — is that correct, Mr. Brown?
Mr. Bkown. Yes.
Mr. Hiss. And had left the Wright Aeronautical Corporation on
July 31, 1925.
That Mr. William A. Willgoos, described as a foreman of the
"Wright Aeronautical Corporation, had left their employ on the 19th
of December 1925 ; and that Mr. Phillip Treffert, a draftsman of the
Wright Aeronautical Corporation, had left their employ on the 31st
of August 1925.
That was rather a complete technical set-up, was it not, Mr.
Brown ?
Mr. Brown. Why, it was the group that was together in the
Simplex Automobile Co. We started there as boys and probabh''
can claim a little credit for putting the first aircraft engine into
production in the United States.
Mr. Hiss. You will note that Mr. Vaughan in his letter says in the
first sentence :
It will be noted that practically the entire executive and supervision personnel
are included.
That is of the Wright Aeronautical Corporation?
MUNITIONS INDUSTRY 1425
Mr. Brown. I wish to question some things here. [Referring to
" Exhibit No. 536."]
Mr. Hiss. Certainly, please do.
Mr. Brown. Take my own case. I note that it says that I cleared
July 31, 1925. I believe that I cleared there about the 15th of July.
Mr. Hiss. It also says that you were paid up to the 31s-t of July.
Mr. Brown. Yes. They paid me my vacation ; that was coming to
me ; and as far as Mr. Willgoos is concerned
Mr. Hiss. Which Mr. Willgoos?
Mr. Brown. Andrew V. D. Willgoos; I am sure that this is not
quite correct, because, if my memory serves me properly, Mr. Will-
goos left before I did.
Mr. Hiss. At the time that the Pratt & Whitney Aircraft Co. was
formed, had the United States Navy been developing an air-cooled
aviation engine, Mr. Brown ?
Mr. Brown. Oh, yes. We were developing several air-cooled
engines.
Mr. Hiss. The committee has been furnished a statement by the
Navy Department, which I will offer as " Exhibit No. 537 ".
(The statement referred to was marked " Exhibit No. 537 " and is
included in the appendix on p. 1543.)
Mr. Hiss. This statement shows that as far back as October 9,
1923, a contract for the development of a 400-horsepower air-cooled
radial engine had been entered into with the Wright Aeronautical
Corporation, the total amount of the contract being for $118,240.18;
that was a sizable development contract, was it not, Mr. Brown?
Mr. Brown. Oh, I would not say so. I would say that the de-
velopment of an ens'ine of that type might well run into a half a
million dollars.
Mr. Hiss. On June 20, 1925, before the Pratt & Whitney Co. was
formed, a further contract for the development of engines of 350
horsepower was let to the Wright Aeronautical Corporation involv-
ing a total sum of $90,773; and on July 21, 1925, the day before the
Pratt & Whitney Aircraft Co. was formed, but after the contract
entered into between the Pratt & WTiitney Co., the Niles-Bement-
Pond subsidiary, and Mr. Rentschler and Mr. Mead, a further con-
tract for the development of 400-horsepower air-cooled engines was
let involving a total sum of $204,750.
I will offer as " Exhibit No. 538 " an excerpt from an article in the
Journal of the American Society of Naval Engineers
Mr. Brown. Pardon me, may I ask why you did not include that
last contract for $47,534, which was the modification of the P-2
engines here ?
Mr. Hiss. No particular reason, if you would like to read it into
the record, Mr. Brown.
'Mr. Brown. It is on the exhibit.
Mr. Hiss. That is right.
Mr. Brown. I thought perhaps you would like to have it in the
record.
Mr. Hiss. I will offer as " Exhibit No. 538 " an excerpt from an
article by Commander Eugene E. Wilson, who, according to a state-
ment of the Navy, was, in August 1927, head of the Design Division
of the Bureau of Aeronautics.
1426 MUNITIONS INDUSTRY
(The article referred to was marked " Exhibit No. 538 " and is
included in the appendix on p. 1543.)
Mr. Hiss. The article is from volume 39, page 537 of the journal
of the American Society of Naval Engineers and the article is
headed "American Aircooled Aircraft Engines." The quotation
from page 538 says :
The Pratt & Whitney " Wasp " engine * * *
Was that the 400-horsepower engine?
Mr. Brown. That w^as our first engine.
Mr. Hiss (continuing) :
was designed in detail by Mr. George J. Mead in close cooperation with the
Bureau on one hand and Mr. Vought on the other.
That is Mr. Chance Vought?
Mr. Brown. Yes.
Mr. Hiss. Who later was the president of the Chance Vought
Corporation, a subsidiary of United Aircraft?
Mr. Brown. That is right.
Mr. Hiss (reading) :
For the first time in our history, the airplane builder and the engine builder
cooperated in such details as the method of mounting the engine, the location
of the accessories, the form of the engine for best aerodynamic arrange-
ment, etc.
Mr. Brown, prior to your leaving the Wright Aeronautical Cor-
poration, and while these three contracts that have been described
in " Exhibit No. 537 " were in effect, was the Wright Aeronautical
Corporation engaged in designing a 400-horsepower air-cooled
engine ?
Mr. Brown. I do not know. My work had to do with the manu-
facturing division and I could not answer that question.
Mr. Hiss. They had had these contracts, according to the Navy?
Mr. Brown. According to this, they had.
Mr. Hiss. And Mr. Mead had been the general manager, had he
not?
Mr. Brown. Oh, no.
Mr. Hiss. Mr. Rentschler had been the general manager ?
Mr. Brown. Mr. Rentschler had been the general manager.
Mr. Hiss. Mr. Mead had been the chief engineer?
Mr. Brown. It may interest you just to add a little something to
this paper that Mr. Wilson read before the society. At that time it
was rather accepted throughout the aircraft-engineering companies
that a 400-horsepower engine could not be developed. Just why the
Wright Co. could not develop the 400-horsepower engine I do not
know. But we did.
Mr. Hiss. The Wright Co. now makes the 400-horsepower engine,
does it not?
Mr. Brow^n. I believe they have one of their engines stepped up
now into the 400-horsepower class. But it was not this engine that
was referred to in this exhibit.
Mr. Hiss. May I call your attention to a further quotation in this
article by Commander Wilson, which appears on page 537 of the
Journal :
In the summer of 1925 Mr. F. B. Rentschler organized the Pratt & Whitney
Aircraft Co., Hartford, Conn., for the express purpose of accelerating the de-
i
MUNITIONS INDUSTRY 1427
velopinent of the 40{)^hoi-sepowei' engine. Mr. George J. Mead, who had wide
experience witli the Wright Aeronautical Corporation in the manufacture of
Whirlwind engines for that corporation, became chief engineer. The Pratt &
Whitney Co. started out with a clean slate. Mr. Rentschler's experience in
the aeronautic world was unexcelled.
Commander Wilson, according to a letter of September 11, 1934,
addressed to Senator Nye from Mr. Roosevelt, the Assistant Secre-
tary of the Navy, was head of the engine section of the Bureau of
Aeronautics in the Navy Department from April 1, 1924, until
December 13, 1926, when he became head of the design division, the
engine section being a part of the design division. I will offer this
letter in the record as "• Exhibit No. 539 ".
(The letter referred to Avas marked "Exhibit No. 539" and is
included in the appendix on p. 1544.)
Mr. Hiss. Continuing with Mr. Wilson's record in the Navy De-
partment, for 3 months, October 12, 1926, until December 12, 1926,
he was at Pensacola as a student naval aviator.
Then, on October 21, 1927, he was detailed to join the battle force.
This letter says :
As head of the engine section, Commander Wilson's duties were primarily
related to the development of new and better engine designs and their incor-
poration into naval airplanes. Procurement of engines as such was handled
by the procurement division, aiso a part of the material branch. As develop-
ment and design cannot be separated wholly from procurement, Commander
Wilson, as the officer in charge of Uil engine section, was one of several officers
concerned in any matter relating to the procurement of new types of engines.
The organization of the Bureau of Aeronautics was such that no subordinate
officer had complete jurisdiction over procnr'^ment matters.
Commander Wilson has always ocen very favorably impressed
with the Pratt & Whitney engine, has he not?
Mr. Brown. Commander Wilson has been very favorably im-
pressed with any good aircraft development.
Mr. Hiss. On page 2 of this letter from Mr. Roosevelt, beginning
with the paragraph headed (a), the following summary of the records
of the Navy Department is given :
(a) April 1924 to July 25 (and subsequently). Bureau Aeronautics as lead-
ing exponent of air-cooled engines continued its endeavors to procure from the
Wright Aeronautical Corporation, only manufacturer of large air-cooled engine
of military size in the United States, improved, and larger engines.
(h) July 1925, the Pratt and Whitney Aircraft Company was formed. Pro-
ceeded with manufacture of a sample 400' HP engine. Informed Bureau of
Aeronautics what they were doing and ascertained probable naval require-
ments as to a suitable engine. Continued this development until January 1926,
when sample engine was placed on test and was successful. Test witnessed
by a naval representative. During this whole period — July 19-:5 to January
1926 — there was the usual cooperation which the Navy Department extends
to any manufacturer who is endeavoring to develop a product in whicli the
Department is interested and which ultimately is to be submitted for naval
uses.
(c) In March 1926, the first Navy contract was placed with the Pratt &
Whitney Company for six engines. These engines were delivered in the summer
of 1926. In June 1926 an additional contract was placed for four (later
increased to six) engines.
(d) May 1926, files show an internal memorandum from Commander Wilson
pointing out that the new, 400 HP, Pratt & Whitney engine had passed success-
ful bench tests and was undergoing flight tests and recommending that the pro-
gram for Navy airplanes for the year 1927 be based on including a number of
these large engines. He pointed out the superior performance that would be
obtained for naval airplanes through the use of this engine. This memorandum
83876— 34— PT 6 2
1428 MUNITIONS INDUSTRY
was commented upon by various officers in tlie Bureau, some of whom showed
skepticism as to the proof up to that time that the Pratt & Whitney engine
was reliable. Discussion and negotiations continued for several months with
the result that two hundred additional 400 HP Pratt & "Whitney engines were
ordered and incorporated in naval airplanes.
According to the next page, that 200 contract was placed on Octo-
ber 5, 1926, at a unit price of $9,245.
Mr. Brown. I thought that was $8,750, but we will accept those
figures as correct.
Mr. Hiss. This letter from Mr. Koosevelt continues :
Development and perfection of Pratt & Whitney engines have continued
since 1927, until now it is considered there are at least two manufacturers in
the air-cooled engine field that are in a position to produce engines in various
sizes which meet the Navy's requirements.
During the year 1926, do you remember what proportion of your
company's business was done with the United States Navy, Mr.
Brown ?
Mr. Brown. The percentage of our business? I have it here.
Senator Bone. That is the Pratt & Whitney Co.?
Mr. Hiss. The Pratt & Whitney Aircraft Co., the engine manu-
facturers.
Mr. Brown. Yes ; we have it in the record here.
Mr. Hiss. The question is, what proportion of the Pratt & Whitney
business in engines was done with the United States Navy in the
year 1926 ?
Mr. Bkown. 100 percent.
Mr. Hiss. You sold to no other customer than the United States
Navy ?
Mr. Love. Might I state that it was impossible to sell to anybody
else, when the whole production was taken up with their orders.
There was nothing available for other orders.
Mr. Hiss. In 1927, what was the percentage?
Mr. Brown. 80.7 percent.
Mr. Hiss. Referring back to the letter from Mr. Roosevelt, " Ex-
hibit No. 539," to Senator Nye, the Navy informs the committee that
on January 18, 1930, Commander Wilson resigned from the United
States Navy.
I have here a letter of September 12, 1934, from Commander Wil-
son's secretary in response to a letter of September 6, by Mr. Raush-
enbush, the secretary of the committee. Commander Wilson's secre-
tary answered in Commander Wilson's absence. She states, " He is
on an extended business trip."
I will offer the letter from Commander Wilson's secretary as
" Exhibit No. 540 " and the letter to which that is a response as
" Exhibit No. 541."
(The letters were marked as indicated, respectively, " Exhibits
No. 540 and No. 541 " and are included in the appendix on pp. 1546
and 1547.)
Mr. Hiss. Question B in the letter of September 6 from Mr.
Raushenbush to Commander Wilson was :
The date on which you accepted employment with United Aircraft & Trans-
port Corporation or any of its subsidiaries.
The answer, under the heading B was January 18, 1930, which
is the date that Mr. Roosevelt informs the committee that Com-
mander Wilson resigned from the United States Navy.
JNCUNITIONS INDUSTRY 1429
Senator Clark. This was the same Commander Wilson who had
been head of the Design Division of the Bureau of Aeronautics?
Mr. Hiss. Commander E. E. Wilson; that is correct. That is
correct, is it not, Mr. Brown ?
Mr. Brown. That was several years subsequent to the time he was
in the design section. Right here I think I would like to read
Mr. Wilson's answer to Mr. Delaney, which is found on page 742
of the report of their hearings :
Mr. Delaney. Mr. Wilson, will you give a short resume of your duties while
you were connected with the Navy?
Mr. Wn-SON. I was ordered to the Bureau of Aeronautics in May 1924 as
head of the engine section and as a relief to Lieutenant Commander B. G.
Leighton. At that time there was very little experience in the Navy here in
aircraft-engine development. I have had no real previous aeronautical en-
gine experience. Commander Leighton turned over to me a new project involv-
ing the development of air-cooled aircraft engines, and up until that time there
had been practically no production of air-cooled engines in this country.
Commander Leighton was one of the pioneers in this field. He had pioneered
it in the face of a lot of inertia and opposition.
Mr. Hiss. In the letter of September 6 to Mr. Wilson, question C
was:
Inclusive dates of employment with each subsidiary company.
The answer is that from February 1, 1930, to December 31, 1931,
he was with the Hamilton Standard Propeller Co., which was a
wholly owned subsidiary of the United Aircraft & Transport Corpo-
ration; is that right?
Mr. Brown. That is right.
Mr. Hiss. Do you know what his position was with that company ?
Mr. Brown. He was president.
Mr. Hiss. And from April 17, 1930, to December 22, 1931, he
was with the Sikorsl^ Aviation Corporation, which was 99 percent
controlled by United Aircraft & Transport Corporation. AVliat was
his position with that company ?
Mr. Brown. I believe he was president.
Mr. Hiss. And from February 1, 1931, to date, he has been with
the Chance Vought Corporation, which is a hundred percent owned
subsidiary of the same corporation?
Mr. Brown. That is right.
Mr. Hiss. What was his position with that company?
Mr. Brown. President.
Mr. Hiss. He is still president of the Chance Vought Corporation?
Mr. Brown. He is still president of the Chance Vought Corpora-
tion ; yes.
Mr. Hiss. This paragraph (D) shows salaries received for each
employment to date. The total salaries received from United Air-
craft & Transport Co., and the other companies. Commander Wil-
son began in January 1930, and in the first year Aircraft & Transport
paid him $4,166.67; Hamilton Standard Propeller Co. paid him
$14,999.98; Sikorskv Aviation Corporation paid him a salary of
$10,000.
Do you know what his position was with the parent company,
the United Aircraft & Transport Corporation, who paid him $4,166?
Mr. Brown. I do not.
Mr. Hiss. 1931, Commander Wilson received a salary of $11,250
from the Hamilton Standard Propeller Co., a salary of $6,250 from
1430 MUNITIONS INDUSTRY
the Sikorsky Aviation Corporation, and a salary of $12,500 fronii
the Chance Vought Corporation.
In 1932 he received a salary of $33,500 from the Chance Vought
Corporation, and in 1933 he received a salary of $33,600 from the
Chance Vought Corporation and, up to August 31, 1934, he had re-
ceived a salary of $21,600 from the Chance Vought Corporation.
That is approximately at the $33,000 rate.
Mr. Brown. I believe Mr. Wilson in 1931 — I will be glad to check
that up — but I believe that he was president of the Hamilton
Standard Propellar Co., and the Sikorsky Aviation at the same
time, holding two jobs.
Mr. Hiss. Yes; according to the statement C, that is correct.
Mr. Brown. Oh !
Mr. Hiss. From February 1, 1930, to December 31, 1931, he was
with the Hamilton Standard Propeller Co.
Mr. Brown. Yes, sir.
Mr. Hiss. And overlapping from April 17, 1930, to December 22^
1931, he was with the Sikorsky Aviation Corporation, he was
with both companies at once, ancl he was with Chance Vought for
an overlapping period. So that for a while he was with all three
companies, and now he is simply president of the Chance Vought
Corporation. Is he also a director of the parent corporation. United
Aircraft & Transport?
Mr. Brown. Yes; he is.
Mr. Hiss. " Exhibit No. 542 " is a letter of January 20, 1934, ad-
dressed to Senator Hugo Black, who was then chairman of the com-
mittee investigating the air-mail contracts. This was a letter
written by a Mr. Albert A. Kennett, of 5 Winter Street, Hartford^
Conn.
(The letter referred to was marked " Exhibit No. 542 " and is-
included in the appendix on p. 1547.)
Mr. Hiss. That letter reads in part as follows :
Have been following your aviation Investigations. Am pleased to note you.
plan to continue.
I am well acquainted with the early development of the P. & TV. Aircraft
Company, doing research work from May 1926 to June 1929.
Do you remember who Mr. Kennett was ?
Mr. Brown. I do not know Mr. Kennett, and I do not see how
he can really back up some of the statements which he has made
in the opening paragraph.
Mr. Hiss (continuing reading) :
Being only a workman holding no office position, I am unable with any
proof to be able to help you. I believe you are doing a much-needed job.
P. & W. motor plans were made from certain Government specifications.
Mr. Brown. That statement is incorrect.
Mr. Hiss. The United States Navy Department was at that time,,
was it not, Mr. Brown, developing
Mr. Brown. When we get to talking about Government specifica-
tions, and so forth, I do not want to confuse this committee, that
the United States Government told us exactly how to build this-
engine. This engine was created by our engineers.
Mr. Hiss. The record already shows that it was done in clos&
cooperation with the Bureau.
Mr. Brown. That is true.
I
MUNITIONS INDUSTRY 1431
Mr. Hiss (continuing reading) :
In 1925, and earlier, the Navj^ Department had been encouraging air-cooled
developments.
Is that statement correct?
Mr. Bkown. The Navy has always done that.
Mr. Hiss (reading) :
At tliat time Wrights had a successful motor, an air-cooled fixed radial, and
its design was basically copied by P. & W.
Is that sentence correct, Mr. Brown?
Mr. Brown. I will challenge that statement to the world.
Mr. Hiss (reading) :
Only two major changes were made. It was larger, the HP doubled and hav-
ing a supercharger. Just a few months earlier Mr. Rentschler had been prac-
tically forced out of Wrights. So with his pull in the Bureau of Aeronautics
•or Navy Department, he then arranged to form a company, having subordinates
from Wrights, who were naturally familiar with this type of air-cooled motor.
This P. & W. motor was built and tested secretly. The Wrights Co. had no
knowledge of this motor, its size, or design, although perhaps certain ones in
the Navy Department knew. Maybe for being a good key man, Mr. E. E.
Wilson landed his later connection with the Chance-Vought Co. You will find
xaany former Government men holding good jobs now on all the United Air-
craft Divisions.
Have the United Aircraft & Transport Corporation given
former United States employees jobs?
Mr. Brown. Gentlemen, 1 want to appeal to your fair judgment.
Are we going to permit reading into the record of this committee
the rambling of a person who does not know a thing about the
business ?
The Chairman. Who is the person ?
Mr. Brown. He is Albert A. Kennett. If he is a responsible
workman, I do not know him. If he held any official job in our
organization, I would know him. I think this is unfair.
Mr. Hiss. Mr. Chairman, this is an unsolicited letter, sent to Sen-
ator Hugo Black under date of January 20, 1934, by Mr. Albert A.
Kennett, who describes himself as a workman.
Senator Vandenberg. Does anybody know who he is, other than
that?
Mr. Hiss. Mr. Brown is unable to identify him.
The Chairman. Mr. Deeds, did you know him?
Mr. Deeds. I did not.
The Chairman. I see no objection to the witness' being examined
as to the charges which are made within the letter. Certainly now
is a good time, if there is a good time, to deny or affirm whatever
may be incorporated within the letter. Proceed, Mr. Hiss.
Mr. Hiss. The last sentence of the letter, which I will read, Mr.
Brown, states:
You will find many former Government men holding good jobs now on all
the United Aircraft divisions.
Are there former United States Navy or United States Army or
United States Navy or Army Keserve men there ?
Senator Bone. We might pause to interrogate. Is it true that
there are former Government men employed by United Aircraft &
Transport ?
Mr. Brown. Yes ; that is true.
1432 MUNITIONS INDUSTRY
Senator Bone. Go ahead, Mr. Hiss.
Mr. Hiss. On page 600, Senator Bone-
Mr. Brown. Would you like to know who they are ?
Mr. Hiss. Yes, sir. I was going to refresh your recollection if
you do not know.
Mr. Brown. If my memory serves me correctly, Mr. Raycroft
Walsh, president Hamilton Standard Propeller Co., and Mr. Fred
Nielson, president of Sikorsky.
Mr. Hiss. And Commander Wilson?
Mr. Brown. And Commander Wilson.
Senator Clark. Can you tell what the former Government con-
nections of those gentlemen were, Mr. Brown ?
Mr. Brown. No ; I do not believe I could give it accurately.
Senator Bone. Were they in the military or naval divisions of the
Government ?
Mr. Brown. Mr. Walsh was, just prior to coming with us, with the
Cheney Silk, and I believe that away back several years ago he was
in the United States Air Corps.
Mr. Hiss. Mr. Nielson was a former lieutenant commander, was
he not?
Mr. Brown. Yes ; he was. I think from his record here before the
Delaney committee you might be able to get his personal history.
Mr. Hiss. Do you know when he first came with the Sikorslr^' Co. ?
Mr. Brown. I do not.
Mr. Hiss. According to the transcript of hearings before the Sub-
committee on Aeronautics, Committee on Naval Affairs, page 600, in
the statement furnished by the Navy Department to the committee^
Lt. Comdr. F. W. Nielson resigned from the Navy on June 24, 1930.
The next paragraph in Mr. Kennett's letter reads as follows :
I believe in 1926 the Government gave P. & W. $100,000 to use in researcli
work * * *.
Did you have any research contracts with the United States Navy,
development contracts ?
Mr. Brown. They were not research contracts, if we did have a
contract.
Mr. Hiss. Were they development contracts?
Mr. Brown. We will see from the record [examining document].
Excuse me for delaying a little bit. No; I have not that informa-
tion here.
Mr. Deeds. Was not that information in one of the previous
exhibits ?
Mr. Hiss. That merely referred to the contracts for the purchase
of engines. Whether they were the same as the contracts her©
referred to, I do not know.
Mr. Deeds. I can answer that question, that they were.
Mr. Hiss. The exhibit was No. 539. Have you a copy of that
exhibit before you, Mr. Deeds ?
Mr, Deeds. I do not. This is the list of contracts furnished by
the Navy Department.
These are the contracts which must have been referred to in this
correspondence, because we had no other contracts then calling for
the delivery of such engines.
Mr. Brown. Those contracts were received after we had developed
the engine.
MUNITIONS INDUSTRY 1433
Mr. Deeds. After we had passed a test.
Mr. Brown. Passed the Navy test.
Mr. Hiss. This letter continues [reading] :
$75,000 in 1927 and same in 192S—
That is, that the Government gave that for research work.
All in all cannot see where P. & W. venture was of any "chance " nature.
My wages were low in those good times. The Wasp 450 hp. sold in 1929,
approximately $5,000, and today with cheaper materials, etc., this motor sells
for approximately the same, and P. & W. wages are as low as forty cents an
hour. They take a profit from both ends.
Mr. Brown. The wages of the employees of the Pratt & Whitney
Aircraft Co. are the highest in the Hartford district.
Senator Bone. What are they?
Mr. Brown. They average around
Senator Bone. What are you paying mechanics or machinists?
Mr. Brown. From 65 cents to 90 cents an hour.
Senator Bone. Is there a 40-cent wage for mechanics ?
Mr. Brown. Not for mechanics.
Senator Bone. What class of workman gets 40 cents an hour?
Mr. Brown. A helper or a student.
Senator Bone. Do you pay union scales of wages?
Mr. Brown. I do not know what the unions' scales of wages are.
Senator Bone. I was wondering if you knew.
Mr. Brown. I think our wages are all jDrobably
Senator Bone. That is a recognized scale in most communities.
Mr. Brown. We are higher than the average rate in Hartford.
Mr. Hiss. In the final paragraph of the letter, " Exhibit No. 542 ",
it states:
If this " pull " business is cut out the Government then won't be doling out
millions to uiillionaires. And under proper competitive bidding you no doubt
will get a better product. It is possible.
Wishing you all success,
Sincerely,
(Signed) Albebt A. Kennett.
5 Winter Street, Hartford, Conn.
Ml*. Brown. I did not know there was such a thing as " pull " in
getting Government business. If you have anything to sell in which
the Government is interested, and it is a quality article, why, you can
find sales for your products. I am talking now about aircraft.
UNITED AIRCRAFT COMPANIES' POLICY WITH REGARD TO COMMISSIONS IN
CONNECTION AVITH FOREIGN SALES
Senator Vandenberg. Mr. Brown, I understand that United Air-
craft Exports, Inc., since 1929, handled all the export business of
equipment, parts, and supplies for your company or subsidiaries.
Is that correct?
Mr. Brown. Would you mind having Mr. Love answer those
questions, because I am not as familiar with it as he is.
Senator Vandenberg. Very well.
Mr. Love. That is true, with the exception of Canadian business.
Senator Vandenberg. I wanted to ask Mr. Brown because of his
larger familiarity with the whole picture. Just speaking roughly,
1434 MUNITIONS INDUSTRY
what percentage of your total operation, in all aspects, would be
export business?
Mr. Brown. I do not know.
Senator Vandenberg. Is it a large factor, or not?
Mr. Brown. It has been small.
Senator Vandenberg. The domestic trade far overshadows the ex-
port trade?
Mr. Brown. Yes; indeed.
Senator Vandenberg. Speaking generally, is the export trade a
profitable trade compared to the domestic trade?
Mr. Brown. Mr. Love would have to answer that question for you.
Mr. Love. It is.
Senator Vandenberg. It is a profitable trade?
Mr. Love. Yes, sir.
Senator Vandenberg. Is the cost of doing business in the export
trade greater than doing business in the domestic field?
Mr. Love. I do not think so.
Senator Vandenberg. We are greatly interested in the competitive
conditions in the world armament market, and I want to ask you to
help us with a little information on this subject.
(Handing paper to witness) I show you a letter from Clark M.
Carr, to the United Aircraft Export Co., from Bolivia, dated Feb-
ruary 26, 1934. I will offer that as " Exhibit No. 543."
(The letter referred to was marked " Exhibit No. 543 " and is in-
cluded in the appendix on p. 1548.)
Senator Vandenberg. Who is Mr. Carr?
Mr. Love. He is a salesman operating in South America.
Senator Vandenberg. I call your attention to the last paragraph
of that letter, in which he seems to be questioning that it is impos-
sible for a South American agent to do a plane business on a 21/2-
percent basis. Would you say that Mr. Carr is correct in suggesting
that the cost of doing business in South America might be greater
than elsewhere?
Mr. Love. He does not sa}^ that.
Senator Vandenberg. I am asking you whether that would be your
observation.
Mr. Love. No ; and I think it is about equal everywhere.
Senator Vandenberg. Now, I show you Mr. Carr's letter of March
20, 1934, addressed to United Aircraft Exports, Inc., which I will
ask to have marked " Exhibit No. 544."
(The letter referred to was marked " Exhibit No. 544 " and is
included in the appendix on p. 1549.)
Senator Vandenberg. Mr. Carr in that letter is still discussing this
matter of Bolivian commission. You are being apprised again of
the high cost of doing business in this South American area. Let i
me read the fourth paragraph of that letter to you [reading] :
I have been emphatically informed on several occasions that this company j
does not sanction and takes no oflBcial coccnizance of extraordinary sales ex-
penses that its agents incur endeavoring to have orders accorded them.
When you instruct your agents what do you mean by " extraor-
dinary sales expenses "? Does that have any particular significance?
Mr. Love. Yes. sir. Almost everywhere when we go out to sell
there are a number of self-appointed commission men who come
MUNITIONS INDUSTRY 1435
around and solicit or pretend to have inside information on con-
tracts or something of the sort, and ahnost invariably we refuse to
have anything to do with them at all. We have told Carr that we
would not tolerate any such thing on several occasions. I know from
personal experience in Bolivia only a few months ago that this is
completely and entirely unnecessary. I had no trouble whatsoever
only a few months ago, just before the embargo, going in and going
right to the Government office and making my proposals in a per-
fectly open and aboveboard way.
Senator Vandenberg. Is there any significance in Mr. Carr's sug-
gestion as to instructions in connection with " taking no official
cognizance "? Does that invite the inference that " unofficial cogni-
zance " is something else ?
Mr. Love. No ; I do not know exactly what he means there, Sena-
tor, because he has a habit of writing very loose and careless letters,
about which we have been scolding him very many times. I do not
know what he means.
Senator Vandenberg. I will read the next paragraph of the letter :
I have likewise been instructed to refrain, whenever possible, from making
direct reference to this condition in my oflScial correspondence.
What does he mean by that?
Mr. Love. As stated in the previous paragraph, we will not tolerate
such a thing, and we do not want him even to write us about it and
propose it.
Senator Vandenberg. You never indicated to any of your agents
that official cognizance and unofficial cognizance were two different
things ?
Mr. Love. That is a wording of his own, which I cannot explain.
Senator Vandenberg. What I am getting at is that your files are
singularly free of any of the usual letters referring to commissions
or to other external influences.
Mr. Love. Senator, I might explain that by saying that for 30
years I have been doing business in South America, the Far East,
and Europe, and perhaps am one of the oldest exporters there is. I
do not concur in any of those statements which have been made
here — I won't say any of them, but most of them — that such practice
is necessary. If you will permit me to give you two or three ex-
amples. Will you allow me?
Senator Vandenberg. Proceed.
Mr. Love. The name of General Azcarate was brought out here,
and his probity was inpugned and attacked. I have done business
with General Azcarate for more than 5I/2 years. I have visited him
in Mexico and he has visited me in New York. Every transaction
we have made with him has been absolutely clean and there has never
been a penny of commission involved. I consider General Azcarate
an absolutely loyal soldier of the Mexican Army,
The same thing is true of the Commander Merino. I have done
business with Commander Merino in Chile and I have met him in
New York. There has never been in any of our transactions any
kind of even an insinuation of special commission or any " chiseling.^'
The same thing is true of Captain Zar, of Argentina. I have done
business with Captain Zar over 5 years, and we are in negotiation
now. There has never been the slightest indication of a commission
or anything else, in any way, nor has anything been paid.
1436 MUNITIONS INDUSTRY
I think it is an absolute outrage that careless, foolish letters from
irresponsible salesmen should be allowed to be published, when the
facts are absolutely otherwise, from my personal, positive laiowledge.
Senator Vandenberg. When you have dealings with these gentle-
men upon export orders, all of your dealings are direct and do not
involve the intermediary action of any of these South American
agents ?
Mr. Love. I think your question is a little involved. In Argentina
we have never had an agent. We have dealt direct. I have gone
there myself on many occasions. In Chile we had an agent for a
certain time, a regular appointed agent, and that is all. He got a
nominal commission. I do not recall what it was, but possibl}^ 3 to
5 percent. I do not remember that. In Mexico we have had no
agent. All my dealings have been direct. In fact, only last fall
I was in Mexico negotiating a deal directly with two or three gen-
erals in charge of aviation, and other matters, and I explained to
them that I was pestered with a lot of " coyotes " in Mexico (with
chiselers) coming around pretending influence, which they have not
got at all, and we have had nothing to do with them. I have never
had anything to do with them in all of my experience in Mexico and
would not now, and the officers thoroughly agreed with me on it.
Senator Vandenberg. How long has Mr. Carr been connected with
your company?
Mr. Love. Approximately a year and a half.
Senator Vandenberg. Would you call him irresponsible ?
Mr. Love. I rather imagine his services could be dispensed with.
I would rather call your attention also to the fact that Mr. Carr with
all of his pretenses here has not sold one single airplane for us in a
year and a half.
Senator Bone. Would you consider a man an irresponsible agent
of the company who was a high official of the company, writing to his
own company and suggesting greasing?
Mr. Love. I certainly disapprove oi it. It has never been done
in our office.
Senator Bone. You are referring to him as an irresponsible agent,
and I think you could hardly charge one of your own executives of
your company with being an irresponsible agent,
Mr. Love. I might modify the word " irresponsible."
Senator Bone. He would hardly be an agent; he is a principal.
Mr. Love. He is not conducting business the way we think neces-
sary.
Senator Bone. He is not conducting business the way you would ?
Mr. Lo\TE. No, sir.
Senator Bone. You do not mean to intimate that he is not an
agent of the company?
Mr. Lo^^. When I said " irresponsible agent ", I had in mind
perhaps two or three men we had had.
Senator Bone. I thought perhaps you had reference to other
companies than your own?
Mr. Love. No ; I would not make such an inference.
Senator Vandenberg. Then, Mr. Carr's further statement in this
letter — and I want it definitelj' understood when I read it I do not
intend to refer to any of the personnel which we have been discussing
MUNITIONS INDUSTRY 1437
previously, or any of the persons we have named — but Mr. Carr
in this letter continues, saying:
However, and whether or not we oflBcially recognize it, the condition exists.
In South American countries I do not believe that any agent can make sales
in such material as we manufacture on the commission basis you propose.
Mr. Love. That is evidence to me he is not of any value to our
company, because what I have told you is the way we have done our
business and propose to do it. His business success speaks for itself ;
lie has never sold anything for us.
Senator Vandenberg. Did you ever raise Gundlach's commission in
response to this argument?
Mr. Love. He does not refer to Gundlach; it was the previous
man we were considering as an agent named Howson. We have
adopted a standard commission of 5 percent.
Senator Vandenberg. If you will look at this letter I think you
will find it is a continuation of the argument as to whether or not
Gundlach's commission of 2i/^ or 3 percent is adequate.
Mr. Love. Very likely there he was in negotiation with Gundlach,
but Gundlach at that time was not our agent, and Carr undoubtedly
had in mind transferring the same rate oi Howson over to Gundlach.
Senator Clark. Do you suppose that Carr was looking out for
himself when you had wanted him to go to Bolivia and Paraguay to
sell equipment to those two nations, then engaged in war, and that
Carr, having consideration for his own head, refused to do it, because
he said he did not want to see the inside of a South American jail?
Mr. Love. That is a whole lot of questions, and we will take them
one by one. In the first place, I came back from China and found
he had been located in one spot doing absolutely nothing for a num-
ber of months, doing no sales work at all, and I told him to go
somewhere where there was a possibility of sales ; and then his state-
ment about risking his head is absolutely ridiculous and foolish,
because we have no trouble in selling ; they come to us and it is per-
fectly open. Do you want me to give you a concrete example ?
Senator Clark. No; will you just answer my question about this.
You wrote Mr. Carr, January 9, 1934, at La Paz, Bolivia, in which
you say to him it would be better to put in some time at La Paz and
Asuncion where there is active purchasing at this time. That active
purchasing was due to war?
Mr. Lo\'E. Yes, sir.
Senator Clark. Then, Mr. Carr writes back to you referring to
your letter 360 under date of January 1934. The first paragraph
refers to his putting in some time in two countries at present at
war, and then he adds :
Under present conditions mail censorship outgoing to the United States is
not watched so closely, while outgoing mail to southern countries is very
carefully scrutinized, etc.
And then he goes on to say that he has no desire of becoming
acquainted with a South American jail; and to my mind that does
not agree with the statement of his being an irresponsible agent.
Mr. LovE. I still consider that letter foolish, and I will give you
an example that happened to me. I was in Colombia discussing
matters with high officials, and I explained to them I was going to
Peru from there. We had made tentative arrangements with Colom-
1438 MUNITIONS INDUSTRY
bia then, with no intermediaries, no commissions, or anything else. I
told them that I was going from there to Pern, and just the previous
-day I had used the public telephone, telephoning to Peru stating
I was coming. This official said, " I have no objection at all, and all
I request is that the matter of deliveries and in the matter of prices
there be no favoritism shown." He said, "I am perfectly aware that
Skoda and other manufacturers of planes are concurrently selling
to ourselves and to Peiu." Of course they were not in an actual
state of war but were expecting it. I considered that letter abso-
lutely foolish, based on my own experience only 6 months ago.
Senator Vandenbekg. I understand then, regardless of anything
in the correspondence, the fact is that your company has never paid
•either officially or unofficially any so-called " extraordinary sales ex-
penses " of a doubtful character ?
Mr. Love. Yes ; I would say that is true.
Senator VANI)E^15ER0. I call your attention again to Mr. Carr's
letter of March 20th and to one sentence in the final paragraph on
page 3 in which he says :
During the past year (that is the year 1933 into the spring of 1934) every
important airplane company in the world had redoul>led its sales efforts in
South America.
Do you think that is a statement of fact?
Mr. Love. No, sir; I do not. I think that is an alibi for a man
•out for a year and a half that has not sold anything.
Senator Vandenberg. Is it not a fact, however, that the increase
in the belligerent atmosphere in South America did invite increased
sales efforts by all manufacturers, of not only airplanes but other
munitions makers, during the last 2 years?
Mr. Love. Yes; I should think so.
Senator Vandenberg. In other words, it is simply the inevitable
character of this business that when trouble is either anticipated or
breaks it invites an increased market ?
Mr. Love. Yes, Senator; but that does not mean necessarily that
all manufacturers go doAvn and try to force sales. We have specific
•cases there where trouble has broken out and they come to us by
cable or long-distance telephone and ask what we can furnish
promptly,
Senator Vandenberg. You would not say you had relaxed your
sales efforts in South America in the last 2 years?
Mr. Lo\TE. Well, slightly, yes; because formerly I was down there
twice a year, and I have been in the Far East the greater part of
the last year.
Senator Vandenberg. I call your attention to a letter signed by
Manuel Toro from Bogota, Colombia, addressed to United Air-
craft Exports. Inc., which I ask to be filed as an exhibit under the
appropriate number.
(The letter referred to was marlved " Exhibit No. 545 " and is
included in the appendix on p. 1560.)
Senator Vandenberg. This letter, " Exhibit No. 545 ", is dated
April 24, 1934, and I read a paragraph in the middle of the letter, as
follows :
Our friends, the Cuban pilots, contracted by the Government, have been
cooperating with us in recommending Corsairs to the various oflicials of the
MUNITIONS INDUSTRY 1439
Ministry of War. They informed the writer — and he has confirmed it — that
Mr. Love offered them some protection in the business, but we will take this
matter up with you definitely wlien we receive a firm offer for a certain number
of planes.
What does that reference to " protection" mean?
Mr. Love. The only thing I can think, the Cubans were just try-
innf to chisel in with our agents; but it is manifestly ridiculous that
I should deal with a few mercenary pilots in the country a short time
and offer them any protection or anything of the sort when, at the
same time, I am dealing with the highest oJBBcials of the Government
who have definitely assured me the next purchases will be our ma-
terial. These pilots were merely trying to chisel on an agent; that
is all.
Senator Vandenberg. That is what I am trying to get at, and I
am just trying to get a picture of it. It would be manifest, even
though you and your company never surrendered to this sort of
solicitation, you are more or less constantly beset by what you call
*' chiselers " ?
Mr. Love. That is true.
Senator Vandenberg. And Mr. Toro is incorrect when he says
you offered these particular chiselers, as you describe them, some
protection. That is incorrect?
Mr. Love. Yes, sir.
Senator Vandenberg. Who is Manuel Toro?
Mr. Love. He is our agent in Colombia.
Senator Vandenberg. Is he responsible or irresponsible?
Mr. Love. He is a very, very responsible man who has been for
many years representative of the U.S. Steel Corporation. I might
point out that no agent of ours now is appointed without a meeting
of the board in New York.
Senator Vandenberg. Did you advise Mr. Toro he was apparently
misinformed about these Cuban pilots?
Mr. Love. I do not know that I ever answered the lettef. Will
you tell me what date it is?
Senator Vandenberg. April 24, 1934.
Mr. Love. No ; at that time I was not in New York. I did not get
back until July, and I never answered the letter.
PARTICIPATION OF UNITED STATES CITIZENS, OFFICIALS, AND BRANCHES OF
GOVERNMENT IN FIELD OF FOREIGN MILITARY AVIATION
Senator Vandenberg. I will ask you whether it is standard prac-
tice to try to place American personnel — and I will say American-
trained personnel — in positions with other governments where they
naturally would favor American manufacturers? Is that a stand-
ard sales method in the export of aircraft and munitions ?
Mr. Lo\'E. I will ask Mr. Brown to correct me in this if I am
wrong, but I do not believe we were ever instrumental in placing
anyone beyond one service mechanic requested by us just to repair
and service engines.
Senator Vandenberg. Do you ever find any sales resistance in the
export field because other American companies have this type of
representation ?
Mr. luOYE. No ; I do not think so.
1440 MUNITIONS INDUSTRY
Senator Clark. You had a project on at one time for private
scholarships ?
Mr. Lo^TE. That was an idea of Carr's that correspondingly was
absolutely turned down and refused.
Senator Vandenberg. Did you have a contract in Chile at one
time in which the settlement is still incomplete?
Mr. Love. Yes, sir.
Senator Vandenberg. What are the circumstances surrounding
that episode?
Mr. Love. It is difficult to recall the exact transaction, but the
Government made a deposit in Chilian currency and there was
American exchange involved. That is a transaction at the New
York end, handled in my absence, but the money was deposited down
there to come to us, and then it was returned to them. When I was
there only a few months ago the Minister of Finance offered to make
payment to me, and then we were negotiating as to the rate of
exchange at which we would settle, and the matter, I believe, still is
under discussion.
Senator Vandenberg. When was that contract made, the one to
which we now refer?
Mr. Love. I am abroad so much I have to figure back where I was
in each year. It was about 3 years ago, I should say, when we sent
the Sikorsky down there.
Senator Vandenberg. Who got that contract for you ?'
Mr. Love. Raoul Besa.
Senator Vandenberg. Did Mr. H. B. Grow have anything to do
with it?
Mr. Love. No, sir.
Senator Vandenberg. Very well; I will come to that later. I
want to continue with this general inquiry about the practice of
placing American personnel in foreign service, and I call your atten-
tion to the following letter, which will be marked as the next exhibit
under the appropriate number.
(The letter referred to was marked " Exhibit No. 546 " and is in-
cluded in the appendix on p. 1550.)
Senator Vandenberg. This letter appears to be from Mr. Carr; is
dated November 4, 1933, and I refer to the fourth paragraph, in
which he says :
In every country visited, there seems to be an army or navy pilot who has
at one time or other gone througli tlie Curtiss School, or who has received help
from Curtiss while visiting the States and who is therefore, particularly
partial to our com'petitor's material.
That is what I am inquiring about, not onlv with resrard to vour
own activities, but respecting your competition. Is it or is it not
a fact that there is an effort to maintain American personnel in
these situations, which might affect export purchases?
Mr. Love. I think, Senator, if I might correct you, he does not
say American Army or Navy pilots, he says an Army or Navy pilot.
There are several pilots in the foreign countries who have gone
through our schools here with the permission of our Government.
They are favorable to American equipment in which they were trained.
However, it has been my experience that in these countries they
were more interested in having the most modern up-to-date equip-
ment they could get, and I never found any of them who would buy
MUNITIONS INDUSTRY 1441
an inferior or cheaper article, and the sales are usually made on
performance strictly, including economy of maintenance and repairs,
speed, altitude, and so on.
Senator Vandenbekg. Let us jump over to the Old World, and in
this connection I show you the following memorandum from your
files dated August 14, 1933, signed S. A. McClellan, addressed to
Mr. T. F. Hamilton, and which will be offered in evidence under
the appropriate number.
(The memorandum referred to was marked " Exhibit No. 547 "
and is included in the appendix on p. 1551.)
Senator Vandenberg. Who is Mr. McClellan?
Mr. Love. He is my assistant to handle things in New York while
I am away.
Senator Vandenberg. This memorandum makes reference to Cap-
tain Coon ; who is Captain Coon ?
Mr. Love. I do not know ; I never saw him.
Senator Vandenberg. I quote from this interoffice memorandum,
as follows [reading] :
A Capt. S. C. Coon called this morning, stating he had just returned from.
Turkey, where he had been working in the Government aircraft factory on
the Government pay roll, but aiding and abetting Curtiss-Wright.
What does that mean ?
Mr. Love. Apparently McClellan says Coon told him that. I do
not know Coon and I do not know what it means.
Senator Vandenberg. I call your attention to the fifth paragraph,
and I would like to say for myself that I quite agree that any
irresponsible comment is not entitled to credence, but the only way
I know of to find out what the truth is or is not, is to ask ques-
tions. So, the fifth and final paragraph of this memorandum reads
as follows:
Coon supplies interesting confirmation of the fact that Curtiss-Wright, wher-
ever possible, get foreign governments to hire U.S. experts of their recommenda-
tion. These people, of course, boom Curtiss-Wright products effectively
through the medium of their official connection.
Did you ever hear of that sort of sales-promotion effort on the
part of American companies?
Mr. Lo\TE. No, sir. I would like to say a little further on this
point that this impresses me that Coon is looking for a job, and he
is coming to us trying to tell us things he thinks we will want to
know about our competitors, trying to build his own position. If
the field was so good, why did he leave the pay roll; why isn't he
with Curtiss-Wright still? Incidentally I never saw this before,
and I would pay no attention to it at all. If you will allow me to
think a minute, I will try to think where there is any American in
control of the purchases in a foreign government.
Senator Vandenberg. Perhaps we will come to that a little later.
Your company never concluded this sort of thing was a good sys-
tem, and that you would try it?
Mr. Lo\nE. No, sir.
Senator Vandenberg. Who is L. G. True?
Mr. Deeds. He is a mechanic with Pratt & Whitney Co.
Senator Vandenberg. Who is Thomas F. Hamilton?
Mr. Love. Mr. Hamilton is the sales representative in Europe.
1442 MUNITIONS INDUSTRY
Senator Vandenberg. How long has he been your sales repre-
sentative ?
Mr. Love. About 2 years, I should say, Senator.
Senator Vandenberg. I show you this letter from True to Hamil-
ton, dated January 13, 1934, True writing from London, England,
to Hamilton, at Berlin, Germany, which letter is offered in evidence.
(The letter referred to was marked " Exhibit No. 548 " and is in-
cluded in the appendix on p. 1551.)
Senator Vandenberg. I read from this letter, " Exhibit No. 548 ",
as follows :
I am enclosing copies of a letter, together with the papers referred to, from
Capt. Staudach with reference to the contract that is to be supplied me.
Personally I do not see much sense in the contract of Johnson, some of the
clauses are not applicable in my case ; others are so worded that it appears to
me to constitute entering the military service of the Persian Government and
therefore jeopardizing my standing as an American citizen.
Who is Johnson; do you know?
Mr. Love. No, sir ; I do not.
Senator Vandenberg. Now, what kind of a contract is it that your
Mr. Hamilton would be offering Mr. True that might jeopardize his
standing as an American citizen?
Mr. Deeds. I think I can explain that. Mr. True is a service me-
chanic with Pratt & Whitney Aircraft Co., and at the time of the sale
of a number of engines for installation in British planes for use in
the Persian Army they required for their own safety, and to conduct
their operations satisfactorily, that they have somebody in the nature
of a service mechanic who was entirely familiar with the product,
and they required us to supply for them or select for them an indi-
vidual who was capable of doing that job, and they were to pay
him. The contract, which I do not know anything about in detail,
was apparently objectionable to the mechanic we selected.
Senator Clark. They wanted him to enlist in the Persian Army?
Mr. Deeds. Apparently they did, and he objected. The request
came from the Persians to us, and it is a normal requirement and
necessity that when they buy something of that kind they want some-
body who knows it.
Senator Vandenberg. In other words, as I understand you, Mr.j
Deeds, this correspondence relates exclusively to the mechanical
phase of operation and has nothing to do with sales?
Mr. Deeds. That is correct.
Senator Vandenberg. Now, you finally got Mr. True straightenedj
out with respect to his citizenship and he went to Persia ; did he not?
Mr. Deeds. Yes.
The Chairman. Was Captain Coon employed by you in any
capacity ?
Mr. Love. No, sir; I never met the man and never saw his name
before just now.
The Chairman. Do you know whether or not he was actually
employed by the Curtiss-Wright Corporation?
Mr. Love. No, sir ; I do not.
The Chairman. Mr. Hiss, what record is there revealing Captain
Coon's possible employment by Curtiss-Wright?
Mr. Hiss. From information furnished by the State Department
we understand Mr. Coon was in charge of the factory at Kayseri,
MUNITIONS INDUSTRY 1443
Turkey, which was a Turkish factory. Curtiss gave Turkey a license
to manufacture planes in that factory, and Coon was in charge of
that factory.
The Chairman. Was there any evidence revealing that Curtiss-
Wright had a hand in employing him there ?
Mr. Hiss. I believe there is evidence that Turkey consulted Curtiss-
Wright with respect to certain personnel and that Captain Coon was
included in that.
Senator Vandenberg. Now, Mr. Love, I hand you a letter dated
February 6, 1934, from Mr. True in London, England, addressed to
Mr. Runyon, which letter will be filed as an exhibit under its
appropriate number.
(The letter referred to was marked " Exhibit No. 549 " and is in-
cluded in the appendix on p. 1552.)
Senator Vandenberg. Who was Mr. Runyon to whom this letter,
" Exhibit No. 549 ", is addressed?
Mr. Deeds. Mr. Runyon was one of the assistants in the service
department of the Pratt & Whitney Aircraft Co. ?
Senator Vandenberg. Mr. True now appears to be preparing to
go to Persia, and I call your attention to the paragraph at the
bottom of page 2 of this letter, " Exhibit No. 549 ", which reads as
follows :
I understand that practically every letter that I write after I get into
Persia will be censored. Therefore, do not expect any too much information
other than technical data on what is going on. I will try to arrange some
method with the American Legation whereby I can occasionally get a message
through in the diplomatic pouch. I will send you my Persian address in a
day or two.
Do you know whether he ever used the diplomatic pouch for
correspondence ?
Mr. Deeds. I do not.
Senator Vandenberg. That would be a violation of the diplomatic
privilege, would it not?
Mr. Deeds. I cannot answer that question.
Senator Vandenberg. Well, it is obvious that it would. Now, the
fact of the matter is that you were also interested in finding a way of
assuring secrecy in some of your own communications to True when
he got there.
Mr. Deeds. I have never had any negotiations with True, and I
(Jo not know what might have transpired between our foreign
representative and Mr. True.
Senator Vandenberg. I call your attention to the following let-
ter of date April 4, 1934, from McClellan to Hamilton, which letter
will be the next exhibit under its appropriate number.
(The letter referred to was marked " Exhibit No. 550 " and is in-
cluded in the appendix on p. 1553.)
Senator Vandenberg. This letter, " Exhibit No. 550 ", appears to
be a report from Mr. McClellan, who. as I understand, is assistant to
the president of your corporation, and is addressed to Mr. Hamilton,
who, as I understand, is your agent in Berlin. I read from this
exhibit as follows :
I have just been over True's report of February 6th. I assume that at
this time the whole matter of True's contract has been straightened out, so
will not discuss this matter any fui-ther.
8;;S7G— 34— PT 6- 3
1444 MUNITIONS INDUSTRY
I have noted in the second page of Tine"s letter that he believes all his
mail will be censored. I aiu wondering if the reverse might be trne of any
letters we would be sending to him. I can foresee there might be certain
information we would want to give True, possibly a warning of some trouble
to look for, that we might not want to publish directly to the Persians. Will
you please advise, therefore, how we sliould handle any correspondence with
True and whether or not it is going to be necessary to send all such matters
to your oflBce, for example, to be forwarded.
We want, for example, to forward enough of the link bolts to take care
of the geared engines. Will you let us know how we should handle getting
these to True? If we send them direct to the Persians, I am afraiid they
will get all hot up about the necessity of tins change, whereas if True gets
them he can install them when an opportunity presents itself and not cause
any alarm. We are holding the bolts for word from your office.
Have you any information regarding that episode or transaction
which is referred to in this letter, Mr. Deeds ?
Mr. Deeds. Yes; from time to time engineering changes and im-
provements are made and considered necessary and desirable for
the continued operation of the engine, and we call it a sort of cam-
paign, in which we go throughout the trade and service all of our
engines. It is similar to the automobile practice where there is
something they want to improve or something that is not as good
as it might be, and the}^ will give all of their customers that service.
Senator Vandenberg. If it is an improvement, why was there
necessity of secrecy?
Mr. Deeds. It is just this, that there is no reason in this par-
ticular case except that the Persians might get the impression if
they did not make this change immediately they are going to get
in trouble. It is a change that was proven advisable after several
hundred hours of operation of the engine, and which could be made
at a normal overhaul period without creating any necessity for
grounding the airplanes and making the general replacement.
Senator Bone. Do you endeavor to give these foreign customers
the best you can ?
Mr. Deeds. The best we have in connection with any current model
that is released for export sale by the United States military service.
Senator Vandenberg. You would not make the change without
telling them, would you ?
Mr. Deeds. No; but it is very much easier for Mr. True on the
ground to make that change and explain it rather than trying to
explain it in a letter.
Senator Vandenberg. Still, isn't it a rather amazing effort of
secrecy to be hunting a way to avoid the use of the nutils in the
transmission of this information? I simply find myself challenged
by the situation, and I am wondering about it.
Mr. Deeds. I think you Avill find it the general practice that if
there is something to be changed in any piece of machinery, that
until the time you are ready and prepared to do it, you at least do not
make it a part of your sales propaganda. This was something
requiring a change which we Avere Avilling to make.
Senator Vandenberg. Now, let us revert again to the practice of
injecting what might be called sales promoters into the service of a
country. As a matter of fact, our own Government encourages this
practice and cooperated in it, did it not? Hasn't the Department of
Commerce, through its Bureau of Foreign Trade, specifically joined
MUNITIONS INDUSTRY 1445
in the effort to place American aviators in foreign service in coopera-
tion with American manufacturers?
Mr. Love. I would not be able to say what the Department of Com-
merce has or has not clone. I do know, for example, sometime dur-
ing early last year Peru requested that the Government send them a
mission such as they formerly had and this Government refused to
do so. Whether or not the Department took up the request I do not
know. At any rate they Avere refused by this Government.
Senator Clark. That was the Navy mission?
Mr. Love. Yes. But that was at the request of the Peruvian Gov-
ernment itself.
Senator Clark. I know ; but that was the former American Naval
Commission ?
Mr. Love. They wanted to have another one sent down.
Senator Clark. I see, but you are referring to the former mission?
Mr. Love. No. I am referring to the one that they wanted to have
now anid did not receive, as a result of which they got an English
mission.
Senator Vandenberg. Other countries engage in this practice, and
it is part of the competitive picture in the export trade, is it not?
Mr. Love. I would not go so far as to say that, Senator.
Senator Vandenberg. You just referred to the English mission.
Mr. Love. But the Peruvian Government requested this, gentlemen.
They requested it when they could not get one from here.
Senator Vandenberg. I w^ill show you a letter dated Januarv 3,
1933, signed by Mr. McClellan, which I will offer as " Exhibit "^No.
55L"
(The letter referred to was marked "Exhibit No. 551'' and is
included in the apjiendix on p. 1554.)
Senator Vandenberg. Mr. McClellan is your chief assistant, Mr.
Love?
Mr. Love. Not any longer. He was at the date of this letter.
Senator Vandenberg. This is addressed to Mr. P. G. Johnson,
United Air Lines, Chicago, 111., and simply bears upon this general
question that I have asked you. I read :
I believe you are fully familiar with the mission of American pilots which
has gone to China under tlie direction of John Juuett to develop and operate a
new school for the training of pilots for the Nanking Government.
Mv. Leighton W. Rogers, * * *
Mr. Rogers is now executive vice president of the Aeronautical
Chamber of Commerce, is he not ?
j Mr. Love. I believe so; yes.
Mr. Vandenberg (reading) :
* * * Chief of the Aeronautics Trade Division of the Bureau of Foreign
and Domestic Commerce, now advises us that Canton is going to put in a
similar school for pilots except on a smaller scale. In this connection Mr.
Rogers" de]);irtment has been authoi'ized to liire six or eight men, including a
pursuit pilot, an observati«m pilot, a bombing pilot, a photographic experi;, a
! radio man, etc. They must necessarily handle this very confidentially and are
I advising only Curtiss-^^'rigllt. Douglas, and ourselves. Mv. Ilogei's has ;;greed,
I before finally forming this group, to submit to us the proposed list of names tO'
I see whether they are acceptable.
Please advise us if y<m know of any individual or individuals, particularly
familiar with our equipment, who might be suitable for the work in question.
1446 MUNITIONS INDUSTRY
That would indicate that there is close and helpful cooperation
between the governmental Bureau of Foreign and Domestic Com-
merce and your company and other aircraft companies?
Mr. Love. Senator, if you will finish the letter, he rings in all of
them. He says:
Undoubtedly Curtiss- Wright and Douglas will be making their own sugges-
tions, and it is advisable * * *
Senator Vandenbekg. I understand. I am not saying that he spe-
cializes on you. But I am saying that as a general proposition there
has been helpful cooperation and close relationships between the pri-
vate companies in this field and this branch of government in the
promotion of external contacts.
Mr. Love. We did not exercise any initiative on that. You will
notice that Mr. Rogers has been authorized, or Mr. Rogers' depart-
ment has been authorized, to hire six to eight men. I suppose by his
'department they refer to the State Department or the Department of
Commerce; I do not know which. '
Senator Vandenbekg. I understand that. I am not making any
point of its propriety. I am trying to find out if that is not the
fact, that there is close and helpful cooperation ?
Mr. Love. Oh, that is what the Bureau of Aeronautics in the
Department of Commerce was established for.
Senator Vandenbekg. Why the necessity that this should be very
confidential ?
Mr. Love. I am sure I do not know, except that it is a Government
matter of putting in this school, and I suppose they did not want it
made too public.
Senator Vandenbekg. At any rate, this particular undertaking
proceeded successfully and on January 26, 1933, there is a memoran-
dum to Mr. F. B. Rentschler from yourself, which I should like to
offer as " Exhibit No. 552."
(The memorandum referred to was marked " Exhibit No. 552 "
and is included in the appendix on p. 1554.)
Senator Vandenbekg. This indicates that three men have been
selected by the Department of Commerce to go to Canton and teach
commercial flying methods. They are identified as Capt. Edward
Deeds, Lt. Clarence Terrell, and Lt. Stuart Baird. Reading from
the third paragraph of the exhibit :
While it is believed that all three of these men are entirely familiar with
Boeing and Corsair equipment, it might be advisable for the Boeing orgnniza-
tion in Seattle to take them through the plant before they sail.
Mr. Love. None of those gentlemen were either ex-United em-
ployees or ex-factory employees. I met all of them later in Canton.
None of them were from our organization.
Senator Vandenbekg. The deleted sentence might indicate, how-
ever, that the Department of Commerce itself realized the possible
improj)riety of the practice ; is that correct ?
Mr. Love. I rather suspect that that is the reason it was kept con-
fidential in the first place.
Senator Vandenbekg. These aviators started for the Orient in a
joint public and private venture. Captain Deeds stops long enough
to investigate his line. I show you a letter signed by Erik E. Nelson,
I;
! MUNITIONS INDUSTRY 1447
\
sales manager — of Boeing Airplane Co., I assume — which is the
plane manufacturing subsidiary of United, is that correct?
Mr. Brown. They were.
Mr. Love. They were.
Senator Vandenberg. At the time this letter was written, February
6,1933?
Mr. Brown. Yes, sir.
Sentor Vandenberg. I offer it as " Exhibit No. 553."
(The letter was marked " Exhibit No. 553 " and is included in the
appendix on p. 1555.)
Senator Vandenberg. This letter is addressed to the United Air-
craft Exports, Inc. Mr. Nelson is reporting upon Mr. Deed's visit.
I read the second paragraph :
Showed him the transports, also the one bomber that we had on the assembly
floor. He did not show much Interest in the former, but was very much
interested in the latter type.
The latter type was the bomber, the former type being the trans-
port. That would indicate, would it not, that although the previous
letters suggest that this mission is going abroad for the promotion
of commercial aviation, this gentleman himself has an idea that
military planes are going to be more important than commercial
planes ?
Mr. Love. That word " commercial " must have been some slip of
I the tongue, because I point that out; I asked for General so and so,
I and so forth. It was not a commercial flying. This was a military
school run by the Government. That word " commercial " is purely
a slip of the tongue and should not be there. It may be a steno-
graphic mistake. There is no question that they were out there to
teach military flying, which they have done very successfully.
Senator Vandenberg. If that is true, it must follow that the De-
partment of Commerce is cooperating with American plane manu-
facturers in the sale of war material in China.
Mr. Lo^^. I would point out that when these gentlemen go abroad,
no matter where they come from, when they return home on their
vacations, invariably they visit all factories, to be brought up to date
on new developments in aviation. Almost monthly there is some
improvement in engines or in type of plane or in propellers, and
naturally anyone active in the aviation business, particularly as an
instructor, visits all factories he possibly can.
There is no direct implication as to sales here.
Senator Vandenberg. Undoubtedly that is so. Nevertheless I am
interested in the specific exhibit as reflecting a practice, and I am
unable to escape the conclusion from the exhibit that these gentlemen
are recruited in the United States upon recommendation of private
aviation companies, by the Bureau of Aeronautics, in the Department
of Commerce, and sent to China for participation in the develop-
ment of a military air service. That is correct, is it not?
Mr. Love. Done so at the request of and as a favor to China, a
friendly power.
Senator Vandenberg. Well, whatever the purpose is. It may be
done at the request of China and for the benefit of a friendly power.
But you can conceive of situations, can you not, in which such a serv-
1448 MUISriTIONS INDUSTRY
ice would be very seriously objected to by some other power in the
same area ?
Mr. Lo^^E. Yes; surely.
Senator Bone. Do you think that Japan looks with friendly eye
on that soi't of practice ?
Mr. Love. I do not know what their attitude is. As a matter of
fact, I would point out that at the time these gentlemen were hired
there were already foreign instructors there ; and as recently as last
year, when I was in Canton, there were still foreigners of other
nationalities instructing in this school.
Senator Bone. Then we are to assume and understand that foreign
countries through their public officials located in China are likewise
attempting to stimulate the sale of foreign airplanes in China for
military purposes ?
Mr. Love. No ; I would not say that.
Senator Bone. Well, what information on that can you give us?
Mr. Love. If you will notice the titles of these gentlemen, they are
all ex-military men. None of them are aircraft men at all. They
are employed at a fixed salary by the Chinese Government as instruct
tors. They have nothing to do with sales.
I was in Canton on two different occasions last year. I met all of
these gentlemen and I was negotiating directly with the Govern-
ment, with no intermediaries, on the sale of planes.
There was no discussion between me and any of these gentlemen
as to sales. Naturally, they were keenly alive to modern improve-
ments and developments in controllable pitch of propellers, or twin-
row engines and all things of that sort.
Senator Bone. I am afraid that you misunderstand my question.
Is it a fact that other governments — that is to say, governments other
than the United States — or, to be more specific, European govern-
ments, have sent missions and what not into China in an endeavor
to aid in the sale of products of airplane factories located in Europe? j
Mr. Love. Yes. I agree with you now; other than the United j
States. I
Senator Bone. How does the Chinese Government raise revenues
with which to buy these planes?
Senator Clark. Let me clear up one thing here if I may. Senator.
I understand that these agents or flyers, or whatever you call them,
were sent to Canton.
Mr. Love. This particular group, Senator; yes.
Senator Clark. Canton is not the central Chinese Government, is
it? It is not recognized by the United States as the Chinese Gov-
ernment ?
Mr. Love. No, sir; but
Senator Clark (interposing). So that your statement a wdiile ago
that we were simply loaning instructors to them because they were
a friendly power, was more or less an inaccurate statement, was it i
not?
Mr. Love. We w^ere not loaning them. Secondly, Canton is under |
the political domination of Nanking. There is a little internal fric-
tion there now" and then, but
Senator Clark. That internal friction amounts to a state of war, \
from time to time, does it not?
MUNITIONS INDUSTRY 1449
Mr. Love. I do not think so; that is just newspaper ' talk.
Senator Clark. I see by tlie papers occasionally where Canton is
making an invasion against the Nanking government or vice versa.
Mr. Liovn. Those are newspaper headlines, Senator. I was there
dealing with the leading heads, all of them; with the head of the
Nanking government, and so forth, and with their permission and
their knowledge, I went down to Canton, and when I came back I
would tell them where I had been.
Senator Clark. But the Canton government is not the central gov-
ernment. That much is admitted, is it not?
Mr. Love, Yes, sir; it reports to Nanking.
Senator Clark. You do not know whether this request came from
Nanking or Canton directly?
Mr. Love. This particular request?
Senator Clark. Yes.
Mr, Love, No, sir; because it came through Mr, Rogers' depart-
ment, I do not know any more than that.
Senator Clark, I thought perhaps you might be certain,
Mr, Love, No,
Senator Bone, Where does the Chinese Government get the money
with which to buy these military supplies? Are these purchases
effected through the flotation of a Government loan?
Mr, Lo^^:. From a number of sources, Senator. They are quite —
not air-minded, but air fanatical.
The individual companies, even such organizations as the Ningpo
Boatman's Association or a guild of tailors, or somebody else, will
take up collections and contribute a plane to the Government,
Even the department stores will take up a collection among their eni-
ploj^ees. Much of that is advertising, because the employees do not
get enough money, but the company would make up the balance
and make a contribution to the Government for the purchase of
planes. It is done in a number of cases.
The Government is operating a $5,000,000 lottery, I believe it is
drawn once every 3 months, and I think 40 percent of that $5,000,000
is devoted to aircraft purchases.
Senator Bone, Military aircraft?
Mr, Love, Yes; because the commercial line is furnished by an
American company.
Senator Bone. The Government has been borrowing money with
which to buy food for people over there. I was wondering how
they reconciled that with these military purchases, if you know.
Mr. Love, Aviation articles are generally purchased from extra-
budget stuff.
Senator Bone. How are they making these extra food purchases?
Mr. Love, That I do not know, I have not followed the Chinese
food jnirchases.
Senator Clark. Why should they, if we donate it?
Senator Bone. Well, that is what it amounts to. We donate the
UKmey.
The Chairman. Have you encountered in your contacts there any-
thing to indicate that there might be foundation for the charges
that have been made to the effect that some of these contributions of
wheat from this country have been diverted in a way that would
enable them to transfer the wheat to obtain munitions?
1450 MUNITIONS INDUSTRY
Mr. Love, Absolutely not. And I do not believe that that is
the case. I do not believe
The Chairman. You do not believe that is so ?
Mr. Love. I do not believe it at all, Senator. They have this
big income from the lottery alone, which amounts to more than
they are currently spending for purchases, to say nothing of the
donations that are being made. Furthermore, collections are taken
up by the Chinese colonies, in San Francisco, in New York, in
Habana, in the Philippines — pretty much all over the world — for the
purchase of aviation supplies for donations to the Chinese Govern-
ment.
Senator Clark. You spoke awhile ago of this visit of Captain
Deeds to the Seattle plant being entirely in the ordinary course.
As a matter of fact, you suggested that visit yourself, did you not?
Mr. Love. Very likely, because he was sailing from Seattle.
Senator Clark. I notice that this memorandum to Mr. Nelson
from 3^ourself says:
While it is believed that all three of these men are entirely familiar with
Boeing and Corsair equipment, it might be advisable for the Boeing organi-
zation in Seattle to take them through the plant before they sail.
Mr. Love. They were all ex-Army men. That is, from the Ameri-
can Army. The Army has Boeing and Corsair equipment, so they
would naturally be familiar with it. I will take back some of that,
because the Corsair is the Navy plane. But they would be familiar
with it, anyway.
Senator Bone. Do you have a plant or any agency of any size in
Japan ?
Mr. Love. A plant of ours?
Senator Bone. A plant or at least an agency.
Mr. Love. No, sir.
Senator Bone. Do you do business with Japan?
Mr. Love. Yes, sir, I visited the Japanese aircraft factory myself
only last year.
The Chairman. Is there American ownership in those factories?
Mr. Love. I would say not the slightest of any kind in Japan.
Senator Vandenberg. Has your trade with Japan materially in-
creased in the last 2 or 3 years ?
Mr. Love. No; I would not say so. Japan does not buy quantities.
They buy mostly license rights. They buy them in Europe and in
this country. They buy them all over.
Senator Vandenberg. And then they put together their own equip-
ment?
Mr. Love. Yes, sir.
Senator Vandenberg. Now, Captain Deeds is on his way to China.
I offer as " Exhibit No. 554 " a letter from Mr. Vought to the United
Aircraft Exports, Inc., dated February 6, 1933.
(The letter referred to was marked " Exhibit No. 554 " and is
included in the appendix on p. 1555.)
Senator Vandenberg. I offer this simply for the purpose of iden-
tifying the fact that he, Captain Deeds, sailed on February 8, 1933,.
and that he intends to build his specifications for equipment when
he arrives.
I now show you a letter dated February 23, 1933, which I offer as
" Exhibit No. 555."
MUNITIONS INDUSTRY 1451
(The letter referred to was marked " Exhibit No. 555 " and is
included in the appendix on p. 1556.)
Senator Vandenberg. This letter is from Mr. Leighton W. Rogers,
chief Aeronautics Trade Division, to Mr. Love, president of the
United Aircraft Exports, Inc. He reports to you on a secret code
message which asks for quotations on equipment for the Canton
Aviation Bureau.
I do not know whether Captain Deed's boat reached China in time
to inspire this inquiry with such amazing facilit}^ or not.
Mr. Love. No; he could not. Senator.
Senator Vandenberg. What I am wondering — and I ask purely
for information — is this : Is there any tentative commitments on the
part of a foreign government to make American purchases when we
interest ourselves in this personnel problem in their behalf? Does
that involve any commitments?
Mr. Love. I do not think so.
Senator Vandenberg. In other words, the fact that Captain Deeds
is on his way to China
Mr. Love. He is on salary by the government as a civilian
■employee.
Senator Vandenberg. He has no connection with you ?
Mr. Love. No ; none at all, with us or with any other aircraft com-
pany that I know of.
Senator Vandenberg. And there is not even a tentative commit-
ment on the part of the Canton government in respect to purchases
as the result of Captain Deeds' visit?
Mr. Love. No, sir.
Senator Vandenberg. Captain Deeds was killed while he was in
the Far East, was he not?
Mr. Love. Yes. I was there at the time.
Senator Vandenberg. How was he killed?
Mr. Love. Captain Deeds was a careful and loyal man. He had
some new planes that the Chinese wanted to fly. He thought they
were a little too fast, and he would not let them take them until he
personally demonstrated and flew ever}' one of them. The first one
he tried, an extremely fast pursuit ship, he himself had his hand
a little out, and he fell off, on his first flight trial on the first ship.
Senator Vandenberg. I offer as " Exhibit No. 556 ", a radiogram
from the Department of Commerce files simply for the purpose of
indicating their activities in this business. The radiogram reads :
Canton wishes engage instructor replace Deeds killed July 1.
In other words, the Department is continuing to recruit American
personnel for the Chinese school.
(The radiogram referred to was marked " Exhibit No. 556 " and
appears in the appendix on p. 1556.)
Senator Vandenberg. I offer as " Exhibit No. 557 " a cablegram
from the same source.
(The cablegram referred to was marked " Exhibit No. 557 " and is
included in the appendix on page 1556.)
Senator Vandenberg. This says that Aviator Claiborne is recruited
to take Deeds' place, and this shows that the Department of Com-
merce is continuing in this relationship.
1452 MUNITIONS INDUSTRY
Mr. Love. Senator, might I observe that the exhibits you are put-
ting in do not affect in any way United or United policy nor is our
name mentioned anywhere in the hist half of those exhibits.
Senator Vandenberg. That is correct.
Senator Clark. They do not purport to.
Senator Vandenberg. They do not purport to, that is right. I
am simply endeavoring to develop as truthfully and accurately as
possible the general picture of the relationships between govern-
ment and private industry in respect to this type of military expan-
sion around the world.
The inverse of this system which we have been discussing is also
true, is it not? This, in turn, has no particular bearing on your
company. But you know the subject and I am asking for informa-
tion if you have it. The Government trains foreign aviators in its
own schools, in this country, does it not ?
Mr. Love. I am inclined to believe that policy has certainly been
greatly modified if not altogether discontinued.
Can you tell us about that, Mr. Deeds?
Mr. Deeds. I cannot.
Mr. Brown. I do not know anything about that.
Mr. Love. I know of one recent case where the Government refused
to do that for a friendly power saying that they needed their fa-
cilities for Americans.
Senator Vandenberg. Without any reference to the United Air-
craft Co., simply bearing on that general aspect, I offer the follow-
ing exhibit, which will be marked '' No. 558," which is a letter dated
October 9, 1929, addressed to J. S. AUard, which shoAvs that the
Curtiss-Wright Co. is advising the Curtiss Aeroplane Export Corpo-
ration of the complete listing of foreign officers attending United
States Army Air Corps schools —
which I thouuht might be of interest to you in t-onueetion with tlie set-up of
export work with their countries.
(The letter referred to was marked " Exhibit No. 558 " and is in-
cluded in the appendix on p. 1556.)
Mr. Love. We never had such information in the United files, to
my knowledge, nor did we ever attempt to obtain it.
Senator Vandenberg. You have never had any contact with foreign
officers attending school in this country?
Mr. Love, I would not go so far as to say that. When they finish
that course they often pay courtesy visits to factories. I do not re-
call any specifically now, but I probably would have had such con-
tact.
Senator Vandenberg. It becomes a fact though, does it not, from
the general purport of the evidence, that there is a constant and in-
severable relationship between private manufacturers of military
air equipment and the public participation of the Government of the
United States in these matters?
Mr. Love. I think most of that is forced on our own Government.
If you will let me explain, for example, I can think offhand of 11
purely commercial operating comjianies in South America alone.
Incidentally, every one of those 11 uses some kind of LTnited or
Curtiss equipment and some Fairchild or Stinson.
MUNITIONS INDUSTRY 1453
We are acknowleclo;ed, I believe, although with a great deal of
regret on the European side, to be the world leaders in aviation. We
have proven it in our civil aviation. The result is that when any of
the foreign countries want to be thoroughly equipped and up to date
in aviation invariably they think of this country. They do not have
in those foreign countries the excellent school facilities, either mili-
tary or naval, which we possess. Generally they make a request, I
suppose through the State Department, that we train some, give ad-
vanced training and not preliminary training, to some of their offi-
cers, so that they may return home and transmit some of this infor-
mation.
Senator Vandenberg. Are you referring there to Government
schools or schools maintained by aviation companies?
Mr. Love. I am speaking of Government schools, because, as I
pointed out in memorandum, a school like ours would be useless
because when these gentlemen request training, they are aviators.
The applicant is already an aviator.
Senator Bone. Are those factories located in South America and
other countries buying military planes? That is to say. the
superior American products?
Mr. Lo\'E. I should think so, because of the various conditions
there. There is the Fawcett Aviation Co., the Umco, the Lloyd
Aero Boliviano, the Scadta Line, whom you will find with American
equipment.
In Chile the National Lines, the Pan American, the Condor, and
I should mention the Panagra, and so forth.
There are a number which do not operate but at least sell Amer-
ican engines, with planes, and so forth.
Senator Bone. Would you say it is not only a known fact but a
recognized fact by the purchasing companies?
Mr. Love. Absolutely.
Senator Bone. Can you explain how that policy has been forced
on our Government? How can this Government be forced to adopt
a policy?
Mr. Love. That is a bad choice of words. I say a decision may
be forced. If they got a request from a foreign government, through
official channels, of course, to train so many of their officers at
Kelly Field, or what not, it is the business of the State Department,
or whoever decides on that, to say so. Definitely, to my knowledge,
they have said " No ", in recent months — about 8 months ago.
Senator Bone. That policy seems to have been carried on over a
long period of years.
Mr. Lo\^. I believe that was in effect over 10 or 12 years ago,
because the men whom I know around the world who have had this
training are nearly all out of active flying. You do not find the
youngsters as active, but there are a few as shown by the Curtiss-
Wright report, but I did not know of that.
Senator Vandenberg. Every export shipment of military equip-
ment or equipment which could be transformed into military use
is invariably clothed with public policy and public interest, so far
as the United States is concerned, is it not?
Mr. Love. No ; I could not say that.
Senator Vandenberg. Why is it not?
1454 MUNITIONS INDUSTRY
Mr. Love. Because there are many sales which never go near the
Department of Commerce except to get permission to export.
Senator Vandenberg. You misunderstood my question. I mean
to say, that there is no such complete public control, and the testi-
mony simply develops the assistance which the Government gives in
creating sales in certain sections of the world. I am asking you,
entirely aside from that, whether or not it is a physical fact that
there cannot be the shipment of a single piece of military equipment
abroad without involving in it the question of public policy and
public interest on the part of the United States.
Mr. Love. Yes, sir; we cannot export a single piece of military
equipment without permission. That is according to how recent it
is; it might be the Army or the Navy Department, and in any
event it is always the Department of Commerce, and I think we are
obliged in every deal recently to furnish an A.T.C., approved-type
certificate. We have to get that to ship anything abroad, so that we
cannot ship without passing it through the Department of Commerce
at least.
Senator Vandenberg. I do not want to take up the examination
out of order, and this phase of the matter is coming up later, but
I was simply interested in the abstract proposition that it seems to
me that there cannot be the export of a single piece of military
material without its involving potentially the welfare of the Amer-
ican people.
Now, just to conclude with this phase of the subject, very briefly,
we referred a little while ago to your Peruvian relationships and
this contract upon which you have had some difficulty in connection
with a settlement. I understood you to say that Commander Grow
had nothing to do with that particular order. Is that correct?
Mr. Love. You asked about Chile at that time.
Senator Vandenberg. I meant Peru before.
Mr. Love. You were talking about Chile, about Merino, and about
the Sikorsky in Chile.
Senator Vandenberg. I meant Peru. I will show j^ou the follow-
ing file memorandum, which will be given the next exhibit number,
dated March 28, 1933, and signed by S. A. McClellan.
(The memorandum referred to was marked " Exhibit No. 559 "
and is included in the appendix on p. 1557.)
Senator Vandenberg. I call your attention to Mr. McClellan's
statement in a paragraph on the second page, in which he says :
Grow apparently is most anxious to get a job witli us, as he repeated several
times that United did not sell the planes to the Peruvian ■Government, but that
he. Grow, sold the contract to Mr. Love.
Is Commander Grow mistaken about that ?
Mr. Lo"s^. You have got a sort of a youngster writing and quoting
another man in the third person. I imagine this is probably what
Grow had in mind : The Peruvian Government needed a consider-
able number of planes, the majority of them purely commercial, pas-
senger planes, and mail planes, some of them military. That program
had been established for a considerable length of time even before
the formation of the United group. He had tried to get, I believe
he told me, Douglass to accept the order, and they refused it because i
of the deferred payment. He tried to get Curtiss to accept it, but i
MUNITIONS INDUSTRY 1455
tliey refused because of the deferred payment. Then our group was
formed. Then he convinced us that the credit was satisfactory.
That is probably what he means when he says he sold us the con-
tract. He could not get anyone else to accept it previously, after
having tried.
Senator Vandenberg. He received no compensation from you in
that connection?
Mr. Love. Not in connection with placing this order; no, sir.
Senator Vandenberg. Who is Commander Grow?
Mr. Love. He was at that time inspector general of aviation in
Peru, not in 1933 but at the time of the transaction.
Senator Vandenberg. I understand he is a graduate of the United
States Naval Academy and had a very fine war record in the air,
and he is generally recognized as a thoroughly expert person in.
aviation.
Mr. Love. Yes, sir.
Senator Vandenberg. I know something of him. I have had con-
tact with his credentials on more than one occasion.
When he was connected with the Peruvian air service, if he did
have anything to do with purchases through your company, it did
not involve any status of agent for you while he was in the Peru-
vian Government?
Mr. Love. Positively not.
Senator Vandenberg. And no compensation?
Mr. Love. Not in connection with sales. Senator. Later Mr. Grow
was of assistance to us in obtaining collections. And I made him
a nominal collection payment.
Senator Vandenberg. Was that while he was still in the Peruvian
service ?
Mr. Love. I believe he was, but that was long after the order had
terminated, and payment was made for executing collections and in
proportion to the cash received.
Senator Vandenberg. From the Peruvian Government?
Mr. Love. From the Peruvian Government.
; Senator Vandenberg. He subsequently made a sale to Peru in
your behalf?
Mr. Love. I believe he did. It happened while I was in China
last year, and I might explain that by saying that Mr. Grow left
Peru with the little coup d'etat in the Government, and the same
party which had released his service now wanted to get him back,
and he did not want to go back and take his position, but he act^d
as a sort of adviser for the Peruvian Government here. He bought
a number of planes in different ways, so he told me, on behalf of the
Peruvian Government, on account of the fact that they were using
him as an expert. In that connection he bought from us, I believe,
three Corsairs for the Peruvian Government.
Senator Vandenberg. Yes; in a letter from Commander Grow on
March 10, 1933
Mr. Love (interposing). He was no longer in the service of the
Peruvian Government at that date, of course.
Senator Vandenberg. When he was no longer in the service of the
Peruvian Government, in a letter which will be identified as the next
exhibit, he indicates that he is making this inquiry " in the name of
the national collection committee " in Peru.
1456 MUNITIONS INDUSTRY
(The letter referred to was marked " Exhibit No. 560 " and is in-
cluded in the paragraph on p. 1558.)
Senator Vandenberg. Then, on June 15, 1933, according to the
next " Exhibit No. 561 ", you are paying him a commission in full set-
tlement of the amounts due on the Peruvian transaction,
(The letter referred to was marked " Exhibit No. 561 " and is in-
cluded in the a})pendix on p. 1559.)
Senator Vandenberg. Now, on June 7, 1933, Commander Grow
writes you again a letter, which will be " Exhibit No. 562 ", and he is
reporting to you
Mr. Love (interposing). May I correct that? He is not reporting
to me. These are all things which I am seeing for the first time.
Senator Vandenberg. I beg jonr pardon. He was reporting to
3^our executive assistant, Mr. McClellan. Was Mr. McClellan at the
head of your operations in your absence?
Mr. Lo\TE. I would not say he was entirely at the head. He
would have to consult with other officers.
(The letter referred to was marked " Exhibit No. 562 " and is
eluded in the appendix on p. 1559.)
Senator Vandenberg. Commander Grow is advising your assistant
of the possible opportunity for his return to Peruvian service, and
he is asking Mr. McClellan :
to consult the powers that be in your organization and tell me frankly their
reaction. Would they like to have me go? Are they indifferent as to whether
I go or not— or would they rather I didn't go?
That question, in turn, was referred to you in Shanghai, was it
not, Mr. Love?
Mr. Love. Yes; I was just recalling that. My recollection is that
they did not answer Mr. Grow, but mailed it to me in China.
Senator Vandenberg. I show you the following letter from Mr.
McClellan to 3'ou, which will be marked as " Exhibit No. 563 ", which
sends you the letter from Commander Grow.
(The letter referred to was marked " Exhibit No. 563 " and is
included in the appendix on p. 1560.)
Senator Vandenberg. So you were probably mistaken when you
said a few moments ago that you had not seen it, were you not?
Mr. Love. I referred to some of the previous ones. Yes; I was
mistaken on that.
Senator Vandenberg. Mr. McClellan says to you [reading] :
We have received a letter from Comdr. H. B. Grow —
And so forth.
Then the third paragraph states :
As regards the personal background of the man and the question of politit'al
relationship involved, it is obviously for these reasons tliat the questions con-
tained in the tifth paragraph of Grow's letter have been referred to you for
recommendation as to the proper answer.
Mr. Lo^'E. He goes on to say [reading] :
It is (tur feeling that Grow will accept this position, regardless of what we
may say, as his livelihood in Detroit has been so slim as to leavr liini very
little alternative.
Senator Vandenberg. Yes; that is correct. I am simply wonder-
ing what you interpreted this inquiry to mean. Why did Com- j
«>«Tirlpr rirow rcDort to you respecting this situation?
MUNITIONS INDUSTRY 1457
Mr. Love. Of course, he does not report to me. He is reporting
to the company.
Senator Vandenberg. I beg your pardon. Why did he report to
your company, as he subsequently does, in even greater detail, under
date of Se])tember 21, 1933, according to the following exhibit, which
will be appropriately marked? Is it contemplated that there would
be some dual relationshij) in the event of his return ?
(The letter referred to was marked "Exhibit No. 564" and is
included in the appendix on p. 1560.)
Mr. Love. ]\Ir. Grow on many occasions even before he left the
Peruvian service had applied to me for position as representative for
us in South America. He knew that it was my intention to appoint
representatives on the east and west coast, and I assume that that
is what he had in mind there. He wanted to be employed by our
company outright, and I think this thing he states here about going
back to Peru was sort of to indicate the great favor he stood in
there in case of future business. He felt he had contacts in Argen-
tina, Chile, and elsewhere. I imagine that is why he did it.
Senator Vandenberg. He was indicating to you that he does have
those connections ?
Mr. Love. Yes, sir.
Senator Vandenberg. But your interpretation of his inquiry would
be with reference to an official position that he was just emphasizing
his utility as an agent, and not for the purpose of suggesting a dual
connection when he arrived in Peru?
Mr. Lo^^. I believe you know Mr. Grow and know he is a naval
officer of very high standing.
Senator Vandenberg. I know he is an officer of exceedingly high
standing. That is all.
Senator Bone. Mr. Love, do you consider it a state of healthy
public policy for the United States Government to be officially aiding
foreign governments to arm themselves in the most complete manne*
their finances will permit, giving them that aid officially?
Mr. Lo^^. I would rather not see it done, but it is one of those
things which seems to be unavoidable. I cited a case a few moments
ago where our Government refused to give an advisory commission to
Peru, and they obtained one very promptly from England. My atti-
tude, as shown from my reports, taken from my office, is that I have
stressed particularly that the future of our company in China and
South America is comjjletel}' — I won't say completely — but is pre-
domiiuintly in commercial aircraft.
Senator Bone. All of the major powers of the world seem bent on
sending missions to all of the smaller countries to encourage a very
greatly increased use of armament of all kinds. That is unqu?stion-
ably the picture presented in this hearing. That is why I asked you
this question. What is to be the logical outgrowth of that ^ort of
program, if contiiuied indefinitely?
Mr. Love. Personally. I am very much oi^posed to it. For the last
30 years, the greater part of it I have spent abroad, and have friends
among those people and speak several languages, and I regret in-
finitely all these war proposals. Recently on my trip to Peru I
talked to the president of one country and to certain high officials of
the opposing country, and used my best endeavoi-s toward peace.
The jiresident of the one said he was quite sure thci-e was not going
1458 MUNITIONS INDUSTRY
to be war — I cannot call the personalities — and the other officials
were of the same opinion and were striving for peace at the same
time, and I supported their efforts.
Senator Bone. While they were urging peace some other branch
of the same Government was actively negotiating for the purchase
of more war supplies. That was the case, was it not ?
Mr. Love. I won't say a branch of our Government.
Senator Bone. No; their Government.
Mr. Love. Yes; that is probably true. They have got to be pre-
pared. They want peace and are working for peace, but they have
got to have it in case their country has war.
Senator Bone. With one hand they make a gesture of peace and
with the other hand they hand out money to increase their naval
and military establishments.
Mr. Love. I make this statement: I do not know a single one of
these countries that deliberately wants war.
Senator Bone. But they are preparing very actively for it, are
they not?
Mr. Love. They all want to have an army and they want an air
force and they want to " keep up with the Joneses." That is about
what it amounts to.
Senator Bone. And also the United States Government lends its
assistance in this regard. For instance, there was evidence here
week before last that the United States Government sent a naval
mission to Peru to assist the Peruvians in connection with sub-
marines, and then the United States turned around and loaned a
naval officer to Colombia to prepare the harbor defense against the
very submarines that another American company had sold the Peru-
vians through the assistance of the Peruvian Naval Mission. It
did not have anything to do with your company, of course, but to
that extent two American companies on armaments were assisted by
the United States Government and did enter into competition in
armaments between those countries.
Mr. Love. That is one of the difficulties that I pointed out before.
When one of these foreign governments asks us to appoint an in-
spector, it is pretty difficult to refuse them — and we have refused
them lately, and it has cost us a considerable lot of business.
Senator Bone. Would our own national defense be stronger if we
did not export anything, but maintained a monopoly as to our own
program ?
Mr. Love. I do not think so. Senator, because last year, according
to the Department figures, 36 percent of all aeronautical equipment
produced in this country was exported, and to keep factors of produc-
tion and to have available an adequate supply of quantities for our
own needs we have got to have an established, going organization.
Senator Vandenberg. How much of that 36 percent was military?
Mr. Love. I do not believe the figures showed that.
Senator Vandenberg. What would be your estimate of the division
of the 36 percent as between commercial and military?
Mr. Love. I would assume — because lately there have been sub-
stantial military shipments — it would be about 60 percent military
and 40 percent commercial ; but that is only a guess.
Senator Clark. So far as China is concerned, any airplane equip-
ment is military equipment, is it not, Mr. Love ?
MUNITIONS INDUSTRY 1459
Mr. Love. No, sir.
Senator Clark. I mean as regards warfare between the various
contending factions in China ; they can use almost any kind of com-
mercial plane for military purposes, can they not?
Mr. Love. I do not think so, Senator. China has bought a number
of Ford trimotors for straightaway transport work and they have
bought Sikorskies for straightaway transport work.
Senator Clark. They could use regular commercial planes in the
factional disputes they have, could they not?
Mr. Love. They might throw firecrackers out of those.
Senator Clark. For a force which is no more highly armed than
they are, those training planes might be very handy for dropping
bombs, might they not, or for certain military jjurposes ?
Mr. LoA'E. I hardly think so.
Senator Bone. How long has it been since the United States Gov-
ernment, through any of its agencies, has kept an accurate check on
the war munitions of all kinds ?
Mr. Love. I cannot answer for war munitions of all kinds, be-
cause we make it a point to avoid bombs and those things ; but, speak-
ing of airplanes, I think we have had to work through the Depart-
ment of Commerce ever since my company was established — I was
going to say, ever since the Bureau of Aeronautics was established,
which was established before the United Exports — that is, we have
had to report every one of ours.
The Chairman. Mr. Love, reference was made this morning by
Senator Vandenberg to a letter of April 24, 1934, addressed to the
United Aircraft Exports, Inc., by Manuel Toro, and it was pointed
out to you that Toro had suggested :
Our friends, the Cuban pilots, contacted by the Government, have been
cooperating with us in recommending Corsairs to the various officials of the
ministry of war. They informed the writer, and he has confirmed it, that
Mr. Love offered them some protection in the business, but we will take this
matter up with you definitely when we receive a firm offer for a certain num-
ber of planes.
I think you responded under questioning to the effect that you
had never seen this letter until today.
Mr. Love. No ; I did not receive it. I said I was in China.
The Chairman. You were in China at the time?
Mr. Love. I was in China at the time.
The Chairman. And have never answered it?
Mr. Love. No.
The Chairman. What are we to conclude this reference to " some
protection " means ?
Mr. Love. It means that they were trying to ask a commission
from my agent, and they were pretending to him that I had promised
it. I might explain that a little in detail. I happened to be in
Bogota when these boys arrived
The Chairman (interposing). These Cuban pilots?
Mr. Lo\'E. These Cuban pilots, and they did not have much money,
and had their wives and children along, and they were pretty much
lost souls and pretty much disgruntled and down and out; many of
them I know from my Cuban days, and I invited them all to a tea
party and invited the high officials of the Government in aviation
83876 — 34 — PT 6 4 ,
1460 MUNITIONS INDUSTRY
and two or three competitors of mine were there and also the Ameri-
can adviser, and gave them quite a tea party, and entertained them,
and they were all praising the Corsairs because they had been trained
on the Corsairs and used Corsairs in their own country, and they
naturally knew I Avas trying to sell Corsairs, and they were promis-
ing all sorts of help for the sale of the ship, which did not mean any-
thing. Later they saw Toro and promised him all sorts of things.
Senator Clark. All they got out of it was the tea ? i
Mr. Love. They had more than tea, Senator, I am afraid.
The Chairman. Have you ever written regulations or rules or let-
ters that you have addressed to your agents the world over, scolding
them or in any Avay taking them to task for even considering these
methods of bribery, that one is to conclude this word " protection "
here means?
Mr. Love. I think of two such letters I wrote, but inasmuch as 1
was severely scolding somebody in my own office, I wrote them by
hand, so as not to have them go through other hands, so as to look
as if there was friction between myself as manager and one of our em-
ploj^ees. I think you will find a letter written by Carr, in which
there was such criticism. It is evident such a letter was written
to him.
Senator Vandenberg. If your letter was in longhand, it would be
exceedingly interesting, and I revert to the phrase in your own letter
that you instructed them not to take " official cognizance " in their
foreign correspondence.
Mr. Love. That is not in my letter. That is not a letter from me,
but is in a letter from somebody else.
Senator Vandenberg. Yes; but it is in connection with your com-
pany. There had not been any longhand letters which, instead of
scolding agents, discussed any extraordinary expenses of that kind?
Mr. Love. Absolutely never from me ; not from me.
The Chairman. The significant thing about it all is that for 2
weeks we have sat here and listened to testimony from employers
and heads of the industry, explaining letters that their agents were
sending them from the world over, suggesting this method, that
method, and other methods, suggesting those who would be helpful
to them, those in official capacities as well as others, and never once
has there been placed into evidence anything to indicate that the
industry itself was resenting the effort or the thought of agents that
their companies might tolerate and might be perfectly willing to
enter into these negotiations, which were expressed as games of " do-
ing the necessary " and whatnot. We have not found that expression
as relates to your own corporation, but it was quite common in con-
nection with many others.
Mr. Love. I saw some of the testimony and I have mentioned
three cases where the^y were not directly impugned, but it was im-
plied, and with two of those were over 5 years ago, and the other, I
think, was 3 or 4 years. I had transactions without any implication
oi that kind, Senator. I have had no difficulty.
I mention one thing: Some of the salesmen who have testified and
some who have not are those who Avrite foolish letters and have not
had the experience I have liad, and never get to see the president
of the country, the minister of war, or the minister of finance, and
MUNITIONS INDUSTRY 1461
cannot speak Spanish, Portuguese, French, or whatnot, and are
obliged to do business through some intermediary whom they chance
to pick up in the hotel. They have a name for them in Mexico,
" coyotes ", and n business man comes down there and he needs a
translator, and they find out his business, and they have all his
negotiations, and if j^ou do not use those people you go much further.
Senator Bone. I take it that you handle the major negotiations
for sales of ^uiy consequence, do you not?
Mr. Loat:. That is true, when I have been in the country.
Senator Bone. When you confer with these officials, you have had
direct dealings?
Mr. Lo\^. I refer particularly, Senator, to South America and the
East. The European matters I have not handled for something
more than 2 years.
Senator Bone. In the Latin-American countries, to which refer-
ence lias been made, you handle these deals direct with the high
officials of the government involved in the transaction?
Mr. Lo\TE. Yes, sir.
The Chairman. The committee will be in recess until 2 : 15.
(Thereupon, at 1:05 p.m., a recess was taken until 2:15 p.m. of
the same day.)
AFTER RECESS
(The committee reconvened at 2:15 p.m., on the expiration of
the recess.)
The Chairman. The committee will be in order. Senator Van-
denberg, I believe you wanted to follow up your line of questioning ?
Senator Vandenberg. Yes; I would like to proceed.
Mr. Love, you spoke this morning very enthusiastically about Mr.
Azcarate, of Mexico. He built an airplane factory in Mexico,
did he ?
Mr. Love. Yes; he did.
Senator Vandenberg. What was his position at that time?
Mr. Love. I believe he was president of it.
Senator Vandenberg. Was he connected with the Mexican Gov-
ernment at that time?
Mr. Love. I don't think he was.
Senator Vandenberg. Did he build a factory under the license
from one of your subsidiaries?
Mr. Love. I did not say he built a factory under a license, but
he purchased a license to build Corsair airplanes.
Senator Vandenberg. He was building these Corsair airplanes
under your license?
Mr. Love. That is correct.
Senator Vandenberg. Was the operation successful — that is, were
the planes successful?
Mr. Love. The planes that he built were successful; yes.
Senator Vandenberg. Was their service record entirely satis-
factory ?
Mr. Love. I never had the details of it, but I never heard anything
to the contrary.
Senator Vandenberg. You never heard there was a great deal of
trouble with the planes built in that particular factory?
1462 MUNITIONS INDUSTEY
Mr. Love. No; I never heard anj^thing about it.
Senator Vandenberg. Are they contemplating the construction of
another factory down there?
Mr. Love. Not that I know of. The present factory was put over
to the Government as a sort of repair and service depot, and some of
of the buildings detailed for a school. That is what I saw there last
November.
Senator Vandeniberg. Have you any negotiations on at the pres-
ent time, with respect to a license or otherwise, in connection with
the expansion of the Mexican air service ?
Mr. Love. No ; we have not.
Senator Vandenberg. You have had no dealings with Mr. Azcarate
along that line?
Mr. Lo\^E. No; because he is no longer in that division. I am
having dealings with the chief of aviation with respect to engines.
Senator Vandenberg. At the conclusion this morning, when Sena-
tor Nye was curious as to why you had never reprimanded any of
your export agents respecting the discussion of export compensation
and commission, you indicated that on one or two occasions you did
write in longhand to your agents on this subject?
Mr. Love. I said longhand, but what I meant was a personal letter.
Once or twice I wrote on my own typewriter.
Senator Vandenberg. That would be letters of which there are no
records ?
Mr. Love. Yes; because personally I would not keep a scolding I
gave a man.
Senator Vandenberg. Would that also explain wh}^ there are no
letters among your files from your agents discussing this subject-
did they always write in longhand?
Mr. Love. No ; I think there is a letter you put in this morning, if
I remember, from Mr. Carr regarding a letter Mr. Miller, or one of
the men wrote him, where he was being scolded.
Senator Vandenberg. He was only speaking generall}' . What was
the occasion of your writing a private admonition to 3^our agents on
two or three occasions?
Mr. Love. It was not on the line of commission; it was the repti-
tion of loose gossip about competitors' claims or pilots' attitudes or
something of that kind of gossip.
Senator Vandenberg. These letters are not in the files either?
Mr. Love. No ; but one I definitely recall writing from Tokyo back
to an agent in Shanghai, and I remember speaking to Carr several
times.
Senator Vandenberg. How much of your correspondence was con-
ducted in what might be called longhand or without record?
Mr. Love. Very little, because when I was traveling much, and I
was traveling as much as 5 or 6 months of a year, I would be kind
of lazy and I wrote as little as possible.
Senator Vandenberg. The committee has had access to all of your
files?
Mr. Lox'E. I understand so, but I was in South America when they
did that.
Senator Vandenberg. That is correct, Mr. Brown?
Mr. Brown. Yes; they have had.
MUNITIONS INDUSTKY 1463
The Chaikman. Mr. Love, how recently is your effort in Europe
to accomplish trade?
Mr. Love. We were first approached bj Europeans before the for-
mation of the Export Co. at all, through subsidiaries, without our
making an effort to sell them. They came to us directly in reference
to engines, and then various letters came in. As soon as we formed
the Export Co., which was in 1929, I believe the following January
or February I made a trip all over Europe contacting the various
people who had written in to us. On that trip I was successful in
starting our engines with the leading line over there, K.L.M., and
furthering our interests with B.M.W. engine builders.
The Chairman. How much more costly is your effort to get for-
eign trade than is your effort to get domestic trade?
Mr. Love. I have no figures on it as to the cost of getting domestic
trade, but I should think it cost less, because of traveling and ex-
port. You see, I have no advertising expense such as they have and
I have none of the burdens of their general overhead, advertising
service men, and I had nothing practically for the first 2 years
except my own salary and expenses. Later as we added more men
it was salary and expense for them also.
sales of united aircraft companies' in countries engaged in war
OR fearful of war
Senator Clark. Mr. Love, at the present time your business is al-
most exclusively confined to military contracts, is it not?
Mr. Love. I have the figures before me now. Senator, and our
sales for the past 5 years have averaged 38 percent commercial
and 62 percent military.
Senator Clark. 1 call your attention to a letter dated February
21, 1934, to the Chief of Air Corps of the War Department from
Mr. C. L, Egtvedt, and he is president of the Boeing Co., is he
not?
Mr. Brown. He is president of the Boeing Co., but we were sep-
arated on the 31st of August.
Senator Clark. That was a separation as a result of new legisla-
tion passed by Congress?
Mr. Brown. Yes, sir; that is correct.
Senator Clark. I ask that this letter from C. L. Egtvedt to the
Chief of Air Corps, dated February 21, 1934, be made an exhibit.
(The letter referred to was marked " Exhibit No. 565 " and is
included in the appendix on p. 1561.)
Senator Clark. Reading from this letter, " Exhibit No. 565 ", I
find the following:
At the present time, we have no prospects of any commercial business and
have only an insignificant order of Navy parts. Our plant is running at about
G0% capacity at present and our primary shops are already running out of
work, necessitating the lay-off of men in these departments. By summer a
great number of employees will be out of work and in the fall all of our present
orders should be completed. Because of these conditions we are very anxious
to obtain some immediate business which will help to keep a portion of our
employees at work and will appreciate your earnest consideration of this
situation.
Is that true of all of the other companies, or was it true of the
other companies at that time ?
1464 MUNITIONS INDUSTRY
Mr. Brown. It was not at that time ; no.
Senator Clark. AVliat was the proportion of commercial business
being done by other divisions of the company?
Mr. Brown. I could get that information for you, Senator, and
I think probably we could answer that now for the Pratt & Whitney
Aircraft Co.
Senator Clark. All right; suppose you answer for that company
and we will be glad to get the other information as soon as you can
furnish it.^
Mr. Brown. We have submitted a report to your committee on all
of the business done. I had one of the boys in our sales department
go through that list just the other night and try to see if he could,
to the best of his knowledge, state what he considered to be the divi-
sion of the commercial and the military business as far as exports
are concerned, and we find that 76 percent of the engines shipped
abroad were for commercial purposes.
Senator Clark. That is over what period, Mr. Brown ?
Mr. Brown. That is from August 1, 1925, to August 31, 1934.
Mr. Hiss. This report is merely from January 1 to August 31,
1934; but I believe you submitted to the Black committee other and
further figures.
Mr. Brown. I had him take it out of this record.
Mr. Hiss. This is only from January 1 to August 31, 1934.
jNIr. Brown. You have the other figures, have you not?
Mr. Hiss. No; the other figures were submitted to the Black
conunittee.
Mr. Brown'. Those figures, then, are available to you; but I
tlujught you had them.
Mr. Hiss. Would those figures you just read include shipments to
(xermarxy, for example?
Mr. Brown. Oh, yes.
Mr. Hiss. All of your sales to Germany are commercial?
Mr. Brown. That is how these are listed, I am sure. Those last
were shipped some time ago.
Mr. Love. I may explain on the shipments to Germany, I have
personally seen our American-made engines in the German Junker
planes in many places all over the world. They are in operation in
the German lines in Shanghai and in many places, so that these
German sales are mostly scattered all over the world.
Senator Clark. So that the statement made by the president of
the Boeing Co. that they have practically no commercial business
did not entirely apply to the other divisions of the United ?
Mr. Brown. It certainly did not apply to the Pratt & Whitney
Aircraft Co.
Senator Clark. There is still a connection between United and
Boeing?
Mr. Brown. No; that was dissolved.
Senator Clark. I understand you are dissolved, but there is still a
very large conmion ownership of stock by the stockholders?
Mr. Brown. Yes; there is.
Mr. Hiss. There is still a substantial similarity on the board of
directors ?
1 The information requestoil was later furnislied to the committee by United Aircraft
Exports Coiporation and is inclnded in the appendix on p. 1507.
MUNITIONS INDUSTRY '■ 1465
Mr. Brown. There is no one on the board of the United Aircraft
Transport that is on the board of the western division, as we term it,
which is the Boeing Co., or the airlines.
Mr. Hiss. Is that true or not of the subsidiaries of the United
Aircraft ?
Mr. Brown. There is no interlocking directorate of the three new
divisions: United Aircraft Corporation, Boeing Airplane Co., and
United Air Lines Transport Corporation.
Senator Clark. Now, Mr. Love, outside of the large sales to Ger-
many, the largest part of your export business in the past few years
has been done in China, where war is more or less continuous?
Mr. Love. Between China and Brazil, I should say; but I think
they are about balanced.
Senator Clark. You testified you had recently been to China ?
Mr. Love. Yes, sir.
Senator Clark. Do you have any idea how many serviceable planes
there are in China in the Government service?
Mr. Love. I have not, exactly. I know what they had wdien I was
there, but I believe they considered that a sort of secret. But there is
not as many as people have an idea. A great many of those they do
have are training j)lanes instead of fighting planes.
Senator Clark. Those training planes, as I suggested this 'morn-
ing, are sometimes used for military })urposes in these factional dis-
putes in China ?
Mr. Love. The average training plane is a small flying plane rang-
ing around four or five thousand dollars, which you are better
equipped than I to state is not fitted for fighting.
Senator Clark. It is estimated that by the end of 1935 China
would have 500 planes, of which 80 percent are military.
Mr. Love. There was an announced program, I thought, for 1936
to have that many planes, but I doubt if they will have them ; and if
they do. I doubt furtlier if they will have enough i)ilots to fly them.
Senator Clark. The newspapers reported recently the sale of 22
Northrop Bombers to China, and a total of 65 Fleet trainers by the
Consolidated Aircraft Co., and that a total of 52 Douglas trainers
have been delivered. Did you know anything about that?
Mr. Love. I have heard about some Douglas bombing planes, but
I do not know the details.
Senator Clark. You were in China last year?
Mr. Love. Yes; but these are recent orders. You have shown there
65 trainers from Consolidated, and how many from Douglas?
Senator Clark. Twenty-two from Northiop and 65 Consolidated
planes, and 52 from Douglas.
Mr. Love. I think there are considerably more for commercial use
than for fighting.
Mr. Hiss. Do you know what the pro])ortion has been between
training planes and what they call fighting planes?
Mr. Love. We do not manufacture training planes, in the category
that they buy, I should add. Ours is more of an advanced trainer.
Mr. Hiss. "Thirteen Corsairs were sold in 1933 to China, and in
1934 a total of about 41 up to August 31. All of those are military
planes ?
Mr. Love. They are all military planes ; that is right.
1466 ' MUNITIONS INDUSTRY
Senator Clark. Curtiss-Wright, Douglas, and Intercontinent have
in process of erection at Hangchow a large factory for the manufac-
ture of airplanes, have they not?
Mr. Lo^^E. I understand so.
Senator Clark. Who is Intercontinent; what do they make?
Mr. Love. In fact, that is not a manufacturing company. They
are the sales agents out there for the Curtiss Co.
Senator Clark. They are controlled by Sperry, are they not?
Mr. Love. I understand they are controlled by one of the big
Curtiss affiliated companies, but the exact ramification I do not know.
Senator Clark. As a matter of fact, Sperry controls both Curtiss
and Intercontinent?
Mr. Love. Intercontinent is generally purported to be controlled
by the Curtiss group.
Senator Clark. In other words, they might be the export sales
agents ?
Mr. Love. They might be; yes.
Senator Clark. As a matter of fact, there is in process of erection
a large factory for the manufacture of planes within the continent
somewhere about 100 miles northwest of Canton; are you familiar
with that?
Mr. "Love. I know that Canton was wanting a factory, but I did
not know they had progressed so far as to go ahead with it. They
have had that idea a long time.
Senator Clark. When did you say you were in China ?
Mr. Love. Last year until about July.
Senator Clark. Reports come to this committee from official
sources that in the year 1933 China had purchased some 200 military
planes, and about 80 percent of them were American. Do you know
whether that is in line with your observation or not?
Mr. Love. I should think that is about right.
Senator Clark. That is for 1933?
Mr. Love. I should think that is about right.
Senator Clark. In the 13 Corsair planes for China which you sold
in 1933 four of these planes were sold to the Nanking National
Government and nine to the Canton government?
Mr. Love. We sold, I think, the nine to Canton, but I doubt if
we sold so 'small a quantity as four to the Central Government.
They usually buy larger quantities than that.
Senator Clark. Do you know how many you did sell to Nanking ?
Mr. Love. It is in the record, but it is more likely about 18.
Senator Clark. In 193'4 I find the United Aircraft, Inc., sold to
Nanking 41 Corsair planes, and they did a total business of $1,170,-
000.
Mr. Love. That is about right.
Senator Clark. And there are still on order eight Corsair planes ;
is that right?
Mr. Love. I am inclined to believe it is a fact that this four is
not a sale, it is likely to be a shipment, because we never make
four and we never sell four, it does not make a squadron or a unit
or anything of the kind.
Senator Clark. Then, that was a part of a larger order?
Mr. Love. I think so; yes.
MUNITIONS INDUSTRY 1467
Senator Clark. So that in 1934 the business of the Export Co.
done with China represented about 40 percent of the total business
of the corporation?
Mr. Love. I will have to check my figures on that. Of course,
bear in mind that shows unfinished business carried over from the
last year, or of sales work done the last year.
Mr. Hiss. The figures you read, Senator Clark, refer to shipments
instead of sales.
Senator Clark. In other words, sales made the last year or some
previous time?
Mr. Hiss. So that the shipments to China were over 40 percent of
the gross shipments?
Mr. Love. That sounds correct.
Senator Clark. Now, Mr. Love, I call your attention to a letter
dated July 8, 1933, signed by L. E. Gale, president of L. E. Gale Co.,
Hankow, China, addressed to yourself. They were your export
agents, were they?
Mr. Love. In certain territory in the interior; yes.
Senator Clark. I offer this letter as a committee exhibit.
(The letter referred to was marked " Exhibit No. 566 " and ap-
pears in full in the text.)
Senator Clark. This letter, " Exhibit No. 566 ", is addressed to
yourself, care of the National City Bank, Shanghai, China, and I
read from it as follows :
I have just received your letter of July 5th. With reference to your proposed
trip to Changsha and Chungking I have just heard from Mr. Litchfield that
the war in Szechwan has settled down to earnest fighting. It is not possible
to go beyond Chungking city. Marshall Liu Hsing, himself, together with all
of the aviators, has gone to the front, approximately 150 miles north of
Chungking. The road is not open now, being reserved for military transport,
and no other trafiic permitted. Under these circumstances it would be of
no use to visit Chungking.
I have just heard from Changsha that General Huang, chief of the aviation
bureau there has flown to Kweiyang with his assistant to further the coop-
erative plan of the air defence of these two provinces. Upon his return to
Changsha, which is expected in about ten days or two weeks, I would like
very much to have you go with me to Changsha to meet him in the event
that you are still in China and have the time to spare. The very best bet
of all, however, would be to arrange to have one of the new Corsairs demon-
strated in Hunan, Kweichow, and Szechwan at the earliest possible moment.
If Nahmmacher could fly this demonstration trip and take me along it would
be a really wonderful boost of Corsair prestige and an immense help to sales.
Wlio is Nahmmacher?
Mr. Love. He was our representative in China.
Senator Clark. He was a well-known aviator who was afterward
killed?
Mr. Love. That is right.
Senator Clark. The letter then reads further:
I earnestly request you, therefore, to do everything possible to make the
necessary arrangement with Nanking to get permits for such a flight. In the
meantime I will keep Nahmmacher advised closely of developments in both
places. Will let you know as soon as General Huang returns.
That would seem to contemplate a demonstration by a well-known
American aviator and practically at the front. Was that plan ever
carried out?
Mr. Love. No; and I don't believe he ever expected it to be. He
refers to the Nanking's permission, and that would never be given.
1468 MUNITIONS INDUSTRY
Furthermore, they do not grant huchaos ^ for any of these interior
provinces. The interior provinces were out to buy aircraft and ap-
parently had the funds, but we could not get permission to make a
demonstration.
Senator Clark. In other words, the situation is that each one of
these interior provinces maintains at least one or more armies of their
own, but they cannot get permission to bring airplanes in, from
the government that controls them?
Mr. Love. No; not that controls them, but the government that
is recognized by the foreign powers, because the customhouse is
controlled by the foreigners and they report to the government which
is recognized by the foreign government.
Senator Clark. Did you ever make this trip to Changsha con-
templated at that tinie and postponed for the moment?
Mr. Love. No; this is just an enthusiastic salesman who wanted
me to go back in the interior.
Senator Clark. You never got any chance to sell any planes back
there ?
Mr. Love. No, sir.
Senator Bone. What governments are involved in the control of
the Chinese customs?
Mr. Love. The Nanking government.
Senator Bone. You spoke of foreign governments; whom did you
mean ?
Mr. Love. The Chinese customs is some kind of an international
combination. I think it is predominantly controlled by the British,
although there are also Americans employed and also French and
others.
Senator Bone. What is the purpose of that — to secure a lien on
the revenues?
Mr. Love. They administer the customs for the Chinese Govern-
ment, and I believe there are various customs pledged on loans.
Senator Clark. I hand you a letter taken from your files dated
Sei:)tember 12, 1933, addressed to Mr. Thomas F. Hamilton, Paris,
France. He is your European agent?
Mr. Love. Correct.
Senator Clark. I offer this letter as an exhibit of the committee
under its appropriate number.
( The letter referred to was marked " Exhibit No. 567 " and is
included in the appendix on p. 1561.)
Senator Clark. This letter is unsigned, but it has the initials
" mn " on it. Do you know who that would be?
Mr. Love. The stenographer, Mary Neelan.
Senator Clark. Who wrote this letter?
Mr. Love. I will read it and see, if I may.
Mr. Love. Yes, sir; that is the letter that I wrote. That is after
I returned from China,
Senator Clark. I notice that you say in the fourth paragraph
[reading] :
Conditions in China so far as tliey affect (jur business are very sood and I
anticii)ate very sul)stantial business in tlie immediate future, possibly during
the present week.
' Iiiipoi't permits.
MUNITIONS INDUSTRY 1469
That had reference to prevalent conditions of continuing war, did
it not, Mr. Love ?
Mr. Love. No, sir. That had reference to the fact that I had been
out there for several months and they had arranged to make this pur-
chase. But I did not remain in China to collect the order. I came
home. The thing was budgeted and set and going through the usual
red-tape of business issued as an order.
Senator Clark. These were Corsair planes?
Mr. Lo\t:. The same Corsair order; yes. You see, the procedure
in selling planes is not the same as ordinary merchandise. Each
country sets up a budget, showing how much they have to spend.
Then they make up their jn-ogram as to what they want in the way of
equipment, what type of planes. The proposals are submitted and
eventually th?y get their selection decided on, as to what type they
want. It is quite a long drawn out affair. This is the order that I
worked on in China and eventually it was received.
Senator Clark. Is there any custom or practice arrangement in
the companies of the United group as to what will be standard am-
munition in the machine guns with which these planes are equipped
for military purposes?
Mr. Love. No, sir.
Senator Clark. Do you have any sort of working alliance with any
particular ammunition comjiany, Mr. Love?
Mr. Love. None at all. We prefer not to and generally do not
sell ammunition. About the only time we did — I think it was in two
cases — when we were obliged because of our having funds belonging
to the supplier, something like that.
Senator Clark. I call 3H)ur attention to a letter dated June 5, 1933,
from Mr. H. F. Beebe, manager foreign department of the Win-
chester Repeating Arms Co., addressed to S. A. McClellan, care of
L^nited Aircraft Exports, Inc., 230 Park Avenue, New York City.
I offer this letter as " Exhibit No. 568."
(The letter referred to was marked " Exhibit No. 568 '' and is
included in the appendix on p. 1562.)
Senator Clark. This letter reads :
Dear Captain McCleill\n: I am enclosin.u- with this copy of letter I liave
'written to Cajit. Antonio Cabral, of the Brazilian Flyers.
Our Mr. E. E. Jonas tells me that .vou are in charge of their itinerary and I
sincerely hope that you will arrange for a visit to our plant.
Contirtentially, I have just had a letter from our Mr. Nelson stating that
Curtiss secured the order for aeroplanes equipped with machine guns and
presumably some cartridges to go with them for China. This bears out what I
told you that in my opini(»n Remington and Curtiss were working very closely
in that market and I trust, under the circumstances, you will find it advan-
tageous to work with us just as far as you can in these matters.
That would indicate an alliance between Remington and Curtiss
and a ])roposed alliance between Winchester and United. Did any-
thing further ever come out of that?
Mr. Lo\t:. We had no alliance with any manufacturer at all. This
is only quoting this fellow Beebe's opinion that maybe Curtiss has.
Senator Clark. Did you ever encounter any such alliance between
Remington and Curtiss. in your competition with Curtiss ?
Mr. Lo\t:. No, sir; I think not.
Mr. Hiss. The testimony shows that Curtiss had a selling agency
for Remington in certain countries.
1470 MUNITIONS INDUSTRY
Mr. Love. We have never competed for ammunition, so I would
not know.
Senator Clark. I understand that you are not in the ammunition
business.
Mr. Love. Oh, no; definitely not.
Senator Clark. I call your attention to a letter dated June 23.
1933, from United Aircraft Export to Mr. Walter C. Thurston,
American Embassy, Rio de Janeiro.
(The letter referred to was marked " Exhibit No. 569 " and is
included in the appendix on p. 1562.)
Senator Clark. This letter is from Clark M. Carr, representative
of United Aircraft Export Co., Inc., and, as I have said, is ad-
dressed to the American Embassy at Rio de Janeiro. The letter
reads in part :
Dear Mr. Thurston : Mr. George S. Forman. representative of the Colt's
Patent Fire Arms Mgf. Co., and I, as representative of the United Aircraft
Exports, Inc., take this opportunity of confirming our conversation with you
of yesterday.
Last year's revolution caused the purchase of approximately a 150 military
and commercial airplanes from the United States America by the Brazilian
Government. This extensive purchase represented the adoption of American
material by the Brazilian Air Corps and, simultaneously, the throwing out of
French material. The military planes of these orders were supplied with Colt
machine guns.
How many of those planes did you sell, Mr. Love?
Mr. Love. I would have to lool^j it up to make sure, but I think
something over 40. Have you got that handy, Mr. Hiss?
Mr. Hiss. Forty-two, I think.
Mr. Love. Mr. Hiss says 42.
Senator Clark. You sold 42 to Brazil. That was in 1933.
Mr. Hiss. The company's own figures show shipments in 1932 to
Brazil of 45 Corsairs and 14 Boeings. The Boeings were pursuits?
Mr. LiOVE. Pursuits; yes.
Mr. Hiss. That is the total of 59 ?
Mr. Lo\T. That is right.
Mr. Hiss. According to their own records.
Senator Clark. I just wanted to indicate that there had been some
difficulty about obtaining permission to train certain officers in the
American Army School.
Mr. Love. I have not reached that far in this letter. That seems
to indicate that these officers came up to learn how to service and
handle the equipment. Necessarily, nobody goes into our factory
without permission of the War Department. That permission was
limited in this case to 3 days. It was not really a course of training.
It was just a matter of staying around to learn something about the
equipment.
Senator Clark. Was that matter straightened out, Mr. Love ?
Mr. Love. I do not laiow. Do you recall, Mr. Deeds?
Mr. Deeds. I do not recall the particular instance.
Senator Clark. Your agent was asking Mr. Thurston at the Amer-
ican Embassy to cable through the proper diplomatic channels, in an
endeavor to correct a situation which, in his opinion, possibly arose
through improper handling in the United States.
MUNITIONS INDUSTRY 1471
Mr, Love. That is another one of those cases where I was in China,
according to the date of that letter. This came up during my ab-
sence, and I never heard of it when I got back here.
Senator Clark. With reference to this order of the Brazilian Gov-
ernment which has been referred to, that included 29 planes which
were at that time being constructed by the Vought and Boeing Cos.
for the United States Navy and which were diverted to fill those
Brazilian orders. That is correct, is it not?
Mr. Love. I do not think that any of the Vought planes were di-
verted, were they, Mr. Brown?
Mr. Brown. I just do not recall the order, but several years ago —
how long ago was that?
Mr. Hiss. In 1932.
Mr. Brown. 1932 — that is about right.
Senator Clark. There were 20 Vought and 8 Boeing planes, Mr.
Love.
Mr. Brown. That is right. In order to make prompt deliveries,
application was made to the Navy to set back their deliveries and
u^e the planes that were coming along the line for this order, and
that permission was given.
Senator Clark. And those 29 planes were part of a total order
of 42 planes purchased from United at that time ?
Mr. Brown. They were Voughts and Boeings.
Senator Clark. Forty-two all told.
I offer as an exhibit a copy of a report from the Navy Department
in this connection.
(The report referred to was marked "Exhibit No. 570" and is
included in the appendix on p. 1563.)
Senator Clark. What were the terms on which those planes were
sold; do you recall, Mr. Love?
Mr. Love. Yes, sir. The planes along with other material, para-
chutes, and some ammunition, and some Waco planes, and different
things — owing to the confusion down below and difficultie3 in the
Government, were all lumped into one letter of credit and the order
for the whole lot was made to United. That letter of credit, as I
recall, was an even 2 million dollars. But it was not all United equip-
ment. We endeavored to get that credit subdivided in its proper
proportions to the other factories, in proportion to what was theirs,
as we wanted to have nothing to do with it. But that was not suc-
cessful. So that we drew on our letter of credit to turn money
over to these other factories.
The terms, as I recall it now, were $82,500 per month. That is
correct, is it not. Mr. Brown?
Mr. Brown. I do not recall.
Mr. LiOVE. Against the letter of credit, which was through the
Guaranty Trust Co.. in New York.
Senator Clark. Was that payment made as planes were delivered,
or were the payments strung out after the delivery of the planes ?
Mr. Lo^t:. The payments were strung out after delivery ; yes.
Senator Clark. I am interested in this, because there has been
evidence that Mr. Webster, president of the Curtiss-Wright Co.
Avitlidrew his bid on this same lot of planes because he was not satis-
1472 MUNITIONS INDUSTRY
fieil with the method of financing. Therefore it becomes interesting
to know what arrangement tho^e planes were finally sold on.
Mr. Love. Xow, that is a mistake, Senator. This order came up
most unexpectedly. As soon as we heard the news, Mr. Webster
took a plane for Brazil immediately. I used the long distance wire,
got the specifications, quoted by wire, and our man wa,s on the way
north with the order and crossed Webster in Para or Pernambuco:
in other words, our man had the order before Webster arrived there.
Senator Clark. In other words, you used the telephone and got
the order by wire, while Webster went down there by plane.
Mr. Love. That is correct. There never was a question of the
terms. This was an irrevocable letter of credit on government bank
of Brazil through the Guaranty Trust Co. Payment was effected
in full without any delay at all.
Senator Clark. Mr. Love, there has been testimony here that Mr.
Webster — and it was by Mr. Webster himself, was it not, Mr. Hiss ?
Mr. Hiss. Yes, sir.
Senator Clark. That after Webster was supposed to have with-
drawn his bid or, according to your statement of it, after your mes-
senger crossed Webster coming home with the order, Webster went
to Buenos Aires and there sold 10 Falcon planes from the Curtiss
factory in Chile to a certain Mr. Jones who claims to be representing
Paraguay, according to Mr. Webster. Mr. Webster later found out
that Mr. Jones was a certain Commander Orsini, a Brazilian officer,
and that planes were purchased for the Sao Paulo revolution. Do
you know anything about that transaction?
Mr. Love. Nothing, only hearsay.
Senator Clark. You w^ere bidding on this South American busi-
ness at the same time, and it occurred to me that you might have
heard something about it or might have known something about it.
Mr. Love. We have never quoted, to my knowledge, on anything
to Paraguay, and I never heard of this transaction until after it
was all completed. I have never met this Mr. Jones, or Orsini, or
whatever his name is ; never saw^ him or heard of him before.
Senator Clark. He never tried to buy any planes from you for
Paraguay ?
Mr. Loy^E. No. The first I heard of this was in reading about the
testimony the other day.
Senator Clark. Did it not occur to you, from your experiences as
a salesman, that it was rather an extraordinary course of conduct
for a man named Jones to turn up in South America with cash in
his pockets to pay for a lot of planes? Did you ever have such an
experience as that?
Mr, Love. I testified awhile ago that most of our sales are set up
in a budget several months in advance. This Brazilian order was
the only one that I can recall that sort of came out of a blue sky.
Senator Clark. You do know that some time after this incident of
these planes turning up in possession of the Brazilian revolution-
ists, the Curtiss Co. was in the bad graces of the Brazilian Govern-
ment, do you not?
Mr. Love. I only know of this from hearsay. Naturally, I heard
this whole story, traveling around down there, but I had no proof
and never saw anybody who was involved in it.
MUNITIONS INDUSTRY 1473
Senator Clark. Your assistant, Mr. McClellan, had information
to that eifect apparently, and in that connection I call your attention
to a letter of March 28, 1934, which I offer for the record as '' Exhibit
No. 571."
(The letter referred to was marked '' Exhibit No. 571 " and is
included in the appendix on p. 1564.)
Senator Clark. This letter is from Mr. S. A. McClellan, who was
your executive secretary?
Mr. Lo\t:. Yes.
Senator Clark. To Mr. Clark M. Carr, Buenos Aires, Argentina.
He says :
In this connection it is interesting to have Jonas' comment that our main
competitor is being represented by the firm of Sousa Sampaio. which enjoys
a most excellent reputation in all quarters and is run by a family prominently
identified with the development of both Brazil and Uruguay for a number of
generations. We liave, in the past, believed that our cmopetitor couhl not
do much in tlie Brazilian market witli the present government because of the
bad reputation they got in connection with supplying second-hand equipment
during tlie course of the Brazilian revolution. Apparently, this should be dis-
counted heavily, if not entirely, due flrst to the type of representation they now
liave in Rio. and second to the following evidence of tlie sliort memory and
forgiving disposition of tlie present Brazilian Government.
Then he goes on to recount the reinstatement of a certain officer
who had deserted to the rebel side, fought against the Government
during the revolution and was now again an officer in their army.
But, in connection with this reference to Curtiss, is that your un-
derstanding of Curtiss' reputation in Brazil following this Jones-
Orsini incident?
Mr. Love. Well, it is really all agents' reports, based on rumors.
It is not entirely true.
Senator Clark. In this case this is information from the home
office to the agents, instead of information sent by some irresponsible
agent to somebody else.
Mr. Love. These are some more rumors, recounting rumors told
by somebody else. He is just passing the rumor along.
I do not believe that Curtiss supplied second-hand equipment
there. I think they were new planes from their Chile factory.
They did some time previous supply some second-hand trainers, but
I was assured by Mr. Webster that they were sold as second-hand
and it was understood that they were second-hand.
Senator Clark. These Falcon planes turned up in the hands of the
rebels, did they not?
Mr. Love. Yes, sir. I saw some of them there.
Senator Clark. What was that?
Mr. Lo\'e. I saw some of them there.
Senator Clark. Were you looking over the rebel planes as well as
the Government planes yourself?
Mr. Love. At that time the revolution had finished and these rebel
planes were stored in the federal hangar.
Senator Clark. Mr. Love, last week when the Curtiss people were
on the witness stand there w^as a letter or an interoffice memorandum
from the Curtiss-Wright files put in evidence as exhibit 426, to which
I ao-ain refer.
1474 MUNITIONS INDUSTRY
This is from W. F. Goulding to Mr. Burdette S. Wright. I am
not familiar with the particular positions of these gentlemen, but this
memorandum says:
Another matter is the question of financing. Apparently United was able to
work this out to their satisfaction, but just how it was done I am not entirely
aware. As a matter of fact, I think it was worked out in connection with the
Farm Board's coffee, but you do not need to tell people this if they do not
know it.
What connection did you have with the Farm Board coffee ?
Mr. Love. Absolutely and precisely none. I never heard of it
before.
Senator Clark. Did you get paid out of the proceeds of the coffee
that the Farm Board took in exchange for some other commodity ?
Mr. Love. No. We definitely got paid on letters of credit from
the Bank of Brazil through the Guaranty Trust Co.
You asked me a moment ago if we had sent ahead planes, ahead
of our monthly payments. Now that I recall it — I said that we
did, which was true, but I think we had sent considerably more than
this monthly allotment covered. Mayrink gave to me in Brazil
6,000 contos of milreis. A conto of milreis is 1,000 mireis. It
runs into a great may ciphers. But, substantially, it was $600,000
that they put up in escrow in Brazilian currency until such time as
the credit ran out. When the credit ran out the money was turned
back to them. That was merely a guarantee that we would receive
the money because of the condition of blocked exchange in Brazil at
the time, of which you are no doubt aware.
Our payments were all on a letter of credit, a straight letter of
credit, and this deposit was merely an additional guarantee on May-
rink's jDart.
CONTRACT BETWEEN UNITED AIRCRAFT EXPORTS AND PERU FOR THE SALE
OF GUANO
Senator Clark. About the same time — that is to say, the middle
of 1932 — you entered into a contract with Peru for financing cer-
tain purchases that they had already made and certain future pur-
chases to be made, did you not ?
Mr. LiOVE. You refer to the guano contract?
Senator Clark. I will offer two contracts, between the United Air-
craft Exports, Inc., and the Peruvian Guano Co. for one and the
United Aircraft Exports, Inc., and the Peruvian Government for
the other.
(The contracts above referred to were respectively marked " Ex-
hibits No. 572 and No. 573 " and are included in the appendix on
pp. 1665 and 1570.)
Senator Clark. Under those contracts, Mr. Love, it was provided
that a certain quantity of guano was to be turned over to the United
by the Peruvian Guano Co. ; is that correct ?
Mr. Love. Yes, sir.
Senator Clark. That was one contract between the company and
the United; that is, the Peruvian Guano Co. Then there was
another between the Peruvian Government and the United ?
Mr. Love. The Peruvian Government intervened and signed wi(li
the Guano Co., because they own and control the Guano Co.
MUNITIONS INDUSTRY 1475
Senator Clark. The Guano Co. is really a governmental agency;
is that it ?
Mr. Love. Yes, sir.
Senator Clark. Controlled under a Government monopoly. The
Government is in complete control of it, with authority to remove
officers of the Guano Co. at will, or dissolve the board of direc-
tors of it, and in all senses absolutely to control the operations of
the company. It is a governmental agency; is that correct?
Mr. Love. Yes. But it is a little more complicated than that, be-
cause the Guano Co., to get started, formed a preferred stock
company, and there are private stockholders who are limited to a
10-percent return on their investments. All beyond that goes to
the Government.
Senator Clark. The beneficial owner, outside of some limited
preferred stock, simply for the purpose of originally marketing
it
Mr. Love. That is correct.
Senator Clark. The beneficial owner of the Peruvian Guano Co.
is the Government itself ; is not that so ?
Mr. Love. That is correct.
Senator Clark. Will you outline briefly just what these contracts
provide? I realize that they are very complicated, but will you
briefly outline the general scheme ?
Mr. Love. Yes, sir. I have done a great deal of barter business
in my life, selling back and forth and exchanging, in substantial
amounts at different times. I went down to Peru, where I have
been going for over 20 years and know everybody, and saw this sit-
uation. They were short of money. They had this guano deposit,
for which there was an active market in this country. But they
had no sales here to speak of and no money with which to pay the
common labor to get out this guano or to buy the sacks or charter
the ships and get it up here. In addition, they owed us an unpaid
balance which I was trying to collect. I worked out a scheme
whereby I advanced under these contracts to the Guano Co. the
cost of $7.40 per ton for paying the labor to get off this guano, to
deliver it on board ships.
I agreed to charter the ships. I agreed to pay the cost of weighing
and sampling and testing, and so forth, to pay the freight and ad-
vance immediately, when they made shipments in Peru, the amount
of $7.40 per ton.
Mr. Hiss. That is $7.20 a ton.
Mr. Love. I am corrected on that detail. It is $7.20 a ton.
That amount of $7.20 paid all their labor and the local cost and
allowed the obligatory 10-percent return on the preferred stock of
the company.
We were to sell that in the States at a fixed price, based on the
daily chemical-trade reports there. I believe it is called the Oil,
Paint and Drug Keporter. That gives the quotations daily of nitro-
gen and ammonia, and the basis was stipulated in the contract.
After making a sale, we deducted from that our cash advances
on the transactions which was $7.20 per ton in Peru, the steamship
charter, the weighing and sacking and testing and delivering, and
so forth, and have a certain cash residue, of course, and to help the
83876— 34— PT & 5
1476 MUNITIONS INDUSTRY
Government in their normal requirements we remitted to them one-
half of that in cash; one-half of that profit on each transaction.
One-quarter of the profit we apply to the payment of our old debt
and another quarter, the remaining quarter of the profit, we had
assigned to the aviation department for their new requirements,
which they needed mostly in spares, to maintain what they had.
Their participation, I might explain, really came in to get the assist-
ance of the marine department in effecting this contract.
Senator Clark. Let me see if I understand this correctly^ Mr.
Love. I think I understand from your statement and from reading
the contract. There were certain fixed charges in connection with
getting out this guano and getting it to the market.
Mr. Love. Yes, sir.
Senator Clark. That included insurance and labor?
Mr. Love. Chartering the ships.
Senator Clark. The freight and everything else.
Mr. Love. Sampling and analyzing.
Senator Clark. Let us say that that is $7.
Mr. Love. Our charges were approximately $14.50 per ton.
Senator Clark. Just for the purpose of illustration I will say
$7, because that has been mentioned here. Then you sold on a fixed
price, to be regulated ?
Mr. Love. We had that sold by professional brokers, H. J. Baker
& Co. I do not know at what price they sold, because that would
depend on quantities and terms, and so forth.
Senator Clark. I understand that. Then you remitted to the
Peruvian Government on the basis of a fixed charge.
Mr. Love. A fixed percentage of the quotations in the daily New
York papers.
Senator Clark. Let us say that price was $8 or $7, any figures
you might be pleased to take. You would remit to the Peruvian
Government the difference between your base cost, which you put
at $7, let us say, and the fixed sale price, which we will put at $10.
You would remit, then, to the Peruvian Government a dollar and a
half of that.
Mr. Love. Yes.
Senator Clark. Fifty percent of the excess between your base cost
and the fixed price. You would retain another dollar and a half,
of which 75 cents or one-quarter of the excess, was to be applied to
the payment on the old debt and the other 75 cents was to be applied
on the purchase of new material by the Peruvian Government.
Mr. Love. That is correct.
Senator Clark. If actually through j^our brokers' arrangement you
are able to sell this material above the fixed price on which you re-
mitted to Peru, that profit belonged to you according to the arrange-
ment that you had made with your broker.
Mr. Love. It belonged to the broker who carried all of the risk
of selling and took the risk of having a loss upon it, because it is a
very treacherous business. It depends on the quantity of stones anci^
dead bird feathers that is contained in the guano and the terms, mu
so forth.
Senator Clark. Then you did not participate in any profit abov
your fixed price, nor did you share any of the loss?
Mr. Love. No. We did not take any of the risk at all.
MUNITIONS INDUSTRY 1477
Senator Clark. You, as well as the Peruvian Government wi'ut on
the fixed-price basis ?
Mr. LiOVE. Precisely.
Senator Clark. Just for the purpose of explaining exactly how
this is figured, I call your attention to an extract from a letter
written by you from Lima, Peru, on February 27, 1932. which I offer
in evidence as '' Exhibit No. 574."
(The extract referred to was marked '' Exhibit No. 574 " and ap-
pears in full in the text.)
Senator Clark. This reads:
Obtain copy of the Oil Paint & Drug Reporter, publislied at 12 Gold St., New
York. Use prices in special section caUed " Fertilizer materials." Copy I
have is Feb. 8th. Take price on page 52, $19 per net ton for sulphate of
ammonia, which converts to $21.28 per gross ton, containing 20^2 units of
ammonia. Now a unit of nitrogen (which is the basis for buying the guano)
is 1,214 units of ammonia (which is the basis for selling in the States) hence
multiplying 20 V2 units per ton of the sulphate of ammonia equals 24.89 units
of ammonia, which, divided into the cost of $21.28 per gross ton, equals 0.805
cents, wliich, adding the 20 percent specified in the contract, and which repre-
sents the superior quality of guano ammonia, gives a net cost to us of i^O.HOG
per unit of saleable ammonia as our cost price c.i.f. Atlantic ports.
The price of the phosphoric acid is based on superphosphate which was
quoted in same issue as $7.50 per ton of 16 percent or a cost to us of $0,466 per
unit, and the current selling price is $0.50. This is little or no profit on this
content, but it doesn't matter.
The potash content is furnished free by Guano Co. and seldom passes 1-2
percent, but is saleable at about $0.50 per unit.
Do not take this matter up with W. R. Grace, as they will surely discouraj:e
the transaction and endeavor to block the agency contract. * * *
That was the agency contract in effect?
Mr. Love. No, sir; the one I was trying to make with the Govern-
ment.
Senator Clark (continuing reading) :
I understand that they have 8,500 tons in stock in Jacksonville, which they
are endeavoring to sell at $2.50 per unit. Bearing in mind that a "unit" is
merely tlie trade way of referring to percentage of weight and that the average
Grace has is 12 units per ton, you will see that the difference between our
apparent cost price of $0,966 and Grace's reported price of $2.50 represents a
difference in their inventory of slightly over $150,000. Or if we were to sell
at $1.50 per unit, which in De Lavalle's opinion would be nearer the market
price at which figure large sales are iminediatelv possible, it means a paper loss
for Grace of $100,000.
Mr. Love. A paper loss?
Senator Clark. A paper loss; yes, sir. That apparently explains
the basis on which the transaction was begun, does it not, Mr. Love?
It illustrates the way in which you figured your cost ?
Mr. Lo\^. I do not know that this settles the question. You see,
this is dated in February 1932, when I was just learning the Guano
business. This last paragraph turned out not as reported to me.
Senator Clark. You got to be an expert on guano, did you not?
Mr. Love. I got to know the difference between organic and inor-
ganic, but I have forgotten it now.
Senator Clark. I offer these in evidence.
Mr. Lo"\^. This was published in all the papers down there and is
a public document, and highly approved by everybody at the time,
and is still on file down there.
Senator Clark. Now. Mr. Love, how did you finance the cost of
$14.50? I believe you said the cost actually ran about $14.50 a ton.
1478 MUNITIONS INDUSTRY
Mr. Love. That was done entirely by Baker, and I think the first
few transactions they advanced the money by cable, and later put up,
I think, letters of credit in Peru in favor of the Guano Co., and sta-
tioned there and have stationed there their own representative, who
checks and and verifies every shipment and makes immediate pay-
ment to them, and Baker turned the money over to us, and it was
immediately divided.
Senator Clark. Did you supply the ships, or did Baker?
Mr. Love. Baker chartered them.
Senator Clark. Baker chartered the ships?
Mr. Love. Yes, sir.
Senator Clark. In other words, as I understand it, it is necessary
to have special ships moving this guano because it smells so badly
that you could not ship it on ordinary passenger ships or freighters.
Is not that true ?
Mr. Love. I do not think it is especially for the smell. You never
notice it when you are around it a few minutes. It is difficult to
handle, and they use little tramp steamers, and it is loaded in bulk
and not in packages.
Senator Clark. They did have a special line of boats chartered
for the purpose of moving it?
Mr, Love. Not a special line, but chartered ship by ship.
Senator Clark. It is necessary for those ships to come up loaded
and to go back empty, as a general proposition, is it not?
Mr. Love. That depends on where they charter. They might
charter them at the Gulf or around Panama,
Mr, Hiss, But, after they deliver a load of guano in the United
States, if the same boat were to be used again, it would go back
empty ?
Mr, Love. Normally they do not go back, because there is a limit
to the season of shipping guano, 3 months, and they would not have
time to load and unload and go back to get another load.
Senator Clark, Was there any limit on the amount of tonnage
which was to be turned over by the Peruvian Government?
Mr, Love. Yes, sir; the limit was to be that available for export
after supplying all home demands and then I think our original
contract required us to take a minimum of 12,000 tons, I think
12,000 a year is correct,
Mr. Hiss. For 5 years ?
Mr. Love, Twelve thousand a year for 5 years.
Senator Clark, I call your attention to a letter dated December
30, 1932, or, rather, a memorandum, from Mr, F, H, Love, your-
self, addressed to Mr. M. F. B. Rentschler, which I offer for ap-
propriate number.
(The memorandum referred to was marked " Exhibit No, 575 "
and is included in the appendix on p. 1574.)
Senator Clark. In that memorandum you state [reading] :
I have just had quite a long session ^^ith Mr. Smith, partner of H. J.
Baker & Brother, regarding the Peruvian situation. I have a high opinion
of Mr. Smith's integrity and am inclined to credit fully any statements he
makes.
Mr. Smith tells me the Peruvians just approached him
Mr. Love (interposing). I would rather leave that out of the
record.
MUNITIONS INDUSTRY 1479
Senator Clark. I think it is an important part of this transaction.
[Continuing reading :]
Mr. Smith tells me the Peruvians just approached him on a basis to notably
skimp their analysis in order to double the profit made at this end. We
mutually agreed to turn the proposition down definitely.
To date he has moved three times the contracted tonnage and he expects
that even this will be further increased, as he has made sample sales in places
like Philadelphia which heretofore have never known guano.
Now apparently, Mr. Love, there was some difficulty as to the
amount to be furnished you by the Peruvian company because I find
this file memorandum, signed J. K. Miller [producing paper].
That memorandum is dated April 3, 1934, and I offer it in evidence
with the appropriate reference number.
(The memorandum referred to was marked " Exhibit No. 576 "
and is included in the appendix on p. 1575.)
Senator Clark. Who was Mr. J. K. Miller?
Mr. Love. Miller is the treasurer of the United Aircraft Exports,
Inc.
Senator Clark. He says :
In talking to Mr. McCormick of H. J. Baker «fe Bros., yesterday, he advised
that the President of Peru had signed a decree dissolving the board of directors
of the Compania Administradora Guano. One of the reasons for this decree
Is the fact that they have disregarded the President's previous decree instructing
them to act favorably with reference to the 15,000 tons of guano for which
Baker Bros, placed orders for the coming year.
Mr. McCormick believes that while this action is far from satisfactorily
closing the matter, it betters our position somewhat over that which we were
in just prior to Mr. Love's departure since the then directors of the Compaiila
Administradora del Guano were among those opposing our contract for political
reasons. Mr. McCormick expressed the opinion that the new directors would
probably be more favorable toward us.
So that you did considerably exceed the limits fixed in the con-
tract in the actual movement of guano, did you not?
Mr. Love. That 12,000 tons per year "
Senator Clark. Six thousand?
Mr. Love. Twelve thousand was the maximum we agreed to take.
We were not obliged to take more than that.
Mr. Hiss. That is the minimum?
Mr. LoA^E. We agreed to take that as a minimum.
Senator Clark. You agreed to take 12,000 as a minimum?
Mr. Love. Yes, sir.
Senator Clark. And then you had some difficulty getting more
than the minimum from the company and, as a result of that, the
President of Peru " fired " the members of the board of directors
of the Guano Co.
Mr. Love. I do not believe that was the reason why he " fired "
them. That is another of these hearsay letters. I know some of
the inside politics, and I know that is not the reason for the changes
they made there. The contract in general proved very, very advan-
tageous to them ; more so than they ever anticipated. That para-
graph I asked ,you to leave out. Senator, will probably show you
why there was a dissolution down there.
Senator Clark. Now, in 1933, Mr. Love, apparently the United
was negotiating with the Federal Laboratories and with the United
States Ordnance Engineers, the selling agency for the Lake Erie
1480 MUNITIONS INDUSTRY
Chemical Co., regarding a shipment of bombs to Peru on the empty
freighters returned in sending cargoes of guano, were they not?
Mr. Love. I would not call it negotiations. My recollection is
that I suggested to somebody that they might get them down on
these guano boats. I do not know. I would have to see that to
refresh my recollection.
Senator Clark. This is a letter to Mr. Francis Love, president
United Aircraft Exports, Inc., 230 Park Avenue, New York, being
from Mr. B. C. Goss, president of the U. S. Ordnance Engineers.
I will offer that in evidence, to be numbered appropriately.
(The letter referred to was marked " Exhibit No. 577 " and is
and is included in the appendix on p. 1575.)
Senator Clark. That letter reads, in part, as follows :
In accordance with your request for quotation, we arc pleased to quote the
following list price, f.o.b. Reynolds, Pa., packed for export.
And then follows schedule A, demolition bombs and ring-type
fragmentation bombs; then schedule B, demolition bombs and ring-
type fragmentation bombs, body empty, fuze and booster loaded;
and then schedule C, body and booster empty, fuze loaded, demoli-
tion bombs and ring-type fragmentation bombs, each —
We estimate sixty days for delivery of the above after receipt of an order.
Your discount from the above list prices is thirty percent (30%).
In accordance with our conference in New York on Tuesday last, will you
please adviae me who in your organization can make specific arrangements for
carrying loaded bombs to Peru, Bolivia, Paraguay, etc., in your guano boats
in case we sliould wish to avail ourselves of your kind offer during your absence
from this country?
In accordance with your inquiry, the name of our temporary representative
in Peru is J. Froletz P. Edificio, Italia 310, Apartado, 1873, Lima, Peru —
Telephone 10126.
Thanking you again for making our stay in New York such a pleasant one,
I am.
And so forth.
What was that negotiation, Mr. Love?
Mr. Love. My recollection on that is that Peru asked us to quote
on this, figuring on using their surplus funds for new equipment out
of their guano. We did not want to handle this stuff, but felt obli-
gated to quote them prices.
You will notice I was away again, being out of the country, and
we tried to get a price delivered down there, and there were not any
boats which would get them. They can not go in a passenger boat
and they cannot go in a freight boat, which makes certain ports,
which forbid explosives to come in. That was merely a suggestion
I made to Colonel Goss, whom I know personally, and so forth, that
he might get them down on one of the empty guano boats that they
were chartering at that time. We did not go into the deal. There
is nobody in our organization, and we never chartered a boat and
had anything to do with it. That is Baker's job, chartering agents.
Certainly nothing ever came of that thing. It was forgotten by
us gladly.
Senator Clark. Here is once you were not out of the country, Mr.
Love [producing paper].
Mr. Love. Good.
Senator Clark. Here is a file memorandum dated December 19.
1933, with copies to Mr. Johnson, Mr. Kentschler, and Mr. McCarthy.
MUNITIONS INDUSTRY 1481
This is signed by Francis H, Love. I will offer that for the record,
to be given the appropriate exhibit number.
(The memorandum referred to was marked " Exhibit No. 578 "
and is included in the appendix on p. 1576.)
Senator Clark. That letter or memorandum reads in part as
follows :
Baker are quite agreeable to their chartered freighters carrying airplane
bombs or other material of ours to South America, whenever it may result to
our advantage.
I That does not sound like an accommodation to Colonel Goss.
Mr. Love. No, sir.
Senator Clark (continuing reading) :
I have in mind the $100,000 loaded bombs for Peru, on which freights on
regular passenger steamers or any direct steamers are unavailable. This order
will only be taken by us with full cash in advance, or equivalent, and freight
assured in advance.
Mr. Love. This other material of ours is airplanes, which we had
thought at that time of sending down, airplanes on guano boats.
You can see there that Colonel Goss is not familiar with the thing,
when he talks about going to Paraguay or Bolivia with a guano boat.
Senator Clark. It does not indicate you were dealing with the
matter just for the bentfit of Mr. Goss when in this memorandum you
state to Mr. Johnson, Mr. Rentschler, and Mr. McCarthy :
Baker are quite agreeable to their chartered freighters carrying airplane
bombs or other material of ours to South America, whenever it may result to
our advantage. I have in mind the $100,000 loaded bombs for Peru, on which
freights on regular passenger steamers or any direct steamers are unavailable.
That indicated you were going into the bomb business on your
own, did it not?
Mr. Love. As I explained before, we were obliged to furnish Peru
or obliged to furnish them material they ordered from the guano.
Senator Clark. In other words, this is 25 percent of the guano
proceeds, which might be for anything Peru wants besides your
equipment?
Mr. Love. I think the contract shows that.
Mr. Hiss. Was it not your contention that the 25 percent had to be
spent for airplane equipment through you ?
Mr. Love. We had that up; and I think the contract reads, if
you have it handy, that it was equipment purchased through United.
I tried to have it United equipment, and they would not have it. I
think you will find the contract reads, anything purchased through
United.
Senator Clark. If this had nothing to do with the guano contract,
Mr. Love, why did you include the following language in connection
with this bomb order :
This order will only be taken by us with full cash in advance, or equivalent,
and freight assured in advance.
In other words, if you had a lot of money in your pocket, it would
not have been necessary to get them to pay in advance, would it?
Mr. Love. What I referred to was probably this : This guano
money was not a static item, and they were continually ordering
against it, and I probably had in mind that we would ha^^e that
money and earmark it for this.
1482 MUNITIONS INDUSTRY
Senator Clakk. You state in your memorandum that you will only
fill the order for cash on the barrel head.
Mr. Love. Cash on hand. We never had a fixed amount piled up,
but were continually sending them orders against that guano deposit.
There were engines, spare parts, plane parts, and so forth.
Mr. Hiss. Mr. Love, if you had bought bombs out of this 25 per-
cent from Lake Erie, you would have received the discount which
was stated in the letter which was just put in evidence, would you
not?
Mr. Love. That is true.
Senator Bone. What sort of bombs were those ?
Mr. Love. We never bought them or handled them, so that I will
have to look.
Senator Bone. Were they explosive, poison gas, or what were they ?
Mr. Love. No, sir; there was no poison gas shipped, Senator.
Demolition bombs and fragmentation bombs and others, or just fuzes.
Senator Bone. Where were they manufactured and by whom ?
Mr, Love. This quotation is from the U. S. Ordnance Engineers,
and my recollection is we got a quotation from somebody else. Is
that correct ?
Mr. Hiss. Correct.
Senator Clark. The U. S. Ordnance Engineers was a private com-
pany, was it not, Mr. Love?
Mr. Love. Yes, sir.
Senator Clark. The name might indicate that it was a govern-
mental agency, but it is a private company ?
Mr. Love. Yes, sir. I did not read all the name. It is the United
States Ordnance Engineers, Inc.
Senator Clark. Yes, sir; the United States Ordnance Engineers,
Inc. Going back to the 25 percent, Mr. Love, as to what was pur-
chased and whether you were bound to go out in the market, can you
tell us more about that?
Mr. Love. I would like to look at the contract.
Senator Clark. Yes, sir. Here is another letter dated February
17, 1933, signed United Aircraft Exports, Inc., by J. R. Miller, assist-
ant treasurer, addressed to the Director General of Administration,
Ministry of Marine and Aviation, Lima, Peru, which states :
Dear Sir: We have for acknowledgment your letter of January 31. in reply to
our cablegram of January 27, relating to the application of moneys in our hands
to the acquisition of aviation equipment.
We desire to point out that under the first article of the contract entered
into under date of June 25, 1932—
That is the contract to which you have been referring —
between your government and this corporation, it is stipulated that your gov-
ernment will acquire new planes and aviation equipment through this corpora-
tion, which agrees to furnish such equipment in accordance with contracts to
be entered into with it for that purpose, and that it is only to the piu'chase
of equipment acquired in this manner that this corporation has agreed to
apply moneys held by it under the contract. This is clear, since, under the
fourth article of the contract, it is provided that 25 percent of the purchase price
of the guano "shall be applied by United to new acquisitions", and in the first
article the term " new acquisitionsi " is defined as new planes and aviation
equipment acquired " through United."
(The letter referred to Avas marked " Exhibit No. 579-A. ", and is
included in the appendix on p. 1578.)
MUNITIONS INDUSTRY 1483
Senator Clark. That, taken in connection with your statement that
you would not enter into this field unless there was cash on the
barrelhead would certainly clearly indicate that these bombs to which
the correspondence referred would not come within the terms of the
contract.
Mr. Love. Senator, I have this thing here. We had a specific dis-
cussion with Commander Galdo, and we tried to get it "bj'- United "
and it specified "' through United." Mr. Miller's complaint was
where they were buying elsewhere and asking us to turn over funds
to a third party. That is what we would not do. We had no
authority under our contract, first of all, to take their money and
apply it to anyone else.
Senator Clark. Did you understand that these bombs came within
the term of " aviation equipment " ?
Mr. Love. They are airplane bombs.
Senator Clark. They are not airplanes.
Mr. Love. Aviation equipment for military purposes.
Mr. Hiss. Was it not your contention, Mr. Love, that it would be
unfair of Peru to use you as a purchasing agent for equipment not
made by your company?
Mr. Love. Yes; that was another thing. When we produced this
revenue for them they did not have the revenue at all unless they
produced the guano and created a market.
Mr. Hiss. It was the contention of your company that Peru must
apply that 25 percent and must acquire United Aircraft products
and not any bombs or stuff from Lake Erie?
Mr. Love. That is what I originally tried, and the contract was
amended to say " acquired through United, aviation and military
equipment acquired through United."
Mr. Hiss. After that you contended, did you not, that Peru was
obligated to buy from you?
Mr. Love. I told them that ; yes, sir.
Mr. Hiss. Did they, as a matter of fact, ever buy any equipment
other than through United for Peru ?
Mr. Love. I think there were some emergencies or spares, which
was somebody else's material, and we did it as an accommodation
and advised it was against the contract.
Mr. Hiss. In other words, your construction of the contract is
that they were obligated to buy with that 25 percent only United
products ?
Mr. Love. Just the opposite — through United. In other words,
they could not buy from somebody else, as I have stated here, and
turn this over to a third party.
Mr. Hiss. I am sorry. I thought you said the Peruvian Govern-
ment was morally obligated to obtain that 25 percent from the
United people.
Mr. Love. I thought so morally; but the contract was amended
by them.
Mr. Hiss. After the contract read that way, did you not write to
Peru telling them that you thought they were morally obligated to
get only United products with that 25 percent?
Mr. Love. I do not know whether I did or not; but the contract
reads that they could buy other stuff.
1484 MUNITIONS INDUSTRY
Mr. Hiss. As a matter of fact, did they buy other than United
equipment with that 25 percent?
Mr. Love. I would have to look that up to be positive, but I think
there was one or possibly two small transactions that, to accom-
modate, we did pay them.
Mr. Hiss. The majority of that money has all been used to pur-
chase United equipment. Is not that correct, Mr, Love ?
Mr. Love, No; I would not say that is correct, because there are
certain parts which United does not make — fabric, wires, and parts
of that kind, which is made by some company and which was not
of our manufacture, but which we currently supplied as spare-s;
instruments, for example.
Senator Clark. About that time, Mr. Love, Chile owed you some
money and you were trying to enter into a negotiation or contract
with them to pay on that, were you not ?
Mr. Love. Yes, sir.
Senator Clark. What came of that deal?
Mr. Love. Nothing up to the present.
Senator Clark. You are still working on that ?
Mr. Love. Yes, sir ; we are still working on that — no ; as a matter
of fact, I have dropped it, because since it has been arranged to pay
in cash, I turned the transaction over to Baker and they were work-
ing on it.
Mr. Hiss. Here is a letter of October 31, 1933, which will be
" Exhibit No. 579 ", written by Mr, J. R. Miller to the director gen-
eral, in which he says that he does consider they should purchase
United products [handing paper to witness] .
Mr, Love, Yes, sir,
(The letter referred to was marked " Exhibit No. 579 " and is
included in the appendix on p. 1577.)
Senator Clark. You were also dealing with the Federal Labora-
tories, were you not, Mr, Love, about being their agent in the sale of
bombs in Peru?
Mr, Love. Not being their agents. We probably got a quotation.
Senator Clark. They requested you to be their agent. I call your
attention to a memorandum, undated, referring to December 13,
signed by yourself, Mr. Love, a copy to Mr. S. A. McClellan, which
I will ask to have marked " Exhibit No. 580."
(The memorandum referred to was marked "Exhibit No. 580"
and appears in full in the text.)
Senator Clark. In that memorandum you say [reading] :
During the past week the Government has been indulging in a spree of
aeronautical and armament purchases, presumably from the proceeds of the
S/.5,000,000 loan for "national defense" obtained from the reserve bank last
month. A contract has been closed with the Curtiss people for the purchase
of nine Curtiss Falcons, three Curtiss Hawks, equipped with " Cyclone " motors,
plus about $80,000 worth of equipment and parts, and quotations have been
asked for ten to twenty more planes. As a matter of interest to the United
Aircraft people, bidders for these planes were reported to be General Aviation,
Northrup, Douglas, Junkers, and Fairey. It is stated that Curtiss promises 40-
to 50-d;iy delivery in New York, and for that reason got the edge on the rest
of the bidders. Terms are believed to be one-third with order and t^vo-thirds
payment against shipment, the credit having been opened under the guaranty
of the reserve bank. We are also told that $100,000 worth of aeroplane bombs
have been ordered from the States and that 135,000 gallons of aviation gasoline
MUNITIONS INDUSTRY 1485
were purchased at short notice from the International Petroleum Company of
Talara for shipment to Iquitos.
All of this, of course, is an offset to Colombia's reported activities, and it is
estimated that the total cost of planes and armament contracted for during the
past week is in the neighborhood of $550,000.
Mr. Love. Senator, you will note that is not signed. That is not
my language at all. I do not believe I ever wrote that. This one
over here is a different memorandum altogether. That is not my
language.
Senator Clark. I beg your pardon, Mr. Love. They were coupled
together, and I though they were the same memorandum.
Mr. Love. No.
Mr. Hiss. It appeared in the files of the company that they were
the same memorandum, being coupled.
Senator Clark. You do not know who wrote that, Mr. Love?
Mr. Love. No, sir. I never used this language.
Senator Clark. They were coupled together in your file. This
memorandum is dated December 27, 1933. It reads as follows :
In conversation with Mr. Young, of Federal Laboratories, on Dec. lOtli, he
was very desirous that we make some arrangement with him to work exclu-
sively on the Peruvian bomb order with his company. This I declined to do,
stating that we were not primarily interested in bomb sales but probably would
become involved in this sale for financial reasons and the possibility of making
delivery of loaded bombs from the east coast on guano boats.
Federal has an agent in Lima, Mr. de Russey, who at the same time is an
agent of du Pont's.
Mr. Young proposes that I contact his agent in Lima and arrange the sale on
the basis of empty bombs, which we would have no difficulty whatever in ship-
ping down on regular passenger steamers (query re loaded fuses) and have
De Russey, as agent for du Pont, bring in the TJN'T. Mr. Young would furnish,
at an approximate cost of $6,000 for salary and expenses, a technician to go to
Peru and actually load the bombs down there.
Mr. Young states the value of these bombs would be about $120,000.
I made no commitments of any kind with Mr. Young and would prefer to
hold the matter in abeyance until I get down to Peru and see what the actual
situation is.
What did come out of that situation, Mr. Love?
Mr. Love. Nothing at all, sir. I side-stepped it. As I say, I de-
clined to make any commitments. I say we are primarily not inter-
ested in bombs.
Senator Clark. But you say you are going down to see what could
be done about it,
Mr. Love. I beg your pardon. I went down on another matter.
Senator Clark. You say, "to hold the matter in abeyance until I
get down to Peru and see what the actual situation is." What did
you find out when you got down to Peru ?
Mr. Love. I never went into it at all. I met the agent of the
company and I simply washed out and never spoke to the agent
about this matter again. I went to Peru on some guano business and
was going down anyway, and this was completely incidental.
Senator Clark. I understand ; but what did you find the situation
to be and what did you do about it, if anything?
Mr. Love. They never took it up with me and I never took it up
any further. I met an agent and he said Mr. Young was going to
get it, and I believe he did get it. Mr. Young had a man down
there.
Senator Clark. Did you have anything to do with it ?
1486 MUNITIONS INDUSTRY
Mr. Love. Not directly or indirectly.
Senator Clark. You took the trouble to check up with du Pont
to find out about their agent doAvn there, did you not ? I direct your
attention to a letter, dated May 9, 1934, to the du Pont Co. from the
United Aircraft Exports, Inc. I offer that for the record.
(The letter referred to was marked " Exhibit No. 581 " and ap-
pears in full in the text.)
Senator Clark. This refers to the memorandum which I just
offered and states that the Federal Laboratories agent was the agent
of du Pont. This letter, as I stated, is signed by the United Air-
craft Exports, Inc., by Mr. J. R. Miller, treasurer.
That letter reads :
Mr. Francis H. Love, who is now in Peru, lias requested us to address your
company, for your particular attention, with reference to the following :
We are at the moment giving consideration to several persons and firms in
Peru with the object of establishing suitable representation for this company
in that country. Among those being considered is Mr. Ernesto de Rossi, of
Lima, Peru, who, we understand, has represented your company for several
years.
We would appreciate receiving from you any information which you may
have available, which you feel free to divulge regarding this gentleman.
Mr. Love. As I mentioned this morning, we appoint no agents
without getting full information and without a board meeting in
New York, and as to this matter I said we will take it up in board
meeting before making appointment.
Senator Clark. De Rossi's name was first suggested by the Fed-
eral Laboratories in connection with the bombing business.
Mr. Love. That is where I first heard of him.
Senator Clark. Du Pont wrote back recommending De Rossi
highly, particularly for his facility in connection with the Gov-
ernment.
Mr. Love. They recommended him; yes.
Senator Clark. I offer this letter as an exhibit for the committee.
(The letter referred to was marked '' Exhibit No. 582 " and is
included in the appendix on p. 1578.)
Senator Clark. You did appoint De Rossi, did you not?
Mr. Lo^^:. I do not believe we did. No; we were having the re-
organization, and I do not believe we went through with that.
Senator Clark. I call your attention to a letter dated May 11,
signed by yourself and addressed to the United Aircraft Exports,
Inc., which I offer as an exhibit.
(The letter referred to was marked '' Exhibit No. 583 " and is
included in the appendix on p. 1579.)
Senator Clark. In this letter you say [reading] :
The De Rossi set-up seems to be working out all right, and I have explained
to him that should we appoint him permament agent he would not share in
either Faucett or Panagra business.
Regarding purchases on guano funds, I am afraid we shall have to wish him
in, as he is daily in the aviation ministry in Miraflores, in the ministry of
marine in Colmena, and two or three times a week in Ancon, and his services
will be well worth a commission.
Did you make arrangements with De Rossi for handling your
guano business?
Mr. Lo\^. As I recall, we have never completed this thing. Mr.
Miller suggested no commission on the guano because they have to
MUNITIONS INDUSTRY 1487
buy that from us anyway, and my suggestion was somebody has to
go through with the detail work, and as the commission is a nominal
one I thought it would be worth the commission. As I recall, that
has never been completed.
Senator Clark. Now, before the treaty was signed between Co-
lombia and Peru, while arms were clashing in those countries, you
were engaged in selling both countries ?
Mr. Love. Attempting to, but we did not do it.
Senator Clark. The treaty was concluded in May 1934, 1 believe?
Mr. Love. About that date, I think.
Senator Clark. During 1933 you sold three engines to Colombia,
did you not ; or at least you delivered three ?
Mr. Love. Yes, delivered; but I do not know when they were sold.
Senator Clark. You sold three Corsair planes and miscellaneous
equipment totaling $135,000 to Peru?
Mr. Love. That is right.
Senator Clark. In the period from January 1 to August 1. 1934,
you sold three engines and other miscellaneous equipment to Colom-
bia. Is that correct?
Mr. Love. That is.
Senator Clark. And during the same period you sold a total
of $28,223 worth of engines and other equipment to Peru ?
Mr. Love. Yes.
Mr. Hiss. The majority of those purchases were before the treaty
was signed?
Senator Clark. Yes ; I believe as far as Colombia is concerned all
but about $2,000 was sold before the treaty.
Mr. Love. I believe I testified this morning there was no objection
on the part of Colombia or Peru. I believe I quoted one of the
high officials saying to me all they requested was equality on delivery
and prices.
Senator Bone. Was that the attitude of the officials down there;
they had no objection to your selling the other country?
Mr. Love. We talk in Spanish down there, of course, and I will
try to think of his exact words. It was a Spanish statement,
equivalent to, " We cannot object ", and he quoted the example of
the Skoda Co. selling both parties, and he only requested equality
as to prices and deliveries.
Senator Clark. Apparently your officers in this country were not
informed of the intent to sell one, and then to sell the other, as
would appear from this document dated April 16, 1934, from J. R.
Miller, addressed to Mr. Wilson, president of the Transport Corpora-
tion, which I now offer as a committee exhibit.
(The letter referred to was marked " Exhibit No. 584 " and ap-
pears in full in the text.)
Senator Clark. I read from this " Exhibit No. 584 ", as follows :
Following our telephone conversation with you today, we sent the following
cable to our representative in Colombia :
" Understand twin-float equipment will materially assist sale Corsairs there.
Water rudder available single-float equipment small additional charge. Under
penalty sacrifice performance can equip Corsair twin floats. If advisable will
quote Corsair so equipped twin floats and prepare specifications plane so
equipped."
Since Mr. Love is now en route to Peru, we sent the same cable to him
there. In view of the existing relations between the two countries, we did
not advise Mr. Love of the cable to Colombia.
1488 MUNITIONS INDUSTRY
So, apparently the other officers of your company were not advised
it was agreeable to sell to one country and then to the other?
Mr. Love. There was no time to advise them. I was en route
between the two, and they liad no time to get mail.
Senator Clark. About the same time you were undertaking to sell
to Paraguay and Bolivia, both at the same time, were you not, who
were actually in a stat« of war?
Mr. Love. Yes, sir. Would you prefer we take sides in favor of
one country or the other?
Senator Clark. No; I am just illustrating the policy of your
company in selling to two combatants at the same time. I ^vill
read this letter from you to C. M. Carr, dated January 9, 1934, which
I now offer as an exhibit.
(The letter referred to was marked " Exhibit No. 585 " and ap-
pears in full in the text.)
Senator Clark. This letter, " Exhibit No. 585," is as follows :
Acknowledging your letter No. 231, as the matter of propeller license seems
to be delayed, we believe it would be better to put in some time at La Paz and
Asuncion, where there is active purchasing at the present time. This further
due to the fact that the complete release for sale of rights for the control
able propeller is not yet available though we expect it will be in the neai
future.
Regarding selling rights on the pursuit and the bomber, we would not donate
these rights but would charge a substantial sum for them, dependent on the
quality of planes on their initial purchase, terms of payment for license, etc.
Senator Clark. I also offer in evidence as an exhibit the letter
from Carr in which he makes reference to not desiring to become
acquainted with the inside of a South American jail nor to experi-
ence the sensation of deportation, to which reference has been made
heretofore in the examination.
(The letter referred to was marked "Exhibit No. 586" and is
included in the appendix on p. 1580.)
Senator Clark. Mr. Love, what was the relationship of your com-
pany, the United group, with the National City Bank of New York ?
Mr. Love. I think Mr. Brown could answ^er that better, perhaps.
As far as the Export Co. was concerned we had nothing but the
regular dealings.
Senator Clark. Will you answer that, Mr. Brown?
Mr. Brown. Our relation with the National City Bank was a place
where we kept our surplus funds and occasionally went to them for
advice on investments.
Seruttor Clark. Did they have anything to do with the recent
reorganization of the United group ?
Mr. Brown. No; nothing whatsoever.
Senator Clark. Were the papers prepared by their attorneys?
Mr. Brown. The papers were prepared by our attorneys.
Senator Clark. They were also attorneys for the National City
Bank?
Mr. Brown. They may be, but I do not know.
Senator Clark. Who are your attorneys?
Mr. Brown. Sherman & Sterling.
Senator Clark. Do you know Mr. Drum, of the National City
Bank?
Mr. Brown. No; I do not.
MUNITIONS INDUSTRY 1489
Senator Clark. Mr. Love, do you know him? He apparently has
something to do with South America.
Mr. Love. Yes ; I have known him a great many years.
Senator Clark. I have a letter from Mr. Carr, of the United
Co., " Exhibit No. 546," in which he calls attention to the fact that
Mr. Drum in the National City Bank had made certain suggestions
with regard to offering scholarships to Argentine, and so forth. Is
there any reason why Mr. Drum should be making suggestions to the
company ?
Mr. Love. Mr. Drum happens to be a friend of mine of many
years standing. The first time he went to South America I happened
to be on the same boat. Furthermore his brother is employed in
our office, and he and I have talked over matters, and he has been
as helpful to me as he could, this boy being in our company but in
a minor position, however.
Senator Clark. In this letter Carr say3 you and Mr. Drum seem
to have found a solution of a problem that has given him continual
worry and he continues to say:
I refer to the fact that with a few exceptions everywhere I go in South
America, Curtiss equipment is better known than is our own. In every country
visited, there seems to be an army or navy pilot who has at one time or
other gone througli the Curtiss School or who has received help from Curtiss
while visiting the States and who is therefore, particularly partial to our
competitor's material.
Were those scholarships ever put into effect?
Mr. Love. No ; as I have previously explained, scholarships would
be of no \ise in a training school of a pilot who already knows how
to fly.
Senator Clark. I read further in this letter as follows :
As you have indicated, the Argentine would probably be the most appro-
priate place in which to initiate your scholarship idea. If it did not prove
satisfactory, the practice could be discontinued at any time ; yet, before having
had an opportunity to give the matter adequate consideration, I frankly admit
my enthusiasm. As implied in your letter, it would not seem advisable to
take such a step in one country without at least the willingness to undertake
the same thing in otlier countries, should circumstances seem to warrant.
And then further as follows:
With your permission. I intend to think this matter over and offer you a
fuller opinion on it within the next few weeks. In the meantime, however,
if you have no objections, I believe it would be advisable for you to take
it up tentatively with our board of directors and perhaps pass along to me
an indication as to whether or not they will give it serious consideration.
Mr. Love. May I ask what letter you are reading?
Senator Clark. I am reading that letter I just handed you. I
read the later paragraph first.
Mr. Love. That is what threw me off. If you will look at the
fourth paragraph, and if you take into consideration that Curtiss-
Wright was established there certainly 5 years before our Export
Co., then it is reasonable to suppose they were better known down
there than we were, when we were just starting out.
Senator Clark. Yes; but what I am getting at is the apparent
agreement down there between your company and the National City
Bank.
Mr. Love. I would hardly say that; but this was an enthusiastic
salesman down there.
1490 MUNITIONS INDITSTRY
Senator Clark. Is that enthusiastic salesman still in your employ
down there? He has been dubbed irresponsible several times today,
and you now say that is an enthusiastic salesman's talk.
Mr. Love. He is in our employ until we get out of this and recall
him. He is due to come back at any time.
Senator Clark. Now, here is another letter from Mr. Carr which
I will also ask be offered as an exhibit.
(The letter referred to was marked " Exhibit No. 587 " and the
handwritten letter enclosed with " Exhibit No. 587 " was marked
" Exhibit No. 587-A." Both letters are included in the appendix on
pp. 1580 and 1581.)
Senator Clark. I read from this letter, " Exhibit No. 587-A", as
follows :
Mr. D. (city bank) brought me in touch with the man referred to in this
letter, one Sr. Alberto de Ibarra. This chap is known to have arranged some
big deals with the Government on behalf of foreign companies, and to be an
intimate friend of the present Minister of Correos y Telegrafos (mail and
telegraph — corresponding to Postmaster General) as well as a friend of the
President's.
Mr. D. is of the opinion that it might be well worth our while to play along.
Sr. Ibarra is hopeful and is the kind of man who does not occupy himself
with nonlucrative business. Sr. Ibarra has set out to attempt to kill the two
proposals already submitted and has done so without further than a verbal
indication from me that we would be willing to consider the feasibility of
cooperating with him in case that was deemed to be our best course.
Mr. D. must not be mentioned in any of the official or file correspondence, and
the entire matter must be considered as being strictly confidential.
Now, what was Mr. D doing in connection with the United busi-
ness down there at that time ?
Mr. Love. Mr. D. had nothing to do with the business except
to be of help, if by Mr. D you refer to Mr. Drum.
Senator Clark. Mr. Drum is who I am referring to.
Now, Mr. Brown, coming back to the question of Shearman &
Sterling, I have here a letter dated February 21, 1934, addressed to
Mr. Carr, signed by J. E,. Miller, which I offer as an Exhibit.
(The letter referred to was marked " Exhibit No. 588 " and is
included in the appendix on p. 1581.)
Senator Clark. Mr. J. R. Miller is the treasurer of your company?
Mr. Brown. Treasurer of the Export Co.
Senator Clark. In the fourth paragraph of this letter, he says :
We would suggest, where possible, that when you have letters of definite
commitment to write that you draft them and have them reviewed by the
attorneys of the National City Bank. No commitment of this nature is made
by us without such review by counsel.
Why was it necessary for you to have contracts reviewed by counsel
for the National City Bank?
Mr. Brown. Mr. Love said he would like to answer that question
for us.
Senator Clark. All right, Mr. Love.
Mr. Love. Because I always assume that the City Bank selected
the best attorneys in their different localities where they have
branches abroad, and rather than leave to this salesman or to any
salesman to select some attorney to pass on things, I told them to get
the City Bank attorney, as I believed we would be getting one of
the most prominent attorneys in all of these cities, because they have
MUNITIONS INDUSTRY 1491
branches all over the world and it has been my policy, instead of
picking an attorney out of a list in the telephone book, to find out
who the bank attorne}- was, and use him.
Senator Clark. Now. Mr. Gordon Rentschler is a director of the
National City Bank and also a director of the United Aircraft &
Transport Co. ?
Mr. Brown. That is right.
Senator Clark. And Mr. E. A. Deeds, the father of Mr. C. W.
Deeds is also a director of the National City Bank and the United
Aircraft & Transport Corporation?
Mr. Deeds. That is true.
Mr. Hiss. And Mr. Frederick W. Jackson is a director of the
United Aircraft & Transport Corporation, and is an attorney in
the office of Shearman & Sterling?
Mr. Brow^n. That is right.
Senator Clark. The National City Bank did assist in financing the
United Aircraft & Transport Corporation ?
Mr. Brown. The National City Co. did.
Senator Clark. The National City Co., I should say, which is a
subsidiary of the National City Bank.
Mr. Brown. The National City Co. was an affiliate of the National
City Bank.
Senator Clark. That is, it was an affiliate of the National City
Bank, about which much testimony has been put in the record in a
hearing before another committee of the Senate, in the last j^ear?
Mr. Hiss. Isn't Mr. Joseph P. Kipley a director of United Air-
craft & Transport Corporation and a director of the National City
Bank?
Mr. Brown. He was, but he is now president of Brown-Harriman.
Mr. Deeds. I do not know that he was a director of the National
City Bank, but I think it was the National City Co.
Senator Clark. The National City Bank was one of the fiscal
agents for the bond issue floated by Peru in 1928?
Mr. Brown. I do not know anything about the bond issue.
Senator Clark. Do you know, Mr. Love?
Mr. Lo\'E. No ; as a matter of fact, Seligman brought it out.
Senator Clark. The National City Bank participated in that, did
they not?
Mr. Love. Yes ; I think they did participate in it.
Senator Clark. Now, this guano contract was a violation of the
terms under which that bond issue had been floated?
Mr. Love. I don't know that it was ; no.
Senator Clark. The sale of the bonds provided against the pledg-
ing of Government revenue until those bonds had been taken care of?
Mr. LiOVE. No; there was no revenue from the guano until we
created it.
Senator Clark. Nevertheless, it was Government revenue.
Mr. Love. And I returned to the Government cash they would
never get in any other way. That contract was passed on by the
leading Peruvian attorneys acting for the Government. Objections
were made by the bankers, particularly by a German banker acting
for the bondholders and his position was not sustained bv the Peru-
vian lawyers.
83876— 34— PT 6 6
1492 MUNITIONS INDUSTRY
Senator Clark. I am not asking for the opinion of Peruvian
lawyers, Mr. Love, but it is a fact that at a time when the Peruvian
bonds sold in this country and floated by the National City Bank
and Seligman were in default, governmental revenues had been
pledged to you in payment of both old armament business and new
armament business.
Mr. Love. There was no revenue they pledged to me; I brought
revenue to them.
Senator Clark. It was pledged to you when they allowed 50 per-
cent of the sale of guano to be used in payment of munitions, was
it not?
Mr. Love. When that began to be questioned down there, the
lawyers decided " no."
Senator Clark. I care not about the opinions of lawyers, but you
admit that 50 percent of the revenue arriving from the sale of guano
was to be returned by you and applied one-half on old debts for
munitions and one-half on new debts for munitions, do you not?
Mr. Love. In that purchase; yes.
Senator Clark. Do you know whether or not the National City
Bank in its capacity as fiscal agent for the bond issue made any
protest against this diversion of funds?
Mr. Love. I do not know.
Mr. Hiss. May I read into the record the language of the agree-
ment by the Peruvian Government?
Senator Clark. I would be glad to have you do that.
Mr. Hiss. The Peruvian Government, in the December 1927 loan,
and also the October 1928 loan, guaranteed it would —
not issue or guarantee any loan or obligation secured by a lien on specific
revenues or without the consent of the fiscal agents, on specific assets unless
prior thereto all bonds of the Peruvian national loan are given a lien on such
revenue or assets.
The source of that statement is Moody's Government for 1933, at
page 943.
Senator Bone. These deposits — were they Government owned?
Mr. Love. Senator, there are a few little islands on the coast of
Peru.
Senator Bone. I asked, was this the property of the Peruvian
Government ?
Mr. Love. Yes; it is.
Senator Bone. It would be an asset of the Peruvian Government?
Mr. Love. Yes.
Senator Bone. There is one question I would like to ask with
reference to the bombs mentioned in the correspondence. They were
demolition and fragmentation bombs?
Mr. Love. Yes.
Senator Bone. The company in question, which has been men-
tioned here, the Federal Laboratories, make other type of war
munitions, do they not ?
Mr. Love. They make gas of various types, I believe.
Senator Bone. Tear gas and things of that sort?
Mr. Love. Yes.
Senator Bone. Do they have a general sale for that?
Mr. Love. I don't know that, but I assume so, since they have a
catalog on it.
MUNITIONS INDUSTRY 1493
Senator Bone. In your travels through South America — and I
take it your contacts are somewhat wide — have you noticed adver-
tisements of such products as tear gas and such?
Mr. Love. I have had salesmen tell me of specific sales, but it is
always to local governments.
Senator Bone. You have known of sales ?
Mr. Love. Yes ; but it is only to police departments.
Mr. Brown. He said advertisements.
Mr. Love. I have not seen advertisements.
Mr. Hiss. May I call attention to the fact that in the memorandum
dated December 30, 1932, written by you to Mr. Rentschler, which
has already been introduced in evidence as " Exhibit No. 575 ", you
said :
Regarding Chile, Bakei- formerly did large nitrate business with Anthony
Gibbs & Company, one of the prominent exporters in Chile before the formation
of Cosach. While in South America recently, Mr. Smith went to Chile and
was offered quantities of nitrate by independent producers, which he can
leadily sell in New York. As Cosach is selling from stocks here and at a loss,
based on their original cost price, and as Smith could, by new purchases with
the depreciated Chilean exchange, further undersell them profitably, he wanted
my opinion as to what he should do and lie was perfectly willing to forego
a profit of several thousand dollars in the transaction if it would be putting
a wrench in the program of the Cosach people who, as you know, are sort
of tied up with the bank of Sherman & Sterling. He took this up with me
especially in connection with the Sikorsky account in Chile and stated he
would use our pesos through him to buy nitrate and he would give us dollars
in New York. I intend to consult with Chambers, of Sherman and Sterling,
with whom I spent some time in Chile when he was working on this Cosach
matter. In the meantime Smith will take no action.
Did you consult Shearman & Sterling about the nitrate business?
Mr. Love. No; I did not. Smith and I decided it was not a nice
thing to do, and we dropped it.
Mr. Hiss. In a postscript to that letter you say :
Since dictating the foregoing I talked with Mr. Chambers, who felt that a
small quantity of nitrate would do no harm. He referred me to Mr. Jackson,
who is now more actively handling Cosach matters, and Mr. Jackson felt very
strongly that no action should be taken detrimental to Cosach's interest.
Mr. Jackson referred to in that postscript is on your board of
directors, and also a partner of Shearman & Sterling ?
Mr. Love. Yes, sir.
Mr. Hiss. So Shearman & Sterling said you should not compete
with Cosach, in which the National City Bank was interested ?
Mr. Love. It was a matter of not lowering the exchange. It did
noT, seem to be quite a nice business, and we never did it.
Senator Clark. It seems United Aircraft got the guano and the
bondholders got the sack.
Mr. Love. The bondholders got 75 percent of an income that never
existed before and never would have existed if I had not made that
contract. Furthermore, Peru is now enjoying the production of
that guano, which I stimulated, and which, as you know, has caused
a small boom in Peru.
Senator Clark. At the same time, some of the bondholders got
nothing ?
Mr. Love. I think, if I may correct you, possibly it did the bond-
holders a great deal of good. Peru is on a small boom now, and,
with the cessation of hostilities, I expect Peru to be one of the first
1494 MUNITIONS INDUSTRY
countries to come back. The Minister of Agriculture of Peru
printed a report while I was there recently showing the cotton
growers had a net profit of 40 percent, and it was commonly said
he did not put it at 60 percent because he did not want anj^body
to correct his figures. I think Peru will be one of the first countries
to resume its payments. The general morale of the people is so
high that as soon as they get established again with the new govern-
ment I expect its bonds to be given attention.
Senator Clark. Their morale is higher than that of the people in
this country holding the bonds?
Mr. Love. No; not higher than the people holding the bonds.
SALES AND OTHER BUSINESS OPERATIONS OF UNITED AIRCRAFT COMPANIES
IN GERMANY IN RECENT YEARS
The Chairman. Mr. Love, your business in Germany has picked
up materially, has it, of late years ?
Mr. Love. Senator, we do not have much business; our foreign
department is so new that we have not been established long enough
to make a comparison. It is steadily growing for the reasons I have
pointed out — that many of the major air lines over there are equip-
ping with United engines and propellers ■ and I think it would show
a steady and continuous growth.
The Chairman. I gather your sales to Germany or German con-
cerns are entirely of a commercial nature, having no relation to
arming the German people?
Mr. Love. Yes; we have never sold any militaiy planes to Ger-
many or an}^ war equipment, such as guns or ammunition.
The Chairman. What would prevent your selling them planes for
military purposes ?
Mr. LoA^. I think it is against the Treaty of Versailles, is it not,
and such a thing never occurred to us.
The Chairman. The reason I asked how greatly your business
had grown in Germany was the study, which is before us in certain
questionnaires, I see it shows that you supplied information for the
Black committee. This information that you supplied reveals that
materials of the United Aircraft & Export Corporation to Germany
from August 6 to December 31, 1929, was $10,000. You Avere organ-
ized in 1929, were you not?
Mr. LoA'E. That is correct.
The Chairman. And this studv further shows that yoiu" sales to
Germany in 1930 were $51,000; in 1931, $2,000; in 1932, $6,000; with
a total in that 3% years of approximately $69,000 in round numbers.
During the same period, acording to the information you supplied,
Holland bought considerably more than Germany did. In 1930 your
sales to Holland were $99,000; in 1931, $210,000; and in 1932, $130,-
000, oi- a total in 3 years of $439,000 worth of equipment to Holland
as compared to $69,000 to Germany. How do you account for this?
Mr. Love. The Holland business was almost entirely engines and
propellers, mainly for the Fokker firm, and the Fokker firm was at
one time pretty nearly dominating the transport sales. These en-
gines and ])ropellers went on the big transjiort lines, like the Swedish
line and others.
MUNITIONS INDUSTRY 1495
The Chairman. Is it not true that during the war a great deal of
Germany's supplies from the outside world were received through
Holland ?
J\Ir. Love. That I do not know. You are not referring to any
United business?
The Chairman. No. I am asking you about the period of the
war.
Mr. Love. That I do not know.
The Chairman. Have you any knowledge of that?
Mr. Love. I have not.
The Chairman. What assurance have you that a large part of these
supplies shipped to Holland were not intended for use in Germany?
Mr. Love. I was personally many times in the Fokker plant nego-
tiating with them and dealing with their sales manager, who would
show me the sales that he was making in Spain, and here and there
and elsewhere, for different transports ; and his motors were ordered
for particular transports or it would be installations of outboard
motors, or things of that sort. I believe we have had service men
there, too, have we not, Mr. Deeds?
Mr. Deeds. Yes.
Mr, Love. Who would be checking the installation of these motors?
Mr. Deeds. Through our service department, we, of course, have
to keep in constant touch with engines that have been sold and we
have an obligation until those engines are retired from service. We
know from our records that substantially all, if not all, that have not
been worn out or crashed, are still in the service of the original cus-
tomers. Most of those are on the K.L.M. line, which is the Royal
Dutch Air Line.
The Chairman. You have, then, pretty good reason to believe that
these sales to Holland during the period which we have had under
discussion, were not sales to be routed into Germany? You think
they were used right there where they were sent ?
Mr. Deeds. We have every reason to believe that because of the
fact we had direct contacts in Germany with the Junkers Co., who
bought engines for installation in their planes, for sale throughout
the world, and B.M.W. works in Munich was at one time our licensee
and is now again.
The Chairman. What agencies or representatives do you have in
Holland ? Let us take the Export Corporation first.
Mr. Love. I have not been handling Europe for approximately 2i/^
years. I believe Mr. Hamilton, who is our representative, handles
all of that direct and has no agent ; is not that true ?
Mr. Deeds. That is correct.
The Chairman. Is Mr. Hamilton here?
Mr. Brown. No; he is not. Mr. Hamilton is in Europe.
The Chairman. Do you, Mr. Brown, have any knowledge at all
of the sales organization in Holland and Germany?
Mr. Brown. Our own sales organization?
The Chairman. Yes.
Mr. Brown. Yes.
The Chairman. How much of a sales organization do you have in
both countries?
Mr. Brown. Why, it is represented by
1496 MUNITIONS INDUSTRY
The Chairman. Are you speaking of the Export Co. now ?
Mr, Brown. Yes, sir.
The Chairman. Proceed.
Mr. Brown. I really do not know anything about agencies, but
Mr. Hamilton is the European representative for the United Aircraft
Exports.
The Chairman. Where does he headquarter?
Mr. Brown. Paris.
The Chairman. Do you know how much of a force he has in the
way of salesmen, agents?
Mr. Brown. He is assisted there by two young men whom we-
trained in our organization.
The Chairman. Assisted in Paris?
Mr. Brown. Throughout Europe.
The Chairman. Throughout Europe?
Mr. Brown. Yes.
Mr. Deeds. I might add that Mr. Hamilton travels considerably
throughout the various countries where our equipment has been sold
and is being sold, and that as his assistants he has a group of about
four men who came primarily as Pratt & Whitney's technical repre-
sentatives, installation engineers, and service men who, in connec-
tion with their foreign duty under Mr. Hamilton are often called
upon to make contacts for him. Their primary function, however, is
service and installation work.
The Chairman. In 1933 your sales to Germany are shown to have
included 29 engines, 13 propellers, and other parts, amounting to a
total cost of $272,000 as compared with $6,000 of business done there
in the preceding year. How are we to account for that increase in
1933 over 1932?
Mr. Deeds. Primarily by the success of the Hornet engine in other
parts of the world and the recognition by Germany that they wanted
that for their own operations.
Senator Bone. That is a Pratt & Whitney engine ?
^Ir. Deeds. It is a Pratt & Whitney engine ; yes.
The Chairman. In the same year, 1933, your sales in Holland
also showed a decided increase. In 1933 you sold 32 engines, 36 pro-
pellers, and other equipment, amounting to $234,000. Is the cause
for that the same as you attribute to the increase in Germany?
Mr. Deeds. I think that is a true statement. Our original instal-
lations on the K.L.M. Line worked out very successfully and Ameri-
can products of the Wright Co. and our own since that time have
been used practically to the exclusion of all foreign engines.
The Chairman. In 1933, last year, you made sales to Germany
in the amount of $272,000, and from January 1 to August 31 of
this year there is shown to have been sales by your company to Ger-
many of 176 engines, two large Boeing transports — is it true that
these transports are readily convertible into large bombing planes.
Mr. Deeds. I would not say that they were. It would take
a large engineering project and expenditure of money, thousands
of dollars, to convert them.
The Chairman. Do you not in fact sell this large plane for bomb-
ing purposes elsewhere?
MUNITIONS INDUSTRY 1497
Mr. Deeds. No, sir. It is identical with the plane that is now
being used on United Air Lines and has never been sold or considered,
to my knowledge, for any other purpose.
Senator Bone. That is the last word in your transport construc-
tion?
Mr. Brown. That is right.
Mr. Deeds. That is right.
The Chairman. In addition to these engines and Boeing trans-
ports, you sold 6 two-seaters, which are described as mail planes ?
Mr. Deeds. These are single seaters which are conversions of the
Vought airplane for a specific purpose by Luft Hansa, to use as a
single-engine mail plane, corresponding to such single-engine mail
planes as are used in this country for the exclusive use of mail only.
The Chairman. Is not this the same type of plane that you sell
for observation and light bombing work?
Mr. Deeds. Considerably modified; yes.
The Chairman. How much of a modification is there ?
Mr. Deeds. There is now none of the fittings or parts for installa-
tion of armament installed. The fuselage is modified to provide a
large mail compartment, which is usually taken up with the military
equipment, the pilot seat, and so forth.
Senator Clark. Hoav long would it take to convert one of those
planes into an observation or light bombing plane?
Mr. Deeds. I imagine if we had it at the Vought factory it
could be done — since we have the jigs and fixtures and the designs for
the military equipment, it could be done very quickly. I would not
want to make a statement as to how long it would take for the
Germans to do it.
Senator Clark. It would depend on what facilities they had ?
Mr. Deeds. Yes.
Mr. Hiss. What is the model number of the transport that you
sold to Germany?
Mr. Deeds. Model 247.
Mr. Hiss. What is the model number of the bomber you have been
offering to South America?
Mr. Deeds. I will have to ask Mr. Love; that I do not know.
Mr. Love. That has been withdrawn, has it not ?
Mr. Hiss. On July 12, 1933, you offered Brazil a model 247-X
bomber.
Mr. Love. That is not the regular bomber.
Mr. Hiss. And in January 1934 you offered the same model to
Peru.
Mr, Love. The regular bomber is 191. That is the bomber model.
We had been asked for something in the way of a bomber and we
considered the possibility of a conversion. My recollection is that
the engineering charge amounted to something like $50,000. That is
for engineering alone. That would make an entirely different air-
plane. Delivery was so far in advance — I do not recall now; I
think it was 10 or 12 months — that the whole matter was dropped.
It was not considered feasible.
Mr. Hiss. You have never sold any 247 model planes as bombers?
Mr. Love. I do not believe we have ever done the engineering, be-
cause of the enormous expense of it.
1498 MUNITIONS INDUSTRY
The Chairman. This sale of 17G en<!;ines and 2 large Boeing trans-
ports, the G two-seaters and other equii)mcnt, up to August 31 of
this year total $1,445,000, as compared with last year's total business
with Germany of $272,000. How are we to account for that large
increase ?
In addition to that, let me add that there was still on order on
August 31 and undelivered 21 engines and one more large transport.
HoAV are we to account — to what are we to attribute such a great
increase?
Mv. Lo^E. Last year there were no shipments of planes and this
year there are.
The Chairman. The planes constituted the large part of that
order, or was it the 176 engines ?
Mr. Hiss. According to the records, the two Boeing planes are
valued at a total of $153,730; the six mail planes at a total of
$187,110; one lot of 121 engines is listed at $627,000.
The Chairman. So the engines are really the big item?
Mr. Hiss. And 29 engines at $150,000 and miscellaneous engine
spares at $159,000. So the engines were considerably the 'larger part
of the value, larger than the planes ?
Mr. Love. Yes.
Senator Bone. Are these engines being adapted to planes that are
being constructed there or are being held in reserve?
Mr. Brown. I understand that these engines were purchased for
installation in airplanes which have been already ordered.
Senator Bone. You are not furnishing the fuselage and the rest
of it?
Mr. Brown. No, no. We just furnish the engines.
Senator Bone. ^^Hio is furnishing the rest of it, do' you know?
Mr. Deeds. Various German manufacturers, of which Junkers is
the most prominent.
Senator Bone. That is what I am getting at. In other words, you
are shipping in the engines and they are supplying the rest of the
planes in Germany?
Mr. Deeds. Yes.
The Chairman. After shoAving a tremendous increase such as that
in Germany, let us go back and pick up the sales to Holland of last
year, which amounted to $234,000. In the eight months up to
August 31 of this year your sales to Holland amount only to $128,000.
So that quite naturally the committee is impressed by the unusual
pickup in business obtained from Germany.
Mr. Brown. I think in connection with the K.L.M. purchases, the
large purchases made in the past are for equipment for their airlines.
I would not be a bit surprised that their purchases for 1934 will be
rather heavy, because I have been told that they are going to replace
a great many of their transport planes that they now have in
operation.
The Chair]man. Who are the purchasers?
Mr. Brown. The K.L.M. Co. of Holland.
Mr. Deeds. That is the Royal Dutch Air Lines ?
The Chairman. Who are the purchasers, in the main, in Ger-
many?
Mr. Deeds. The two main purchasers are the B.M.W. Co.
MUNITIONS INDUSTRY 1499
Senator Bone. What is that?
Mr. Deeds. That Ls an engine-manufacturing company which is
our licensee in Munich.
The Chairman. Would you give the name of that company?
Mr. Deeds. It is the Bavarian Motor Works; and the Junkers
Airplane Co. Those are the two big purchasers.
Mr. Hiss. You also sold to the Luft Hansa, the commercial air
line.
Mr. Deeds. Those were sales of airplanes.
Mr. Hiss. That is right.
The Chaiijman. Do you have an extensive European trade in other
countries of Europe?
Mr. Deeds. Yes: in proportion to their size. With the excep-
tion of France and England, we have been successful in selling our
engines pretty generally throughout Europe.
The Chairman. I have before me a statement intending to show
your sales to the different countries in Europe from .January 1
to August 31 of this year. I will read only the round figures:
England, $4,000; Finland, .$1,000: Fram-f. ,$6,000: Germany, $1,44.^.000;
Holland, $128,0<J0; Italy. .$:i2.00^J ; Poland, $81.fXX); Sweden, $.ol,^X>0; .Switzer-
land, $2,000.
AVliy are not the other countries .showing the urge to replace and
to use this newer development in motors as Germany evidently is
doing?
Mr. Brown. England and France have their own manufacturing
companies, their own engine companies.
The Chairman. You are thoroughly convinced, I take it, that
your sales to Germany are wholly on a commercial basis?
Mr. Deeds. That is what I am led to believe.
The Chairman. The production does not enter into war planes
in any way ?
Mr. Deeds. We have all heard rumors to the effect that Germany
was going to rearm and that as far as I know applies to the future
and is .still not a matter of fact.
The Chairman. Have you at any time, Mr. Deeds, felt that you
were aiding in this cause of rearmament over there?
Mr. Deeds. We have sold engines, that are .suitable for the equip-
ment of their planes.
The Chairman. Have you understood that they were to be u.sed in
airplanes that had a military purpose, or would become a military
plane ?
Mr. Deed.';. We have under.stood exactly the contrary.
Senator Vandenberg. Could these 170 engines have been placed
into militan,' planes or as Avell as commercial planes?
Mr. Deeds. Yes; they could have. They would not. however, be
in a position to .secure the maximum performance with the type of
engines that they purcha.sed. Militant' aircraft, as a rule, use the
maximum of supercharging and the maximum oi power output. In
this case, the engines .selected and purchased in Germany were of a
le.sser dejrree of .supercharging commonly used in this country only
for commercial purposes.
Senator Vandenberg. But do I understand that the\' have no facil-
ities for making engines themselves ?
1500 MUNITIONS INDUSTRY
Mr. Deeds. They have excellent facilities, and they have selected
our engine, the Hornet engine, to manufacture under a manufactur-
ing license at the Bavarian Motor Works, previously referred to.
The Chairman. And you enjoy a royalty by reason of that manu-
facture ?
Mr. Deeds. We do.
The Chairman. How much did your royalty from January 1 up
to August 31 this year amount to? That is paid quarterly, is it not?
Mr. Deeds. Yes. I cannot tell you without referring to the record.
The Chairman. Then you would have a record of only 6 months
or two quarters ; is that right ?
Mr. Deeds. I have forgotten the exact date of the agreement.
The Chairman. We will come back to that later.
Senator Vandenberg. Do you know in fact where these 176 engines
went ?
Mr. Deeds. I do not.
Mr. Hiss. Mr. Deeds, there is a type sold known as the Hornet
S-4D-2. You say that has no military use?
Mr. Deeds. No ; I did not. I said that practically any engine that
is installable in an airplane can be used for military purposes.
Mr. Hiss. Is the Hornet S-4D-2 customarily sold by the Export
Co, for military purposes to other countries ?
Mr. Deeds. It would depend on the country. You see, the ratings
of the engines depend on several factors, namely, the type of fuel
and the type of operation for which they are going to be used. For
example, that particular rating corresponds to the type of engine
used on Pan-American Airways. While the engine that is used in
this country — or has been ; it is now a generally released model — we
call that the series SDG.
Mr. Hiss. You also sold some Hornets, 1690-S-D-G to B.M.W. in
1934, did you not?
Mr. Deeds. We sold one.
Mr. Hiss. How about the 1690-T-2-D-1 ? How do you describe
that model?
Mr. Deeds. That is sea-level rating, direct-drive engine. That
corresponds to the commercial rating in this country.
Senator Clark. Mr. Deeds, what is the amount of royalties re-
ceived by you this year as an indication of the number of airplane
engines manufactured in Germany under your patents?
Mr. Deeds. The royalties are on a fixed fee for year basis.
Senator Bone. Per engine.
Mr. Deeds. For a year.
Senator Clark. The number of engines manufactured has nothing
to do with the amount of your royalties?
Mr. Deeds. No.
Mr. Brown. I think it would be well to acquaint the committee
with the fact that
The Chairman. If you will allow me to interrupt, I should like to
clarify that and we shall a moment later come back to the agree-
ment and understanding that exist with respect to the roj^alties and
your compensation for Avhatever they might manufacture under j^our
patents.
What do you know, Mr. Brown, of the pick-up in Germany itself
as respects the manufacture of airplanes and engines for them?
MUNITIONS INDUSTRY 1501
Have you had any reports indicating that Germany has greatly
increased production along those lines?
Mr. Brown. I think that I have probably received a letter from
our people over there saying something about what their plans are.
I believe there is such a letter here with the committee, which is
nothing more than what we have been reading in the newspapers.
The Chairman. Who is Mr. A. B. Butterfield?
Mr. Brown. Mr. A. B. Butterfield was installation engineer sent
over there to supervise the installation and help Mr. Hamilton in the
technical problems.
The Chairman. Before me is a copy of a letter written by him to
Thomas F. Hamilton, who is your European representative, which
I will offer as " Exhibit No. 589."
(The letter referred to was marked " Exhibit No. 589 " and is
included in the appendix on p. 1582.)
The Chairman. This letter is dated May 9, 1933, and is written
from London. Let me refer to the fifth or sixth paragraph where
Mr. Butterfield says :
One large airplane factory in Germany has doubled the number of its em-
ployees since Hitler came into power. The next ranking company has tripled
the number of employees in the same period. * * *
In the same paragraph there is this language :
Hawker cannot take care of all of their government orders, and their planes
are being built in the Vickers factory.
Are we to understand that Hawker is building some of these
German planes?
Mr. Deeds. Hawker is a British manufacturing company.
The Chairman. That is not the question. Are we to understand
that Hawker is building some of these planes for Germany, or
equipping the planes in any way ?
Mr. Deeds. I doubt it very much.
The Chairman. The manner in which it is tied up in this single
paragraph would indicate that very strongly.
Mr. Deeds. I do not believe that to be the case. I know that the
Hawker planes at the moment are among the most popular in the
British Air Force. I would judge that he is reviewing the general
situation and referring to their manufacture for British consumption.
The Chairman. Taking this paragraph as a whole one would have
Mr. Butterfield painting a picture of such aggressive building in
Germany that they were even reaching out and affording Hawker a
chance to do some of their building. You do not think that is the
case?
jNIr. Deeds. I do not, no. I do not believe that to be the case.
The Chairman. Have you had any information that would per-
mit you to say that j^ou had heard this from other sources, aside from
this letter of Mr. Butterfield's?
Mr. Deeds. No. I have not heard of any plane from European
manufacture being sold in Germany.
The Chairman. Mr. Love, have you heard of any British planes
being sold in Germany or manufactured for use in Germany?
Mr. Love. No, sir; t have not. I do not contact that territory at
all.
1502 MUNITIONS INDUSTRY
The Chairman, In this same letter, " Exhibit No. 589 ", I find this
paragraph :
Napier, have obtained the license to build the Junkers Jumo oil burning
engines in England. They now have engineers in Dessau.
What is the meaning of that?
Mr. Deeds. Napier is a manufacturer of water-cooled engines for
the British trade.
The Chairman. With their plant in Britain?
Mr. Deeds. Their plant is in Britain. The Junkers is the highest
development of heavy oil engine in Europe at the present time.
The Chairman. And their home is where?
Mr. Deeds. I believe it is Dessau.
Mr. Love. Dessau, Germany?
Mr. Deeds. It is in Germany.
The Chairman. Mr. Brown, prior to 1933, the Pratt & Whitney
Aircraft Co. had granted a license to the B.M.W., and Mr. Hamilton,
your foreign representative, wrote to the Hamilton Standard Pro-
peller Co. a letter dated November 3, 1933, which I am offering as
" Exhibit No, 590 " a copy of which will be placed before you.
(The letter referred to was marked " Exhibit No. 590 " and ap-
pears in full in the text.)
The Chairman, Who is the Hamilton Standard Propeller Co. ?
Mr. Brown. They are the propeller company of the United Air-
craft Corporation, manufacturing propellers and propeller hubs.
The Chairman, Located where?
Mr, Brown. East Hartford, Conn.
The Chairman. Mr. Hamilton, in this letter " Exhibit No. 590 ",
he ssijs :
During my tour of Germany considerable additional interest was manifest
in our controllable and hollow-steel propellers. I purposely broke off the
Siemens & Halske negotiations because information I received at the air min-
istry indicated it would be better to work with and through B.M.W.
"Wlio were Siemens & Halske?
Mr. Deeds. They are another engine manufacturer in German}^,
aircraft-engine manufacturer. They also manufacture other auto-
motive equipment I understand.
The Chairman. Continuing this letter, Mr. Hamilton says :
I have therefore given B.M.W. to understand that as and when we are ready
to conclude for either of these developments they will be given the first
consideration.
B.M.W. works rather closely with Krupp, and Krupp is also interested In
the hollow-steel development. It is my observation that Krupp would be in a
good position to supply the semifinished material, whereas B.M.W. would be
in a better position to machine aud deliver it as an aeronautical product.
I will give complete information on this first-hand upon my return.
Thos. F. Hamilton.
Does this indicate also any possible military usage of your rights
and patents?
Mr. Brown. I think he has to deal here with the hollow-steel pro-
peller and suggests that B.M.W. work rather closely with Krupp
because this hollow-steel propeller is made with a tube, and Krupp
& Krupp are the steel mantifacturers of Germany. This is nothing
more than a plan of trying to place our products abroad.
MUNITIONS INDUSTRY 1503
The Chairman. This speaks of a possible contract with B.M.W.
It appears that you had an earlier license; had granted a license to
B.M.W.
Mr. Brown, Yes, sir.
The Chairman. Which was not at all satisfactory from the stand-
point of the contracting parties.
I read from a memorandum to Mr. F. H. Love, dated February 6,
1933, which I offer as " Exhibit No. 591."
(The memorandum referred to was marked "Exhibit No. 591"
and is included in the appendix on p. 1583.)
The Chairman. That memorandum states, in part, as follows :
Our previous contract with B.M.W. did not work out well for either of us.
Our returns from royalties were next to nothing. "We were handicapped in
attempting to sell engines in Europe to others outside of Germany, and all in
all the plan was just unsound.
Is the committee to understand that under this license B.M.W.
had the rights in Europe, or that your rights were in conflict under
that contract?
Mr. Deeds. That is the case. The first contract which was negoti-
ated was prior to the organization of the export company, in which
it might be because of our inexperience in that field, we granted the
B.M.W. Co. the entire continent of Europe as a territory. It is im-
practical to handle business in those countries in that manner. Na-
tional manufacturing units must be the points to contact in each of
the countries.
The Chairman. The writer of this memorandum to Mr. Love was
Mr. F. B. Rentschler. Who was he?
Mr. Brown. Mr. Rentschler was at one time president of Pratt &
Whitney Aircraft Co., and also, too, at one time president of the
United Aircraft & Transport Corporation.
The Chairman. How recently did he serve in either capacity?
Mr. Brown. I believe he resigned about 1 year ago.
Mr. Hiss. He is now vice chairman of the board of directors of
the United Aircraft Corporation?
Mr. Brown. That is right.
The Chairman. He is still connected, then, with the United Cor-
poration ?
Mr. Brown. Yes; he is.
The Chairman. In the face of this unsatisfactory license, Mr.
Rentschler indicated in this memorandum of February 6, 1933, that
negotiations were being undertaken then, in February of 1933, to
accomplish a new license.
Mr. Brown. Yes, sir.
The Chairman. He wrote in that memorandum that B.M.W.
needed a more powerful air-cooled engine to compete in Germany.
They knew about the Wright Cyclone and indicated they understood
that Wright were developing plans to push the Cyclone sales in Ger-
many. The new Hornet D had come to their attention, and they had
asked for a proposal covering the licensing to them of the Hornet D
engine in Germany. This license to them was to cover the Hornet D
alone ?
Mr. Deeds. Yes ; I think the wordin<j: of the contract will explain
that it was to cover that model of engine, or any model within the
displacement range of 1,650 to 1,750 cubic inches.
1504 MUNITIONS INDUSTRY
The Chairman. Did not this give you cause, that early, to suspect
that, maybe, these planes and engines and these plans were being
mobilized for a military j)urpose?
Mr. Deeds. I do not think, from our standpoint, that that entered
into the question at all.
The Chaieman. Surely it Avould, would it not?
Mr. Brown. All of our engines, as I wanted to explain to you a
moment ago, every engine that we are exporting today has been
released for export by the United States Government. We, further-
more, report every month the shipment of our products.
The Chairman. To whom do you report?
Mr. Brown. To the United States Navy, and if there were any
question about whether or not these products should be shipped
into Grermany, it seems to me that we should have been informed.
Senator George. How long has that arrangement existed?
Mr. Brown. The arrangement for the release of engines for ex-
port has been in existence ever since we were in business, going back
to 1926. It probably goes back earlier than that, but that is the date
of which I have knowledge of this arrangement.
The Chairman. Mr. Love, particularly because this memorandum
was directed to you, I want to call j^our attention to the fourth para-
graph thereof, which states :
The present situation in Germany is beginning to change from past condi-
tions. It seems pretty clear that Germany is about ready to insist on reason-
al)le armament programs, whieli will undoubtedly include aircraft. In the
meanwhile Luft Hansa are beginning to expand their program. It seems
reasonable and possible that within the next five years the German Govern-
ment will provide itself, both for military and commercial purposes, with a
considerable amount of new equipment. Naturally, all of this equipment
would have to be manufactured in Germany, and I am sure we could never
sell direct for such a program. This may mean that royalties in the next five
years might amount to a reasonable sum.
What is the meaning of the language that you " could never sell
direct " ?
Mr. Love. The idea of that is that there is a great sense of na-
tionalism over there. For example, France insists on manufactur-
ing locally all of her aviation equipment, just as England does,
and the idea was that Germany eventually would insist on manu-
facturing in Germany all of her requirements.
The Chairman. Yes; but Mr. Rentschler might just as well have
said, might he not, that there were ways of selling indirect?
Mr. Love. No; I do not think he would have had that in mind.
He is not that kind of man.
Senator Bone. Is he a sort of blunt, forthright person? If so,
why did he employ language which is somewhat obscure, " selling
indirect "?
Mr. Love. I am sure he meant we could not sell from our Hart-
ford factory direct, " direct " meaning from the Hartford factory,
but would have to sell through a licensee in Germany. I am posi-
tive of that.
The Chairman. You say you are positive of that ?
Mr. Love. Positive that was his meaning. What he refers to by
" Luft Hansa " is that most of their equipment at this time, 2 or 3
years ago, was pretty well antiquat^^d. They had to replace the
greater part of both planes and engines because of obsolescence.
MUNITIONS INDUSTRY 1505
just worn out, and his forecast there is true; they have replaced
the greater part of the equipment which they had at that time.
Mr. Deeds. I might add that cycles of replacement programs go
on in all countries. In this country, for example, we are now in the
stage of almost complete replacement of our commercial air-transport
equipment. From time to time that takes place in European coun-
tries, as it did in the case of the engine replacements on the K.L.M.
line.
The Chairman. I take it, Mr. Love, that you feel, and the others
of you feel, that your business with Germany has been strictly upon
a commercial plane; that you have not been doing anything wliich
was, directly or indirectly, in violation of the treaty?
Mr. Love. I feel so. As I have said before, I have not touched
this German business for 2% years, since about the time of this
memorandum. But I know we report to the Government, and I
know that we did not violate any of these conditions. I have fur-
thermore described six places scattered around the world where
Junkers have sent commercial planes, powered with our engines,
New Guiana, Colombia, Brazil, China, and pretty much everywhere.
The Chairman. I offer in evidence now " Exhibit No. 592 ", which
is a letter dated March 15, 1933, addressed to Mr. F. B. Kentschler,
president United Aircraft & Transport Corporation, Hartford,
Conn., indicating that copies of this went to Mr. Mead, Mr. Brown,
and U.A.E. Who is that?
Mr. Brown. United Aircraft Exports.
The Chairman. Very well. This letter is unsigned.
(The letter referred to was marked " Exhibit No. 592 " and is in-
cluded in the appendix on p. 1584.)
The Chairman. I wonder, Mr. Brown, since you received a copy
of this letter, if you know who the writer of the letter was.
Mr. Brown. I probably could identify it.
The Chairman. Do you suppose that was Mr. Hamilton's?
Mr. Brown. It sounds very much so. I imagine if I should get a
letter like that I would say it was Mr. Hamilton's.
The Chairman. Let us read this letter for the most part, being
dated March 15, 1933. We will start with the third paragraph,
which follows, presumabh^, Mr. Hamilton's report on his return from
Berlin [reading] :
Germany's determination to liave an air force, as previously recorded, is now
taking definite form rather rapidly. One of the large bank buildings, prac-
tically half a block long, five stories high, has been taken over by the Aviation
Bureau. My friend. Dr. Milch, technical director of Luft Hansa, has been
made State Secretary for Air Traffic. My conversations with the various de-
partments indicate tliat their interests extend far beyond matters of traflBc.
The Chairman, By the way, what is Luft Hansa ?
Mr. Deeds. It is one of the largest air lines in Europe.
The Chairman. One of the largest commercial air lines in Europe ?
Mr. Deeds. One of the largest commercial air lines in Europe
and a German commercial air line.
The Chairman (continuing reading) :
My conversations with the various departments indicate that their interests
extend far beyond matters (if traffic.
Is not the committee to assume that this was a pretty direct
report from Mr. Hamilton, to the effect that some of these activities
1506 MUNITIONS INDUSTRY
were indicating a determination to build up her air forces for mili-
tary purposes?
Mr. Brown. Perhaps, but I think at the same time in reading this
letter over, I would naturally assume that Germany had made ar-
rangements w^ith the other powers to have an air force.
The Chairman. What is the advantage of an air-cooled motor in
a military plane?
Mr. Brown. We think there are advantages of air-cooled engines
in all types of airplanes.
The Chairman. What is the advantage ?
Mr. Brown. One big reason is it is lighter and does not require
all the plumbing that a water-cooled engine requires.
Mr. Hiss. Is it not also true, Mr. Brown, that a water-cooled
engine can be put out of commission by a bullet through the radiator,
whereas an air-cooled engine does not have that risk?
Mr. Brown. I think you could put an air-cooled engine out of
commission if you hit it with a bullet.
Mr. Hiss. As easily as a bullet through the radiator of a water-
cooled engine?
Mr. Deeds. I think in answer to the question there is considerable
difference of opinion throughout the world, and even in our own
country, as to which is the better for military purposes, the air-
cooled or water-cooled.
Mr. Hiss. I mean that specific point as to the raditor.
Mr. Deeds. In England the water-cooled engines predominate at
the moment.
Mr. Brown. The air-cooled engine today is standard equipment
on every transport line in this country.
Mr. Hiss. Also of the United States military forces, is it not?
Mr. Brown. No; I would not go that far.
The Chairman. Let us read on in this letter to Mr. Kentschler :
For the past two years I have called upon Director Milch and his assistants
in Luft Hausa with hardly any hope of doing business with them directly, and
yet keeping them informed of our new developments, both in engine and pro-
pellers, so that now that Milch steps into this position he is very well
acquainted with our new things.
Their interest centers around the latest Hornet 1690 engines, both direct
and geared, and the simplified controllable propeller.
In the past I have made a point of indicating to Milch that our relationship
with B.M.W. was cordial, and that while we adjusted our contractual relations
so that we were free to sell our products in Europe, B.M.W. was nevertheless
the licensee for the Hornet A in Germany, and that we were always in touch
with them. This stands us in good stead now as B.M.W. is one of the three
or four major companies receiving volume business.
Mr. Brown, having been sent a copy of this letter at the time, is
not this pretty strong indication of a military purpose in connection
with the enlargement of the aviation facilities in Germany?
Mr. Brown. Yes, it is; but what I read in Mr. Hamilton's letter
is the same as I have read in the press in this country.
The Chairman. Have you reported conditions, such as this, w^hich
have come to your notice, to the Navy Department or the State
Department or the Commerce Department?
Mr. Brown. It never occurred to me that I should.
The Chairman. Of course, you would appreciate
MUNITIONS INDUSTRY 1507
Mr, Beown. We report, you understand, to the Navy on the pro-
duction which we ship out of this country.
The Chairman. Yes ; but you would, at the same time, a^Dpreciate
that your Government would not want to be compromised as re-
spects any possible violation of the treaty, would you not?
Mr. Brown. I would not want to be a party or take any part in
having our Government compromised.
The Chairman (continuing reading) :
Junkers is obtaining practically all of the plane business and has some
very good orders on hand at the present time. ^
Heinkel is developing a .high-speed plane somewhat similar to the Lockheed
Orion, but equipped with B.M.W. 650 HP water-cooled engine which uses up
most of the pay load. This plane has recently made a world record of 358 km.
in one hour's flying time over close circuit.
Senator Bone. What is the equivalent of that?
Mr. Love. Five-eighths of a mile is a kilometer.
The Chairman (continuing reading) :
Siemens & Halske have developed several new engines including a small
5-cylinder 2-cycle Diesel and a new 700 to 800 HP radial engine which is a
cross between a Pegasus and a Hornet.
What is a Pegasus?
Mr. Deeds. A British engine.
The Chairman (continuing reading) :
The foregoing is reported to indicate the trend of developments in Germany.
I have already sent New York the only pro forma copy available of the
Siemens-Halske controllable propeller contract and am pleased to state that
although I am prepared to close at approximately a total of $25,000, they
have not raised too serious objections to the terms that have already been
quoted, which I am prepared to reduce by 50 percent if necessary.
In the case of the B.M.W. negotiations, the previous agreement was so
favorable to them that it is going to be more difl5cult to increase the price
substantially over that indicated in your cable. I do feel, however, that it is
absolutely essential to start higher and trade down as necessary. I am quite
sure that if I submitted your original figures they would use them as top
figures and trade down in accordance with the European custom. Further-
more, the German Government is so anxious to obtain a reliable high HP
air-cooled engine that I am sure they will not consider this figure excessive.
Now, would you say, Mr. Brown, that a report like this, coming
from one of your vice presidents, or from your
Mr. Brown. Representative.
The Chairman (continuing). Or from your European represen-
tative, would indicate that this was entirely an effort on a commercial
scale ?
Mr. Brown. Let us go back to this high-speed airplane to which
he was referring up here. The Lockheed Orion is strictly a com-
mercial transport plane. Other things which he has reported here
are just general questions on which we were very glad to find out
what the people on the other side are doing in engine development.
Senator Clark. He says the German Government is so anxious
to obtain reliable high-powered air-cooled engines that " I am sure
they will not consider this figure excessive."
The Chairman. It is the German Government now which Mr.
Hamilton is evidently speaking about, and they were the ones who
were in the market, evidently operating through Mr. Milch, for
8.3876— 34— PT 6 7
1508 MUNITIONS INDUSTRY
these high-horsepower air-cooled engines. It seems to me that that
is a most direct piece of information to you, that these activities
had relation to planes for military usage rather than commercial
usage. Is it not fair to draw that conclusion ?
Mr. Brown. I am just wondering if the German Government do
not control air transport lines as well as all other aircraft activities.
I do not know.
Senator Bone. Those are privately owned, are they not?
Mr. Brown. I believe the air line of Luft Hansa is.
The Chairman. Up to this time, with whom were you dealing
as respected what you knew to be strictly commercial activities?
Mr. Brown. The Bavarian Motor Works and Junkers.
The Chairman. Not with the Government?
Mr. Brown. Not with the Government.
Mr. Love. I would say that is a figure of speech, and he means
B.M.W. could sell.
Mr. Brown. I was told by one of the Bavarian Motor Works engi-
neers, when he was over here in connection with this engine manu-
facturing contract, that there were plans under way to build an air
line from Berlin, Germany, to Shanghai, China, and I believe that
line has been started, has it not?
Mr. Deeds. It was started.
The Chairman. Mr. Hamilton, following the language of the
paragraph which has been read, states :
I shall, of course, be guided by your judgment and instructions on the matter.
What was your judgment and what were your instructions on the
matter ?
Mr. Brown. That had to do, Mr. Senator, I believe, with the
propeller license, and I am not prepared to say just what the
instructions were which were given to him.
The Chairman. Did you discuss, among yourselves, at the time,
the probability that these engines and these activities were of a
military nature rather than of a commercial nature?
Mr. Brown. I do not believe it ever entered our minds.
The Chairman. Now, coming to the contract between you, the
Pratt & Whitney Aircraft Co., and the B.M.W., a new license agree-
ment between you was drawn up as of March 28, 1933. I am sorry
I have only one copy of that, but I think we will not need to resort
to it materially. At some later date an agreement dated March 29,
1933, or 1 day later, superseded the agreement of March 28, 1933.
The March 29, 1933, agreement granted a license to B.M.W. to man-
ufacture an air-cooled aviation engine having a displacement range
of from 1,650 cubic inches to 1,750 cubic inches. By article II, sec-
tion 2 (b), of the March 29 agreement, Pratt & Whitney were to pay
a royalty of $200 on any licensed engine sold by them within the
German Reich. Is that correct?
Mr. Brown. I am going to let Mr. Deeds answer the questions on
matters of license. I know about them in general, but he handled
it in detail.
The Chairman. As I review this, if you have a contrary opinion,
I wish you would interrupt to say so, Mr. Brown.
Mr. Deeds. That is correct.
MUNITIONS INDUSTRY 1509
The Chairman. A royalty of $200 on any licensed engine sold by
hem within the German Keich, and not to be exported from the
Jeich by the purchaser. Fuithermore, all such sales were required
o be at not less than the current price being quoted by B.M.W.
Under paragraph numbered (i) under section 1 (b) of article IV,
3.M.W. was required to pay Pratt & Whitney $200 for each licensed
■ngine manufactured, leased, sold, or shipped by B.M.W.
Under section 2 of article IV, B.M.W. was to render semi-annual
itatements to Pratt & Whitney, showing the models and numbers of
ill licensed engines manufactured and shipped, sold, leased, or used
)y B.M.W.
Roughly, does that cover the nature of the contract ?
Mr. Deeds. That does. Of course, the reason for the royalty pay-
ible to them under that agreement is based on the fact that we
lave granted them the exclusive territory.
The Chairman. Germany is their exclusive territory ?
Mr. Deeds. Yes, sir.
The Chairman. Let this agreement be entered as " Exhibit No.
)93."'
(The agreement referred to was marked " Exhibit No. 593 " and
s included in the appendix on p. 1585.)
Mr. Brown. Would you mind granting us a favor there, that the
lollars and cents be omitted from that agreement and just leave
hat blank, for the reason that I think it is information that you
;vould not want just to throw into our competitors' laps.
The Chairman. All right. Let that be done.^
That was March 29, 1933. Under date of March 8, 1934, and prior
;o the receipt of anything such as were called for under this con-
tract of the year before, prior to any receipt by Pratt & Whitney,
:he Pratt & Whitney Aircraft Co. released B.M.W. from the royalty
provisions, in consideration of a lump-sum pajmient of $50,000 a
^'ear royalty.
Now, then, at the royalty figure to which there has been reference,
it that figure per engine, $50,000 is equal to the royalty on 250 en-
pnes a year. Furthermore, B.M.W. waived the payment of any
royalty by Pratt & Whitney under section 2 of article 11.
Inasmuch as United Aircraft sold 176 engines to German customers
during the 8 months period ended August 31 of this year, that was
a sizable concession, was it not, Mr. Brown ?
Mr. Brown. Well, I do not know.
Mr. Deeds. I do not think it is. Certainly, from our business
standpoint, there is insurance of a fixed fee in considerably larger
amount than our previous experience on the less remunerative agree-
ment of earlier years.
Senator Vandenberg. But from their standpoint it indicates that
they are going to make more than 250 engines a year, does it not?
Mr. Deeds. They probably think they will.
The Chairman. In any event, of the 176 engines which you sold,
150 were Hornet S-4-D-2 and one was a Hornet 1690-S-D-G and
25 Hornet model T-2-D-1, All these types are within the displace-
ment range covered by the license, are they not?
^ The pri.'e.s quoted in " Exliibit No. 508 " were deleted b.v liermission of the nhairra;in.
(See appendix, p. 1585.)
1510 MUNITIONS INDUSTRY
Mr. Deeds. That is correct.
The Chairman. However, 151 engines sold in 1934 were sold to
B.M.W. Is it not likely, as a practical matter, Mr. Brown or Mr.
Deeds, that the royalty provision did not affect these sales at all?
Mr. Deeds. The royalty provision did not affect those sales at all.
Those were what we would call interim sales. They did not have
the opportunity in less than a number of months to get into pro-
duction on an engine, and for their interim requirements they pur-
chased from us.
The Chairman. Of course, these 151 were part of the total of 176,
were they not ?
Mr. Deeds. Yes, sir.
The Chairman. The total compensation gained by Pratt & Whit-
ney, as to which you consented to waive your right to require
royalty from B.M.W., is equivalent to the royalty upon approxi-
mately 500 engines a year on that basis. Is that right?
Mr. Deeds. It is 200 into 50,000 ; 250 engines, is it not ?
Mr. Hiss. Plus the waiving of your duty to pay them a royalty
on any engines you sold in Germany.
Mr. Deeds. Only 25 of those engines in either lot sold were sold in
their territory. What we sell to them directly we would not have
to pay a royalty on.
Mr. Hiss. There is no clause in the license one way or the other.
Mr. Deeds. That is a foregone conclusion.
Senator Bone. Your patents in Germany are all filed and they
are thoroughly protected under the patent law of that country?
Mr. Deeds. Yes, sir.
Senator Vandenberg. Is 250 engines a year a big production?
Mr. Deeds. I would say it is quite small.
Senator Vandenberg. Small?
Mr. Deeds. Yes, sir.
Senator Vandenberg. How many engines do you produce a year?
Mr. Deeds. Koughly, 1,000.
Mr. Hiss. How many of those are sold to the United States ? Do
you know, roughly?
Mr. Deeds. I think we have some figures.
Mr. Hiss. Koughly.
Mr. Deeds. Roughly, between 50 and 60 percent.
Mr. Hiss. What were your sales to the Army and Navy of the
United States?
Mr. Deeds. I would say 50 to 60 percent.
Mr. Hiss. So that 250 engines would be a maximum production
for the Army and Navy per year.
Senator Vandenberg. How many planes are there in the Army
and Navy today ? Do you know ?
Mr. Deeds. I cannot answer that question authoritatively.
Senator Vandenberg. I heard there were less than 1,000 in the
Navy, for instance. Does that sound reasonable ? About 900 in the
Navy?
Mr. Brown. I beg your pardon.
Senator Vandenberg. How many planes are there in the American
Navy today?
Mr. Brown. I do not know.
MUNITIONS INDUSTRY 1511
Senator Vandenberg. Would 900 be a reasonable figure? Does
that sound reasonable?
Mr. Brown. I don't know whether you would want to divulge
that secret or not, and I would much prefer you get it from the Navy.
Senator Vandenberg. I don't know whether there is much secret
about it.
Mr. Brown. I really couldn't give you the exact number.
Senator Vandenberg. This would indicate they are going to man-
ufacture as many engines as are used in the Navy in 1 year, which
would seem to be a relatively high production.
Senator Bone. With their own production and this added, they
might easily have 2,000 or more planes within a year.
Mr. Brown. I have some figures here that would check it up.
From 1926, the time we started in business, until December 31, 1933,
we have shipped a total of 7,912 aircraft engines. That is to all
parties.
Senator Bone. You mean outside of this country?
Mr. Brown. No; this is the total engines produced, and I hope
I am not divulging an}^ military secrets, so if you would like to, you
can leave this figure off of the record. I will show this statement
to you, if you would like to have it.
Senator Vandenberg. That is about a thousand a year for 8 years ?
Mr. Brown. We have got it by years here, and I will read into
the record what our production was by years.
Senator Vandenberg. Is this the total production ?
Mr. Brown. Yes. For 1926, 19; for 1927, 271; for 1928, 955; for
1929, 2,017; for 1930, 1,589; for 1931, 1,286; for 1932, 805; for 1933,
989.
Senator Clark. Is that engines or planes ?
Mr. Brown. Those are engines.
The Chairman. Do you have the figures up to the present date,
this year?
Mr. Brown. I haven't them with me, but I would be glad to
furnish them.
Senator Vandenberg. Let us take the 989 engines for 1933; how
many of those would you say were exported ?
Mr. Deeds. We have it for the total period, 646 engines.
Senator Vandenberg. Six hundred and forty-six exported out of
the 7,900; is that right?
Mr. Deeds. Yes.
Mr. Hiss. But the proportion has increased in the last few years,
and you are exporting a larger amount of your production than
those figures there for the 8 years would indicate?
Mr. Deeds. Our export figure has increased ; yes.
Mr. Hiss. During those years, and at the present time, aren't
practically all of the engines made in this country for military use
made by your company and the Wright Aeronautical Co.?
Mr. Deeds. In the power range which we cover ; yes.
Mr. Hiss. For military use ?
Mr. Deeds. Yes.
Senator Vandenberg. If your total production was 989 engines
for export and domestic trade in 1 year, then would you not say
an arrangement contemplating 250 engines in one German plant
was a substantially important production?
1512 MUNITIONS INDUSTRY
Mr. Deeds. I would say that it was not. I don't know; I have
never been there.
Mr. Brown. You will remember, if it is a 3-engine transport, that
would represent 3 into 250, which would be about 70 or 75 planes,
If it was a 4-motor ship, it would be so much less.
The Chairman. What has been stated as the beginning of the
release from the provisions of this contract is revealed in a letter
dated March 8, 1934, addressed to B.M.AY. by the attorney in fact
of the Pratt & Whitney Aircraft Corporation, which will be entered
as " Exhibit No. 594.'^^
(The letter referred to w^as marked " Exhibit No. 594 " and is in-
cluded in the appendix on p. 1593.)
Senator Clark. Referring to the estimate made by Senator Van-
denberg on the engines constructed in Germany, B.M.W. is 1 of 3 or ■^
companies receiving a volume business, and the conclusion to be
drawn is that production in Germany is three or four times that ol
B.M.W. , based on the license agreement?
Mr. Deeds. Our figures here are for one of two or three manufac-
turers, so that the comparison being made with our production should
also be considered in the same light.
Senator Clark. In other words, the production is three or four
times what it appears to be on the figures of your company?
INIr. Deeds. Yes; the same applies to our domestic production.
The Chairman. We shall have to leave this matter until in the
morning, but I think, in order to have a connected story here, we
should put in evidence the reason why B.M.W. stated they desired
to modify the royalty provisions as shown in this letter. This lettei
is dated October 27, 1933, addressed to Thomas F. Hamilton, writ-
ten by C. W. Deeds, and it is offered in evidence as "Exhibit No,
595."
(The letter referred to was marked " Exhibit No. 595 " and is in-
cluded in the appendix on p. 1594.)
The Chairman. On the second page of this copy of the letter, ir
paragraph 5, it reads as follows:
I pointed out that we were not interested in modifying tlie present B.M.W
agreement and tliat we would like to have a written request for such modifica
tion with the reason therefor. Mr. Hamilton stated he knew the reason, but
B.INI.W. was not willing to put it in writing, that reason being that they die
not want to reveal the number of engines manufactured. This, of course, W(
anticipated. I mentioned that $15,000 did not seem anywhere near adequate,
and Hamilton pointed out that this was merely their offer and that he had in
mind at least be that much. I said I .still thought that that was low, considering
the possibility of manufacturing 700 to 800 engines per year. He said this
wa.s out of the question and that he felt that we would sell them more engine?
than they would ever build.
B.M.AY. referred to is the Bavarian Motor Works?
Mr. Deeds. Yes, sir.
The Chairman. What, Mr. Deeds, gave you reason to believe thai
B.M.W. might manufacture seven to eight hundred engines pei
year?
Mr. Deeds. I had no reason to believe it except I offered that as a
po.ssibility in connection with the $15,000 offer they were making us
in royalty.
The Chairman. You must have had some basis for expressing the
possibility of their manufacturing 700 to 800 engines per year.
MUNITIONS INDUSTRY 1513
Mr. Deeds. If we assume B. M. W. had a production as large as
our company, that would be the case. They have the factory and
facilities.
Senator Bone. With three big companies operating at full blast
over there, they would have no difficulty in exceeding that sort of
record, would they?
Mr. Deeds. I don't think so.
Senator Bone. How many engines could three big plants of the
type of this plant manufacture in the course of a year?
Mr. Deeds. Senator, I have never seen the plant.
Senator Bone. What would you think?
Mr. Deeds. I could not answer the question.
Senator Bone. You would not speak of 800 planes as an extrava-
gant figure?
Mr. Deeds. We are speaking of engines.
Senator Bone. Yes; you would not speak of 800 engines as an
extravagant figure?
Mr. Deeds. No ; I would not.
The Chairman. Through all of this you have no ghost of an idea
these planes could be for military purposes ?
Mr. Deeds. We are thinking of the future. It was a matter of
common gossip that they were anticipating rearmament.
Mr. Brown. That contract was over a period of 5 years, wasn't it?
Mr. Deeds. That is correct.
Mr. Hiss. You mean the license gave them rights for 5 years?
Mr. Deeds. That is correct.
Mr. Hiss. And your figure was 700 to 800 engines a year?
Mr. Deeds. That is correct.
The Chairman. So that there are 4 years to go on that contract?
Mr. Deeds. Yes ; in which time there is a possibility of their reach-
ing the production.
The Chairman. Mr. Deeds, this " Exhibit No. 595 " purports to be
in confirmation of a telephone conversation you had with Hamilton
the afternoon of October 27, 1933. Where were you?
Mr. Deeds. I was in Hartford.
The Chairman. And Mr. Hamilton, where was he ?
Mr. Deeds. I don't remember, but he was in Europe.
The Chairman. Then you had a very extended conversation that
day, did you not. since this memorandum would indicate you had 12
specific things you wanted confirmation of in that telephone
conversation ?
Mr. Deeds. As I recall, the telephone bill was $250.
The Chairman. Now, wasn't there actually information given
to you by Mr. Hamilton that day concerning the military activities
there, and that this great talk about the building of motors and
planes had relation to a military program ?
Mr. Deeds. I was led to believe that the political situation in
Europe in general was very much disturbed and there was very
great activity on the part of our competitors, and we were naturally
anxious to get our share of the business.
The Chairman. In this same memorandum, " Exhibit No. 595 ",
you say in paragraph 7 [reading] :
Mr. Hamilton referred to various cables and communications relative to
the demonstration in England and the essential points in the discussion were
1514 MUNITIONS INDUSTRY
that he desired the two-way propeller for the direct-drive engine to be used
in the Fury, as among other things the item of expense would enter into the
picture.
What was this demonstration for?
Mr, Deeds. It was a demonstration proposed for the Persian and
Finnish in a Hawker-built airplane. The Persians had previously
purchased Hawker planes equipped with our engines and were con-
sidering a future program.
Senator Vandenberg. Referring to this 990 engines produced in
1933, what percentage of those engines went into commercial planes?
Mr. Deeds. We might explain at this time that our records classify
everything not sold to the United States Government in a general
category of commercial. The Export Co. makes all export sales and,
of course, other airplane manufacturers whom the United Aircraft
do not represent, purchase engines from us, and they may or may
not be exported. Our knowledge to that effect is only as it may be
incidental to some correspondence or conversation on the subject.
Senator Bone. These sales are listed as commercial sales.
Mr. Deeds. I am referring to Pratt & Whitney Aircraft Company's
books.
Senator Bone. That is what I mean. That is what your records
show.
Mr. Deeds. Yes.
Senator Vandenberg. What is the answer to my question, please?
Mr. Deeds. Of the 989 engines sold in 1933, the number of com-
mercial engines sold, which is engines outside of shipments to the
Army and Navy, was 46.4 percent.
Senator Vandenberg. Out of the 990 engines, that would be in
the neighborhood of 450 engines.
Mr. Deeds. That is right.
Senator Vandenberg. So your maximum commercial production
in 1933 was around 450 engines and the cancelation of this con-
tract for this one German plant having a production of at least
250 and probably more engines, then under the cancelation of this
one contract it was only one of three or four plants in Germany, so
that they could not all have been converted into commercial traffic to
that extent.
Mr. Brown. I don't see wh}^ not. If they have three-motor
planes, as I pointed out a while ago, it would mean less planes.
Senator Vandenberg. You only had four hundred-and-some-odd
of them in the United States.
Mr. Brown. May I just call your attention to the commercial pro-
duction in 1929 when this country was building up its air transpor-
tation. We sold 1,221 motors.
Senator Clark. Mr. Brown, a while ago, if I understood you cor-
rectly, you said this transport you sold to Germany is the latest-type
transport ship, like the ships on the United Lines in this country.
Mr. Brown. As I understand it, that is what it is.
Senator Clark. That is the same kind of ship that carries the mail
over here.
Mr. Brown. That is right.
Senator Clark, I understand this type of ship is not readily con-
vertible into a bomber.
Mr. Brown. That is what I have been told b}' aircraft engineers.
MUNITIONS INDUSTRY 1515
Senator Clark. I am interested in that, because we are constantly
being requested to vote for these subsidies, because they are interested
in having this latest type of ship used in the subsidies because they
are fitted for military purposes, and you say they are not fitted for
military purposes at all.
Mr. Brown. Isn't the answer to this that the entire air lines in
this country could be turned over to the Government for the trans-
portation of troops and supplies?
Senator Bone. You mean to transport troops on these ships that
are carrying the mail?
Mr. Brown. Why not?
Senator Bone. I am wondering how you could transport any num-
ber of troops for any distance in an airplane.
Mr. Deeds. The Army and Navy have transportation divisions
and use transport planes in connection with their activities.
Senator Clark. I am afraid we will never win a war moving
troops by air.
Senator Bone. Did you ever hear of any war where they moved
troops by airplane? I am glad Senator Clark brought up the
question of these huge subsidies for these air lines on the theory it is
of assistance to our defense. If they are not suitable for bombing,
what would they be suitable for?
Mr. Brown. I would prefer to have that question answered by
someone who knows the subsidies better than I do.
Senator Bone. Some of the air lines have been the recipients of
the largest subsidies on that theory.
Mr. Brown. I would hardly say that they receive their subsidies
on that basis.
Senator Bone. That is the defense made in Congress and in the
press, for paying these subsidies, or at least a part of the defense, that
they are an assistance to the Army in war.
Mr. Love. I have seen cases where they carried a great amount of
material and have transferred it by airplane and particularly heavy
material.
Senator Bone. We want all of the light we can get on it and if
you can enlighten us further on it I, for one, will be glad to have the
additional information.
The Chairman. Mr. Love, you may understand yourself to be ex-
cused, but Mr. Brown and Mr. Deeds we would like to have back
here at 10 o'clock in the morning.
Until that time the committee will be in recess.
(Thereupon, the committee recessed until 10 a.m., Tuesday, Sept.
18, 1934.)
I
INVESTIGATION OF MUNITIONS INDUSTRY
TUESDAY, SEPTEMBER 18, 1934
United States Senate,
Special Committee to In\t:stigate
the Munitions Industry,
Washington^ D.C.
The hearing was resumed at 10 a.m., in room 310. Senate Office
Building, pursuant to the taking of recess. Senator Gerald P. Nye
presiding.
Present: Senators Nye (chairman), George, Clark, Bone, Pope,
and Vandenberg.
Present also : Alger Hiss, investigator.
The Chairman. The committee will come to order, Mr. Hiss, you
may proceed.
TESTIMONY OF DONALD L. BROWN AND CHARLES W. DEEDS—
Resumed
Mr. Hiss. Mr. Deeds, yesterday it was testified that the two Boe-
ing model 247 planes which were sold to Germany, were shipped to
Germany, in 1934 and one Boeing still on order — which I judge is
of the same type, is that correct?
Mr. Deeds. Yes.
Mr. Hiss. Represented a transport which was not suitable, in your
opinion, for military purposes as a large bomber. Is that a correct
summary of your statement?
Mr. Deeds. That is substantially correct. It is not suitable in its
present form, but any equipment that we sell — in fact, practically
any commodity that we export — can be made usable for military pur-
poses in time of war and would be used in time of war. To make
a bomber out of the 247 would require an expensive engineering
program and an expensive manufacturing operation.
Mr, Hiss, Would the weight of a Boeing of the 247 type be the
same, if it were a military ship, as if it were outfitted purely for
commercial purposes; tliat is, exclusive of armament?
Mr. Deeds. That is a techincal question which I cannot answer.
It is something that the airplane designer would have to answer.
Mr. Hiss. As late as January 5, 1934, you were quoting the Boeing
transport 247-D to the Export Co.'s agent in Bolivia, as a bomber.
Does the model 247-D differ markedly from the model 247 ?
Mr. Deeds. Well, the 247-D is the successor to or the modification
of the present 247 for strictly commercial purposes. Whether or
not that designation has been applied by the Boeing Co. to a fur-
ther modification for bombardment purposes, I do not know. But
the 247-D is the type that is just now going into production for
air-line use with an increased performance.
1517
1518 MUNITIONS INDUSTRY
Mr. Hiss. Let us assume that the 247-D is the same fundamental
model actually converted for military purposes.
Mr. Deeds. It is not.
Mr. Hiss. It is not ?
Mr. Deeds. No.
Mr. Hiss. Let us take the example of the 247 converted for mili-
tary purposes. You do not know about whether the weight of the
247 for transport purposes would be the same as the 247 converted
for military purposes?
Mr. Deeds. I clo not.
Mr. Hiss. How about the load capacity; what would be the capac-
ity of that ship from the specification point of view ?
Mr. Deeds. I do not know that definitely, but I understand that
the 247 load as it is now used, the pay load, is approximately 2,500
pounds.
Mr. Hiss. There was also put in evidence the fact that during
the first 8 months of 1934 the Export Co. shipped to Germany what
were described as six mail airplanes. On the list furnished by your
company to the committee they are described as the type V-85-6.
Is that the same as the Navy SU 2-seater fighter simply with one
cockpit converted into a mail comiDartment ?
Mr. Deeds. Well, it is basically the same design as the Vought
Corsair, wdiich is the SU type.
Mr. Hiss. Which is used for light bombing purposes, 2-seatei
fighter, observation, and such purposes?
Mr. Deeds. Yes. I believe I testified to that effect yesterday.
Mr. Hiss. I just wanted to clear it up in the record.
The Chairman. Mr. Deeds, last night when we took our recess
we were discussing such knowledge as may have been yours and that
of your company during the past year or more concerning military
activities in Germany. Are you maintaining that you had pretty
thorough assurance all the way through that these operations which
were yours in German}^ were not in any way related to a military
program ?
Mr. Deeds. I stated yesterday, at least, to the effect that we had
statements from our representatives and also general press reports
to the effect that Germany was planning to rearm. Wliat method
they were going to use was not considered. We have every reason
to believe, however, that the normal requirements of the commercial
operations in Germany would absorb the orders that we received
from them.
The Chairman. But surely all the reports that you were gettino
from your agents and representatives abroad clearly indicated that
there was a military purpose back of many of these orders, did they
not?
Mr. Deeds. They indicated just as I stated, that Germany was
planning to rearm. We did not, from our standpoint, take it into
consideration one way or another.
The Chairman. Mr. Rentschler, in his letter of February 6 to Mr,
Love, " Exhibit No. 591 ", said :
It seems reasonable and possible that within the next five years the German
Governnient will provide itself, both for military ;ind conuuercial purposes, witb
a considerable amount of new equipment.
MUNITIONS INDUSTRY 1519
Then in a letter of the following month, March 15, " Exhibit No.
592 ", which has been identified as a letter probably written by Mr.
Hamilton to Mr. Rentschler, there was reference to Hamilton's
friend, Dr. Milch becoming technical director of Luft Hansa and
becoming State secretary for air traffic. Then he says :
My conversations with the various departments indicate that their interests
extend far beyond matters of traffic —
making it seem quite clear that at least Mr. Hamilton knew that
these negotiations, involving orders to be placed with your firm, were
more or less of a military nature.
In addition to that, you had increasing knowledge, growing knowl-
sdge from day to day, of what must be taking place when you
abserved such tremendous increases in the total of your business
with Germany, as instanced by the fact that your business increased
from $6,000 in 1932 to $1,445,000 in the first 8 months of this year.
There has been reference in your correspondence to the interest
Df the German Government in these orders and in these plans ; and in
iddition to that I am very confident — and I think you will find
[•eason for our confidence — that the matter of Germany's militarj'^
plans, as related to their air preparations, were matters of common
yossip among the air trade in Germany. Have you not been aware
;hat you probably were helping in a military program, not alone a
commercial program ?
Mr. Deeds. I think I have stated the fact that we were aware of
:hat situation as it applied to the future. Incidentally, I looked up
ast night some facts regarding Luft Hansa, which are published
Facts — and my purpose was to indicate the size of their operations
md that their purchase from us would be a normal requirement —
:o the effect that they serve 52 German and 31 foreign cities. It
s made up of 53 different air lines which comprise the Luft
Hansa system, and they operate approximately 175 airplanes. For
:he first time in history in the winter of 1933-34 they operated
dl their services throughout the winter, and that required more
equipment, replacement equipment.
During 1933 they speeded up their service, and in order to do so
liey used higher-powered engines of the type which we supplied,
rhat increased their speed approximately 20 percent, just as our
)wn air lines have been speeded up by improved equipment.
The new planes purchased by Luft Hansa for this increase in
raffic and service used American-built engines.
From May 1 to August 31, 1933, the German air-line traffic in-
:reased more than 25 percent and the passenger traffic more than 34
percent in number of passenger miles and 12 percent in express traffic.
The traffic of November 1933 was 190 percent greater than that
)f November 1932.
So we have ample justification to believe, from the knowledge that
he engines, as stated, were of a current commercial type, that they
vere normally required in their air-line operations.
The Chairman. Mr. Deeds, will you tell us what records your
lome office has regarding the number of men that Mr. Hamilton may
lave under his employ in Europe? Does Mr. Hamilton submit a
tatement monthlv to vou concerning his expenses?
1520 MUNITIONS INDUSTRY
Mr. Deeds. I am not familiar with that situation. That is han
died by the Export Co.
The Chairman. Mr. Brown, what knowledge do you have of that?
Mr. Brown. I do not know whether he furnishes his expense state-
ment monthly or not. They go right direct to the Export Co,
Senator Vandenberg. Mr. Chairman, before you leave the previ-
ous matter that was discussed between you and Mr. Deeds, if you
will permit me to ask this question; would your explanation, Mr.
Deeds, also cover the license permit which contemplates a minimum
production of 250 engines a year ?
Mr, Deeds, I should think so; yes.
Senator Vandenberg, With that included, from your viewpoint,
that would still be amply within purely commercial expansion ?
Mr. Deeds, It certainly would, I do not say that that is what
it is for.
The Chairman. Is it not true that between the United Air-
craft Corporation and the Pratt & Whitney Co., in April of this year,
you had at least six representatives in Germany ?
Mr. Deeds. In Europe.
The Chairman. In Germany?
Mr. Deeds. I do not know.
The Chairman. Are there that many in Europe ?
Mr, Deeds, Yes,
The Chairman, We had testimony yesterday that you did not have
more than two,
Mr, Deeds, I do not believe that that is correct, I recall stating
that we had four men from Pratt & Whitney.
The Chairman, Perhaps the record as relates to two had refer-
ence to the United Aircraft representatives; or do they work to-
gether there ?
Mr, Deeds, They work together. I think I explained that yes-
terday.
Mr. Brown. Mr, Chairman, I believe that you are correct. When
the question was asked of us how many men Pratt & Whitney had
over there, I believe I did answer " two ", and then Mr. Deeds fol-
lowed me and explained that we had more than two.
Senator Clark. I think that is right.
Senator Vandenberg. I think that is correct.
The Chairman. Before the committee there is evidence that you
had at least six in Germany in April of this year. That would not
be an exaggeration, then, would it? There were probably that
many?
Mr. Deeds. If the major portion of our force happened to be in
Germany at one time, that would be the case. I do not know that it
is a fact.
Senator Clark. The greatest portion of your business in Europe
this year has been with Germany, has it not ?
Mr. Deeds. So far this year ; yes.
The Chairman. Is it not true that the trade has generally recog-
nized that enough American equipment was being delivered into
Germany to equip a hundred planes per month ?
Mr. Deeds. I never heard that statement. I do not know how it
would be arrived at.
MUNITIONS INDUSTRY 1521
The Chairman. What have you heard as regards that? How
much equipment has been going over there? You have understood
that you were not the only firm shipping equipment in there, have
you not?
Mr. Deeds. Are you speaking of aircraft engines ?
The Chairman. Yes.
Mr. Deeds. I am not familiar with the sales in Germany of other
firms.
The Chairman. Have you understood that you had competition?
Mr. Deeds. Yes, sir.
The Chairman. How is that ?
Mr. Deeds. I have understood to that effect.
Senator Clark. Mr. Deeds, you do not mean to leave the impres-
sion with this committee that a company like yours, that has grown
something over 10,000 percent in a few years, is entirely ignorant,
in a general way, of the volume of business being done by its com-
petitors in this country ? You have means of getting information as
to what your competitoi'S are doing, have you not?
Mr. Deeds. Certainly. The published statistics indicate the ex-
ports and domestic commercial sales in total by classes, for the in-
dustry. We might subtract from the total what we sell and arrive
at the total of our competition in this country.
Senator Clark. Do you not know what is being exported from
this country by your competitors as well as yourself ?
Mr. Deeds. Yes, sir ; but I do not know where.
The Chairman. From what you have heard, Mr. Deeds, what
would you estimate to be the equipment that was being assembled in
Germany per month ? What would be its equivalent in the way of a
finished product? Would you say 50 planes per month?
Mr. Deeds. I do not have any information with respect to that.
The Chairman. Have you heard anything at all on that score?
Mr. Deeds. Not that I recall.
The Chairman. As to what their larger program was calling for,
in Germany?
Mr. Deeds. There might be some estimates or guesses from Mr.
Hamilton in the files, but I do not recall them at the moment.
The Chairman. Is it not true that from Germany there has been
a flow of cables urging you to speed up your production and speed
up deliveries of German orders?
Mr. Deeds. That was true in connection with the order for 150
engines which w^e received from the B.M.W. Co. and also some of
the Junkers orders that we were behind on.
The Chairman. Referring to those orders and to the amount of
orders on file as yet undelivered, as of August 31, do you have any
understanding as to how much business you are going to do with
German firms next year?
Mr. Deeds. We have no information.
The Chairman. Has Mr. Hamilton indicated what was in pros-
pect for next year?
Mr. Deeds. I do not recall. His hopes were that there would be
more business.
The Chairman. More business?
Mr. Deeds. Which has not to date materialized.
1522 MUNITIONS INDUSTRY
The Chairman. Have you not heard it said that at the end of this
year Germany will have at least 2,000 planes?
Mr. Deeds. I have not.
The Chairman. You have not heard that?
Mr. Deeds. No; not to my knowledge or recollection.
Have you, Mr. Brown?
Mr. Brown. I have not, either.
Mr. Hiss. Mr. Deeds, is it not true that the engines shipped to
Germany in 1934 can readily be synchronized with machine guns —
they are so designed as to be able to do that?
Mr. Deeds. The engines can be disassembled and a synchronizer
drive can be inserted. That is true of any engine manufactured by
our company, and I am sure it is true in general of engines manu-
factured by others.
Mr. Hiss. Yesterday yon spoke of the fact that most military
engines Avere highly supercharged. Is it not a fact that the addition
of a supercharger to one of your engines is quite a simple matter
from an engineering point of view?
Mr. Deeds. I would not say it is a simple matter. In the case of
our engine it requires a complete replacement of the gear train in the
rear of the engine and the design and manufacture of a higher
compression piston.
Mr. Hiss. Is it possible to insert a higher compression piston in
the engines that you shipped to Germany?
Mr. Deeds. It is. Such a piston has not been designed, however.
Mr. Hiss. What would really have to be done to one of the trans-
ports to convert it into a bomber? You merely add a bomb rack,
and would not that make it a serviceable bomber ?
Mr. Deeds. I cannot answer that question.
Mr. Hiss. Do you think that a bomber for long-distance bombing,
not for any particular tactical operations other than merely a long-
distance trip for bombing, would have practically the same stress
problems from an engineering point of view as the 247 transport ?
Mr. Deeds. Again, that is a technical question which I do not feel
qualified to answer.
Senator Bone. You build military planes for the Government; do
you not ? ;
Mr. Deeds. We build engines, military engines.
Senator Bone. Were you connected with a company that did build
planes ?
Mr. Deeds. No.
Senator Bone. You were not?
Mr. Deeds. No ; I was not.
Senator Bone. Was any member of your group present here today
connected with a company that built planes for the Government?
Mr. Brown. No.
Mr. Deeds. I should say directly connected, of course, through
the United Aircraft & Transport Corporation we have been affiliated
with airplane manufacturers.
Senator Bone. You would know something about the business;
would you not ?
Mr. Deeds. Yes.
Senator Bone. Eighty percent of j^our business at one time wa^
with the United States Government. We miffht well assume that
MUNITIONS INDUSTRY 1523
you would know a little something about the practical side of mili-
tary operations.
Mr. Deeds. But not the technical side.
Senator Clark. You control the Sikorsky Co., do you not?
Mr. Deeds. Yes.
Senator Clark. Do they not build the military planes?
Mr. Deeds. They have built a few flying boats — very few.
Mr. Hiss. The Boeing Co. and the Chance Vought Co., which the
Boeing Co. formerly controlled, the Chance Vought Co. still being
controlled by the United Aircraft, both build military airplanes?
Mr. Deeds. That is correct.
Mr. Hiss. In 1925, during the hearings before the Select Com-
mittee of Inquiries of the House of Representatives into the Opera-
tions of the United States Air Forces, at page 836, Lieutenant Van
Zant, of the Army Air Service, testified that he had for the past
two years been making a special study of the relation of the develop-
ment of commercial aeronautics to the national defense, that he had
traveled abroad during that time, and at page 837 he said that he
had personally visited the principal airports of Europe and traveled
as a passenger some 6,500 miles on English. French, Rumanian,
Polish, German, and Dutch air lines in order to investigate the
development of commercial aviation abroad. He testified that the
attitude of European governments toward commercial air lines was
as follows :
All tbe principal countries of Europe recognize commercial aeronautics as
an indispensable factor in the national defense. In spite of serious financial
stringencies, the Governments of England, France, Switzerland, Hungary,
Rumania, Poland, Germany, Holland, Belgium, Denmark, and others are con-
tributing liberally to the support and encouragement of commercial air lines.
At page 848, he testified in general that the flyers now in com-
mercial operation — this refers to European flyers — were in the war.
had gained their training at government expense during the war.
In answer to a question by Mr. Lea :
Are flyers in these lines —
That is, the foreign lines —
generally in the reserve forces of their country?
Lieutenant Van Zant testified :
Yes. In fact, by the subsidy arrangements they are required to be.
Do you know anything that would tend to contradict Lieutenant
Van Zant's opinion that the European governments consider com-
mercial airlines a distinct feature of a national-defense program?
Mr. Deeds. I do not.
Mr. Hiss. Or that would tend to contradict his opinion that the
pilots of commercial airlines in those European countries were
required to be in the military reserves.
Mr. Deeds. I do not ; no, sir. That was quite a while ago.
The Chairman. Mr. Deeds — or Mr. Brown, either one of you gen-
tlemen— is it not true that the Sperry Gyroscope Co. has been doing
a considerable business in Germany?
Mr. Broavn. I do not know.
The Chairman. You have no knowledge of that at all, Mr. Brown?
83876—34 — pt 6 8
1524 MUNITIONS INDUSTRY
Mr. Brown. No.
The Chairman. Mr. Deeds?
Mr. Deeds. I do not know.
The Chairman. The committee is advised — and that will be later
developed, as to its truth — that the Sperry Gyroscope Co. has been
delivering automatic pilots and gyrocompasses and other instru-
ments, sufficient to equip at least 50 airplanes in Germany a month,
and that this process of late weeks and months has been considerably
speeded up.
You have not heard it said that at the end of this year, or about
a year from now, Germany will have about 2,000 or 2.500 planes ready
for military use ?
Mr. Deeds. No.
The Chairman. Do you know anything of the practice in Ger-
many at this time of forbidding the exportation of certain machines ?
Mr. Deeds. I do not. Are you speaking of aircraft ?
The Chairman. Yes ; having relation to aircraft in that their pro-
duction might be standing in the way of production of aircraft
engines ?
Mr. Deeds. Why, I have information to the contrary. I know
that aircraft are being exported from Germany to various parts of
the world, because they have our engines in them.
The Chairman. Do you know of machine shops in Germany pro-
ducing things that are divorced quite completely from engine manu-
facture that are being closed down for their normal production in
order that they might have more capacity to produce engines?
Mr. Deeds. I do not.
The Chairman. You do not know of any orders placed in America
for this production, that is, remote from aircraft production? For
instance, a machine shop in Germany might be manufacturing cer-
tain instruments, but that particular shop is needed to produce these
engines and the shop would have to find some outlet for the produc-
tion of the other material that they had been producing. You do
not know that such orders have been placed in America ?
Mr. Deeds. I do not.
The Chairman. Or in England?
Mr. Deeds. I do not.
T'lie Chairman. How and in what form do you get payments for
your work in Germany ?
Mr. Deeds. New York funds in advance of delivery.
The Chairman. Do you get payments in foreign exchange ?
Mr. Deeds. Well, I cannot answer the question. The Export Co.
handles the transaction. The purchaser has the foreign-exchange
problem. Our terms are New York funds in advance of shipment.
The Chairman. Do you know whether or not the foreign funds
that have been impounded by the German Government are being
used for the payment of military equipment on subsidies to German
military establishments?
Mr. Brown. I do not know.
Mr. Deeds. I have no information on that. I don't believe I have
heard that.
The Chairman. I find here a copy of a letter dated December 4,
1933, addressed to the United Aircraft Exports, Inc., by the Inter-
MUNITIONS INDUSTRY 1525
national Engineering Co., Inc., by H. F. Scholtz, manager. What
is the International Engineering Co., Inc.?
Mr. Deeds. They are agents of the Exports Co. in Siam.
The Chairman. I offer this letter as " Exhibit No. 596."
(The letter referred to was marked " Exhibit No. 596 " and is
included in the appendix on p. 1595.)
The Chairman. Down in the fourth from the last paragraph is
this language :
Three weeks ago a member of the firm of brokers used visited Bangkok and
advised us that on Government tenders they would meet any non-German com-
petition, provided we secured the name, nationality, and prices quoted for them
to submit to the German Government.
This fact should be known to American firms, as we have recently noted
that the foreign funds impounded in Germany are now used in financing such
subsidies.
That was last December. Mr. Deeds, what is vour recollection
of that letter?
Mr. Deeds. I never saw it. This is addressed to the Export Co.
The Chairman. Mr. Brown, have you seen that letter before ?
Mr. Brown. I have never seen this letter before.
Senator Clark. Who takes care of the business of the Export Co.
in the office when Mr. Love is on one of his frequent trips?
Mr. Brown. It is generally handled by Mr. McClellan.
Senator Clark. And you don't know anything about these
matters ?
Mr. Brown. No; because my job was, up to the 1st of September,
head of Pratt & Whitney Aircraft Co., and I spent the majority of
my time there.
Senator Clark. You are now with the United, though?
Mr. Brown. Yes, sir.
The Chairman. This letter, "Exhibit No. 596", in the fourth
paragraph declares:
We know they have been trying to interest the aviation in German engines
and we also know that the German Government are subsidizing German manu-
facturers to the extent of 20% if necessary against non-German competition
in all lines.
Have you not encountered this information previously?
Mr. Deeds. I know we have encountered German competition at
what seemed to us low prices.
The Chairman. The subsidy and price had been operating in a
direction that eliminated a great deal of outside business. Mr.
Scholtz said in his letter:
We have purchased certain engineering supplies in Germany which, due to
prices, eliminated American products in this market.
Have you felt that competition in your business?
Mr. Deeds. The results indicate that, irrespective of price, we have
been successful in selling engines in Siam. I do not remember the
figures, but I know a year ago, and even before that, we had some
sales and shipments into Siam.
Mr. Brown. I would like to add here for the benefit of the com-
mittee that I have heard that the cost of manufacturing aircraft
engines in EurojDe is considerably higher than the cost here in
America.
1526 MUNITIONS INDUSTRY
Senator Clark. How do you account for that, Mr. Brown, the-
difference in labor and organization?
Mr. Brown. No; it should be less, because labor rates over there
are lower than they are here.
Senator Clark. Your trained labor is very much more eflBcient?
Mr. Brown. Yes; they are very much more efficient. Perhaps
that is one reason why it would be necessary for the German Govern-
ment to subsidize German manufacturers to the tune of 20 percent,
in order to compete. That would be my observation from that
statement.
The Chairman. Now, gentlemen, there has been considerable dis-
cussion as to what could and what could not be done under the Ver-
sailles Treaty. On August 5, 1933, Mr. Joseph C. Green, of the
State Department, wrote to the Under Secretary a letter which I am
going to read quite in its entirety, and which is offered as " Ex-
hibit No. 597."
(The letter referred to was marked " Exhibit No. 597 " and is in-
cluded in the appendix on p. 1596.)
The Chairman. The letter is addressed to Mr. Hickerson — and
Mr. Green writes :
I called up the Aeronautics Trade Division of the Department of Commerce
this morning and asked whether they had any information in regard to any
recent purchase by the German Government of airplanes from American manu-
facturers. After they had consulted their record, they reported that they
had no information in regard to such purchases, but that twenty airplane
engines had been exported from the United States to Germany within the
last six months.
Do you have before you figures to indicate what number of that
total might have been your production ?
Mr. Deeds. Mr. Hiss probably has that.
Mr. Hiss. The records submitted by the company do not show the
actual date within the year of shipments, but in 1933 a total of 29
engines were shipped to German customers.
The Chairman. Then at least a part of these engines referred
to in this memorandum of Mr. Green were engines of your produc-
tion, were they not?
Mr. Brown. They might have been.
The Chairman. Mr. Green goes on as follows :
Article 170 of the Treaty of Versailles reads in part as follows :
" Importation into Germany of arms, munitions, and war material of every
kind shall be strictly prohibited."
Article 198 of the Treaty of Versailles reads in part as follows :
" The armed forces of Germany must not include any military or naval
air forces."
Article 1 of the treaty between the United States and Germany restoring
friendly relations, read as follows :
" Germany undertakes to accord to the United States, and the United States
shall have, and enjoy, all the rights, privileges, indemnities reparations, or
advantages specified in the aforesnid joint resolution of the Congress of the
United States of July 2, 1921, including all the rights and advantages stipulated
for the benefit of the United States in the Treaty of Versailles which the
United States shall fully enjoy, notwithstanding the fact that such treaty has
not been ratified by the United States."
Article II of the same treaty reads in part as follows :
" With a view to defining more particularly the obligations of Germany
under the foregoing article with respect to certain provisions in the Treaty of
Versailles, it is understood and agreed between the high contracting parties :
MUNITIONS INDUSTRY 1527
(1) That the rights and advantages stipulated in that treaty for the benefit
of the United States, which it is intended the United States shall have and
enjoy, are those defined in section 1 of part IV and parts V, VI, VIII, IX, X,
XI, XII, XIV, and XV."
Now, on the second page of the exhibit which you have before you,
referring to the second from the last paragraph, I read :
As Germany accepted the decisions of the conference of ambassadors as
constituting her interpretation of articles 170 and 198 of the Treaty of Ver-
sailles, and as this Government, under the provisions of articles I and II of
the treaty between the United States and Germany restoring friendly rela-
tions, enjoys all the advantages stipulated in articles 170 and 19S, the im-
portation of military aircraft into Germany or the possession or use of aircraft
by the German police would constitute a violation of the treaty rights of this
-Government.
In view of the treaty provisions referred to, there was included the follow-
ing sentences : " It is the policy of this Government not to encourage the sale
of arms, ammunition, and implements of war intended for export to Ger-
many * * * " in a confidential memorandum on the policy of the United
States in regard to restrictions on international traffic in arms, ammunition,
and implements of war, which was sulimitted by Mr. Stimson to President
Hoover in May 1931. This memorandum having received the approval of
President Hoover, has since that time been used by the Department as a guide
in making decisions on questions relating to the export of arms. In respect
to the portion of the memorandum quoted above, it has been the custom of the
Department, when occasion has arisen to inform manufacturers and exporters
that the export of arms, ammunition, and implements of war to Germany
would not be regarded with favor by this Government. In view of the desire
and obvious interest of the manufacturers and exporters to do nothing contrary
to the wishes of the Government, this admonition is believed to have been
suflBcient to prevent such shipments. It is possible, however, that some manu-
facturers, realizing that the export of arms to Germany was not definitely
illegal and could not be forcibly prevented, may have, unknown to the Depart-
ment, exported arms, ammunition, or implements of war to Germany.
It is suggested that Mr. Osborne be informed of the policy of this Govern-
ment in regard to the export of arms, ammunition, and implements of war to
Germany, and that he be further informed that, although this Government is
not legally empowered to prevent such exports to that country, nevertheless,
should the occasion arise, it would make every effort to dissuade airplane
manufacturers from exporting military airjilanes to Germany, and that it is
probable that such measures would prove effective.
(Signed) J. C. G.
(Joseph C. Greb:n.)
Now, Mr. Brown, what have been your contacts with the Depart-
ments of the Government respecting your exportations to Germany?
Mr. Broavn. Well, gentlemen, I would like to review just how we
go about getting releases of our engines to export fields. As a gen-
eral rule — may I change that? Every engine which we have de-
veloped has been developed with the close cooperation of either the
officers of the United States Navy bureau of Aeronautics or the
officers at the Materiel Division at Wright Field.
There is an order issued by the War Department to the effect that
all military engines cannot be released for commercial or export sales
without their permission. That has been a policy of the United
States Government, and it has been the policy of the Pratt & Whitney
Aircraft Co. to follow that to the letter.
Now, in connection with the engines which are under discussion
at this time, as well as the manufacturing license agreements which
you have before you, we have had permission from the United States
Government, Army, and Navy to sell those engines commercially and
for the export trade. We have always worked very very close with
1528 MUNITIONS INDUSTRY
both departments of the Government, and for perhaps the last year,
I do not know just when this report that I am going to mention
started, but Ave did report to the United States Navy ever}^ export
shipment which we made.
Now, gentlemen, I am a business man, and I don't believe you
would expect me to be as familiar with treaties as our Government
people are. We have felt that we had the right to export our en-
gines, and if there was any question about the shipment of engines
into Germany, it seems to me that the releases of the engines should
have specified release to all countries except German3\
There has been a great deal of mention about the Versailles
Treaty here. I don't know whether this country has ratified that
treaty or whether we are any part of it.
Now, gentlemen, I don't like the inference that we have been
unpatriotic in the operation of our business.
The Chairman. Your contact with your Government in these
matters has been confined strictly to the Army and Navy ?
Mr. Brown. Yes; we cooperate closely with them in the develop-
ment of our product.
Senator Clark. This matter of notifying the Navy of these ship-
ments is comparatively recent?
Mr, Brown. I qualified that I did not know just when we started
that.
Senator Clark, It is comparatively recent?
Mr. Brown. It is.
Mr. Deeds. It covers this entire German situation we are dis-
cussing, however.
Senator Bone. It is obvious there was no objection from the Army
or Navy to these shipments, or you would not have made them?
Mr, Brown. That is right.
Senator Bone. So I am taking that statement at its face value,
tliat you had full right to export the engines you have exported.
What kind of arrangement did you have, by word of mouth?
Mr. Brown. No; we have an arrangement that this particular
engine is released for commercial and export sale.
Senator Bone. Is that in the form of a memorandum from the
Navy Department, or how do they give you a clearance on that ?
Mr. Brown. The clearance generally comes to us in this manner.
As a general rule we have an informal discussion as to whether there
are any objections on the part of either service to the release of that
engine.
Senator Bone. Where are those informal discussions had ?
Mr. Brown. It is generally with the particular division head of
the engineering section at Wright Field.
Senator Bone, It is some officer that is in the field rather than
with the Department here at Washington?
Mr. Brown, No; it heads right up to the Department at Wash-
ington.
Senator Bone. You have not had any objection from Washington,
so it has become a rather routine matter, hasn't it?
Mr. Deeds. All such releases of any model are signed by either
the Secretary of War or the Secretary of the Navy.
Senator Bone. Obviously you can ship into Germany any kind of
engine you are making that is released for export?
MUNITIONS INDUSTRY 1529
Mr. Deeds. We have no information to the contrary.
Senator Bone. You have not had any objection raised; that is
what I am getting at.
Mr. Brown. No ; we have not.
Senator Bone. You say all of these engines have been developed
in close cooperation with the Government departments. What does
that mean or imply ?
Mr. Brown. Let me see how I can best explain that to you,.
Senator.
Senator Bone. Let me ask some further questions, and perhaps
it will develop the idea a little better. Does it mean that the Gov-
ernment itself has a corps of men or body of men that are inter-
ested in the technical side of engine manufacture and development?
Mr. Brown. That staff in its studies are confined solely to their
own requirements rather than detailed design.
Senator Bone. Are they men that understand thoroughly the
nature of an engine and how it should be built and what they want?
Mr. Brown. As to general knowledge ; yes.
Senator Bone. Otherwise they would be of no use to you?
Mr. Brown. That is right.
Senator Bone. Does the Government maintain that sort of staff?
Mr, Brown. Yes.
Senator Bone. Then they frame up a design of what they want
or think they want in an engine as to displacement, power, and
everything, and they come to you with drawings ?
Mr. Brown. No drawings.
Senator Bone. What do they tell you ?
Mr. Brown. I can illustrate that best by one of our most recent
developments. We were requested about a year and a half or two
years ago to take under consideration the design and development of
a two-row radial engine of a certain size and horsepower output.
We made the study and designed and developed the engine, and that
is about true with practically all of our other developments.
Senator Bone. If you put that design of an engine in the hands
of the Government Army engineers and naval engineers, do they
know what it is all about, would they understand the technique, and
so on?
Mr. Brown. Of course.
Senator Bone. Of course, they could not make an intelligent sug-
gestion unless they knew what they wanted. That is right, isn't it?
Mr. Brown. That is true.
Senator Bone. How long have these relations of the Government
with private building outfits been in existence — since before the war
or during and since the war?
Mr. Brown. To my knowledge it goes back from the war days.
Senator Bone. What do you know about this Government's air-
plane plant in Philadelphia ?
Mr. Brown. Well, I know they have the naval aircraft factory
there, which is used primarily, I believe, for research work. They
have built some planes there.
Senator Bone. The Government has a staff of men there who are-
engaged in research work?
Mr. Brown. Yes.
1530 MUNITIONS INDUSTRY
Senator Bone. Do they have the equipment there to build an en-
gine for experimental purposes?
Mr. Brown. I couldn't answer that.
Senator Bone. Is the Government actually doing any research
work up there, at Philadelphia, do you know ; any construction of
engines, or any study of airplanes and their characteristics?
Mr. Brown. That is a part of their research program.
Senator Bone. Do you know whether they are carrying that on
now or not?
Mr. Brown. I don't know, but I imagine they are.
Senator Bone. Have you come in contact at all with the work of
that airplane factory up there in connection with plans or sugges-
tions, from either the Army or the Navy ?
Mr. Brown. No ; I have not.
Senator Bone. Where do these men in the military service or the
naval service of the United States work ; who prepare the plans and
drawings and suggestions that come to your factory ?
Mr. Brown. The Army Engineering Corps is at Dayton, Ohio,
and the Bureau of Aeronautics is located here in Washington.
Senator Bone. Do they have laboratories for that sort of work?
Mr. Brown. The laboratories for the Bureau of Aeronautics is at
the Naval Aircraft Factory in Philadelphia, and the laboratories
for the Air Corps is at Dayton, Ohio.
Senator Bone. There has been some testimony in the record — I
do not know whether you or Mr. Deeds gave the testimony or
whether it was in some of the records filed — but it seems airplane
engines were sold to the Government in the early stages of the Pratt
& Whitney operation, at somewhere under $10,000.
Mr. Brown. That is right.
Senator Bone. What price does your company make the Govern-
ment now for airplane engines for military and naval purposes? I
wish you would just run down the scale and give us some idea of
what the Government pays for these engines. Let us go back to
say 1925 and 1926.
Mr. Brown. In 1926, after our engine had completed the test in
accordance with the Navy specifications we entered into a contract
with the United States Navy for six experimental engines at $15,000
each. In the year 1927 we sold approximately 200 engines at
$8,737.26.
Senator Bone. Is that to the Government?
Mr. Brown. I am giving you all military engine prices.
Senator Bone. Is that the same power engine ?
Mr. Brown. This was the original Wasp engine. That repre^
sented a reduction in price to the Navy of 41.7 percent.
In 1928, with additional improvements, the engine sold for $6,700,
a reduction of the previous price of 23.3 percent.
In 1929 the engine sold for $5,200, which was a reduction in price
of 22.3 percent.
In 1930 the engine sold for $4,800, representing a reduction on the
previous price of 7.6 percent.
In 1931 the price was $4,770, being a reduction on the previous
price of 1,6 percent.
In 1932 the price was $4,535.60, being a reduction on the previous
price of 4.9 percent.
MUNITIONS INDUSTRY 1531
In 1933 the price was $4,290, a reduction on the previous price of
5.4 percent.
In 1934 there was a slight increase of price to $4,447, being an
increase of approximately 3 percent.
From 1926 to 1934 the output of the engines had been increased
from 400 to 550 horsepower. That is the Wasp prices.
Now, I am going to give the Hornet prices on the 1690 model.
Senator Bone. Is that a larger or a smaller engine ?
Mr. Brown. That is a larger engine.
In 1927 the price on that engine for small quantities — I do not
recall now what they were, but I can get it for you.
In 1928 the engine sold for $7,950, a reduction of 9.1.
In 1929, with our larger volume of business, the price was reduced
to $5,500, a reduction of 34.8.
In 1930 the price was $4,950, a reduction of 10.0.
In 1931 the price was $4,915.60, a reduction of 0.6.
In 1932 the price was $4,915.60, no reduction.
In 1933 it was $4,663.28, a reduction of 5.9.
In 1934 the price was increased to $4,875.
Senator Bone. What is the power of that engine ?
Mr. Brown. That engine started out with 525 and now has an
output of 750 horsepower.
Senator Bone. These figures would seem to indicate that you were
getting into what might be called " quantity production."
Mr. Brown. That is true, Mr. Senator.
Senator Bone. You sold up to around what figure? What was
the figure — eight, nine, or ten thousand engines ?
Mr. Brown. Seven thousand nine hundred and twelve is the total.
Senator Bone. Seven thousand nine hundred and twelve?
Mr. Brown. Yes, sir.
Senator Bone. How were these engines bought from your firm?
By a call for bids or on what we have frequently had referred to as
" negotiated contracts " ?
Mr. Brown. In the majority of cases it has been negotiated con-
tracts.
Senator Bone. What does that term mean ? Will you tell us what
it means? I am very curious to know how the Department and
your company arrive at the idea that they should negotiate a contract
instead of calling for bids.
Mr. Brown. On negotiated contracts the Army and the Navy have
in their possession cost figures as a result of an audit.
Senator Bone. What are those based on? If they do not manu-
facture engines, on what would they base cost figures ?
Mr. Brown. It is on the auditors' report, on the actual audit taken
at our factory.
Senator Bone. All right. Go ahead.
Mr. Brown. It is just a case of sitting down and arriving at a
price which is acceptable to the procurement officer of the United
States Government and acceptable to us.
Senator Bone. When you speak of the United States Government,
you are talking about some officer down here in a building?
Mr. Brown. Yes.
Senator Bone. And not the Congress or the 120,000,000 people in
this country?
1532 MUNITIONS INDUSTRY
Mr. Brown. That is right.
Senator Bone. That is what I am getting at. What you have got
to do is satisfy some gentleman down here in a building that that
is the right figure, and that is the end of it.
Is that what we are to understand?
Mr. Beown. It is not that simple.
Senator Bone. It is almost that simple, is it not?
Mr. Brown. I cannot agree with you, Mr. Senator.
Senator Bone. You cannot?
Mr. Brown. No, sir. He has before him complete information of
the cost of that engine.
Senator Bone. Let us get back. "WTiat authority is there in law
ior that?
Mr. Brown. The Procurement Act of 1926.
Senator Bone. Does it provide for that?
Mr. Brown. Not the negotiated contracts but the audit.
Senator Bone. What authority in law is there for these negotiated
•contracts ?
Mr. Brown. I am not prepared to answer that.
Senator Bone. I know, but you are a party to one of those con-
tracts. You certainly haA^e legal advice in dealing with people, but
unless you conform to the law you have no right to collect, and that
is fundamental law.
Mr, Brown. If we are invited to come down to the United States
^Government and discuss the procurement of engines, we will do it.
Senator Bone. I have no doubt that the companies prefer to do it
that way, but I am trying to get you to explain this matter. Has
your legal department ever advised you if that is a legal way for
the Government to buy engines?
Mr. Brown. We accepted it as legal by virtue of the fact that
the majority of the Government contracts were handled in that
manner.
Senator Bone. We are patently aware of the fact that a lot of
them have been handled in that fashion. I was wondering if your
legal division ever advised you if that was permissible.
JNIr. Brown. We never thought it was necessary to refer the ques-
tion to our legal department.
Senator Clark. Mr. Brown, Pratt & Whitney are equipped to make
•other things besides airplane engines, are they not?
Mr. Brown. No, sir; Pratt & Whitney Aircraft Co. specialize in
the manufacture of aircraft engines only.
Senator Clark. Did you have any negotiations with parties in
Germany with regard to machinery or furnishing machinery to
'Germany for manufacturing a machine gim ?
Mr. Brown. Not our company.
Senator Clark. Do you have any connection with the Pratt &
Whitney Co.?
Mr. Brown. They manufacture tools, jigs, and fixtures, and our
company is the Pratt & Whitney Aircraft Co. We were together
at one time.
Senator Clark. At what time ?
Mr. Brown. That was up until the United Aircraft & Transport
•Corporation purchased the Aircraft Co. from Niles-Bement-Pond.
MUNITIONS INDUSTRY 1533
Senator Clark. Do you know whether Mr. Rentschler is a director
in the Pratt & Whitney Co. ?
Mr. Brown. I believe he is.
Mr. Hiss. Are you a director, too, Mr. Deeds ?
Mr. Deeds. I am a director.
Senator Clark. Mr. Deeds, did you ever know of any negotiations
by the Pratt & Whitney Co. to furnish machinery for machine guns
in Germany?
Mr. Deeds. I never knew of any purchase of any such machines.
Senator Clark. Did you ever know of Mr. Rentschler, or any
other director of the Pratt & Whitney Co., within the last year, hold-
ing negotiations in Berlin with regard to furnishing machinery for
the manufacture of machine guns in Germany on behalf of the
Pratt & Whitney Co. ?
Mr. Deeds. The Pratt & AVhitney Co. have a standard line of ma-
chine tools which would be usable in the manufacture of any product.
Senator Clark. You do not know of any negotiations in Germany
in that regard?
Mr. Deeds. No, sir.
Senator Clark. Mr. Chairman, I am going to have Mr. Rentschler
subpenaed at a later meeting to testify in respect to that matter.
The Chairman. Is he in the country?
Mr. Deeds. Yes, sir.
The Chairman. Is Mr. Hamilton in the country?
Mr. Deeds. No, sir.
The Chairman. How often does Mr. Hamilton return ?
Mr. Deeds. Once a year.
The Chairman. What time of the year ?
Mr. Deeds. Usually around June or July.
Senator Clark. Which Mr. Rentschler is it who is a director in
the Pratt & Whitney Co., Mr. Deeds?
Mr. Deeds. Mr. F. B. Rentschler.
Senator Clark. He is the same Mr. Rentschler that has been
shown in the record was in Germany in the early part of the year?
Mr. Brown. There is a possibility that it might be his brother.
Mr. Deeds. I do not recall F. B. Rentschler being in Germany this
year.
Senator Clark. There was some testimony here yesterday to that
effect.
Mr. Brown. G. A. Rentschler is in the manufacture of machinery
and equipment, too, is he not?
Mr, Deeds. Yes, sir.
Mr. Brown. So that I think you ought to find out what Rentschler
it is.
Senator Clark. It was the Pratt & Whitney Co. to which I was
directing my attention.
Mr. Brown. I doubt if F. B. Rentschler was in Germany. I am
sure F. B. Rentschler was not in Germany this early spring.
Senator Clark. It was not your company.
The Chairman. In this memorandum Mr. Green wrote, and which
was read in great length, can you advise us as to who Mr. Osborne
referred to in that memorandum is?
Mr. Brown. I do not know the gentleman, Mr. Chairman.
1534 MUNITIONS INDUSTRY
The Chairman. Do you know a Mr. Osborne connected with any
aircraft corporation?
Mr. Brown. I believe there is an Osborne connected with a con-
cern which manufactures floats.
The Chairman. What concern is it?
Mr. Deeds. There used to b^ a Mr. Osborne who operated the
Aviation Magazine. I am not sure what his connections are at the
present time.
The Chairman. As to the release of which you speak, which you
obtained from the Army and Navy Departments, is it not true that
that release was merely upon the design? There was not a release
for exportation particularly, but it was a release upon the design
which was being exported. Is not that true ?
Mr. Deeds. That is correct. We had no knowledge of any other
release or license being necessary.
Senator Clark. But you did not specifically ask them for a re-
lease on exports to Germany. They simply approved your design
for general export. Is not that correct?
Mr. Deeds. On the basis of that, we assumed we could export to
any country where there was not an embargo.
Senator Clark. We are getting to the nature of the release of the
War and Navy Departments. They simply approved the general
design for export, did they not?
Mr. Deeds. That is correct.
Senator Clark. There was nothing said in any communication
to the Department about export to Germany ?
Mr. Deeds. Nothing.
, Senator Bone. Do you know whether the German Government
subsidizes airplane builders over there, Mr. Deeds ?
Mr. Deeds. I do not know.
Senator Bone. Can you advise the committee, Mr. Brown, if that
is the case?
Mr. Brown. I beg your pardon.
Senator Bone. Does the German Government subsidize builders
of airplanes or airplane parts?
Mr. Brown. I do not know.
Mr. Deeds. We are led to believe that from the correspondence
which has been read here today.
Senator Clark. Does the price at which you supply these engines
to the United States Government compare with the price at which
you sold these engines in Germany ?
Mr. Brown. The military price is lower.
Senator Clark. The military price is lower in this country?
Mr. Brown. We have always given our Government the preferred
price on engines.
Senator Clark. You do not have to ask permission
Mr. Brown. With the exception, perhaps, of an isolated case, where
one engine might be purchased as a sample. But in general it has
been our policy to sell our Government at several hundred dollars
less than what we sell the engines for in the export field.
The Chairman. I think, gentlemen, that that is all, and you will
understand yourselves to be excused.
Mr. Brown. Thank you.
MUNITIONS INDUSTRY 1535
Senator Vandenberg. Mr. Brown, I Avould like to suggest that you
do the same thing Mr. du Pont suggested he would like to do, I
imagine our basic viewpoint will be totall}^ different respecting the
control of this situation, but it is perfectly obvious from everything
that has been disclosed that your business interlocks with govern-
mental policy
Mr. Brown. Very closely.
Senator Vandenberg (continuing). In every step of the way.
Mr. Brown. In every step of tlie way.
Senator Vandenberg. From the development of the order to the
final selling of the order. Obviously, there has not been adequate
information and control. Nobody knows better than those who are
engaged in the business what the vicissitudes of the business are in
the international arms market. Nobody knows better than you do
where the need for correction is. Personally, I would be very happy
if you would submit to the committee, at your convenience a brief
indicating what you think ought to be done b}^ way of correction of
the situation.^
Mr. Brown. All right. I would be happy to do so.
Mr. Deeds. It just occurs to me, if I may have a moment, in refer-
ence to the license arrangement with Germany. Yesterday I think
there was one point which ought to be taken into consideration, which
was not brought out, and that is that the arrangement provides for
an interchange of information and the benefits accrue to this country
and to our company of any improvements which might be made to
our product by the very excellent engineering departments in the
German B.M.W. factory,
I think that is important.
This concludes the record of the Pratt & Whitney Aircraft Co. and
United Aircraft Exports, Inc. The committee at this point took up
the case of the Federal Laboratories, Inc., which is printed in part
VII.
The brief requested above was submitted to the committee by Mr. Brown on Nuv. 21,
1934, and appears in the appendix on p. 1599.
APPENDIX
Exhibit No. 528
[Excerpt]
THE PR.\TT & WHITNETT AIRCRAFT COMPANY FINANCIAL HISTORY FROM INCEPTION TO
DECEMBER 31, 1932
The Pratt & Whitney Aircraft Company was incorporated on July 22, 1925,
under the laws of the State of Delaware, in compliance with a contract dated
July 14. 1925, between the Pratt & Whitney Company, a subsidiary of Niles-
Bemeut-Pond Company, and F. B. Rentschler and G. J. Mead, with the object
of designing, constructing, testing, and experimenting with aeroplane engines,
aeroplanes, hydroplanes, etc., and if successful to proceed with the production
thereof. The company had at that time an authorized capital of 20,000 shares
of 7% preferred stock, par value of $100.00 per share, and 20,000 shares of no
par common stock.
The contract further provided that 5,000 shares of no par common stock be
issued at 20 cents per share, 2,500 shares to the Pratt & Whitney Company,
1,375 to F. B. Rentschler, and 1,125 shares to G. J. Mead. Also that"the Pratt &
Whitney Company was to furnish factory facilities and necessary cash and
materials at cost, not to exceed $250,000.00 during an experimental period to
extend for the duration of one year, witli interest at the rate of 7% per annum,
unless terminated earlier by act of the board of directors of the Pratt «fc Whitney
Aircraft Company. In the event that it was decided to proceed with a produc-
tion program during, or at the expiration of, the experimental period just
referred to, the Pratt & Whitney Aircraft Company was to issue 7% preferred
stock for all cash advances, materials, and machinery and equipment thereto-
fore furnished by the Pratt & Whitney Company.
After the completion of the experimental period and during the course of the
production program the Pratt & Whitney Company was obligated to advance, as
required, additional sums of money not to exceed $500,000 and to receive
therefor preferred stock of the Pratt & Whitney Aircraft Company.
In accordance with the terms of the aforementioned contract, the board of
directors of the Pratt & Whitney Aircraft Company declared the experimental
period to be terminated on March 31, 1926 and the issuance of the company's
preferred stock was authorized. Such stock of an aggregate par value of
$200,000 was issued on April 2, 1926, in payment of cash advances, equipment,
and materials at cost furnished to March 31, 1926, as follows :
Cash advances $140, 000. 00
Equipment, materials, etc 59, 390. 94
Interest 3, 322. 35
202, 713. 29
7% preferred stock issued 200,000.00
Balance of advances to 3/21/26 2, 713. 29
During the period from April 1, 1926, to December 31, 1926, additional capital
was furnished amounting to $622 291.04, including accrued interest. Accord-
ingly 7% preferred stock was issued in part payment therefor of an aggregate
par value of $550,000.00 on the dates given hereunder :
Oct. 1, 1926, 3,000 shares $300, 000. OO
Dec. 31, 1926, 2.500 shares 250, 000. 00
Total 5,500 shares 550,000.00
There therefore remained at December 31, 1926, a balance of advances from
the Pratt & Whitnev Company amounting to $75,004.33. During the year
1927 additional advances amounting to $205,409.37 were made by the Pratt &
1537
1538
MUNITIONS INDUSTRY
Whitney Company and its parent company, Niles-Bement-Pond Company, whicli
together with the balance outstanding at December 31, 1926, were covered by
demand notes payable with interest at 6% annum held by the latter com-
pany. These notes, aggregating $280,413.70, were subsequently paid in 192S.
With reference to the common stock, of which 5,000 shares were originally
issued on August 5, 1925, the records of the company reflect the transfer to
C. W. Deeds on June 6, 1927, of 200 shares, 110 shares, and 90 shares, being
transferred from F. B. Rentschler and G. J. Mead, respectively.
On October 26, 1928, there was declared a stock dividend of 395,000 shares
of common capital stock to holders of record November 1, 1928. This dividend
was recorded on the books of the company by transfer from surplus to capital
account at 20 cents per share, the aggregate amount of $79,000.00. In con-
nection therewith the following certificates were issued :
Date
Issued to
Number of
shares
November 1,1928
197,000
99, 935
<•
George J. Mead
81, 765
<<
Charles W. Deeds
15, 800
395,000
On December 15, 1928, an agreement was entered into between Boeing
Airplane & Transport Corporation (name subsequently changed to United
Aircraft & Transport Corporation) and the holders of the outstanding common
capital stock of the Pratt & Whitney Aircraft Company represented by 400,000
shares, in which it was agreed that the stockholders of the Pratt & Whitney
Aircraft Company were to receive in exchange for their holdings, 868,000
shares of common stock of United Aircraft & Transport Corporation. This
transaction was consummated on February 11, 1929, as a result of which the
entire outstanding common capital stock of the Pratt & Whitney Aircraft
Company, represented by 400,000 shares, was transferred into the name of
United Aircraft & Transport Corporation.
Px'ior to the exchange transaction referred to above, the outstanding pre-
ferred stock of the Pratt & Whitney Aircraft Company, of an aggregate par
value of $750,000.00, was redeemed at $107.00 per share, plus accrued dividends
for a total sum of $808,541.10. The necessary funds for the retirement of this
stock was obtained through a loan which was immediately repaid by means
of an advance from United Aircraft & Transport Corporation. Subsequently
in the year 1929, this advance was paid by the Pratt & Whitney Aircraft
Company.
As at the effective date of acquisition, namely, October 31, 1928, the capital
accounts of the Pratt & Whitney Aircraft Company were represented by the
following, after giving effect to the stock dividend declared on October 26,
1928 :
Preferred 7% capital stock (authorized, 20,00 shares, at $100.00
per share; issued and outstanding, 7,500 shares) $750,000.00
Common capital stock (authorized, 500,000 shares without par
value: issued and outstanding. 400,000 shares) 80,000.00
Earned surplus 2, 152, 821. 59
2, 982, 821. 59
The sun)lus at date of acquisition reflected in the foregoing i^ummary of
$2,152,821.59. was segregated on Ihe books of account, reduced by the premium
on the preferred stock when retired in the amount of $52,500.00. During the
year 1930 such surplus was transferred to " Capital stock " account by resolu-
tion of the board of directors, together with the sum of $3,319,678.41, repre-
senting a dividend from s>uhsequent earnings which, at the direction of the
United Aircraft & Transport Corporation, was not withdrawn but added to
capital. The outstanding capital stock, represented by 400,000 shares, all owned
by United Aircraft & Transport Corporation, was thereaf;er carried on the
books at a value of $5.500.0()().0<\
(Submitted to Black committee. November G. 1933.)
MUNITIONS INDUSTRY 1539
Exhibit No. 529
[Excerpt]
UNITED AIRCEAFT & TRANSPORT CORPORATION FINANCIAL HISTORY FROM INCEPTION
TO DECEMBER 31, 1932
Boeing Airplane & Transport Corporation (name subsequently changed to
United Aircraft & Transport Corporation), a holding company, was organized
on October 30, 1928, under the laws ot the State of Delaware. Immediately
thereafter it acquired the entire outstanding capital stock of Boeing Airplane
Company and Boeing Air Transport, Inc., as well as a controlling interest in
Pacific Air Transport.
On October 30, 1928, W. E. Boeing, the National City Company (of New
York), and Boeing Airplane & Transport Corporation entered into a contract
whereby the National City Company agreed to purchase from this corporation
90,000 shares of its 6% cumulative preferred stock, series A, at a price of
$4,500,000.00, cash, together with accrued dividends to date of payment, and
to purchase for the sum of $500,000.00, cash, 45,000 shares of this corporation's
common stock, together with warrants for the purchase on or before November
1, 1938, of 90,000 additional shares of common stock, at $80.00 per share. The
stock and warrants were duly issued, and cash in the amount of $5,000,000.00
received therefor.
During the winter of 1928-1929 arrangements were made for the acquisi-
tion by this corporation of the entire outstanding stock interests in the Pratt &
Whitney Aircraft Company, Chance Vought Corporation, and Hamilton Aero
Manufacturing Company. Effective January 19, 1929, the authorized capital of
the corporation was increased from 200,000 shares of preferred stock of $50.00
par, and 650,000 shares of common stock without par value, to 1,000,000 shares
and 2,500,000 shares, respectively, at which time its name was changed to United
Aircraft & Transport Corporation.
In order to provide a fund for working capital and expansion, an agree-
ment was entered into witli the National City Company on January 29, 1929,
for the sale to it of an additional issue of 6% cumulative preferred stock,
series A, in the amount of $7,500,000.00. Upon the issue of this additional stock
the total outstanding preferred stock amounted to 240,000 shares, of an aggre-
gate par value of $12,000,000.00. The preferred stock, so sold, was accom-
panied by warrants for the purchase on or before November 1, 1938, of 100,000
shares of conmion stock at $30.00 per share, and the total purchase price of the
preferred stock and the warrants was $8,812,500.00, plus interest at the rate
of 6% per annum on the $7,500,000.00 from January 1, 1929, to the date of
delivery. Of the amount so received, the sum of $1,312,500.00 was credited
to paid-in surplus account.
In addition to the acquisition of the stocks of the subsidiary companies afore-
mentioned, there were acquired, by exchange of stock in 1929, controlling
interests in Stout Air Services, Inc., Northrop Aircraft Corporation, Sikorsky
Aviation Corporation, Standard Steel Propeller Corporation, and the Stear-
man Aircraft Company, and during 1930, control of National Air Transport,
Inc., and Varney Air Lines, Inc., was similarly acquired.
*******
With respect to the preferred stock, 90,000 shares, having an aggregate par
value of $4,500,000.00, were retired in 1932.
*******
(Submitted to the Black committee November 6, 1933.)
(The remainder of the preferred stock was retired in January 1934.)
83876— 34— FT >
1540
MUNITIONS INDUSTRY
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Exhibit No. 631
ORGANIZATION CHART
UNITED AIRCRAFT & TRANSPORT CORP.
CAPITALIZATION OUTSTANDING
PREFERRED STOCK ^ SO ^ R^R * 7.SOO,000 00
COMMON STOCK NO PAR VALUE 2.086.839 SHARES
BOARD OF DIRECTORS
CHARLES W DEfOS
EDWARD A DEEDS
FREDERICK y/ JACK
JOSEPH P MSCARTHY
EDWARD O MtOONNELL
GEORGE J MEAD
EXECUTIVE COMMITTEE
RENTSCMLER • VICE CHR
OURNEV E NEWLIN
CORDON S BENT5CHLEF
JOSEPH P RIPLEY
GEORGE S WHEAT
EUGENE C WILSON
I
FINANCE COMMITTEE
■ C.t.v..m. ' ' •
OTHER UNIT EJD COMPANIE S
83876— ai. (KaM p. 1 MU.)
MUNITIONS INDUSTRY
1541
Exhibit No. 532
September 18, 1933.
Mr. Clark M. Carr,
Hotel Gloria,
Rio De Janeiro, Brazil.
Letter No. 233.
Re: Material desired for the manufacture of guns and ammunition.
Attached to this letter you will find a copy of our letter of September 12th
to Mr. R. M. Derby, of Niles-Bement-Pond, together with a copy of Mr.
Derby's reply of September 13th and copy of our letter of even date to Casa
Mayrink Veiga.
In sending us this letter of September 13th, Mr. Derby wrote separately :
" Referring to your letter of the 12th instant and our letter of today in reply,
I might mention confidentially that for almost a year our company has been
working with the Brazilian War Department on a plant for making projectiles,
bombs, etc., etc. As a matter of fact, we have practically engineered the
proposition for them.
" We have orders for two or three machines on our books for this plant,
but the main business has not been placed on account of the shortage of ex-
change and there is no telling when it will go through.
" If this is the proposition which Mayrink have in mind, they are coming
in pretty much at the last moment and it is extremely doubtful whether we
could cooperate with them. However, if the proposition which they mention is
an entirely new one with which we have not been in touch, it is a different
matter.
" I would suggest that you send Mayrink "Veiga the letter which we are
sending you in quadruplicate, stating that while there are close relations be-
tween your company and ours, the export business is handled entirely separately,
but that you have given us a strong recommendation in their favor."
We believe this will give you full information on this subject. As you know,
we are not interested in the sale of any products not of our own manufacture
except as they are incorporated as a part of, or accessory to, a product of our
own manufacture.
S. A. MoCleixan.
original— ^via airmail
cc — via reeular mail.
Exhibit No. 533
Statement of salaries, bonuses, and directors' fees received by C. W. Deeds
from Pratt d Whitney Aircraft Corporation and United Aircraft & Trans-
port Corporation
Salary
Bonuses
Directors
fees
Salary
Bonuses
Directors
fees
1926
$2, 125. 00
7, 333. 40
15,004.00
20, 626. 03
20, 000. 04
1931
$24, 440. 70
27, 750. 32
25, 333. 58
$19, 000. 00
932. 36
$1, 260. 00
790 00
1927
$6, 666. 67
38. 237. 42
65, 909. 98
20, 430. 38
1932
1928
1933 to
11/30/33
Total. -
1929 .
$814. 75
1, 515. 25
142, 613. 07
151,176.81
4, 380. 00
1542
MUNITIONS INDUSTRY
Exhibit No. 534
Statement of salaries, bonuses, and directors' fees received hy George J. Mead
frani Pratt & Whitncj/ Aircraft Company and United Aircraft & Tran^sport
Corporation
Salary
Bonuses
Directors' fees
1925
1926
1927
1928
1929
1930
1931 P. & W
United-
1932 P. & W
United-
1933 P. & W
United.
Total-.
661. OC
750. 00
666. 72
333. 60
33, 750. 00
30, 000. 00
500. 00
500. 00
000.00
000.00
625. 00
000.00
280, 786. 32
$33, 333. 33
1, 997. 90 bal. 1927
90, 810. 81 a/c. 1928
8, 587. 78 bal. 1928
93, 497. 62 a/c. 1929
1, 245. 57 bal. 1929
12, 226. 96 a/c. 1930
$242. 50
216. 75
730.00
680. 00 to Dec. 1
2, 049. 25
Exhibit No. 535
Statement of salaries, bonuses, and directors' fees received by F. B. Rentschler
from United Aircraft & Transport Corporation and/or its subsidiaries or
predecessors
Salary
Bonuses
Directors' fees
1925 . -- --.
$6, 661. 00
20, 250. 00
44, 000. 00
73, 336. 00
100, 001. 07
100, 000. 08
148, 125. 30
192, 500. 61
98, 646. 06
1926 - -
1927
$40, 000. 00
2, 397. 47 bal. 1927
151,351.35 a/c. 1928
14, 312. 96 bal. 1928
315, 667. 84 a/c. 1929
3, 736. 72 bal. 1929
140, 000. 00 a/c. 1930
6, 122. 23 bal. 1930
90, 000. 00 a/c. 1931
6, 650. 29 bal. 1931
1928 -
$269. 50
1929
1, 562. 25
1930 _ .
2, 885. 25
1931
2, 090. 00
1932
1, 470. 00
1933 to 12/1/33
2, 330. 00
Total ---
783, 521. 12
770, 238. 86
10, 607. 00
Exhibit No. 536
Weight AsaioxAUTioAL Coejporation,
Paterson, N.J., September 12, 193^.
Special Committee Investigating the Munitions Industry,
United States Senate, Washington, D.C.
(Attention Mr. Stephen Rausclienbush, .secretary.)
Gentlemen : I am in receipt of your letter of September 8th requesting infor-
mation on certain personnel formerly with the Wright Company and now with
Pratt and Whitney. I take pleasure in listing below the personalities requested
plus certain other key men. It will be noted that practically the entire execu-
tive and supervision personnel are included.
Andrew J. Willgoos, chief draftsman, hired 12/1/19, paid to 8/15/25, cleared
8/5/25.
George J. Mead, chief engineer, hired 3/23/21, paid to 6/30/25, cleared
7/10/25.
Fred B. Rentschler, general manager, hired 1/1/21, paid to 12/31/24, cleared
8/30/24.
MUNITIONS INDUSTRY 1543
Edwin H. Godfrey, engineer, hired 6/1/20, paid to 8/15/25, cleared 8/15/25.
Reinstated 1/27/30, paid to 12/31/30, cleared 12/31/30. Reinstated 7/13/32,
paid to 8/5/32, cleared 8/5/32. Reinstated 4/17/33, paid to 1/17/34, cleared
1/17/34.
John J. Borrup, superintendent experimental machine shop, hired 12/1/19,
paid to 7/31/25, cleared 7/31/25.
Donald L. Brown, materials superintendent, hired 11/15/20, paid to 7/31/25
cleared 7/31/25.
William A. Willgoos, foreman, hired 12/1/19, paid to 12/24/25, cleared
12/19/25.
Phillip Treffert, draftsman, hired 12/1/19, paid to 8/31/25, cleared 8/31/25.
Should there be any other information you may require, we will be indeed
glad to furnish it.
Yours very truly,
Wright AsaiONAUTioAL Corpobatton,
G. W. Vaughan, President.
GWV : HER
Exhibit No. 537
BuEEAu OF Aeronautics
U.S. Navy contracts with Wright Aeronantical Corporation prior to 1926 for the
ctevelopment of a JfOO-hp. or above air-cooled radial engine
C-58746 of October 9, 1923, for 3 model PI engines of 400 hp $118, 240. 18
C-64097, dated June 20, 1925, for 6 R-1200 engines of 350 hp 90, 773. 88
C-644S3, dated July 21, 1925, for 12 model P2 engines of 400 hp 204, 750. 00
a-66648, dated March 15, 1926, for 2 modified model P2 engines 47, 534. 00
Exhibit No. 538
[Excerpt]
Vol. 39. No. 3.
JOURNAL OF THE AMERICAN SOCIETY OF NAVAL ENGINEERS
(August 1927)
Ameirican Aik-c(K)Lf;d Aircraft Engines
(By Commander Eugene E. Wilson, U.S.N. Member)
(Page 537:)
It was the appreciation of these possibilities, after careful analysis, which
resulted in the Navy's undertaking in conjunction with Mr. Lawrance the de-
velopment of the Wright " P-1 " 400 H.P. fixed radial engine. At the time the
" P-1 " was undertaken we were inexperienced in the design of the radial. As
a result the " P-1 " engine did not progress as rapidly as was necessary, and
we were forced to continue utilizing the water-cooled engines. Naturally, every
effort was made to improve and refine the water-cooled engine pending the de-
velopment of the air-cooled, and so we found ourselves developing the air-cooled
engine's competitor right alongside the air-cooled engine. Tliis made the path
of the air-cooled engine more difficult as we went along, but the final result was
the more complete.
In the summer of 1925 Mr. F. B. Rentschler organized the Pratt & Whitney
Aircraft Company, Hartford, Conn., for the express purpose of accelerating the
development of the 400 H.P. engine. Mr. George J. Mead, who had wide ex-
perience with the Wright Aeronautical Corporation in the manufacture of the
"Whirlwind" engine for that corporation, became chief engineer. The Pratt
& Whitney Company started out with a clean slate. Mr. Rentschler's experience
in the aeronautic world was unexcelled. The facilities of the Pratt & Whitney
Company are well known throughout the world. It was to be expected, then,
that the final result would be gratifying.
1544 MUNITIONS INDUSTRY
(Page 538:)
The Pratt & Whitney " Wasp " engine was designed in detail by Mr. George
J. Mead in close cooperation with the Bureau on one hand and Mr. Vought on
the other. For the first time in our history the airplane builder and the engine
builder cooperated in such details as the method of mounting the engine, the
location of the accessories, the fonn of the engine for best aero-dynamic arrange-
ment, etc. Manifestly, this in itself was a step in advance.
*■ * * It * * *
(Page 541:)
* * * In other woi-ds, from the standpoints of weiglit per horsepower, fuel
consumption, dei>endability, durability, each of maintenance, and cost, the new
Pratt & Whitney " Was^) " is superior to the best water-cooled engines Ivnown.
From tlie standpoint of i>erformance, the engine entered tlie pursuit field and
demonstrated immediately that it was equal to or slightly better in high speed
at sea level than t!ie best water-cooled fighters. In the matter of altitude
performance, including climb, ceiling, and speed at altitude, it is definitely
superior even in airplanes equipped with the deck-arresting gear. In one of
the latest battleship fighters equipped with this engine, the high speed as a
seaplane at sea level was greater by a mile or two than the high speed of the
same plane as a landplane. We have, then, today, in production battleship
seaplane fighters which are superior in speed, climb, and ceiling to water-
cooled shore-based fighters. The Vought " Corsair ". a two-seater with 1,277
pounds of useful load, is superior in performance at altitude to some of the best
water-cooled fighters with 500 pounds less useful load.
Exhibit No. 539
[Copy]
A2-14(5) (330921-3).
Department of the Navy,
Office of the Secretary,
Washington, 11 Septemher 1934-
My Delar Senator Nye: Responsive to the request of the secretary of the
Special Committee Investigating the Munitions Industry, there is given below
an abstract of the service record of former Commander E. E. Wilson, U.S.N.,
covering the years 1924-1930:
1 April 1924, It. comdr., Bureau of Aeronautics, head of Engine Section.
12 April 1925, comdr.
12 Oct. 1926, NAS Pensacola (student naval aviator).
12 Dec. 1926, designated naval aviator (HTA).
13 Dec. 1926, Bureau of Aeronautics, head of Design Division.
21 Oct. 1927, senior aide, Staff Aircraft Squadrons, Battle Force.
21 May 1929, aide, commander in chief, Battle Fleet.
IS Jan. 1930, resigned.
In elaboration of the foregoing, it can be stated that Commander Wilson,
earlier in his naval career, had taken a course in postgraduate instruction in
mechanical engineering. He was assigned to duty in the Bureau of Aeronautics
in April 1924 on account of his technical knowledge and experience. He was
placed in charge of the Engine Section, which is a pait of the Design Division,
which in turn is part of tl;e material bi'anch of tb.e Bureau of Aeronautics. He
continued on this duty until October 1926, when he went to the naval air sta-
tion, Pensacola, and qualified as an aviator, returning to the Bureau of Aero-
nautics in December 1926 and becoming head of the Design Division. He
remained as hend of the Design Division until October 1927, when he was
detached from the Bureau of Aeronautics. He served at sea for two years
before resigning from the Navy.
As head of the engine section Commander Wilson's duties were primarily
related to the development of new and better engine designs and their incor-
poration into naval airplanes. Procurement of engines as such was handled
by the Procurement Division, also a part of the material lu'anch. As develop-
ment and design cannot be separated wholly from procurement, Commander
Wilson, as the officer in charge of the engine section, was one of several oflicers
concerned in any matter relating to the procurement of new types of engines.
MUNITIONS INDUSTRY
1545
The organization of the Bureau of Aeronautics was such that no subordinate
oflBcer had complete jurisdiction over procurement matters.
The records have been consulted and the following summary is furnished as
showing Commander Wilson's participation in matters affecting relations with
the Pratt & Whitney Aircraft Company :
(a) April 1924 to July 1925 (and subsequently). Bureau of Aeronautics as
leading exponent of air-cooled engines, continued its endeavors to procure from
the Wright Aeronautical Coiiwration, only manufacturer of large air-cooled
engines of military size in the United States, improved and larger engines.
(b) July 1925 the Pratt & Whitney Aircraft Company was formed. Pro-
ceeded with manufacture of a sample 400 hp. engine. Informed Bureau of
Aeronautics what they were doing and ascertained probable naval requirements
as to a suitable engine. Continued this development until January 1926, when
sample engine was placed on test and was successful. Test witnessed by a
naval representative. During this whole period — July 1925 to January 1926 —
there was the usual cooperation which tlie Navy Department extends to any
manufacturer who is endeavoring to develop a product in which the Department
is interestetl and which ultimately is to be submitted for naval uses.
(e) In March 1926 the first Navy contract was placed with the Pratt &
Whitney Company for six engines. These engines were delivered in the sum-
mer of 1926. In June 1926 an additional contract was placed for four (later
increased to six) engines.
(d) May 1926 files show an internal memorandum from Commander Wilson
pointing out that the new 400 hp. Pratt & Whitney engine had passed success-
ful bench tests and was undergoing flight tests and recommending that the pro-
gram for Navy airplanes for the year 1927 be based on including a number of
these large engines. He pointed out the superior performance that would be
obtained for naval airplanes through the use of this engine. This memorandum
was commented upon by various officers in the Bureau, some of whom showed
skepticism as to the proof up to that time that the Pratt & Whitney engine was
reliable. Discussion and negotiations continued for several months, with the
result that two hundred additional 40O hp. Pratt & Whitney engines were
ordered and incorporated in naval aii-planes.
Development and perfection of Pratt & Whitney engines have continued since
1927, until now it is considered there are at least two manufacturers in the air-
cooled engine field that are in a position to produce engines in various sizes
which meet the Navy's requirements.
As illustrating the general situation prevailing at the time in reference to
technical engine developments, there is inclosed herewith a copy of a paper de-
livered by Commander Wilson before the Society of Automotive Engineers.
This was issued as a " Technical Note " to the service and it is a copy of this
Technical Note which is inclosed.
There is given below :
Summary of engine GOmtracts tmth Pratt and, Whitney Company, April 1924-
December 1927
Contract
No.
Date
Type of
engine
No.
Approxi-
mate unit
price
66703
3-15-26
R-1300
6
$15, 000
67662
6-19-26
R-1300
6
15, 380
910
10- 5-26
R-1300
200
9,245
1645
11-29-26
R-1700
5
21,000
3712
5-18-27
R-1700
2
17, 950
3994
6-20-27
R-1300
39
7,800
4375
6-30-27
R-1700
81
9,685
5602
11- 7-27
R-1340B
346
7,276
In addition to the foregoing Pratt & Whitney contracts, a number of experi-
mental engine contracts were placed during the same period with Wright
Aeronautical Corporation, Packard Motor Car Company, and Curtiss Airplane
and Motor Co., Inc., and production engine contracts were placed with the
Wright Aeronautical Corporation to the number 1,062 engines and Packard
Motor Car Company to the number 338 engines.
1546
MUNITIONS INDUSTRY
In the course of his duties while in the Bureau of Aeronautics, Comnmnder
Wilson did not initiate or pass upon, except as routine procedure or as a matter
of information, contracts for airplanes, but responsive to your request there is
included a tabulation of the airplane contracts made with the Chance Vought
Corporation betwet>n the period April 1924-December 1927.
Summary of airplnne contracts with Chance Vought Corporation, April 1924-
December 1921
Contract
No.
Date
Type of
airplane
No..
Approxi-
mate unit
price
60692
63738
64133
67911
67222
3375
4358
6-27-24
7- 7-25
6-25-25
6-30-26
5-10-26
4-20-27
6-30-27
Obs.
Obs
Obs
Obs
Obs
Obs
Obs
20
40
20
20
2 Exp.
33
56
$10, 500
10,500
9,300
10,500
38,000
13, 250
13, 650
In addition to the foregoing Chance Vought Corporation contracts, airplane
contracts in quantity were placed with other manufacturers during the same
period, viz:
Boeing Airplane Co 165 airplanes
Glenn L. Martin Co 301 "
Loening Aero. Eng. Corp 59 "
Curtiss Airplane and Motor Co 112 *'
Consolidated Aircraft Corp 191 "
Sincerely yours,
(Sign.) H. L. Roosevelt.
Hon. Gerald P. Ntej,
Chairman Special Committee Investigating the Munitions Industry,
United States Senate, Washington, D.C.
(1 inclosure.)
Exhibit No. 540
[Copy]
Chance Vought Cokpobation,
Hartford, Connecticut, Septemher 12, 1934-
Mr. Stephen Rausheijbush,
United States Senate, Special Committee Investigating the Munitions
Industry, Washington, D.C.
Deab Sir : This will acknowledge receipt of your letter dated September 6th,
1934, addressed to Mr. E. E. Wilson. Mr. Wilson is on an extended business
trip and to avoid dela.v in submitting the information called for, I have com-
piled the answers to the questions contained in your letter from his records
and I am tabulating the data below :
(A) November 18th, 1929.
(B) January 18th, 1930.
(C):
Hamilton Standard Propeller Co., February 1st. 1930. to December 31st, 1931.
Sikorsky Aviation Corporation, April 17th, 1930. to December 22nd, 1931.
Chance Vought Corporation, February 1st, 1931.
CD):
1930
1931
1932
1933
To Aug. 31, 1934
United Aircraft & Transport Corp
Hamilton Standard Propeller Co
$4, 166. 67
14, 999. 98
10, 000. 00
$11,250.00
6, 250. 00
12, 500. 00
Chance Vought Corporation
$33, 500. 00
$33, 600. 00
$21, 600. GO
MUNITIONS INDUSTRY
1547
(B)
1931
1934
United Aircraft & Transport Corp. (Del. Board)
Hamilton Standard Propeller Co
Sikorsky Aviation Corp
Chance Vought Corporation
United Airports of Connecticut
United Aircraft & Transport Corp. (Executive Com.).
$160. 00
$60.00
160. 00
220. 00
160. 00
$200.00
240.00
80.00
200.00
80.00
$600. 00
220.00
180. 00
240. 00
100.00
350.00
$400. 00
160.00
200.00
60.00
100.00
(F) No gifts or gratuities have been received by Mr. Wilson. The bonuses
received are as follows :
Hamilton Standard Propeller Co.: 1930, $1,559.29; 1931, $3,.50O.0O; 1932,
$853.76.
Very truly yours,
(Signed) T. L. Conlan,
Secretary to E. E. Wilson.
Exhibit No. 541
Septembee 6, 1934.
Mr. E. E. Wilson,
ChOAice-Vought Corporation, East Hartford, Connecticut.
De:ar Sik : It is requested that you furnish the Senate committee investigating
munitions the following information :
A. The date on which you resigned from the United States Navy.
B. The date on which you accepted employment with United Aircraft & Trans-
port Corporation or any of its subsidiaries.
C. Inclusive dates of employment with each subsidiary company.
D. Salaries received for each employment to date.
E. Director's fees.
F. Bonuses, gifts, or gratuities received, if any.
G. Items D, E, and F are to show the companies from which they were
received and the inclusive dates.
This information is to be furnished as soon as possible.
Sincerely yours,
Stephen R.\ushenbush, Secretary.
Exhibit No. 542
[Copy]
Jan. 20, 1934.
Senator Hugo Black.
Deab Sib: Have been following your aviation investigations. Am pleased to
note you plan to continue.
I am well acquainted with the early development of the P. & W. Aircraft
Company, doing research work from May 1926 to June 1929. Being only a
workman holding no office position I am unable with any proof to be able to help
you. I believe you are doing a much-needed job.
P. & W. motor plans were made from certain Government specifications. In
1925, and earlier, the Navy Department had been encouraging air-cooled de-
velopments. At that time Wrights had a successful motor, an air-cooled fixed
radial, and its design was basically copied by P. & W. Only two major changes
were made. It was larger, the hp. doubled, and having an supercharger. Just
a few months earlier Mr. Rentschler had been practically forced out of Wrights.
So with his pull in the Bureau of Aeronautics or Navy Department he then
arranged to form a company, having subordinates from Wrights who were
naturally familiar with this type of air-cooled motor. This P. & W. motor was
built and tested secretly. The Wrights Co. had no knowledge of this motor,
its size, or design, although perhaps certain ones in the Navy Department knew.
1548 MUNITIONS INDUSTRY
Maybe for being a good key man Mr. E. E. Wilson landed his later connection
with the Chance-Vought Co. You will find many former Government men
holding good jobs now on all the United Aircraft divisions. These key men with
former connections help to sell planes and motors.
I believe in 1926 the Government gave P. & W. $100,000 to use in research
work, $75,000 in 1927, and same in 1928. All in all I cannot see where P. & W.
venture was of any " chance " nature.
My wages were low in those good times. The Wasp 450 hp. sold in 1929,
approximately $5,000, and today with cheaper materials, etc., this motor sells
for approximately the same, and P. & W. wages are as low as forty cents an
hour. They take a profit from both ends.
If this " pull " business is cut out the Government then won't be doling out
millions to millionaires. And under proper competitive bidding you no doubt
will get a better product. It is possible.
Wishing you all success,
Sincerely,
(Signed) Albert A. Kennett,
5 Winter Street, Hartford, Conn.
Exhibit No. 543
[Copy]
La Paz, Bolivia, Februartf 26, 1934.
Letter No. 280— Air mail.
United Aircraft Exports, Inc.,
230 Park Avenue, N.Y.
Subject: C F. Gundlach & Cia.
Gentlemen : It hardly seems necessary for me to attempt to report on the
financial rating of C. F. Gmidlach & Cia., since you have been able to get that
information more accurately from our New York bankers, and from the General
Motors Export Corporation. Suffice it to say, that the firm's financial standing
seems satisfactory, and that it enjoys a good local reputation.
Regardless of whether or not a Government order is secured through Gund-
lach at the present time, I believe it would be avisable to accord him our sales
agreement for the territory of Bolivia, and recommend so doing after pending
negotiations are definitely terminated. I do not recommend, however, giving
Gundlach any jurisdiction over Lloyd Aereo Boliviano, or any commission on
the latter's business. In fact, I emphatically recommend against such pro-
cedure. (See my letter no. 278.)
With the above in mind, it is suggested that a clause excluding jurisdiction
over L.A.B. be incorporated in our standard form sales agreement, which is
sent to Gundlach. I had intended to suggest offering Gundlach a flat dis-
count of 20% on P. & W. spares as well as on engines and accessories, thereby
making the difference between what he got and what we allow L.A.B. so small
as to be nor worth his while to try to horn in, until your direct communication
to Gundlach made that difficult. For the time being, Gundlach simply operates
on a letter of authority to represent us in pending negotiations with the Bolivian
Government, copy of which letter is attached to my no. 278, and additional copy
which is attached hereto.
For your general information, in such cases as this, I believe it would be a
better policy to increase slightly the amount of commission we have been in the
habit of offering on planes (complete units) and decrease the commission we
have been offering on spares. I know of no South American agent who can
do plane business on a 2- and 2 1/4 -percent basis, particularly true if he is an
established company doing business in other lines. The agent's sales cost on
complete units to a government on this continent is high, whereas his sales cost
on accessories, spare parts, and replacement parts (of which he carries none
in stock) is generally negligible.
Clark M. Carr.
MUNITIONS INDUSTRY 1549
Exhibit No. 544
[Copy]
Buenos Aires, 20th March 1934.
From : Clark M. Carr, letter No. 291.
Ref. : Your letter No. 412.
Sul»jcct : Bolivia.
United Aircbaft Exports, Inc.,
230 Park Avenue, Neto York.
Gentujmen : Regarding tlie matter of commissions taken up in your letter
no. 412 : As you are aware, it was impossible for me to report fully on matters
in La Paz during my stay there due to existing Government censorship. How-
ever, in spite of the fact that the acquisition of as high as ten bombing planes
was talked of, it was not believed that a greater number than six actually
would be purchased, and there were possibilities that this number would
dwindle to three or four.
Concerning your suggestion that we require Messrs. C. F. Gundlach & Co.
to work on the basis of a 2^2 or 3% commission, I would advise you that
Gundlach's sales cost in business of this kind would exceed that figure.
Endeavoring to consider the commission involved in the light of the total
amount of an order to be ultimately received is, in my opinion, very com-
mendable theory, but very unremunerative practice, throughout South America
as a whole and particularly in Bolivia.
I have been emphatically informed on several occasions that this company
does not sanction and takes no official cognizance of extraordinary sales
expenses that its agents incur endeavoring to have orders accorded them.
I have likewise been instructed to refrain, whenever possible, from making
direct reference to this condition in my official correspondence. However, and
whether or not we officially recognize it, the condition exists. In South Amer-
ican countries I do not believe that any agent can make sales in such material
as we manufacture on the commission basis you propose. Mayrink Veiga
calculate their sales price on planes on the basis of a flat 20% of the net
c.i.f. Rio de Janeiro price. I do not reconunend any such commission as this
in other countries and am making all possible effort to bring the figure down
in Brazil without sacrificing business thereby. Nevertheless, talk of a 2%%
commission to such a firm as Gundlach & Co. is simply humorous. It would
be better to attempt to deal direct, which, in Bolivia, as in many other parts
of South America, is equivalent to getting no business at all.
Concerning the suggestion you make that I contact National City Bank
attorneys before giving letters of temporary authorization to represent us in
specific sales, this is precisely the i^rocedure that I would follow were it pos-
sible. In La Paz, however, as you know, no branch of the National City Bank
of New York exists, and no good lawyer is available who would not be inter-
ested, from the standpoint of personal friendship or for financial reasons, in
either Gundlach or his competitors. To follow your suggestion in such a case
would be to pay out good money for inaccurate, worthless advice, and in all
probability would tip our hand to additional hungry Government officials.
In the last paragraph of your letter no. 412 you suggest that I be very
careful to make no commitment to Gundlach & Co. with reference to their
permanent appointment as our sales representative ; yet by your letter to
Gundlach of January 5th, viewed in the light of existing conditions in Bolivia
today, you made it impossible for me to deal with anyone else, even had that
seemed advisable. Fortunately, Gundlach is our best bet in Bolivia under any
circumstances. In my opinion, it is not possible for us to continue on a
maybe yes, maybe no, maybe quien sabe policy in these matters in this terri-
tory. After receiving my copy of your letter of January 5th to Gundlach and
investigating his connections and record on the ground, I naturally assumed
that we would appoint him our Bolivian representative, which is both the
logical and the wise thing to do. While I have made no definite commitment
to the effect that we will appoint him to represent us, I believe it would be
advisable for us to do exactly that without further delay. I have previously
discussed his connection and relationship with Lloyd Aereo Boliviano and what
was decided upon during my visit to La Paz. Our normal contract of sales
representation with an additional clause excluding Gundlach from any juris-
diction over Lloyd Aereo Boliviano will, I am sure, be satisfactory to him.
1550 MUNITIONS INDUSTRY
Concerning representation in general, it is possible tlaat we may make occa-
sional mistakes by decisive action in this terrilury, although I do not believe
we will lose nearly as much business thereby as we have lost by our wishy-
washy inability to make a decision.
In La Paz, Gundlach is the only suitable agent for our material who is
available at present. Until such time as he has made a definite connection
with us naturally he will be on the kK)kout for other important companies.
He is disappointed in the fact that General Aviation accorded their West
Coast representative to Echeuique. Also, during the past year every important
aeroplane company in the world has redoubled its sales efforts in South America.
In a very short time there will be no suitable agents still without lines.
Clakk M. Carb.
Exhibit No. 545
[Copy]
Manuex Toro,
Bogota, Colomhia, S.A., April 2Jtth, 1931
Letter No. 1.
United Airckaft Exports, Inc.,
230 Park Avenue, New York Citij.
Deiar Sirs : We acknowledge receipt of your cable of April 16th, reading as
follows :
" Understand twin float equipment will materially assist sale C(u-sairs there
(Stop) Water rudder available single float equipment, small additional charge
(Stop) Under penalty sacrifice performance can equip Corsair twin floats
(Stop) If advisable will quote Corsair-equipped twin floats and prepare
specifications plane so equipped."
We are sending you herewith copy of the letter which we delivered per-
sonally to Engineer Jorge Triana, general director of aviation of the Ministry
of War.
We have been in daily communication with the Ministry of War in an effort
to obtain a favorable decision on our proposal for Corsairs.
The writer recently had an' interview with Dr. Alfonso Araujo, Minister of
War, who stated that we could be certain that we would shortly receive an
order for Corsairs.
Our friends, the Cuban pilots, contracted by the Government, have been co-
operating with us in recommending Corsairs to the various officials of the
Ministry of War. They informed the writer, and he has confirmed it, that Mr.
Love offered them some protection in the business, but we will take this
matter up with you definitely when we receive a firm offer for a certain num-
ber of planes.
We are also in communication with Mr. William E. Cooper, and are cooper-
ating to satisfactorily arrange some small difficulty which has occurred ui
connection with his traveling expenses.
We are awaiting your recommendations and complete lists of the machinery
and other material which are necessaiy for the repair shops. We have been
informed that the Ministry of War has asked Curtiss-Wright to give sug-
gestions and recommendations for repair-shop machinery consisting of lathes,
milling machines, honing machines, and drilling machines to repair aeroplane
motors, guns, etc., etc.
Yours very truly,
( Signed ) Manuel. Toro.
MT.AB cc Mr. F. H. Love.
Exhibit No. 546
[Copy]
Letter No. 194.
United Aircraft Exports, Inc.,
230 Park Avenue, New York Citii, N.Y.
Dear Reeo: This will acknowledge your letter #246 on the subject of your
discussion with Mr. James Drumm, of the National City Bank, concerning sug-
gestions as to our offering scholarships to Argentine and Brazilian military
pilots in the Boeing School of Aeronautics.
MUNITIONS INDUSTRY 1551
Frankly, I believe tlie idea to be a capital one, and one which might be
worked out in such a way as to be a tremendous help in the getting of future
business in South America. I am in accord with your opinion that it would
be hax-dly reasonable to expect United to stand the expenses of traveling and
maintenance for any officers to whom such scholarships should be awarded;
nevertheless, it would seem reasonable to supixise that the respective govern-
ment or governments of such officers wonld be willing to undertake that item.
As you have indicated, the Argentine would probably be the most appropriate
place in wliich to initiate your scholarship idea. If it did not prove satisfac-
tory, the practice could be discontinued at any time ; yet, before having had an
opportunity to give the matter adequate consideration, I frankly admit my
enthusiasm. As implied in your letter, it would not seem advisable to take
such a step in one country without at least the willingness to undertake the
same thing in other countries, should circumstances seem to warrant.
You and Mr. Drumm seem to have found a solution for a problem that has
given me continual worry. I refer to the fact that with a few exceptions every-
where I go in South America, Curtiss equipment is better known than is our
own. In every country visited there seems to be an army or navy pilot who
has at one time or other gone through the Curtiss School or who has received
help from Curtiss while visiting the States, and who is, therefore, particularly
partial to our competitor's material.
With your permission I intend to think this matter over and offer you a
fuller opinion on it within the next few weeks. In the meantime, however, if
you have no objections, I believe it would be advisable for you to take it up
tentatively with our board of directors and perhops pass along to me an indica-
tion as to whether or not they will give it serious consideration.
Best regards,
Clark M. Cakr.
Exhibit No. 547
[Copy]
August 14, 1933.
File — memorandum.
A Captain S. C. Coon called this morning, stating he had just returned from
Turkey where he had been working in the Government aircraft factory on the
Government pay roll, but aiding and abetting Curtiss-Wright.
Captain Coon said that on his return voyage he met a Persian, who advised
him that the Government had bought a number of Pratt & Whitney engines,
and believed it was intended to establish a factory in Persia to manufacture
planes to take our engines. If this was the case, Captain Coon wanted a job
to organize the factory for us.
Coon claims to have been a production man in the U.S. Army Air Corps,
weaving there to go wdth Curtiss-Wright for whom he established the branch
factory in Chile, which was closed down by the recent revolution.
Coon was advised that so far as we know there was no factory project in
Persia, or anywhere else in which U.A.E. was interested. He asked us to keep
him in mind and gave as his forwarding address, the Curtiss-Wright Exptirt
Company, 29 West 57th Street, New York City.
Coon supplies interesting confirmation of the fact that Curtiss-Wright,
wherever possible, get foreign governments to hire U.S. experts of their recom-
mendation. These people, of course, boom Curtiss-Wright products effectively
through the medium of their official connection.
(Signed) S. A. MoClellan.
cc — Mr. T. F. Hamilton.
Exhibit No. 548
[Copy]
Gbosvknok House,
London, England, January 13, 193^.
Mr. Thos. F. Hamilton,
Hotel Adlon, Berlin, Germ any.
Dear Sir : I am enclosing copies of a letter together with the papers referred
to from Captain Staudach with reference to the contract that is to be sup-
plied me.
1552 MUNITIONS INDUSTRY
Personally I do not see much sense in the contract of Johnson ; some of the
clauses are not applicable in my case ; others are so worded that it appears to
me to constitute entering the military service of the Persian Government, and
therefore jeopardising my standing as an American citizen.
In order to lose as little time as possible I believe that it will be necessary
for me to draft the contract and submit it to the Persians for approval.
Therefore, through the commercial attach^ of the American Embassy, I will
get in touch with an international attorney and have a tentative contract
drawn up, which I will submit to the Persians.
In the case of Capt. Larsson the Persians have already evaded some of the
clauses of his contract, if not in the actual wording, at least in the intent. For
this reason, coupled with the conclusions that I have been forced to draw from
my contact with the Persians, I think that it is necessary to have legal advice
and assistance in drawing up an airtight contract.
Very truly yours,
L. G. Teue.
Copy to : Pratt & Whitney,
United Exports,
Mr. Hamilton (N.Y.).
Exhibit No. 549
[Copy]
Cumberland Hotei.,
London, Enffland, Feh. 6, 1934.
Mr. C. G. RuNYON,
T}ie Pratt d Whitney Aircraft Co.,
Hartford, Conn., U.S.A.
Deab Sir: During the week ending January 27, 1934, I checked over the
engine that was in the " Fury No. 204 " that was crashed at the Air-Ministry
test at Martlesham. I was unable to find any indication of damage. The
engine, no. lasS, has been put back in the aeroplane and will shortly be ready
for an engine run.
The contract with the Persians has been completed and I will be leaving in
a few days for Persia. The contract as it is written has, in my opinion, some
bad features to it ; however, I was unable to get them out of it, and rather
than stir up too much of a mess I accepted it and the conditions that I do
not like. Parag^-aphs, nos. .3 and T are, ,to my niind, rather objectionable in
the way they are worded. The amount of salary and expenses is not what
I was led to believe it would be when this matter was discussed Mdth me in
Hartford. While discussing this feature in Bern I succeeded in getting the
Persians to raise their offer from $150.00 in U.S. dollars and 3,000 Persian
rials, which is equivalent to about $300.00 60-cent dollars to the present figure,
which is about $400.00 60-cent dollars. In the matter of expense, I was unable
to do anything.
I telegraphed Mr. Hamilton of the condition I was up against and asked if
the United Aircraft would asisurae the difference in the present offer and the
offer tliat was made to me in Hartford. Through Mr. Gould I was informed
that it was up to me to obtain as good a contract. I will send it to you. I
feel that it was the duty of the United Aircraft Exports to have negotiated this
contract and not have passed it on to me. This was done, however, and
though I have no legal claim, I expect that in all fairness that the terms of
this contract will be carefully analyzed by tlie United Aircraft Co. and Pratt
& Whitney and compared to the terms of the sales contract as of date when
written, it can clearly be seen that this present contract calls for a salary of
$240.00, gold ; bare transportation from Persia to New York ; practically no
allowance for expenses in Persia.
A letter informing me just what action is contemplated or will be contem-
plated in this matter is requested.
The Persians recognized the fact to a certain extent that it was not fair
to expect me to absorb the loss due to the United States going off of the gold
standard, and although their contract provided that the United Aircraft Co.
must furnish them a man at not to exceed $300.00 (dollars United States cur-
rency), they have absorbed half of the loss. In the matter of exi>enses, I had
nothing to go on except the sales contract which specified " The expense from
MUNITIONS INDUSTRY 1553
the time of leaving until returning to New York will be paid by the Ministry
of War." This I interpreted as it read. The Persians insisted that it was
the intent of this portion to pay transportation to and from New York.
Transportation when away from the home base in Teheran and a nominal
per diem in lieu of expenses. I asked Mr. Gould regarding this point and
was informed that this was the intent of Mr. Hamilton and Major Arfa at
the time the contract was drawn up. That point I do not intend to question
at this time. I do feel, however, that in view of the fact that the expense
item is out, that the United Aircraft Company should make up the difference
in salary to correspond to payment of $300.00 on a gold standard.
In the contract the Persians wanted to pay Ist-class fare only to London
from New York. I insisted that they refund the actual expenses that I paid
in coming to London, and this was made a portion of the contract. "When I
receive this money I will remit it to the United Aircraft Export' Co. The cost
of a trip to Antwerp and to Bern I wanted incorporated in the contract, but
the Persians would no consent to this. Therefore, that is a question that will
have to be settled directly by the United Exports with the Persians.
From the information that I could obtain in Bern it looks very much like the
Persians have no intention of testing the new Hornet D engine at all. Captain
Cheybani informed me that they were waiting in Bern for instructions from
Teheran ; that the general staff was tired of all the delay and not in favor
of any more tests of any kind ; that he had sent a cablel to the Curtiss-Wright
Co. telling them that the Persians did not want any Wright engines for test
purposes ; that the general staff did not intend to try to put together any more
aeroplanes by bringing an engine from one company and installing it in a plane
by another company who had not designed their plane for that particular type
of engine ; that the general staff at this time was in favor of the British
product. This, of course, means Hawker planes with Rolls Kestrel engines.
I believe that the only chance of future business with the Persians is to sell
them complete units.
I understand that practically every letter that I write after I get into
Persia will be censored; therefore, do not expect any too much information
other than technical data on what is going on. I will try to arrange some
method with the American Legation whereby I can occasionally get a message
through in the diplomatic pouch. I will send you my Persian address in a
day or two.
In answer to a letter from Mr. Bunce regarding proof of American citizenship,
I sent him a certified copy of my Army discharge paper that I had here with me.
This copy you are at liberty to put in your files and retain, as I have the
original in my possession.
The pass that Mr. Butterfield was to have sent to me to go to Felixstowe
never came. I will turn thel parts needed and the tools that I had made up
over to Mr. Hofman.
The bolts sent for the reduction gears will not be used here in England, and
as we would have to pay duty to take them out of the customs, we are having
them reshipped to Persia.
The 30 plate clutches are greased and packed at Brooklands. I will leave
instructions with Mr. Bulman, chief test pilot for the Hawker Co. at Brooklands,
to hold them subject to your instructions.
Please be sure to send the seven springs for the new spring coupling to
replace the seven that were taken out of engine no. 1598 and returned to you.
Very truly yours,
L. G. True.
Copy to: United Exports.
Mr. Hamilton.
Exhibit No. 550
[Copy]
April 4, 1934.
Letter No. 449.
Mr. Thomas F. Hamilton,
Berlin, Germany.
Pratt & Whitney are looking for answers to the questions raised in their
memorandum to you of February 21st, addressed to Berlin, Germany, by J. L.
Bunce, reading:
1554 MUNITIONS INDUSTRY
" I have just been over True's report of February 6tb. I assume that at
this time the whole matter of True's contract has been straightened out so
will not discuss this matter any further.
" I have noted in the second page of True's letter that he believes all his
mall will be censored. I am wondering if the reverse might be true of any
letters we would be sending to him. I can foresee there might be certain
information we would want to give True, possibly a warning of some trouble
to look for, that we might not want to publish directly to the Persians. Will
you please advise, therefore, how we should handle any correspondence with
True and whether or not it is going to be necessary to send all such matters to
your oflBce, for example, to be forwarded.
" We want, for example, to forward enough of the link bolts to take care
of the geared engines. Will you let us know how we should handle getting
these to True. If we send them direct to the Persians I am afraid they will
get all hot up about the necessity of this change, whereas, if True gets them,
he can install them when an opportunity presents itself and not cause any
alarm. We are holding the bolts for word from your office.
" Under separate cover we are mailing the Berlin office the 7 #10901 springs
that True requests in his last paragraph. Will you please see that these are
sent to True."
McC : E.
Exhibit No. 551
[Cop.v]
S. A. McClesllan.
January 3, 1933.
Mr. P. G. Johnson.
United Air Lines, La SaUc-Wnckcr BuUdlno,
Cliicago, Illinois.
I believe you are fully familiar with the mission of American pilots which
has gone to China under tlie direction of John Jouett to develop and operate a
new school for tlie training of pilots for the Nanking Government.
Mr. Leighton W. Rogers, Chief of the Aeronautics Trade Division of the
Bureau of Foreign and Domestic Commerce, now advises us that Canton is
going to put in a similar school for pilots except on a smaller scale. In this
connection Mr. Rogers' department has been authorized to hire six to eight
men, including a pursuit pilot, an observation pilot, a bombing pilot, a photo-
graphic expert, a radioman, etc. They must necessarily handle this very con-
fidentially and are advising only Curtiss-Wright, Douglas, and ourselves. Mr.
Rogers has agreed, before finally forming this group, to submit to us the pro-
posed list of names to see wliether they are acceptable.
Please advise us if you know of any individual or individuals, particularly
familiar with our equipment, who might be suitable for the work in question.
Undoubtedly Curtiss-Wright and Douglas will be making their own sugges-
tions, and it is advisable for us to get ours in as promptly as possible.
S. A. McClellan.
MVK.
Exhibit No. 552
[Copy]
January 26, 1933.
Memorandum to Mr. F. B. Rentschler.
The parties selected by the Department of Commerce to go to Canton and
teach commercial flying methods are as follows : Captain Edward Deeds, Lieut.
Clarence Terrell, Lieut. Stuart Baird.
These men are sailing from Seattle on February 8th. They will be under
the direct charge of Freddie Wong in Canton.
4( 4e ^ iji ^ ^ ^
While it is believed that all three of these men are entirely familiar with
Boeing and Corsair equipment, it might be advisable for the Boeing organiza-
tion in Seattle to take them through the plant before they sail.
MUNITIONS INDUSTRY 1555
We do not have the exact name of the steamer on which these men are sail-
ing, as they are leaving quietly on a small and relatively unknown line. We
are promised the name of the steamer in the next few days and will relay it
at once to Mr. Nelson.
Francis E. Love.
Exhibit No. 553
[Copy]
Boeing Airplane Company,
February 6, 1933.
To : United Aircraft Exports, Inc.
Attention : Mr. Francis H. Love.
Subject : Captain Edward Deeds.
The above-named gentlemen called today with a letter of introduction to
Mr. Boeing. Due to the fact that Mr. Boeing was absent, Mr. Deeds was
referred to me as I took him through the plant, giving him full and complete
details on the nine model 267's that we are manufacturing for you for expor-
tation to Brazil, also other pertinent information pertaining to our manu-
facturing methods, etc.
Showed him the transports, also the one bomber that we had on the
assembly floor. He did not show much interest in the former, but was very
much interested in the latter type. Gave him whatever information I could
and he of course knew that it would be impossible at this time to export any
of these machines.
He advanced the information that the Chinese, with whom he had been in
contact, are very anxious to obtain some single-seater fighters. As you know,
of course, previous to this time, most of the Chinese inquiries have been for
two-seater fighters due to the fact that they apparently did not care to fly
alone or felt that single-seater equipment would not be suitable, but now, after
watching the work done by the Japanese in their single seaters they have become
convinced that this is the type not to be neglected.
Captain Deeds also asked for information as to prices, deliveries, etc.,
but due to the fact that this is eirtirely up to your office. I advised him accord-
ingly and he then asked me to write to you requesting that you forward such
information as you cared to to him % American Commercial Attache, Mr.
Barringer, Hong Kong, China.
EHN : cp.
Erik E. Nelson, SaJcs Manager.
Exhibit No. 554
[Copy]
Chance Vought Corporation,
East Hartford, Conn., February 6, 1933.
United Aircraft Exports, Inc.,
230 Park Avenue, New York, N.Y.
(Attention Mr. Francis Love, Mr. S. A. McClellan.)
Gentlemen: Mr. Arthur Wong, president of the Bank of Canton, called me
to his office to meet Capt. Ed Deeds, who has been employed by the Canton
government to develop an advanced training school for pilots in one of their
southern provinces. He is sailing on February S and he intends to build his
specifications for equipment when he arrives. I have turned to Mr. Deeds cer-
tain limited informatioai of the performance data issued by United Aircraft
Exports on both V-65 and V-SO aii-planes. He is taking this with him to
Hong Kong and intends to use same in his set-up. Apparently he has influen-
tial backing, for Arthur Wong tells me that he is being sent over by the local
Chinese to further train these some 100 Cantonese students, who have had their
basic training in this country a few months ago.
Sincerely,
(Signed) R. R. Vought.
RRV
DMc
83876— 34— PT 6 10
1556 MUNITIONS INDUSTRY
Exhibit No. 555
Fbbeuabt 23, 1933.
Mr. Fbancis H. Love,
President United Aircraft Exports, Inc.,
230 Park Avenue, New York, New York.
Dear Mr. Love : We have received a repeat on the secret code message trans-
mittefl to you by means of my letter of February 20. With the corrections, the
cable is as follows :
" Canton Aviation Bureau now desires quotations and latest high-speed per-
formance data Vought Corporation equipped Hornet C 600 engine. Quotations
desired for quantities of 5 and 20. Have United telegraph by Western Union
telegraph code, 5 letter code, to me as they have no business representative
active or authorized in my territory, and Fisher will not take lead in securing
this prospective business until they authorize him."
Very truly yours,
Leighton W. Rogers,
Chief Aeronautics Trade Division.
Exhibit No. 556
[Copy — Radiogram]
From : Arnold, Shanghai.
Via : Navy Radio — 55.
Date : July 6, 1933. Rec'd : 6th.
Routing: 45-14-6.
No. 6.
Canton wishes engage instructor replace Deeds killed July first. Must be
active flier with knowledge pursuit, army cooperation, gunnery, observation,
map making, holding rank captain or major. Salary, Hongkong dollars one
thousand monthly with traveling expenses. Suggest Rogers cooperate with
Pawley in securing desired flying instructor.
Arnold.
Exhibit No. 557
[Copy]
WEEKLY SEPOBT
Shanghai, Ohina, September 7, 19SS.
Report for the week ended September 2, 1933.
Submitted by Julean Arnold, commercial attach^.
Rec'd. Foreign Service Oct. 3/33.
(Full excerpt)
Aviator Claiborne is en route from Los Angeles to Canton to take the place
vacated by Deeds as head of the Canton air forces. We were responsible in
securing him for Canton.
Exhibit No. 558
[Copied from carbon copy]
OCTOBEDEC 9, 1929.
Mr. J. S. AiJ^VRD,
Curtiss Aeroplane Export Corp.,
21 West 57th St., Neic York City.
DavR Jack : For your information, I am attaching copy of a list of " Foreign
Officers Attending U.S. Amiy Air Corps Schools ", which I thought might be of
MUNITIONS INDUSTRY 1557
interest to you in conned ion with the set-up of Export work with their
countries.
Very truly yours,
BSW/LH
Dictated but not read.
1 enc.
Washington file: General.
[Copies from original]
(Handwritten notation: "Corrected to Oct. 8, 1929")
FOREIGN OFFICERS ATTENDING U.S. ^VRMY AIR CORPS SCHOOLS
Lieut.-Colonel Luang Amara, Siamese Army — Air Corps Tactical School, Lang-
ley Field.
Lieut.-Colonel Luang Deves, Siamese Army — Air Corps Tactical School, Lang-
ley Field.
Justo A. Sepulveda, Colombian Army — Technical School, Chanute Field.
Justino Marino, Colombian Army — Technical School, Chanute Field.
Benjamin de la Pena, Colombian Army — ^Technical School, Chanute Field.
Captain Ricardo Rodas, Guatemalan Army — Technical School, Chanute Field.
Lieut. I. F. J. Cadaval, Argentine Navy — Technical School, Chanute Field.
Lieut. Enrique Santamaria, Colombian Army — Primary Flying School, Brooks
Field.
Lieut. Alfredo Duarte, Colombian Army — Primary Flying School, Brooks
Field.
Cilia Mei Hu, China Army — Primary Flying School, Brooks Field.
Nai Kwan Wang, China Army — Primary Flying School, Brooks Field.
Sgt. Cesar Nalli, Peruvian Army — I'rimary Flying School Brooks Field.
Washington file : General.
Exhibit No. 559
[Copy]
File memorandum.
Maboh 28, 1933.
Commander H. B. Grow, late Inspector General of Aviation in Peru, called
yesterday afternoon in connection with the f.o.b. and f.a.s. New York quotations
which had been made to him on Stearman trainers model 6A and Vought
Corsairs model V-80.
The Stearman trainer quotation originally made as a landplane only, was
modified to include extra seaplane undercarriage. This quotation was made on
a basis of :
Edo Aircraft list price on floats and struts is $1,375.00, plus $70.00 for water
rudders and lifting device and $120.00 for crating and trucking to shipside New
York City, giving a total net figure of $1,565.00 per plane.
Grow states that he is doing his purchasing for Luis Pardo of the CoUecta
Nacional. He indicated that he was well on his way to be appointed resident
purchasing agent for all of the Peruvian Government's requirements in the
United States. He stated that this action was being started by Gilardi, ihe
present head of the air force, and oflacials of the Government is strong for
Grow's return to his old post. Gilardi, wishing to remain in his present posi-
tion, is advocating Grow for handling purchases in this country so that he
can claim he is too valuable up here to be recalled to Peru.
This does not fit very well with Grow's further statement that he was run
out of Peru as a result of the deliberate efforts on the part of Webster of
Curtiss-Wright Export and " Slim " Faucett who was Webster's main repre-
sentative in Peru. Gilardi is hand-in-glove with Faucett and with Cliff Travis,
the new Curtiss-W^right representative in that territory. If Grow were to
handle all purchases in the United States, it would completely upset the
Gilardi-Curtiss-Wright combination now existing.
Grow volunteered (admitting it was none of his business) that he felt we
had made a great mistake in quibbling with Peruvian authorities over the
paying of interest on the overdue portion of their debt to us. He claims that as
1558 MUNITIONS INDUSTRY
long as they owe us money they will continue to duck us in every way possible
and buy from other sources of supply. He feels that we should materially
scale down the balance due us and effect a cash settlement and place ourselves
in a position to benefit from future orders to be placed. Grow pointed out
that many of the machines covered by the purchase have already been
destroyed and that if the matter continues to hang fire until they have all been
destroyed, the psychology of the people is such that they will strongly resist
any further payment whatever.
Grow apparently is most anxious to get a job with us, as he repeated sever.al
times that United did not sell the planes to the Peruvian Government, but that
he. Grow, sold the contract to Mr. Love. Unfortunately, the contract which had
been sold to United in good faith proved unsatisfactory, but that was due only
to unexpected circumstances and that anyone who was a good enough salesman
to sell such a contract to smart people like the United oflScials would be just the
man to sell airplanes to other people in South America.
S. A. McCUEILLAN.
Exhibit No. 560
[Copy]
Graham, Grow and Company.
Penoiscot Building, Detroit, Mich., March 10, 1933.
United Aircraft Exports Corp.,
230 Park Avenue, New York, N.Y.
(Confidential: Attention Mr. Miller.)
Gentlemen : Would you please be so kind as to inform me at once if you
iiave any Corsairs for immediate release for shipment, or the earliest date that
shipment could be made. Should any purchases be made they will be for
cash. The situation is a.s follows :
The Peruvian Government has asked me to locate some planes for them,
used or new. I quote the contents of a cable received from them.
In the name of the National Collection Commitee and aware of your effection
f(tr and interest in Peruvian aviation, we ask you to inform us concerning the
existence of pursuit seaplanes for inuuediate delivery and which given your
knowledge of the situation and our needs you can recommend. The ma-
chine guns should be of calibre 7.65 since we have that size already. If
through your influence and connections you can obtain seaplanes reconstructed
for pursuit work and which will satisfy the urgent need of the moment, which
includes immediate delivery, it would permit the acquiring of a certain
amount of material such as we need at once. In anticipitation of the possible
enibargt) of war materials please hasten your reply in order to proceed with
the purchase and shipment."
This has been replied to and they have agreed to send me a small sum for
travel exijenses. They have the money available and are doing a good cash
business with Curtiss. (Webster is aware of my connection and may try to
block it.) I also quote for you confidential information a paragraph from
a letter received yesterday * * *. "Also there is the almost certainty of
a contract with the French who wish to sell us 36 planes, among which will
be Nieuports, Potez, Heiu'iots, and Moraine Saulniers. The French contract
presents the inconvenience that delivery is from 5 to 6 months and we need the
stuff at once " * * *.
I should like to be able to tell them that I have some good ships for im-
mediate delivery for cash. I wish you would be so kind as to advise me by
wii-e if you can do anything on this matter.
I have good connections down there and the Ambassador in Washington
has recommended to the Lima government that they deal through me up here.
I am aware of the past sad story of your previous contract with them which
I put over, but that is no reason why you should not take a new order if it
be cash on the line before you go ahead. It is possible that I shall be able
to leave here tomorrow night for New York, I shall as soon as the Consul
in New York sends me the necessary funds to travel.
Any information you may be able to give along the lines mentioned will be
greatly appreciated as would also your cooperation. If any kind of a deal goes
MUNITIONS INDUSTRY 1559
through I shall purchase the ships from you and shall not do so until I have
the cash in the bank here from them.
Sincerely,
(Signed) H. B. Grow.
Exhibit No. 561
[Copy]
June 15, 1933.
Commander H. B. Grow,
PenohffCot Building, Detroit, Michigan.
My Dear Commander: Confirming our telephone conversation of today in
connection with your letters of June 7th and 9th.
The three V-80's were shipped from New York on June 1st aboard the S.S.
President Pierce. Not having received shipping instructions from IVIr. Henriod,
it will be impossible for us to ship the floats for these three ships prior to
June 29th.
Tntl receipt of payment for the floats, we will not have received payment
in full afiainst this order. However, in view of your request we enclose here-
with our check in the amount of $765.00 in full settlement of the amounts
due you on this transaction, in accordance with our letter of April 6th.
We are glad you now understand why it is necessary for us to receive the
proposed spare-parts order direct from you in order to definitely free ourselves
of any necessity of paying a commission in other quarters. In case you succeed
in procuring this business for us, we will pay you on a sales commission of
5%, which will apply to the price of list less 15% f.o.b., the factory, which
you have been authorized to offer on these Pratt & Whitney spare parts.
We understand that you expect to be in New York sometime next week
and look forward to the opportunity of continuing our discussion over the
phone.
With kindest personal regards, I am.
Very truly yours,
United Aircraft Exports, Inc.,
el S. A. McClellan, Assistant to the President.
Exhibit No. 562
[Gonfldential]
June 7, 1933.
Mr. S. A. MoCleillan,
United Aircraft Exports, Inc.,
230 Park Avenue, New York, N.Y.
My Dear McClellan : The purpose of this letter is to inquire as to whether
the V-SO's have been shipped as yet, and if so, if I may expect a check from
you soon. I am getting a little short of cash, and it would be of great assistance
to me.
The following information will be of interest to you. I have this day received
a communication from the Government of Peru of which the following is a
translation :
Confidential : " The minister of marine and aviation would like to know
under what conditions you would like to return to Peru, to resume your duties
in the inspection general of aviation. I am also charged with asking you,
what would be your minimum requirements as compensation to go to Peru in
the form suggested. Naturally taking into consideration the financial situation
of the country — the new contract could not be based on the same conditions
as the one which you formerly held."
You will see from the above that I have been making ground down there, but
I am in a quandary as to whether to go or not. There is no doubt but that I
could stop again all these foreign sales. On the other hand, I question very
much whether I could make it worth my while or not.
I should like vou to consult the jiowers that be. in your organization and
tell me fraugly their reaction. Would they like to have me go? Are they in-
different as to whether I go or not— or would they rather I didn't go?
1560 MUNITIONS INDUSTRY
I wish you would treat this with the greatest of confidence. I anxiously
wait your reply.
Most sincerely,
H. B. Grow.
HBS : Id
841 Penobscot Bldg.
Exhibit No. 563
June 15. 1933.
Letter #75.
Mr. Francis H. Love,
Shanghai, China:
We have received a letter from Commander H. B. Grow, dated June 7th, as
per attached copy, to which we have replied under even date, as per attached
copy. We called Grow on the telephone in order to forestall the necessity of
giving him any answer in writing.
For your information. Grow has been very active and quite successful in
selling the three Corsair V-80s to Peru. The commission he reserved for him-
self was, as you can see, extremely reasonable. In the case of quotations on
spare parts now pending, his quotations have included entirely reasonable com-
missions, although slightly greater in proportion.
As regards the personal background of the men and the questions of politi-
cal relationship involvetl, it is obviously for these reasons that the questions
contained in the fifth paragraph of Grow's letter have been referred to you for
recommendation as to the proper answer.
It is our feeling that Grow will accept this position regardless of what we
may say, as his livelihood in Detroit has been so slim as to leave him very little
alternative.
S. A. MoCl.KT.T.AN.
Exhibit No. 564
[Copy]
First Income Trading Corporation,
835 Penobscot Building,
Detroit, Michigan, September 21, 1933.
Mr. S. A. McClellan,
United Aircraft Exports, Inc., 230 Park Avenue,
New York, N.Y.
My T>eas. McClellan : I am writing you to give you the translation of extracts
of an air-mail letter that I received today from Peru. This U4ter of mine has
no ulterior motive other than to place in your hands information which will
be interesting and may be of value to you.
" But I am grieved at the diversity of types which ai'e arriving in the country.
It is certain that foreign representatives have here their representatives sent
especially for the purpose of selling planes and place difficulties in the path of
the American manufacturers. They are like fleas. You are missed here and
somebody should send you as a representative, and I believe that no factory in
the world would have a better chance than you above all, in this country, where
you have so much prestige, respect, honor, and where there are so many proofs
of your professional ability. I do not undei'stand how Americans, who are the
best financiers in the world, have no interest in this matter of investing a small
amount of money for expenses for a representative in order not to lose a client
that they at one time had and which is buying plenty of material.
" Day after day we hear the rumor that you are going to return, and at the
present moment speaking with your good friend Mr. Israel, I said to him, 'And
why do you not speak with the President concerning the return of Commander
Grow?' and he told me that, as a matter of fact, he had just finished speaking
about the matter with the President and the President had replied, that he didn't
intend to make any radical changes until Congress adjourned, that when this
took place he was going to take this matter under consideration.
" Your return should take place sooner or later, it is merely a question of
time. When Sanchez Cerro was in oflSce, your return was almost an accom-
MUNITIONS INDUSTRY 1561
plished fact and executives of the bank were working the hardest along those
lines. I need not tell you because you well know the happiness that will take
place in all the air corps when you come.
" Your V-80's are stupendous. I congratulate you for this purchase. Thus
should be all the planes which come to us."
I thought the above might interest you as well as the fact that I am work-
ing hard through my political connections down there to put over this new deal
for you.
Most sincerely,
(Signed) Grow,
H. B. Grow.
Exhibit No. 565
February 21, 1934.
To : Chief of Air Corps, War Department, Washington, D.C.
Subject : Boeing Model 281.
We have an immediate opportunity to sell approximately twenty-four (24)
airplanes of our model 281 single-seater (Army P-26 type) to the Turkish
Government. Most of these airplanes are to be delivered only partially con-
tructed, with the necessary material, etc., furnished for their completion in
Turkey. A small portion will be completed by this company. The oppor-
tunity to obtain this business, and in so doing keep our employees from being
laid off in large numbers during the summer and fall, depends entirely upon
receiving sanction to start delivering parts for partially completed airplanes
during June and July 1934 and delivery of the few completed ones in October.
We respectfully request permission to be allowed to carry out this program
of deliveries, which will in nowise delay delivery of Government orders now
under way in our factory or possible orders resulting from outstanding bids
submitted January 26, 1934.
At the present time we have no prospects of any commercial business and
have only an insignificant order of Navy parts. Our plant is running at about
60% capacity at present, and our primary shops are already running out of
work, necessitating the lay-off of men in these departments. By summer a
great number of employees will be out of work, and in the fall all of our
present orders should be completed. Because of these conditions we are very
anxious to obtain some immediate business which will help to keep a portion
of our employees at work and will appreciate your earnest consideration of
this situation.
Boeing Airplane Company,
C. L. Egtvedt.
cle :bk.
cc-BAC- Seattle.
(" Exhibit No. 566 " appears in text on p. 1467.)
Exhibit No. 567
[Copy]
Letter No. 802.
Mr. Thomas F. Hamilton,
Paris, France.
Drab Tom : This is pretty late to be acknowledging your letter of April 22nd,
but it chased me around China, and when I did receive it, did not have either
a stenographer or a typewriter. In any event, the matter was not of great
importance except that I do want to tell you now that there is not a chance
of selling used Hornets of B.M.W. or even of our own in the Far Eastern
market, otherwise I should have been very glad to cooperate.
The Air Line is in the hands of Pan American and the three Chinese flying
fields are in the hands of ex-American Army and Navy officers and nothing
will be considered except absolutely new equipment. However, the German
Air Line, in cooperation with Luft Hansa, have been sending out some old
rebuilt Junkers ships and if there was any possibility at all of using these
engines it would be through either Luft Hansa or Junkers.
1562 MUNITIONS INDUSTEY
I am sorry to say that four Junkers with American Hornets crashed while
I was there and Jerry Clarlv says that the American engineering staff: at
Hangchow was quite insistent tluit the failure was due to the fact that they
did not have a fuel pump on these ships. He strongly recommended that we
suggest to Junkers that fuel pumps be put on. I am not sufficiently technical
to comment on this but pass it along for what it is worth.
Ccmditions in China so far as they affect our business are very gootl and
I anticipate very substantial business in the immediate future, possibly during
the present week.
Please give my kindest regards to Director Popp and, if you care to, you
may suggest that on the old rebuilt Junkers which they are sending out for
the German-Chinese mail line, they might be able to dispose of their suiplus
engines.
i was very pleased to see how your sales in Europe are progressing and
wish to congratulate you.
With kindest personal regards, I am
Sincerely,
MN.
Exhibit No. 568
Winchester REa>E3ATiNG Arms Company,
June 5th, 1933.
Capt. S. A. MoCleuoan,
c/o United Aircraft Exports, Inc.,
230 Park Avenue, New York. N.Y.
Deak Captain MoClexlan : I am enclosing with this copy of letter I have
written to Capt. Antonio Cabral, of the Brazilian flyers.
Our Mr. E. E. Jonas tells me that you are in charge of their itinerary and
I sincerely hope that you will arrange for a visit to our plant.
Confidentially, I have just had a letter from our Mr. Nelson stating that
Curtiss secured the order for aeroplanes equipped with machine guns and pre-
sumably some cartridges to go with them for China. This bears out what I
told you that, in my opinion, Remington and Curtiss were working very closely
in that market, and I trust, under the circumstances, you will find it advanta-
geous to work with us just as far as you can in these matters.
With the signer's kindest regards, we remain,
Yours very truly,
H. F. Beebe,
Mgr. Foreign Department.
HFB : ERJ-93.
Exhibit No. 569
Rio DB Janeiro, June 23, 1933.
Mr. Walter C. Thurston,
American Embassy, Rio de Janeiro.
Dear Mr. Thurston : Mr. George S. Forman, representative of the Colt's
Patent Fire Arms Mfg. Co., and I, as representative of the United Aircraft
Exports, Inc., take this opportunity of confirming our conversation with you of
yesterday.
liast year's revolution caused the purchase of approximately a 150 military
and conmiercial airplanes from the United States America by the Brazilian Gov-
ernment. This extensive purchas^e repi'esented the adoption of American ma-
terial by the Brazilian Air Corps and, simultaneously, the throwing out of
French material. The military planes of these orders were supplied with Colt
machine guns.
IMonths ago, after most of these airplanes had arrived and were assembled,
the Brazilian Government, after due consideration, decided that it was neces-
siary to send a group of officers to the United States for the puipose of familiar-
izing themselves with tiie necessary technical knowledge to enable them to
properly use and maintain the material which American factories had supplied
them.
MUNITIONS INDUSTRY 1563
This matter was brought to the attention of our military attache, Major
Sackville (and through him to the attention of Ambassador Morgan), who co-
operated with the plan. Major Sackville, naturally, in approval of the idea,
accompanied by Mr. Carr, visited General Aranha, the chief of the military
aviation for Brazil, and, at that time, the general was assured by Major
Sackville, unofficially, that if the Brazilian Government requested permission
for a visit to certain Army and Navy aviation fieUlsi and Amencan factories
who had supplied the material, this request would be acted upon favorably by
the American authorities.
Accordingly the Minister of War of Brazil nominated a special commission of
officers from the Brazilian Army Air Coriis, who were charged with the duty
of going to the United States to leani the proper handling and care of this
purchased American material. The commission, headed by Major Plinio, left for
the United States about eight weeks ago.
We visited the cabinet of the Ministry of War today and found that there
was a feeling of deep dismay at the lack of understanding of the matter. They
had received official information from Major Plinio, the head of the commission
in the United States, to the effect that our War Department has given permis-
sion to visit certain factories, but that this permission was drastically limited
to one-, two-, and three-day visits. Since these officers were sent to gain
technical knowledge relating to the purchased products, so limited a visit was,
of course, considered entirely useless. The officers spoken to at the Ministry
of War here were deeply disappointed as they had been given no reason to
believe that there could be any objection to the plans which had been adopted
and duly discussed in advance.
We respectfully suggest that it would be inimical, not alone to American trade
interests, but also to the spirit of good will which prevails between the two
countries, to allow this matter to remain as is. Brazil went to quite some
expense and trouble to send the mission to our counti-y, and under the circum-
stances it is left with the alternative of suddenly recalling it. Would it not,
therefore, be advisable to cable through the proper diplomatic channels in an
endeavor to correct a situation which, in our opinion, possibly arose through
improper handling in the United States.
Respectfully yours,
UNITB2) Air Craft Exports, Inc.,
Clark M. Carr, Representative.
Colt's Patent Fire Arms Mfg. Co.,
George S. Forman, Representative.
CMC/fk
Exhibit No. 570
[Copy]
Aer-M-2-EP.
Navt DEPARTMB3^T,
Bureau of Aeronautics,
Washington, D.C., 17 September, 1932.
(Confidential.)
From : The Chief of the Bureau of Aeronautic-s.
To : The Chief of the Bureau of Supplies and Accounts.
Subject : Aircraft for foreign sale.
Reference: (a) Bu. Aero, letter Aer-M-2-BA, Lll-4(2), dated 6 September
1932 to Bu. S&A.
(&) Sec. Nav. letter (SC) EF12, dated 15 September 1932.
(c) Sec. Navy letter Op-13B-PS(SC) EF12, datetl 16 September
1932.
(d) Bu. Aero, letter, Aer-M-2-BA, Lll-4(2), C-21737, to Bu. S&A.
1. Reference (&) approved the diversion of twenty (20) Vought planes and
eight (8) Boeing planes for foreign sale. Reference (c) so modified reference
(b) as to allow the Bureau of Aeronautics "In its discretion to release for
foreign sale such number of Vought and Boeing planes as may be desired, pro-
vided the total released does not exceed twenty-eight (28)."
2. Reference (c) requests the Chief of the Bureau of Supplies and Accounts
to authorize the diversion of fifteen (15) SU airplanes from delivery to the
Navy to enable them to make deliverj' of these planes for foreign sale. It is
requested that this authorization be modified to allow the Chance-Vought Cor-
1564 MUNITIONS INDUSTRY
poration to divert fourteen (14) SU airplanes instead of fifteen (15) for foreign
sale from contract nos. 24198.
3. Reference (d) authorize the diversion of a total of eight (8) Boeing
fighters under contract nos. 21737 for foreign sale. It is requested that the
Boeing Company be permitted to divert from delivery to the Navy to permit
foreign sale of a total of fourteen (14) Boeing fighters instead of eight (8)
airplanes as previously authorized to be diverted.
A. B. Cook,
Captain, U.8.N.,
Acting Chief of the Bureau.
Exhibit No. 571
[Copy]
March 28, 1934.
Letter No. 442,
Mr. Clark M. Carr,
Buenos Aires, Argentina.
Mr. F. S. Jonas, who represents Federal Laboratories and Remington Arms
Company in Latin America, has just returned from a trip down the east coast
of South America.
Jonas reports to us that there is considerable aviation activity in the
Argentine due to a combination of the realization of their need for a greater
air force, which has been accentuated by the recent revolutions, and a wide-
spread national feeling of the inferiority of their air force occasioned by the
display of aerial strength made by the Brazilian Government at the time of
President Justo's visit to Rio de Janeiro.
Jonas asked if we had an agent in the Argentine and, being advised in the
negative, stated that that is one place we certainly should have one, and
recommended the firm of Leon & Bonasegna to us. Jonas states that they
are a live outfit, specializing in government business.
In connection with Brazil, Jonas states that the army and navy have
received an appropriation of twenty-five million dollars for all arms of the
service for the current fiscal year. The division of this appropriation between
the two services and into the different arms of each service had not been
made prior to his departure. However, it is definitely understood that the
army is going to acquire twenty amphibion planes in order to properly patrol
the upper Amazon in anticipation of recurrence of hostilities between Colombia
and Peru.
Jonas advised that Federal Laboratories had broken with Casa Mayrink
Veiga due to their practice of representing the product of competing firms ; in
this case. Lake Erie Chemical. It is Jonas' opinion that Casa Mayrink Veiga
are in very poor repute with the government and not improving their situation
materially as the days go by.
In this connection it is interesting to have Jonas comment that our main
competitor is being represented by the firm of Sousa Sampaio, which enjoys
a most excellent reputation in all quarters and is run by a family prominently
identified with the development of both Brazil and Uruguay for a number of
generations. We have, in the past, believed that our competitor could not
do nmch in the Brazilian market with the present government because of the
bad reputation they got in connection with supplying second-hand equipment
during the course of the Brazilian revolution. Apparently, this should be
discounted heavily, if not entirely, due first, to the type of representation they
now have in Rio and, second, to the following evidence of the short memory
and forgiving disposition of the present Brazilian Government.
Captain Muricy has just expressed his personal indignation over the receipt
of news from Brazil that a certain officer in the Brazilian army aviation, who
deserted to the rebel side in the last revolution, has been reinstated with his
old rank and seniority. This officer not only deserted to the rebel side, but
took with him the best of the pursuit planes, a French Dewoitine, and during
the course of the revolution engaged in combat, using this plane, against
Captain Muricy fi.ving a Waco. Only the failure of the machine gun in the
Dewoitine saved Muricy's life, because of the vastly superior performance of
the more powerful machine. Now, this man is not only Muricy's " brother-
in-arms ", but his senior in point of rank. Knowing Latin temperaments and
personalities, I am sure you will agree that if such action is taken r<>garding
MUNITIONS INDUSTRY 1565
individual's the government will not scruple too long over the past performance
of our competitor.
The writer has just received a visit from Captain Aguirre, or the Brazilian
Navy, who apparently is doing odd jobs for Casa Mayrink Veiga in addition
to serving the Brazilian Government in this country. Captain Aguirre wished
me to advise him where he could get information regarding standard United
States Army long-range observation planes and bombers. He was reading his
requirements from a letter which was carefully folded to conceal the letterhead.
I drew out the information that he expected to get in touch with the Glen L.
Martin Company and was looking for the names of other manufacturers. By
upsetting some material from the desk, I caused the captain to jump, revealing
the familiar letterhead of Casa Mayrink Veiga. It is reasonable to assume
from this that they are neither anxious to, nor contemplating, concentrating
their attentions on the merchandising of United Aircraft products in the
aviati(m line. I advised Captain Aguirre that the United States Army had no
occasion for long-range observation planes, due to the fact that we do not con-
template any offensive wars and the topograpliy and wide-spread development of
this country did not require long-range observation planes for use in connection
with defensive military operation. I called his attention to the excellent range
of the new Corsair and to the performance of the Boeing bomber.
The great distances involved in South America, together with the unsatis-
factoi-y means of communication in certain sections are fully appreciated by us.
These considerations, however, would seem only to further point to the necessity
of having adequate local representation in the countries where potential business
exists. With proper agency set-ups, our interests would not only be continually
followed on the ground, but you yourself would be continually advised of the
developments in different quarters and be able to plan your own movements
for maximum effectiveness. This would also make it possible for you to keep
us fully advised of the general developments and changed political and economic
situations. As the situation exists at present, we receive much more informa-
tion of this type from outside sources than from yourself.
Naturally, we are ready to assist you in any suitable way toward the end
of developing and coordinating our necessary sources of information and selling
efforts in South America.
S. A. MoClellan.
mvk.
Exhibit No. 572
Augusto Changanaqui, Notary. Address, Botica de San Pedro (Giron
Ayachcho), No. 410. Telephone 751. Lima.
(Rubber stamp:) Office of Notary Changanaqui, Botica de San Pedro
(Ayachcho) 410. Telephone 30-751. Safe for the custody of files.
Oedinary Copy of the Instrument of Sale Granted by the Compania Admin-
ISTRADORA DEL GXJANO IN FaFOV OF THE UNITED AIRCRAFT EXPORTS, InC, FO
New York. No. 1332. Folio 1980 (Forward)
Introduction. — In Lima, on the thirtieth day of the year nineieen hundred
and thirty-two, before me, Notary Augusto Changanaqui Brent, appear Messrs.
Adolfo Lainez Lozada, Peruvian citizen, single, engineer, possessor of Electoral
Registration Card No. thirty-six thou.sand one hundred twenty-three, and with
evidence of having deposited ballot in Desk No. three thousand three hundred
forty-two, a resident of this city, in his capacity of Manager of the Compania
Administradora del Guano ; Francis H( nry Love, representing the Uni ed Air-
craft Exports, Inc.; and Harold Sylvester McCormick, both Americans, mar-
ried, business men, residents of the city of New York, on passage in this city;
the three of legal age, conversant with the Spanish language, whom I know;
proceed with capacity, freedom, and sufficient knowledge to contract, as I have
verified through the examination I have previously made in accordance with
the provisions of the Notary Law, and hand me, for the purpose of legal regis-
tration of recorded instruments, the minute which I file, the literal tenor of
which is the following:
Minute. — Please enter in your registry of legal public instruments the present
contract of Purchase-Sale of Guano, entered into and between the Compania
Administradora del Guano, on one part, represented by its manager, Engineer
1566 MUNITIONS INDUSTRY
Mr. Adolfo Lainez Lozada, hereinafter called the "seller"', and Uni:od Aircraft
Exports, Inc., a company of the State of New York, hereinafter called the
" buyer ", and which is represented by Mr. Francis H. Love, as per powers of
attorney, which you will please insert.
First. Object and duration of cotitravt. — During the period commencing on
the date of this instrument and which will end on the first day of June of year
nineteen hundred thirty-seven the seller agrees to sell to tlie buyer and the
buyer buy guano of the Peruvian Islands, pure and unadulterated, in the
quantities, at the prices and subject to the terms and conditions set forth in the
following clauses :
Second. Territory. — The sales market assigned to the buyer is composed of
the following territories :
a) The territory of the United States of America, with the exception of
the States of Washington, Oregon, California, Idaho, Nevada, Arizona, New
Mexico, and Wyoming.
b) The Dominion of Canada.
c) Puerto Rico.
d) Cuba.
The seller guarantees that no quantity of guano or mixtures containing it,
except under this contract, will be sold or offered by him for resale in the said
market or territory.
Third. Quantity. — Maximum limitations : The seller agrees to accept orders
from the buyer only up to the limit permitted by the available tonnage for
export after all the requirements of the Peruvian agriculture have been pro-
vided for and the existing contracts made by the seller, which contracts the
buyer declares as known to him. In accordance with clause four the seller is
obliged to advise the buyer on each year the quantity available for export and
for sale in accordance with this contract.
Minimum limitations : The buyer agrees to purchase not less than twelve
thousand English tons per year; that is, between the first day of June of
each year and same date of the following year. Consequently, this contract
is made on the basis that the buyer purchase not less than sixty thousand
tons in the course of the five years of the life of this contract.
The tons referred to in this contract are of two thousand English lbs. each.
The seller may cancel this contract if the buyer does not purchase the mini-
mum stipulated quantities, without any responsibility nor indemnization for
damages or prejudices from one part against the other.
The buyer cannot place orders for the purchase of guano for less than five
hundred tons, but the seller shall not be compelled to effect shipments until
these amount to two thousand five hundred tons.
Foui-th. Orders. — Fifteen days after the legal registration of this contract,
the buyer shall advise the seller the quantity of guano which he expects to
purchase during the first year. On the first day of June of each year, or
before this date in each of the following years of the duration of this contract,
the buyer shall make a similar notification. On receipt of this advice the
seller shall, in turn, notify the buyer by cable, within ten days, if he can
totally or partially attend to the order.
It is understood that failure on the part of the buyer to advise the seller
within the period stated in this clause shall entitle the seller to cancel this
contract.
The buyer may at any time isisue orders to the seller for shipment during
months expressly specified. All these orders or instructions given to the seller
on or before July 15 of each year, within the tonnage notified to the buyer
as available for shipments as stipulated above, shall be inunediately accepted
by the seller, confirmed by him to the buyer, and a firm contract shall be in
effect for the purchase and sale of the ordered quantity on the svime basis of
this contract, miless specially agreed upon. The seller is not conijielled to
accept orders for the shipment of guano from August fifteen until February
first, inclusive, during which time the incubation and reproduction of tl.e guano
birds takes place, except by special agreement in this respect. All orders
given to the seller after July fifteenth of any year shall be subject to accept-
ance or rejection of the seller at its option. Such quantity, if accepted, shall
be considered for computation of orders given by the buyer for the purpose
of applying the minimum limitation provision of clause 8 hereof. All orders
shall include specific shipping instructions.
Since several months of this first year of contract have passed, during which
months orders could be placed and shipments could be made, the seller and
MUNITIONS INDUSTRY 1567
the buyer agree to extend in this first year the period during which shipments
can be made.
Fifth. Qualiti/.— The guano for delivery under this contract shall contain:
(a) Not less than 8% total nitrogen. Any quantity giving analysis of more
than 1314% total nitrogen shall be considered, for the purpose of determining
the price, as hereafter provided, as analyzing only 13^^%.
(b) Not more than 12% sand and silicons material.
(c) Not more than 25% moisture.
(d) Not more than 6% stone.
Any excess over these percentages of stone, sand, and silicons material and
moisture shall be deducted from the weight to be paid for by the buyer.
Sixth. Wei(/ht. — The weight of each cargo or part thereof discharged at
any port shall be established on discharge by steamer by public weigher at
seller's expense. The buyer and the seller may be represented at the weighing
operation. The buyer may be represented by person or persons as it may
designate, in the islands or at any shipping points for the purpose of control
weight and quality of guano to be made before each out-going shipment, thus
offering both parties a basis, as approximate as is possible, for the provisional
computation of the price referred to in clause nine iiereof.
Seventh. Auali/sis. — Representative samples of each shipment shall be drawn
on arrival of each shipment by the public weigher. For the drawing of a
representative sample of each shipment or part thereof discharged at each
port, the weigher shall take a sample from each car lot, or where cars are not
used, from each 20-ton lot, equivalent to one-half of one percent of its net
contents. If the guano is discharged in bags, the same proportion from the
totiil number of them will be drawn, such bags being alternatively selected by
the weigher. If the cargo is unloaded in bulk, the samples shall be put in bags.
All the bags containing samples sliall be placed in a spot protected from any
cause that might alter its composition, after having been sealed by the weigher
or the representatives of the buyer and seller. (3f the total number of the
separated and sealed bags, there shall be selected 50, alternatively, by the
representatives of both parties, or the total number of bags if they do not
reach this number. The bags thus selected shall be weighed, the net weight
being established by the difference between the gross weight and that of the
empty bags. The guano emptied from the bags shall be passed through a
steel sieve of 5-mm mesh over which the lumps of guano which remain shall
be rubbed strongly in order that all the guano may pass through the sieve,
so that only the stones will remain. These stones, after being cleaned, shall
be weighed so as to establish the i^ercentage they repi-esent with relation to
the weight of the guano taken to constitute he sample. The guano, which
has passed through the sieve, shall be carefully mixed and by successive removal
of part of it, its quantity shall be gradually reduced until sufficient quantity
is obtained to fill 6 jars with screwtops to contain one pound each, which jars
shall be waxed and sealed by the representatives of the buyer and the seller.
The buyer and seller may each select a public fertilizer chemist in the United
States of good business reputation, and each shall send to the chemist so
selected one of the bottled samples in their possession. Each chemist shall
then determine in its sample the total nitrogen, available phosphoric acid,
moisture, and siliceous material. The average of these two analyses shall be
the basis of payment unless there should be between them a difference of i/^ unit
for the nitrogen or 1 unit for the available phosphoric acid. In the event that
the difference in one or more of these elements, nitrogen or available phosphoric
acid be greater than that as indicated, the seller and buyer will each send
bottlefl sample in their possession to Messrs. Wiley & Co., Baltimore, who will
thoroughly mix the two samples and determine the element or elements in dis-
pute. The average between Wiley's analysis and the analysis nearest to Wiley's
shall be considered as final. The analyses shall be made in accordance with
the methods adopted by the American Association of Official Agricultural
Chemists. The seller and buyer shall each pay the fees of their respective
chemists, but the cost of Wiley's analysis shall be borne by the party whose
chemist shows the greater difference with this analysis.
Eighth. Price. — The price to be paid for the guano delivered under this con-
tract c.i.f. port or ports of destination shall be the sum of the price of its
contents of nitrogen and available phosphoric acid (soluble in citrate of
ammonia and water) indicated by the analysis and determined in the manner
as hereinafter established.
1568 MUNITIONS INDUSTRY
For the fixing of the price of the nitrogen contents the following procedure
shall be observed: Of the section Current Market Quotations of the issue of the
review Oil Paint and Dnig Reporter of New York, nearest prior to the date of
cable order by the buyer, there will be taken tlie lowest price per ton of sulphate
of ammonia, domestic production, for commercial use, in bulk, f.o.b. Atlantic
ports, including Baltimore ; and the lowest price for imported sulphate of
ammonia of same class as the previous one, c.i.f. Atlantic ix)rts, including Balti-
more. These two prices shall be average<l into each other. The average shall
be divided by 20.5625, thus obtaining the price per unit of nitrogen in the
sulphate of ammonia, which shall be increased by 30 percent in ordei- to -obtain
the price per unit of niti'Ogen in the guano. This latter price shall be multiplied
by the number of units of nitrogen given by the analysis, subject to limitation
of its contents of nitrogen, as per clause tifth hereof, thus obtaining the price of
the contents of nitrogen in the guano. The procedure for the price of the con-
tents of available phosphoric acid shall be as follows : From section Current
Market Quotations of the issue of the review Oil Paint and Drug Reporter of
New York, nearest prior to the date of the cable order by the buyer, it shall be
taken : the lowest price per ton of 16% superphosphate, in bulk, f.o.b. Atlantic
ports, including Baltimore. This price shall be divided by 16, thus obtaining
the price of the available phosphoric acid unit. This price shall be multiplied
by the number of units of available phosphoric acid given by the analysis pro-
vided in clause seventh hereof and the result shall be the price of the contents
of the guano in available phosphoric acid.
If, for any reason, during the life of this contract, the prices api^ear in the
section Current Market Quotations of the Oil Paint & Drug Reporter for the
imported sulphate of ammonia be nominal and should not correspond to actual
sales, in this case, the price of the guano shall be fixed on the basis of the
quotation for the domestic sulphate of ammonia only. If the quotation for
the domestic sulphate of ammonia should be nominal and not actual, the price
of the guano shall be fixed on the basis of the quotation for the imported sul-
phate of ammonia.
In these circumstances the buyer shall cable the seller advising the situation
for its approval.
If the buyer should purchase or order delivery of ground guano in bags and
the seller could supply said guano on account of having adopted the necessary
machuiery, the seller and the buyer shall, by agreement, fix an extra price for
the guano manipulated in such manner.
The buyer shall, from time to time, notify the seller of the quantities resold
by the buyer (or, in the case above provided for, by the person to whom the
buyer has resold) the dates of such sales and the market price determined as
aforesaid.
Nhith. Pojimemt. — The payment of the guano paid under this contract shall
be made in the following manner : Against delivery to the National City Bank,
Lima branch, of the corresponding complete shipping documents, including con-
sular invoice of the estimated value, certificate that the guano emanates from
the islands and copies of the charter party, the seller shall receive a sight draft
equal to the sum of seven dollars twenty, U.S. funds, for each ton included in
the said shipment. If the equivalent in Peruvian money of the seven dollars
and twenty cents which the buyer shall advance to i he seller added to the sum
covering freight would not be sufiiciont to cover Ihe expense of exploitations
and freight incurred by the seller plus a sum of 10 computed on the basis
of the cost of exploitation and such a fact verified by the seller the
advance of seven dollars and twenty cents shall be increased by mutual agree-
ment of both parties.
The sense of this clause is that the seller is not compelled to sell gaiano at a
loss and without a minimum profit of 10% over the cost of exploitation and
exportation of guano.
The balance, until the sales price is completed, shall be placed at the disposal
of the seller as soon as, in accordance with the terms of this contract, the
the definite price of the shipment is established.
From this balance the buyer shall deduct the sums paid to the .seller as
advance of price, in accordance with this contract, including the amount of
insurance, the issuance of which for the account of the seller, is herewith
expressly aiithorized.
Tenth. Shipment. — The shipments of guano shall be made in steamers in
quantities of 2,500 tons, as minimum, such tons of 2,000 lbs. each during the
period from April 15 to August 15, inclusive, on each year in accordance with
MUNITIONS INDUSTRY 1569
instructions from the buyer. The deliveries shall be made at not more than
three ports for each shipment, between and including Galveston, Tex., and
Saint John, New Brunswick, inclusive, and the rotation of ports shall be from
south to north. The buyer has the right to order the shipments to any port
within the range above named, where the steamer may safely enter and lie
afloat. Should the buyer desire shipments made to ports in Puerto Rico or
Cuba, for which port there is freight available, the buyer must cable the seller
the corresponding advice and the seller shall notify the buyer of the difference
in the price as compared with the usual rate between Galveston and Saint
John. The buyer may then notify the seller whether or not to ship, the differ-
ence in freight being for the buyer's account.
The ocean freight for each .shipment and the insurance shall be paid by the
buyer for the account of the seller on arrival and shall be deducted from the
purchase price of the guano. There shall also be deducted the $7.20 U.S. funds,
per ton delivered buyer in accordance with clause ninth hereof and any other
payment which the buyer might have made on account and with the consent
of the seller.
It is agreed that the guano shall be shipped in class A-1 steamers only,
unless the insurance underwriters accept and assume responsibility on ship-
ment by any other steamer.
The steamers carrying the guano shall be sent to the order of the buyer, who,
directly or through his agents shall give the captain instructions as to the
ports of call, which shall not be more than three, and located successively, from
South to North, unless otherwise agreed upon. Instructions as to the second
or third port shall be given within twenty-four hours after arrival at first or
second port.
On arrival of each steamer carrying the guano at the port or ports of desti-
nation, the buyer agrees to have the necessary arrangements made, for the
steamers' account, for the discharge of all or part of the cargo, which nmst
be effected on the minimum proportion of 100 tons per weather working day,
Sundays, holidays, and half holidays excepted. Payment of demurrage, which,
in accordance with the charter party must be paid to the steamer for a daily
rate of discharge inferior to the indicated one of 100 tons per day, shall be for
the account of the buyer.
Eleventh. Import duties and others. — In the event that the importation of
guano into the territory, be affected by the United States law, usually known
;is the Antidumping Act, or other laws which fundamentally alter the contract
through their effect, all penalties as provided in such laws shall be for the
account of the buyer and if the buyer should decide not to assume any
responsibility for such laws on subsequent shipments or in the event that addi-
tional import duties or any other restrictions may be imposed on the importa-
tion of guano into the territory or the sale or use of guano prohibited, the
buyer has the option of cancelling this contract, and in the case of the buyer
canceling the contract, all buyer's responsibilities thereof shall cease, with
the exception of payment, in accordance with the provisions set forth in this
contract, of any balance which might be due for guano purchased and delivered
prior to this termination.
Twelfth. Re-exportatiwi.—The buyer agrees not to re-sell any quantity
of guano purchased under this contract for its exportation from the territory.
Payment of damages for breach of this clause shall be 50% of the purchase
price of the guano, computed in accordance with this contract, knowingly resold
for export, to be credited to the seller by the buyer.
Thirteenth. Force majeure. — Neither party shall be responsible to the other
for failure of delivery or receipt of the guano under this contract when such
failure shall be originated by fire, strikes, lock-outs, civil war, revolution, acts
of God or public enemies or any other superhuman, irresistible cause not within
the control of the parties, but in any such case the party claiming the benefit of
this article shall use due diligence in order to remove any cause and to resume
the compliance of this contract as soon as possible, the compliance of the other
party being in su.spense and excused meanwhile.
Fourteenth. Transfer.— It is recognized that the buyer may bpcome associated
with other persons, be it individuals or collectively, to exploit this contract,
resell the guano in its totality, or transfer its rights to a third entity. In t he
latter case the seller, at the request of the buyer, may deal directly with the
third entity to the extent requested by the buyer ; however, the buyer shall not
be exempt of responsibilities or obligations under this contract.
1570 MUNITIONS INDUSTRY
Fifteenth. Arhi'tration. — Auy dis^agreement between the buyer and the seller
as to the interpretation of this contract or its compliance shall be resolved by the
Chamber of Commerce of Lima, Peru, in the capacity of arbitrator.
Sixteenth. Fees.— Law fees and attestation for the seller are for the account
of the buyer.
Seventeenth. Authorization. — The seller forthwith lends his consent so that
the buyer may commit or entrust everything: concernins the sale of guano
which he — ^tlie buyer — obtains to the firm H. J. Baker & Bro., of New York, but
the buyer shall totally assume the respousiljility for the manner in which the
said firm manages the business with which it is entrusted. The representative of
the H. J. Baker & Bro., Mr. H. S. McCormick, signs this contract as a sign of
acceptance.
Eighteenth. Conventional address. — The buyer forthwith indicates as his local
address in this city, for all communications and summons in connection with
this contract and exclusively in relation with the seller, the premises of the
National City Bank, Edificio Italia, ground floor, located at the corner of Coca
Street and Jesus Nazareno. The buyer shall be able to change his address at
any time for any other in this city with advice to the seller through notary.
You are requested to append the conclusions of the law and to insert the
powers of attorney proving the representation of the Messrs. Love and Lainez
Lozada. Lima. May 30, 1982. A. LAINEZ LOZADA, FRANCIS H. LOVE,
H. s. Mccormick.
Notation. — Exempt of taxes. Lima, May 30, 1932. Depai-tnient of Deposits
and Consignments, office of the collector, Gmo. Ureta Solar, head of the
department.
Exhibit No. 573
[Copy]
AGREEMENT — THE GOVERNMENT AND " UNITED AIBCRAFT EXPORTS, INC.", OF NEW
YORK
Introduction: In Lima, on this twenty-fifth day of June, nineteen hundred
thirty-two, before me, notary, Augusto Changanaqui Brent, at the Direction Gen-
eral of Finance of the corresponding Ministry, appear Messrs. Felipe S. Portocar-
rero, Peruvian lawyer, with electrol registration card no. 340008 and with evidence
of having cast his ballot at desk no. 1743, in his capacity as Director General
of Finance, representing the government ; and Francis H. Love, North Ameri-
can business man, in his capacity of president of United Aircraft Exports, Inc.,
of New York, both married, of age, residents of this city conversant with the
Spanish language, whom I know ; proceed with capacity, liberty, and sufficient
knowledge to enter a contract, as I have verified through previous examination
in accordance with prescriptions of the notary law, and deliver for the pur-
pose of registration as public instrument the minute which I file and the tenor
of which is literally as follows :
Minute : To the notary : Please enter into your Registry of Public Instru-
ments one evidencing contract being entei'ed into between the supreme govern-
ment, represented by the Director General of Finance, Dr. Felipe S. Portocar-
rero, according to supreme resolution which you will please insert, on one part,
and United Aircraft Exports, Inc., represented by Mr. Francis H. Love, accord-
ing to power of attorney which you will also insert hereinafter called " LFnited ",
on the other part, on the terms and conditions which follow :
First. The sujjreme government owes United, as of May 31, the sum of $746,-
647.48 U.S. dollars by virtue of contract of purchase sale of aeroplanes and
equipments (>ntere(i on rec(n-ded public instrument on January 29, 1930, before
notary. Mi-. Augusto Changanaqui, as per statement attached liereto, as integral
parts of this contract, which you Mr. Notary will please insert in this public
instrument. This debt during the course of this contract will be referred to as
" Contract debt 1930." Furthermore, the supreme government, through the
Ministry of Marine and Aviation, will acquire from time to time new planes and
aviation etiuipment for military and commercial purposes in Peru, through
United, who shall furnish them on conditions and terms to be specified in con-
tracts to be entered for the purpose. The obligation in which the supremo gov-
ernment may incur on account of these acquisitions will hereinafter be referred
to as " new acquisitions."
MUNITIONS INDUSTRY 1571
Second. In order to procure the Government the necessary funds for the
liquidation of the contract debt 1930 and the necessary funds for the new
acquisition, United has, by virtue of recorded public instrument of May 30,
entered a contract with the Compania Administradora del Guano, hereinafter
called " Compania ", before notary public, Mr. Augusto Changanaqui, for the
purchase sale of guano on terms and conditions stipulated in the said contract.
Third. Clause no. 8 of the said purcliase-sale contract stipulates that the
price of the guano acquired by United shall be paid for in the following man-
ner : Against receipt of complete shipping documents United shall pay the
equivalent of the sums actually expended by the Compania covering freight
plus the sum of $7.20 U.S. dollars per ton of guano comprised in each shipment.
The balance (less the expense incurred by United for the account of the Com-
pania inclusive of insurance charges) is stipulated to be paid as soon as, in
accordance with the contract, the price of the shipment is definitely established.
By virtue of the present contract the Supreme Government agrees to expressly
and irrevocably assign United fifty percent of the balance of price mentioned
in the preceding paragraph, and which constitutes fiscal profit in the sale of
guano for export and which exclusively corresponds to the Government, for the
purpose of having United apply it to the amortization of the contract debt 1930
and to the liquidation of contracts which may be entered into for future acquisi-
tions. United shall pay the Compania the other 50% (fifty percent) in ac-
cordance with, or as stipulated by, the contract. This contract does not alter
general payment obligation assumed by the Government in contract of January
29, 1930, before Notary Cliauganaqui, and the other conditions stipulated
therein, and shall be construed as complementary of the latter, procuring the
economical means to the Government for payment of its obligations.
Fourth. Of the 50% retained by United, 25% shall be applied to the amortiza-
tion of the capital on the old debt, amounting to $746,647.48 U.S. dollars, and
the balance of 25% shall be applied by United to new acquisitions. The liquida-
tion of the interest accrued only on principal $708,544.59 U.S. dollars, beginning
June 1, shall be agreed upon between both parts.
If, after a period of 6 montlis of liquidation of one guano shipment, the
Supreme Government did not make any aeroplane or equipment purchases nor
should there be any debits to the Government on account of new acquisitions,
the sum representing the 25% shall lie retained by United with instructions
to apply it solely and exclusively to the amortization of such contracts that
may be entered into for new acquisitions. If during the lift of this contract,
the contract debt 1930 should be completely liquidated, the 25% applying to
this debt .shall be retained l\v United for the amortization of contracts entei'ed
into covering new acquisitions. In the event tl'at United should not be totally
paid on the old debt as well as on the new acquisitions at the expiration of the
guano contract and this contract should not be renewed, the Supreme GoV'
ernment and United shall agree as to the manner of payment of the unpaid
balance.
Fifth. The assignation for payment of the 50% of the fiscal profit, computed
as indicated and in accordance and subject to the conditions of the preceding
clauses, is obligatory and irrevocable during the total life of the contract for
the purchase-sale of guano l)etv>een United and the Compania. At the execu-
tion of this contract, tlie Supreme Government shall officially notify the Com-
'pania the irrevocable assignation being made in favor of United, thus being
understood as paid to the Compania, in each case, 50% of the balance of
the price stipulated in clause no. 8 of the contract purchase-sale of guano.
Without further additions, attending to the insertion of the power of attorney
referred to and the Supreme Resolution approbative of the contract also
authorizing the Director General of Finance, to sign it, in representation of the
State, please enter this minute as recorded public instrument. Lima, June 6,
1932. Felipe S. Portocarrero — seal of the Direction General of Finance of the
corresponding Ministry — Francis H. Love.
Evidence : Being after 2 p.m. time during which the respective office of Ca ja
de Depnsitos y Consignaciones Departamento de Recaudacion, and being of
urgent need to execute the instrument at once, at the request of tlie interested
parties, I reserve tlie right to obtain the passage of the minute at the first
working hour.
Inserts: Inquiry: To the Minister of Marine and Aviation: F. H. Love,
President of United Aircraft Exports. Inc., respectfully depose and say: That
I enclose a statement of ac ount between the Supreme Government and the
83876 — .34— PT 6 11
1572 MUNITIONS INDUSTRY
company I represent as of the 31st inst. so that you may duly approve it
upon revision. The enclosed statement is, as mentioned, as of the 31st instant,
and an error was corrected therein, incurred in the previous statement showing
the computation of interests. Therefore, I beg you to accede to my request.
Address : National City Bank, Lima, May 30, 1932. United Aircraft Exports,
Inc. Francis H. Love, President.
Statement of account of United Aircraft Exports, Inc., with the Government
of Peru, as of May 31, 1932, which must be recognized by the Minister of
Marine and Aviation. Number. Payments due per contract. Payments re-
ceived. Payments in arrears. Maturity date. Date of Payment. Day in
arrears to May 31, 1032. Interest on days in arrears to May 31, 1932: 1. 1930.
1930. 6% 1.— Januarv 31, $25,000. January 31. March 18. 46 $189.04 2. Feb.
28, $25,000 $25,000 Feb. 28, April 25, 56, $230.13 ; 3 March 31, $25,000 $25,000,
March 31, June 16, 77, $316.43 ; 4, April 30. $25,000 $25,000 April 30, Ag, 6-$9S,
$402.73 ; 5, May 31, $25,000 $25,000 May 31, in arrears 731, $3,004.40 ; 6, June
30, $25,000 $25,000 June 30, in arrears 701 $2,881.12 ; 7-July 31, $25,000 $25,000
July 31, in arrears 670 $2,753.72 ; 8-Aug. 31, $25,000 $25,000 Aug. 31, in arrears
629*, $2,626.33 ; 9-Sept. 30, $25,000 $25,000 Sept. 30, in arrears 609 $2,503.04 ; 10-
Oct. 31, $25,000 $25,000 Oct. 31, in arrears 578, $2,375.65; 11-Nov. 30, $25,000
$25,000 Nov. 30, in arrears 548 $2,252.36; 12, Dec. 31, $25,000 $25,000 Dec. 31,
in arrears 517, $2,124.97 1931 1931-13-Jan. 31, $25,000 $25,000 Jan. 31, in
arrears 4S6-$1,997.57 ; 14-Feb. 28, $25,0(J0 $25,000 Feb. 28, in ari'ears 458,
$1,882.51 ; 15-March 31, $25,000 $25,000 March 31, in arrears 427, $1.755.11 ; 16,
April 30, $25,000 $25,000 April 30, in arrears 397 $1,031.83 ; 17, May 31, $25,000
$25,000 May 31, in arrears, 366-$l,504.43 ; 18-June 30, $25,000 $25,000 June 30
in arrears 336 $1,381.15; 10-July 31, $25,000 $25,000 July 31, in arrears 305
$1,253.75; 20-Aug. 31, $25,000 $25,000 Aug. 31, in arrears 274 $1,126.36; 21-
Sept. 30, $25,000 $25,000 Sept. 30, in arrears 244, $1,003.07 ; 22-Oct. 31, $25,000
$25,000 Oct. 31, in arrears 213 $875.68 ; 23-Nov. 30, $25,000 $25,000 Nov. 30, in
arrears 183 $752.30 24-Dec. 31, $25,000 $25,000 Dec. 31, in arrears 152 1932
1932 25-Jan. 31, $25,000 $25,000 122 $508.32; 26-Feb. 28 $25,000 $25,000 92,
$383.32; 27-March 31, $25,000 $25,000 62 $258.32; 28-April 30 $25,000 $25,000
31 $129.16 ; 29-May 31, $25,000 $25,000 ; 30-June 30 $25,000 $25,000 ; 31-July 31
$25,000 $25,000 ; 32-Aug. 31, $25,000 $25,000— $8,544.59 $8,544.59. Obligation to
May 31, 1932. Total payments without including interest on payments in
arrears $808,544.59, $100,000, $708,544.59. Payments nos. 5 to 32 inclusive,
$708,544.59. Interest May 31, 1932, $38,102.89. Total of obligation including
interest to May 31, 1932, $38,102.89. Total of obligation inckKling interest to
May 31, 1932, $746,647.48— Lima, May 31, 1932. Francis H. Love, President.
Report : From the Director General of Administracion of Marine to Minister
of Marine. Subject: Sum owed United Aircraft Exports, Inc. (reference A).
Contract entered into between the supreme Government and United Aircraft
Exports, Inc.
First. (Under reference A.) A contract was entered into for the acquisition
of 26 military planes and construction of the respective spares for the school of
aeronautics and the passenger and mail services in the mountain airways in the
total sum of $745,000 plus interest accrued in the amount of $59,600, in view of
the fact that payment should be made in monthly sums of $25,000, making a
total of $804,600.
Second. This contract has been fulfilled by United Aircraft Exports, Inc.,
who delivered in due time all the machines and spare parts mentioned under
reference A,
Third. In view of the fact that the freight, insurance, and other expenditures
have been exceeded by $3,944.59 over and above the stipulated quantity under
reference A for payment of the expenses in accordance with clause no. 3 of
refeience (A) payment of this sum corresponds to the Government.
Fourth. The supreme Government has only met the payments of $25,000
corresponding to the months of January to April 1930, equal to a total of
$100,000, therefore owing the sum of $708,544.59 as of May 31, 1932, plus the
interest corresponding to instalments unpaid until May 31, 1932, which amount
to $38,102.89.
Fifth. This direction gives its conformity to statement showing the total
amount of $746,647.48 U.S. dollars, which, as per attached inquiry is presented
by Mr. Francis H. Love, representing United Aircraft Exports, Inc.
MUNITIONS INDUSTRY 1573
Sixth. Consequently recognition of tlie said credit is in order, passing it to
the Ministry of Finance for proper course. God bless you! Captain N V
Galdo. ■ ■
Supreme resolution, Lima, June 8, 1932 : Upon examination of the attached
folio followed by United Aircraft Exports, Inc., requesting payment of supplies
made of training equipment for the aviation schools of the Republic and planes
for the mail-air service and passenger-air service to the mountain, in accordance
with its contract entered into on January 9, 1930, and following the reasons
bring forth, it is hereby resolved : Recognize for payment in favor of United
Aircraft Exports, Inc., the sum of soles (gold 3,135,919) three million one
hundred and thirty-live thousand nine hundred nineteen gold soles and forty-
one cents, equivalent to $746,647.48 U.S. dollars at the rate of exchange of
$4.20 (four dollars twenty cents) balance of planes and equipment delivered
during the years of 1930 and 1931, and in consequence pass it on to the Ministry
of Finance in order to affect the said credit to entries of concluded budgets.
This resolution to be reported and entered. Signature of the President of
the Republic, Benavides — Ministry of Finance — Notification desk. Volume
D.F.V., letter U no. 1, folio 767. Received June 25, 1932.
Another — Ministry of Finance, Lima, June 25, 1932. Examined (a) The con-
tract of purchase-sale of guano entered into between the Compania Adminis-
tradora del Guano and United Aircraft Exports, Inc., per recorded public instru-
ment, date May 31, last, before notary Mr. Augusto Changauaqui Brent.
(&) The supreme resolution of the 8th inst. dictated by the Ministry of
Marine & Aviation, recognizing the sum of three million one hundred thirty-
five thousand nine hundred nineteen soles and 41 cents (3,135,919 gold soles and
41 cents) as balance of the value of planes and equipment delivered in 1930 and
1931, and
(c) The contract to be entered into between the supreme Government and
United Aircraft Exports, Inc., covering payment of the debt for the supply of
planes and accessories for its future provision ; whereas :
Payment as stipulated in said contract is convenient for the good standing
and credit of the State, which payment permits the progressive amortization of
the debt for the supply of planes and training equipment for the aeronautical
schools of the Republic, with the proceeds of the sale of guano, which the
same United Aircraft Exports, Inc., will develop, and insures with the said
funds, the acquisition of machines and equipment which may be required by
the military and commercial aviation of Peru ; and that there have been con-
signed in the general budget, approved by the constituent congress for the pres-
ent year, the corresponding entries in the respective folios for the service of
amortization and interest on the debt and for new acquisitions. It is resolved :
Said contract is herewith approved, containing five clauses, which shall be entered
as recorded public instrument, authorizing the Director General of Finance to
sign the minute and public instrument in representation of the Government.
It is established that on the sums pertaining to the Government and which
shall be retainecj by United, in accordance with clause no. 4, the Government
shall perceive the corresponding legal interest. To be communicated and
registered. Signature of the President of the Republic. Braindariz, Ministry
of Finance. Notifications desk. Registered on folio 742, no. 586, Lima, June
25, 1932. A. Lanfranco.
Evidence: (Power of attorney of Mr. Francis H. Love follows:)
Conclusion : The grantors ratify the contents of this instrument, which I
read in the presence of witnesses Messrs. Miguel R. Estrade and Humberto
Zeballos, respectively, with electoral registration cards 96870 and 554605, with
evidence of having cast ballots at desks nos. 3291 and 3405, both of age, resi-
dents of this locality, whom I also know; in witness whereof, Felipe S.
Portocarrero. Seal of Direction General of Finance of the corresponding
ministry, Francis H. Love, Miguel R. Estrada, H. Zeballos, Augusto Changanaqui
Brent, notary.
Marginal notation : I do hereby certify that this public instrument has not
incurred fiscal tax. Lima, June 25, 1932. Changanaqui Brent.
This first testimony agrees with its principal entered into my registry, folio
no. 2112 and over. Lima, June 27, 1932.
("Exhibit No. 574" appears in text on p. 1477.)
1574 MUNITIONS INDUSTRY
Exhibit No. 575
December 30, 1932.
Confidential.
Memorandum for M. F. B. Rentscliler :
I have just bad quite a long session witli Mr. Smith, partner of H. J. Balier
& Brotlier, regarding the Peruvian situation. I liave a liigli opinion of Mr.
Smitli's integrity, and am inclined to credit fully any statements he makes.
Mr. Smitli tells me the Peruvians .lust approached him on a basis to notably
skimp their analysis in order to double the profit made at this end. We
mutually agreed to turn the proposition down definitely.
To date he has moved three times the contracted tonnage and he expects
that even this will be further increased, as he has made sample sales in places
like Philadelphia which heretofore have never known guano.
The basic price of sulphate of ammonia is rising and future shipments should
show a better return tiiau the last four cargoes. Mr. Smith is further pressing
the matter of screening in Peru, which would eliminate our advancing $7.20
per ton, plus freight charges, etc., on a considerable percentage of weight
of plain stones, dead birds, feathers, etc. I am writing to all guano friends
in Peru supplementing his efforts.
Regarding the Grace situation, I am in pretty direct touch with the new,
and, aparently permanent. President of Chile, and also with jNIr. Ballen, who
has the nitrate concessions, and we feel that eventually we could take this
a\^•ay from Grace. However, we mutually agreed to do nothing and let Grace
carry on as, in any event, their tonnage is very small — about 10,000 tons per
year at present.
Grace just lost a steamer loaded with guano on the Honduran coast, having
a total shipment of 5,400 tons of which they salvaged only 750. Smith has
voluntarily offered Grace any quantity of Peruvian guano they need for their
retail establishments in Florida, but they do not buy direct, but do buy from
Baker through undercover agents, who frankly informed Baker for whom
they are purchasing. A sale of 500 tons was made last week by Baker to
Grace through a third party.
Smith wishes me to help him to endeavor to get the European sales of
Peruvian guano, and I am doing so, although we realize it will be difficult.
Schorder, the banking house, is now taking for Europe 15,000 tons a year mini-
mum, and keeping 60% of the proceeds for interest on Peruvian guano bonds.
Mr. Smith is cooperating thoroughly in supplying various original docu-
ments, which the Guano Company have requested in relation to the four
shipments made to date.
Regarding Chile, Baker formerly did large nitrate business with Anthony
Gibbs & Company, one of the prominent exporters in Chile before the forma-
tion of Cosach. While in South America recently Mr. Smith went to Chile
and was offered quantities of nitrate by independent producers which he can
readily sell in New York. As Cosach is selling from stocks here and at a
loss, based on their original cost price, and as Smith could, Irj- new purchases
with the depreciated Chilean exchange, further undersell them profitably, he
wanted my opinion as to what he should do, and he was perfectly willing to
forego a profit of several thousand dollars in the transaction if it would be
putting a wrench in the program of the Cosach people w4io, as you know% are
sort of tied up with the bank of Sherman & Sterling. He took this up with
me, especially in connection with the Sikorsky account in Chile, and stated
we could use our pesos through him to buy nitrate and he w'ould give us
dollars in New York. I intend to consult with Chambers, of Sherman and
Sterling, with whom I spent some time in Chile when he was working on
this Cosach matter. In the meantime Smith will take no action.
Regarding the Argentine Smith is at present buying an average of $25O,0€O.0O
a year in bone meal, dried blood, and other slaughterhouse products based on
his paying the official rate of 25 cents per peso. The bootleg rate is 20 cents
per peso, and on this basis he can, he says, double or triple his present pur-
chases there, and while the bank cannot officially handle it for him, I am,
as a matter of good will, arranging in a personal confidential way through
Drumm, of the City Bank, to make connection with a money In-oker who will
get him his 20 cents pesos. The main point on this Argentine transaction is
tliat a few months hence, when they come to purchase aircraft, we can, if
necessaiy, take payment in Argentine money or some kind of an exchange
transaction and Baker can readily use up any funds we might thus acquire.
MUNITIONS INDUSTRY 1575
As pointed out to you in the Brazilian transaction with Mayrink, the exchange
profits are sometimes much greater tlian the actual merchandise profits.
Regarding Brazil, on the official rate of 13 milreis to the dollar. Baker can-
not handle the slaughter products there, but on a rate anywhere from 16 to 2'0
he can handle quantities of Brazilian fertilizers, and in the event that we
ever have to take over the 6,000 contos deposit to the account of Mayrink,
we can probably work it on Brazilian exports through Baker.
F. H. Lo\-E.
mvk
cc-Mr. J. F. McCarthy.
P.S. — Since dictating the foregoing I talked with Mr. Chambers, who felt
that a small quantity of nitrate would do no harm. He I'eferred me to Mr.
Jackson, who is now more actively handling Cosach matters, and Mr. Jackson
felt very strongly that no action should be taken detrimental to Cosach's
interest.
F. H. L.
Exhibit No. 576
[Copy]
April 3, 1934.
File memorjindum.
In talking to Mr. ^IcCormick of H. J. Baker & Bros, .vesterday he advised that
the President of Peru had signed a decree dissolving the board of directors of
the Compania Administradora del Guano. One of the reasons for this decree is
the fact that they disregarded the I'residenfs previous decree instructing them
to act favorably with reference to the 15,000 tons of guano for which Baker
Bros, placed orders for the coming year.
Mr. McCormick believes that while this action is far from sntisfactorily
closing the matter, it betters our position somewhat over that which we were
in just prior to Mr. Love's departure, since the then dii'ectors of the Compania
Administradora del Guano were among those opposing our contract for political
reasons. Mr. McCormick expressed tlie opinion that the new directors would
probnbly be more favorable toward us.
We are not passing tliis along to Mr. Love, since he will have reached Peru
prior to receipt of tliis memorandum.
J. R. Miller.
mvk
ce-Mr. P. G. Jolinson.
Exhibit No. 577
[Copy]
U.S. Ordnance Engineers. Inc.,
Cleveland, Ohio. Dec. 9th, 1933.
Mr. Francis Love,
Prcsidcni United Aircraft Exports, Inc.,
230 Park Avenue, New York, N.Y.
Dear Mr. Love: In accordance with your request for quotation, we are
pleased to quote the following list price, f.o.b. Reynolds, Pennsylvania, packed
for export :
Schedule A — Fully loaded:
250^220 lb. demolition bombs, each $150.00
700-110 lb. - 31. 50
700-25 lb. " o^'in
700-30 lb. ring type fragmentation bombs, each 31. 50
Schedule B — Bod}! emptij, fuze and booster loaded:
250-220 lb. demolition bombs, each '2.00
700-110 lb. •• -^-^^
700-25 lb. '• ..,., „^
700-30 lb. ring type fragmentation bombs, each — ''"
Schedule C — Bodu and booster empty, fuze loaded:
250-220 lb. demolition bombs, each o? an
700-110 lb, " ^l-f^
700-25 lb. "
700-30 lb. ring type fragmentation bombs, each 21.40
1576 MUNITIONS INDUSTRY
The bomb rack from which the various bombs are to be used makes no differ-
ence, except for the location of the suspension lugs and this lias no bearing
on the cost. The same is true regarding the fuze timing, on which we will
be glad to give them anything they want.
The 30-lb. ring-type fragmentation and 25-lb. demolition bombs are equipped
with Mk. XIV nose fuze, booster, and adapter, made in strict accordance with
U. S. Army siJeciflcations ; the 110-lb. demolition bombs are equipped with Mk.
VIIMII nose fuze, made in strict accordance with U. S. Army specifications ; the
220-lb. demolition bombs are equipped with Mk. VIIMII nose fuze, plus Mr,
VMI tail fuze.
We estimate sixty days for delivery of the above after receipt of an order.
Your discount from the above list prices is thirty per cent (30%).
In accordance with our conference in New York on Tuesday last, will you
please advise me who in your organization can make specific arrangements for
carrying loaded bombs to Peru, Bolivia, Paraguay, etc., in your Guano boats
in case we should wish to avail ourselves of your kind offer during your
absence from this country.
In accordance with your inquiry, the name of our temporary representative
in Peru is .1. Froletz P. Edificio, Italia 310, Apartado 1873, Lima, Peru, tele-
phone 10126.
Thanking you again for making our stay in New York such a pleasant one,
I am,
Very truly yours,
U.S. Ordnance Engineers, Inc.,
B. C. Goss, President.
beg.
bis.
P.S. — We are sending you, under separate cover, three Baby Giant gas guns
with six shells, for which there will be no charge.
B. C. G.
Exhibit No. 578
[Copy]
December 19th, 1933.
File memorandum.
I had luncheon yesterday with Mr. Smith, of H. J. Baker and Brother, re-
garding the guano situation.
It is probable that Mr. Smith, one of the partners of the firm, will come down
to Peru when I am there next month, to assist in getting additional tonnage.
They are endeavoring to obtain far in excess of the original commitments of
approximately 6,000 tons a year as they could use up to 40,000 tons a year.
It is doubtful that they can obtain more than the maximum of 25,000 tons
annually, due to the increased prices for Peruvian cotton and sugar, which
have greatly increased local demands. Apparently Peni has put in some sort
of a national recovery act, permitting preference to local consumers, notwith-
standing foreign commitments.
The Peruvians are endeavoring to force on H. J. Baker a certain tonnage
of low-grade guano, not over 2% ammonia, on which the expenses would just
about equal the sales price, and this would act detrimentally to our present
contract. While H. J. Baker are willing to acept a certain amount to insure
their getting the rich guano, any such agreement on their part would have
to be according to the legal document exempting it from our present contract.
Should the unusual domestic demand continue, I shall endeavor (with H. J.
Baker's permission) to extend the present contract anywhere from two to five
years, as a off-set. It is hoped that the consumption of low-grade guano in
Peru can be encouraged, thereby releasing more high-grade guano for export.
The Chilean rich guano, controlled last year by Mr. Vallen, of Peru (friendly
to ourselves), is now back in the hands of the Chilean Government. We under-
stand that W. R. Grace are endeavoring to obtain the American sale, but to
date have been unsuccessful.
There is a debt of approximately $25,000 of the Chilean Government to
Sikorsky, which we were hoping to get out in the near future on indirect ex-
change. Letters from the American consul and the American commercial
MUNITIONS INDUSTRY 1577
attache in Santiago, Chile, indicate a great need for aviation equipment, and
with Baker willing to take, under the usual conditions, all the rich Chilean
guano we can obtain, unless something unexpected occurs in the meantime, I
have agi-eed mth Baker to endeavor to negotiate with Chile a similar guano
contract to what we have with Pei'u. Our particular Sikorsky debt is not of
great importance, as usually we would get this anyway, but we might tie in
Chile for future aviation purchases from guano proceeds for some five years.
Baker are quite agreeable to their chartered freighters carrying airplane
bombs or other material of ours to South America, whenever it may result to
our advantage. I have in mind the $100,000' loaded bombs for Peru, on which
freights on regular passenger steamers or any direct steamers are unavailable.
This order will only be taken by us with full cash in advance, or equivalent,
and freight assured in advance.
No additional commitment of any kind regarding the Peruvian situation or
the Chilean situation has been made with Baker or with the Guano Co. I am
to have a final meeting with members of the firm of H. J. Baker before I leave
next month, when they are to give me written authority for additional negotia-
tions in our mutual behalf.
Fkancis H. Love.
mn.
c.c. — Mr. P. G. Johnson.
Mr. F. B. Rentschler.
Mr. J. F. McCarthy.
Exhibit No. 579
[Copy]
OOTOBBB 31ST, 1933.
DiRECTOB General of Administration,
Ministry of Marine and Aviation, Lima, Peru.
Sir : We have for acknowledgement your letter of October 10th, in reply
to our cable of October 6th, which in turn referred to our letter of February
17th. In that letter, we took the position that moneys held by us under the
contract of June 25th, 1932, were applicable only to the purchase of equipment
acquired through us. We are pleased to note from paragraph (a) of your
letter that you are in agreement with this view, when you say that the contract
establishes in a definite form that the purchase of aviation material will be
through our medium. There seems to be no lack of accord between us on any
point, except that, if we understand you correctly, you insist that the moneys
should also be applicable to the purchase of equipment not acquired "through
our medium ", if for any reason we should not ourselves be able to supply
such equipment. Having in view the history of the negotiations which culmi-
nated in the signing of the contract, we find ourselves unable to subscribe to
this point of view. The contract was intended to provide a means to assist in
the liquidation of a very large indebtedness of your Government to us, and
one of the principal inducements for our entering into the contract was the
consideration that we were thereby assured that one-half of the guano proceeds
would accrue to our benefit either through the discharge of existing indebted-
ness or through the sale of additional equipment. The contract was drawn
with this in view, and we believe gives full effect to the deliberate intentions
of the parties at the time of its signature.
As noted above, we do not understand that you dispute our interpretation
of the contract, but rather that you take the view that it should be presently
revised so as to permit the application of moneys in a manner other than is now
provided for. As our president, Mr. Love, is contemplating a visit to Lima
in the early part of next year, an opportunity will doubtless arise of pursuing
this matter with him at that time. It may well be that, upon a further examina-
tion of the question, the justice of your position will appear, but until such time
as the contract is revised upon mutual consent, we have to suggest to you the
propriety of proceeding under the contract according to its present provisions.
Yours very truly.
United Aircraft Exports, Inc.,
J. R. MiixER, Treasurer.
mn
ec — Mr. C. M. Carr, Rio.
1578 MUNITIONS INDUSTRY
Exhibit No. 579-A
[Copy]
(Translate into Spanish)
February 17, 1933.
Capitau de Navio M. V. Galdo,
Director Gral. de Administracimi,
Ministerio de Marina y Aviacion.
Dear Sir : We liave for acknowledgment your letter of January 31 in reply to
our cablegram of January 27 relating to the application of moneys in our hands
to the acquisition of aviation equipment.
We desire to ix)int out that under the first article of the contract entered
into under date of June 25, 1932, between your Government and this corpora-
tion it is stipulated that your Government will acquire new planes and aviation
equipment through this corporation, which agrees to fui-nish such equipment in
accordance with contracts to be entered into with it for that purpose, and that
it is only to the purchase of equipment acquired in this manner that this
corporation has agreed to apply moneys held by it under the contract. This is
clear since, under the fourth article of the contract, it is provided that twenty-
five percent of the purchase price of the guano " shall be applied by United to
new acquisitions ", and in the first article the term " new acquisitions " is
defined as new planes and aviation equipment acquired " through United."
We have no doubt that upon a review of the terms of the contract above
referred to the director general will be in complete accord with our interpreta-
tion of the coutractural provisions, and that further misunderstanding with
respect to the application of moneys held by us under the contract will be
avoided.
Yours very truly,
United Aircraft Exports, Inc.,
J. R. Miller, Assistant Treas.
Original — via airmail,
copy — via regular mail,
cc Mr. J. F. McCarthy.
Mr. C. L. Gault.
("Exhibit No. 580" appears in text on p. 1484.)
(" Exhibit No. 581 " appears in text on p. 1486.)
Exhibit No. 582
[Copy]
E. I. DU Pont de Nemours &; Company,
Wilmington, Dclaivare, May l.'t, 193-'i.
UNITE© Aircraft Exports, Inc..
230 Park Avenue, Neif York City.
(Attention Mr. J. R. Miller, Treasurer.)
Gentlemen : We have for acknowledgment your letter of 9th May 1934, in
which you request information regarding Sr. Ernes; o De Rossi, of Lima. Peru.
Sr. De Rossi has been this department's agent for many years. We have
found him quite satisfactory in the conduct of our business, particularly in
negotiations with the Government. These appraisals are made on the writer's
pers^onal observations of Sr. De Rossi's activi ies in Lima, where it was found
he had very good and intimate connections in Government circles, both army,
navy, and aviation. We are glad to be given the opportunity to put in a good
word for Sr. De Rossi, which, we assure you, is based solely on merit.
Yours faithfully,
For E. I. DU Pont de Nemours & Co.
(Signed! M. H Bates, Jr.
MUNITIONS INDUSTRY 1579
Exhibit No. 583
[Copy]
Lima, May 11th, lOSJf.
United Aircraft Exports, Inc.,
230 Park Avenue, Neic York, N.Y.
Dear Sirs : I attach copj- of protest I am handing to the Minister of Hacieda,
Benjamin Roca.
I have arranged with Mr. de la Valle on my absence to follow up on this
abont every two weeks and will send down copies to you.
There is plenty of cash here but until the war scare with Colombia is
adjusted, there is frankly little hope of getting payment on the old debt. It
is generally expected that the matter will be adjusted without war and we
should then be in line to get some payment.
Roca had a full page article in yesterday's paper, proving conclusively that
the cotton producers of Peru (the largest industry) are earning 40% net per
year, and, as you can imagine, general business, including Government incomes,
are in a boom period, and it is only the diversion of Government income for
war material which prevents our getting some quick payment.
In tlie meantime we have in the new Ijudget to be approved next week
soles 250,000 to be applied on our old debt on a monthly basis. I have a little
arrangement with a certain political people whereby we shall probably get
this money in addition to any guano proceeds. The same deal will cover any
further payments not budgeted if they can be obtained.
Tlie inunediate moment is not at all favorable for my pushing for substantial
settlement of old account because of the war scare and when this blows over
another visit may be necessary.
There is nothing new on the general situation except the personal confidential
assurance to me of Mr. Ballen that he thinks that he shall have at least 15,000
tons of rich guano from us the present year.
Regarding the small balance of the war department, I have discussed this
with Grace's lawyers and they have a supreme resolution ordering payment.
As aliove stated, while the war scare is still on, no payment on old debt
will be made but Grace's lawyer, Mr. Espinosa, feels that there is little doubt
of eventual full collection.
I have an unexpected opportunity to get quickly into La Paz by flying
four hours to Cuzco (normally about 12 days from Lima and catching train
from Cuzco and boat in Titicaca to La Paz). I shall be there very briefly
to close up with Gundlach and go right on to Santiago.
I have just learned from Travis and Webster that they got the Bolivian
order for three Condor bombers based on price and delivery. Travis is en
route to the States to his home in Seattle and will visit our Seattle factory
and proliably will have to fly these bombers down, hence temporarily he is out
of the picture for the position I have mentioned in a previous letter. Of the
two I have in mind, Travis and Tobin, I really prefer Tobiu and I shall be
sending his letter either enclosed or later mailed so that you may make the
customary investigations.
Regarding Jim Spencer in Santiago I have known him for about 22 years
and believe he will make an excellent agent for us.
I have your cable no. 18 and have wired Spencer of my arrival and have
wired Carr to sit tight in Buenos Aires and I have further asked Spencer
to cable you direct regarding arrival of Lucas.
The De Rossi set up seems to be working out alright, and I have explained
to him that should we appoint him permanent agent he would not share in
either Faucett of Panagra l)usiness.
Regarding purchases on guano funds, I am afraid we shall have to wish
him in as he is daily in the Aviation Ministry in Miraflores, in the Ministry of
Marine in Colmena and two or three times a week in Ancon and his services
will be well worth a commission.
I have just come from Las Palmas and they are running some new tests on
the Corsairs.
They have readjusted the tails in accordance with your latest drawings, but
the pilots are afraid of the machines and they chose the three biggest, strongest,
huskiest pilots to make the tests because they claim in a dive that takes a
strong powerful man using both arms to pull the plane out. Further they
claim normal acrobatics are not what could be reasonably expected. Gillardi
and Bellatin (chief of the field) feel that substituting a Wasp for the Hornet
may correct the difficulty.
1580 MUNITIONS INDUSTRY
I understood they did put on the new tails without any improvement, then
your new drawings came along last week and then made some readjustments.
This is what we are now testing at Las Palmas on wheels and one on floats
at Ancon.
Yours truly,
(Signed) F. H. Love.
("Exhibit No. 584" appears in text on p. 1487.)
("Exhibit No. 585" appears in text on p. 1488.)
Exhibit No. 586
[Copy]
Letter no. 274.
La Paz, Bolivia, February 8, 1934.
Unitbh) Aieceaft Expoets, Inc.
Gentlemen : Referring to your letter No. 366, under date of January 9, 1934,
addressed to me at La Paz, Bolivia. In the first paragraph of this letter refer-
ence is made to the possibility of my " putting in some time " in the respective
capitals of two countries at present at war.
Under present conditions most incoming Bolivian mail is censored, outgoing
mail to the U.S. is not watched so closely, while outgoing mail to southern
South American countries is carefully scrutinized.
It is respectfully requested that in future you refrain from such references
as that mentioned above, at least when the letter containing the reference is
addressed to me while I am located in one of the belligerent countries. I have
no desire to become acquainted ^^ith the inside of a South American jail nor to
experience the sensation of deportation — neither of which would help out
business interests in the country in question.
Claek M. Carr.
Exhibit No. 587
[Copy. Strictly confidential]
Buenos Aires, Argeinttna, December H, 1933.
No. 238
United Aircraft Exports, 11^ c,
230 Park Avenue, New York City.
Mr. S. A. McClellan.
Del\r Steve : In the second part of my letter no. 18 of May 16, which was
headed "Air-line equipment and single-engine cabin ", I reported upon the
possibility of the establishment of one or more national Argentine air lines. At
that time it was believed that if anything were done, the Argentine Government
would grant concessions to a private group here, and there seemed little hope
of our getting initial business from the proposed company here due to the
fact that they contemplated the use of such equipment as Cabin Wacos and
Stinsons. The same group reported upon in that letter have continued their
efforts to secure such concessions, although, up to the present time, none have
been granted them.
A few days ago there came to my attention the possibility of our being able
to forestall the plans of these people and to secure the substitution of a plan
which would involve the acquirement of equipment built by our manufacturing
companies.
A certain gentleman here is known to have successfully negotiated business
with the Argentine Government for various important foreign companies, and
is interested in cooperating with us to the end that the proposed system be
undertaken by the Government itself and that we furnish the necessary mobile
equipment. Under such an arrangement we might also be called upon to fur-
nish tentative plans for the establishment of maintenance and overhaul bases,
MUNITIONS INDUSTRY 1581
or even to provide a limited number of Iceymeu trained in air-line operation
work.
There is reasonable hope that the above-mentioned gentleman could successfully
" spike " the plans of the private group seeking a Government concession. This,
for the reason that he has on his side the powerful argument that, should the
air line be established by the Government itself, it could be used as an effective
weapon in case of internal disorder, and as a second line defense in case of
international conflict. This man would have to act in the capacity of our
special agent for the particular business involved, and would, of course, receive
a legitimate commission should his services on our behalf result in the consum-
mation of actual business.
During President Justo's recent visit to Brazil he was very much impressed
with the display of air force there and has, I am told, returned here more
enthusiastic about aviation and more determined to foster its advancement
in the Argentine.
It is readily apparent that this matter could reach the point of constituting
very well worth-while business, for which reason I should appreciate your tak-
ing it up with officials of the parent organization and giving me a prompt
indication as to what extent we would be interested in cooperating with the
establishment of such a system.
Clark jNI. Care,
Care the National City Bank of New York.
(December 15. P.S.)
Since dictating the above a little further information has been obtained. In
addition to the private group referred to in paragraph one, page one, of this
letter (who are endeavouring to negotiate with the highest Government
officials) another proposition has been submitted, by Lee Wade and associates,
who are dealing through the head of the civil aviation department, Sr. Mendes
Goncalves. The first group plans and has resources to finance themselves to a
considerable extent. The second would have, I believe, less to draw upon,
and both schemes call for offering stock to the public. In this same general
connection. Pan American Airways a few months ago, tried to arrange per-
mission to establish a line from B.A. to Ascuncion. They dealt through Col.
Zuloaga and were flatly refused.
C. M. C.
Exhibit No. 5S7-A
[Copy. Handwritten letter]
Dear Steve: Mr. D. (city bank) brought me in touch with the man referred
to in this letter, one Sr. Alberto de Ibarra. This chap is known to have ar-
ranged some big deals with the Government on behalf of foi'eign companies, and
to be an intimate friend of the present minister of " Correos y Telegrafos "
(mail and telegraph — corresponding to Postmaster General) as well as a friend
of the President's.
Mr. D. is of the opinion that it might be well worth our while to play along.
Sr. Ibarra is hopeful, and is the kind of man who does not occupy himself with
nonlucrative business. Sr. Ibarra has set out to attempt to kill the two pro-
posals already submitted, and has done so without further than a verbal indi-
cation from me that we would be willing to consider the feasibility of cooperat-
ing with him in case that was deemed to be our best course.
Mr. D. must not be mentioned in any of the official, or file correspondence,
and the entire matter must be considered as being strictly confidential.
C. M. Carr.
Exhibit No. 588
[Copy]
Letter no. 412. Febeuaey 21, 1934.
Mr. Clark M. Carr,
G/o American Legation, La Pas, Bolivia.
Re your letter no. 172.
Sub : Bolivia.
We acknowledge receipt of your letter no. 172, advising us with reference to
the purchases under consideration by the Bolivian Government.
1582 MUNITIONS INDUSTRY
We believe that subsequent cables have precluded the necessity of replying
to many of the points mentioned in your letter. We would, however, like to
mention your letter of January 24th to Messrs. ('. F. Gundlach & Company, a
copy of which was attached to your subject letter. This is not the type of
letter which we would approve for granting the authority which you invest in
Gundlach. There are certain portions of it which have definitely no applica-
tion. We refer specifically to the last sentence in the second paragraph, which
we do not believe applies in this case in any respect and offers no qualification
or protection to the commitment which j'ou are making. Without knowing the
circumstances under which you are endeavoring to work, we might suggest
that we would have endeavored to limit the time for which the authority is
granted Gundlach to some definite period.
Further, your later cables indicated that as high as ten bombers were under
consideration and a lesser number of pursuits. On this basis this would be a
very large order, were it consummated. The commissiou of 7% on the maxi-
mum sales figures involved would have produced for Messrs. Gundlach a hand-
some remuneratiiin. We endeavor in all cases, wliere granting authority for
representing our interests in connection with specific sales, to try to consider
the commissions involved in the light of the total amount of the order to be
ultimately received.
We would suggest, where possible, that when you have letters of definite com-
mitment to write that you draft them and have them reviewed by the
attorneys of the National City Bank. No commitment of this nature is made
b.y us without such review by counsel. Further, we believe, where negotiations
of the importance of those under consideration are involved, that if there is no
National City branch where your negotiations are being carried on that you
should cal)le us requesting the names of the attorneys who are our New York
counsel's correspondents in that territory. There may, of course, be reasons
wh.v you prefer not to enlist the services of even those whose names we may
give you. We believe, however, that if this procedure is followed, you will
find it will be profitable in the long run.
We are now in receipt of a letter written by Gundlach & Company in reply
to yours of January 24th. We suggest that you be very careful in making no
commitment to Gundlach & Company with reference to their permanent appoint-
ment as our sales representative until such time as you have had sutficient time
to review our new contract of sales representation which is now being prepared.
Further, we believe that the question of Lloyd Aereo Boliviano in connection
with their representation agreement should be considered from all angles.
J. R. MiLLEE.
Exhibit No. 589
[Report No. 28]
London, England, Maji 9, 1933.
To: Thos. F. Hamilton,
From : A. Butterfield.
Subject : General news items.
In Rotterdam I met Mr. and Mrs. Guy Vaughn, of Wright Aero. Mr. Vaughn
had only l)een over here less than a week. They were staying in Holland two
days and then were going to Berlin, where I believe they were to meet Melvin
Hall. From IJerlin they were going to Frankfort, Germany. They have some
deal on there that I cannot figure out. They are then visiting Warsaw. Poland,
for a few days and proceeding to Moscow, Russia, for two weeks. After that
they plan on visiting Budapest and Vienna and are ending up at Milan. Italy.
Bob Farmsworth, of Curtiss Wright, has leased an apartment in Constan-
tinople for the summer.
Hulse, former Pan American airport engineer, is still in Turkey in charge
of the commercial air line.
Napier have obtained the license to build the Junkers Jumo oil-burning
engines in England. They now have engineers in Dessau.
Curtiss Wright liave changed their Paris address to IS Rue Matiguon. Paris
SE. Telephone. Elysee 25-50.
One large airplane factory in Germany has doubled the number of its
employees since Hitler came into power. The next ranking company has tripled
the number of employees in the same period. Hawker cannot take care of all
of their government orders and their planes are being built in the Vickers factory.
MUNITIONS INDUSTRY 1583
KLM have taken over three Wnsi) TlDl engines from Tokker and will put
them into an F-12 for tests with the controllable pitch pvopellers. They plan
on buying three Wasp TlDl to replace these engines at Tokker's.
Test flights on the Fokker (KLM) " F-9 " are scheduled for about May 18.
This plane has the Hornet T3C1 (chocked down to GOO h.ii.). One Junkers
'• G-3.S '■ transport (four motored) has been recomraissioned and is now in
service on the Berlin-London run. The other plane of this type is being
eqnipped with Junkers Jumo oil engines of 650 h.p. The weight of this engine
is 1,480 lbs. I heard in Dessau on rather good authority that twenty of these
four-motored commercial planes will be built during the next year.
Mr. and Mrs. Mollison are planning a flight to New York sometime in July.
They will use the new deHaviland " Dragon " with two Gypsy 125 h.p. engines.
From New York they plan to fly east with Bagdad as their objective in an
attempt to break the straight-line distance record.
Madame Florman is visiting friends at Walton-on-Thames, just outside of
London. Capt. Florman is in Stockholm, ftlrs. Maijstrom plans on visiting
Constantinople the latter part of June.
A. B. BUTTEKFIELD.
("Exhibit No. 590" appears in text on p. 1502.)
Exhibit No. 591
February 6, 1933.
Memorandum to Mr. F. H. Love.
A week or more ago INIead received a letter from B.M.W. The gist of it was
that they needed a more powerful air-cooled engine to compete in Germany.
They knew about the Wright Cyclone and indicated they understood that
Wright were developing plans to push the Cyclone sales in Germany. The new
Hornet D had come to their attention, and they have asked for a proposal
covering the licensing to them of the Hornet D engine in Germany.
We nuist now make a decision whether to go on with some limited license
for B.M.W. or endeavor to sell all types of engines entirely upon our own
account.
Our previous contract witli B.M.W. did not work out well for either of us.
Our returns from royalties were next to nothing. We were handicapped in
attempting to sell engines in Europe to others outside of Germany, and all
in all the plan was just unsound.
The present situation in Germany is beginning to change from past condi-
tions. It seems pretty clear that Germany is about read.v to insist upon rea-
sonable armament program, which will undoubtedly include aircraft. In the
meanwhile Luft Hansa are beginning to expand their program. It seems rea-
sonable and i)ossible that within the next five years the German Government
will provide Itself, both for military and conunercial purposes, with a consid-
erable amount of new equipment. Naturally, all of this equipment would have
to be manufactured in Germany, and I am sure we could never sell direct for
such a program. This may mean that royalties in the next five years might
amount to a reasonable sum.
From our past experience I certainly am unwilling to consider any license
for B.M.W. for sale of engines outside of Germany. Past experience has
proved this point definitely. In the same manner I feel that they should have
no claims whatever except to the one engine type they are interested in, which
in this case would be the Hornet D.
There is another angle to this whole matter which we should consider care-
fully, namely, sales price. If B.M.W. are able to sell the Hornet D much
more cheaply than Pratt & Whitney, then their sales price might jeopardize our
whole price structure to other countries in Europe. Other things being at all
equal, the other countries would no doubt prefer to purchase directly from
Pratt & Whitney, but if B.M.W. sales price were wholly out of line, we would
find ourselves in plenty of trouble.
If we undertake to license B.M.W. for the Hornet D, the arrangement should
include sending them a sample engine, for which, of course, they should pay.
In addition, it will be necessary to send them complete drawings of the engine
and possibly some details and data in regard to fixtures and jigs. I doubt if
1584 MUNITIONS INDUSTRY
they will waut any parts, although they may. I also doubt whether it would
be possible to get any large sum of money for the drawings, although we might
get $10,000. It might be possible to raise the old rate of royalty. After all,
$150.00 an engine is not very much ; $200.00 or even $250.00 would not be un-
reasonable. Moreover, there should be some guaranteed minimum royalty.
We have been thinking of the advisability of Mead's making a brief trip to
Europe. This would furnish an ideal opportunity to carry on these negotiations
with B.M.W. It seems to me that in order to bring this to a head, we might
proceed to draft a new contract containing the provisions and along the line
generally indicated above. In the meanwhile there will be opportunity for
all of us to comment on the whole situation, and I am sui'e that we can keep
B.INI.W. interested and satisfied until matters can be brought to a head.
I am sending a copy of this memorandum to Hamilton for his information
but am asking him not to contact B.M.W. until we request him to do so.
F. B. Rentschlee.
Copies to Messrs. G. J. Mead, D. L. Brown, J. F. McCarthy, T. F. Hamilton.
Exhibit No. 592
March 15th, 1933.
Letter no. 178.
Mr. F. B. Rentschlee
President United Aircraft & Transport Corporation,
Hartford, Conn.
Copies to Mr. Mead, Mr. Don Brown, U.A.E.
I was very sorry to learn from George Mead's cable that he is unable to
come to Europe this month. I had counted so much on his help in connection
with several projects pending. If he is able to come later, please let me know.
I have just returned from Berlin, and was Indeed glad to get away from
there on account of the Nazi situation at the nroment. I left because the
political situation is such that no decision could be taken for a week or
ten days. I feel, however, that things will probably clear up, for better or for
worse, in the very near future.
Germany's determination to have an air force, as previously recorded, is
now taking definite form rather rapidly. One of the large bank buildings,
practically half a block long, five stories high, has been taken over by the
Aviation Bureau. My friend. Dr. Milch, technical director of Luft Hansa,
has been made State Secretary for Air " TraflBc." My conversations with the
various departments indicate that their interests extend far beyond matters of
trafiic.
For the past two years I have called upon Director Milch and his assistants
in Luft Hansa with hardly any hope of doing business with them directly,
and yet keeping them informed of our new developments, both in engine and
propellers, so that now that Milch steps into this position he is very well
acquainted with our new things.
Their interest centers round the latest Hornet 1690 engines, both direct
and geared, and the sirtfiDlified controllable propeller.
In the past I have made a point of indicating to Milch that our relationship
with B.M.W. was cordial, and that while we adjusted our contractual rela-
tions so that we were free to sell our products in Europe, B.M.W. was never-
theless the licensee for the Hornet A in Germany, and that we were always
in touch with them. This stands us in good stead now as B.M.W. is one of
the three or four major companies receiving volume business.
Junkers is obtaining practically all of the plane business and has some very
good orders on hand at the present time.
Heinkel is developing a high-speed plane somewhat similar to the Lockheed
Orion, but equipped with B.M.W. 650-hp. water-cooled engine, which uses up
most of the pay load. This plane has recently made a world record of 358 kn.
in one hour's flying time over close circuit.
Siemens & Halske have developed several new engines, including a small 5-cyl-
inder 2-cycle Diesel and a new 700- to SOO-hp. radial engine, which is a cross
between a Pegasus and a Hornet.
The foregoing is reported to indicate the ti-end of developments in Gennany.
I have already sent New York the only pro forma copy available of the
MUNITIONS INDUSTRY 1585
Siemens-Halske controllable propeller contract and am pleased to state that
although I am prepared to close at approximately a total of $25,000, they have
not raised too serious objections to the terms that have already been quoted
which I am prepared to reduce by 50% if necessary.
In the case of the B.M.W. negotiations, the previous agreement was so favor-
able to them that it is going to be more difficult to increase the price sub-
stantially over that indicated in your cable. I do feel, however, that it is abso-
lutely essential to start higher and trade down as necessary. I am quite
sure that if I submitted your original figures they would use them as top
figures and trade down in accordance with the European custom. Furthermore,
the German Government is so anxious to obtain a reliable high hp, air-cooled
engine that I am sure they will not consider this figure excessive.
I shall, of course, be guided by your judgment and instructions on the matter.
I already have made several appointments and am not sure that I can go
to Munich before the end of the month. In any case the contract which has
been sent there instead of here will probably not arrive before that time.
I shall keep you fully informed by cable or telephone, if necessary, in case
any major changes are required.
Exhibit No. 593 '
[Copy]
Agreement this 29th day of March 1933 between the Pratt & Whitney Air-
craft Company, a corporation organized and existing under the laws of the
State of Delaware, United States of America, having its principal place of
business in the town of East Hartford, State of Connecticut, United States
of America (hereinafter referred to as "Licensor"), party of the first part,
and Bayerische Motoren Werke, A.G., a corporation organized and existing
under the laws of the German Eeich, having its principal place of business in
the city of Munich, Bavarian Free State, German Reich (hereinafter referred
to as " licensee "), party of the second part.
In consideration of the payments to be made by the licensee to the licensor
in the amounts and manner hereinafter provided, and of the mutual promises
herein set forth, the parties hereto hereby agree as follows :
Article I. Definitions
The following definitions shall apply to the terms employed in this agree-
ment wherever such terms are so employed, respectively, unless a different
meaning be clearly indicated by the context :
(a) The term "licensed engine" shall mean any single-row, air-cooled
radial aviation engine within a displacement range of from 1,650 cubic inches
to 1,750 cubic inches, both inclusive, of any type or model which may at any
time during the term of the license granted by this agreement be manufactured
commercially by the licensor : Provided, That no engine of any type or model
shall at any time be deemed to be a licensed engine for any purpose of this
agreement unless and until the Government of the United States of America
shall have approved and consented to the commercial export of engines of such
type or model into the licensed territory as herein defined. For the purposes
of this agreement an engine shall be deemed to be of a type or model distinct
from the type or model of another engine, if it shall be of a design basically
different from the design of such other engine, or if any essential operating
part thereof shall be of a design basically different from the corresponding
operating part of such other engine, or if it be of a displacement size more
than fifty cubic inches larger or smaller than such other engine.
(b) The term "licensed part" shall mean any spare or replacement part for
a licensed engine : Provided, That such term shall not include within Its mean-
ing any spare or replacement part peculiar to an engine of a type or model
which shall not be a licensed engine within the meiining of this agreement.
(c) The term "licensed product" shall include within its meaning any and
all licensed engines and licensed parts.
1 Bv permission of the chairman all mention of prices has been deleted from " Exhibit
No. 59.3."
1586 MUNITIONS INDUSTRY
(d) The term ''licensed territory" shnll mean only the territory enihiaced
witliin the present limits of tlie German Keich.
(a) The term "licensee" shall mean the party of the second part and
also any and all persons to whom the party of the second part shall grant
sublicenses under this agreement with the written approval of the licensor :
Provided, That such written approval shall he a condition precedent to the
■•alidity of any such sublicense.
(f) The term "affiliated company" shall mean any corporation of which a
majority of the outstanding sh;ire capital sliall, from time t() time, be owned
or controlled, directly or indirectly, by another corporation which contempo-
raneously shall own or control a majority of the outstanding share capital of
the licensor, and shall also mean any corporation of which a majority of the
outstanding share capital shall, from time to time, be owned or controlled,
directly or indirectly, by the licensor.
(g) Words and clauses employed in the disjunctive order shall be deemed
to be employed also in the conjunctive, and vice versa.
(h) Words importing persons shall include also firms, associations, and cor-
porations.
(i) Words importing the singular number shall include also the plural num-
ber, and vice versa.
Article II. Kights Granted and Resebveid
Section 1. The licensor hereby grants to the licensee, upon the terms and
conditions and subject to the limitations, reservations, and rights of termina-
tion herein set forth, the exclusive right or license, for the term or period of
ten (10) years commencing April 1, 1D33, and ending March 31, 1943, to manu-
facture, sell, or otherwise dispose of any and all tJie licensed product within the
licensed territory, but not elsewhere : Provided. That if at any time any person
not within the control of the licensor shall, without the procurement or consent
of the licensor, ship into or sell or otherwise dispose of within the licensed
territory any of the licon.sed product, such shipment, sale, or other disposition
thereof shall not be deemed to be a violation of the exclusive right granted to
the licensee by the provisions of this agreement, and the licensor shall be under
no liability or responsibility to the licensee with respect thereto.
Section' 2. Anything herein contained to the conti-ary notwithstanding, the
following rights are hereby expressly reserved to the licensor and its affiliated
companies, respectively :
(a) The licensor or any affiliated company .shall have the right at any time
or times to ship into and sell within the licensed territory any and all engines,
including licensed engines, designed for installation in airplanes, and neither the
licensor nor any affiliated company shall be under any liability or responsibility
to the licensee for any payment, as royalties or otherwise, with respect to any
engines so shipped or sold : Provided, That at the time of shipment, the shipper
shall have received and shall in good faith rely upon assurances from the pur-
chaser of such engines that, under 'bona fide contracts then subsisting, such
engines are to be exported for use outside the licensed territory.
(b) The licensor or any affiliated company shall have the right at any time
or times, either before or after the date of this agreement, to ship into and
sell or otherwise dispose of within the licensed territory completed airplanes
equipped with licensed engines : Provided. That for each licensed engine so
shipped, sold, or otherwise disposed of the licensor shall pay to the licensee the
sum of ).
(c) The licensor or any affiliated company shall have the right at any
time or times to ship into and sell or otherwise dispose of within the licensed
territory any and all licensed engines, in the event that the purchaser thereof
shall prefer to purchase engines manufactured by the licensor rather than
engines manufactured by the licensee: Provided, That the price received for
any such engines by the licensor shall not b(> less than the ])rice then currently
and regularly quoted by the licensee for similar engines manufactured by it :
And provided. That for each such engine so shipped, sold, or otherwise disposed
of by tlie licensor, the licensor shall pay to the licensee the sum of ).
(d) The licen.sor or any affiliated company shall have the right at any time
or times to ship into and sell or othenvise dispose of within the licensed terri-
tory any and all spare or replacement parts for any licensed engines which
at any time, either before or after the date of this agreement, may be shipped
into or sold or otherwise disposed of within the licensed territory under any
MUNITIONS INDUSTRY 1587
of the provisions of this section 2 : Provided, That, for each spare or replace-
ment part so shipped, sold, or otherwise disposed of, the licensor shall pay
to the licensee a sum e<iual to of the net sale price thereof received by the
licensor or its affiliated company, as the cnse may be.
The term "net sale price", as employed in this paragraph (d), shall mean
the net amount received from sales of parts, less returns and allowances, but in
no case shall the net sale price of any part be less than the factory cost of
such part, determined in accordance with the licensor's usual prac.ice, from
time to time.
Section 3. Any and all payments herein provided to be made to tne licensee
with respect to any and all engines or si)ace or replacement parts which may
be shipped into and sold or otherwise disposed of within the licensed territory
pursuant to any of the provisions of the foregoing section 2 of this article II
sliall be made by crediting the licenses with the amount thereof against the
royalties payable by the licensee, from time to time, as herein provided in
article IV hereof.
Section 4. Within thirty (30) days after the close of each six-month period
commencing with the six-month period ending September 30, 19'33, the licensor
shall render to the licensee a statement in such reasonable detail as the
licensee shall require (duly verified by oath of a proper officer of the licensor),
showing (a) the models and numbers of all licensed engines shipped and sold
during such .six-month period under the provisions of paragraphs (a), (b),
and (c), respectively, of section 2 of this article II. Each such statement shall
contain such further information (if any) as may be reasonably requested by
the licensee, from time to time, for the purpose of enabling it to detei-mine
the amount of any payments payable to it hereunder. Any statement rendered
by the licensor to the licensee, if not questioned by the licensee within six
months after the date of the i-eceipt thereof by it, shall be deemed to be final
and incontestable as to both parties hereto.
Section 5. The licensor shall keep full and accurate books with respect to
engines and spare or replacement parts shipped, sold, or otherwise disposed
of under any of the provisions of section 2 of this article II ; and such books
shall be open at all reasonable times during business hours to the inspection of
the licensee, or its duly authorized agent, for the purpose of verifying the
statements to be rendered to it by the licensor under the provisions of the
foregoing .section 4 of this article II.
Article III. Drawings, Specifications, Manufacturing Equipment, Parts,
Etc.
Section 1. Whenever requested by the licensee, the licensor shall deliver
to it, with rea.sonable dispatch, at the licensor's principal place of business in
East Hartford, Connecticut, complete sets of detailed-part blne-pr'iit draw'ngs,
bills of material and specifications covering each type or model of licensed
engine specified in such request, complete sets of operation sheets for the
manufacture of each such type or model so specified, and blue-print drawings
of changes in any such licensed engine or part thereof ; additional specifications
thereof, etc. : Provided. That at or before the time of the delivery thereof to
the licensee, the licensee shall pay to the licensor (a) the sum of for
each complete set of detailed-part b'.ue-print drawings, bills of matei'ial, and
specifications; (b) the sum of for each square foot of operation sheets;
and (c) the «uin of for each square foot of blue print drawings of
changes, additional specifications, etc.
Section 2. The licensor shall deliver to the licensee, within three months
from date of this agreement, f.a.s. port of New York, one direct-drive licensed
engine manufactured by the licensor and one licensed engine manufactured
by the licensor incorporating a 3 : 2 ratio propeller-reduction gearing, each
with standard equipment as usually furnished by the licensor with similar
engines, to serve as samples in the manufacture of the licensed product by the
licensee: Provided, That at or before t!ie time of delivery of such engines
as herein provided, the licensee shall pay or cause to be paid to the licensor
the sum of for the direct-drive engine and for the geared engine.
Any further engines which may from time to time he purchased by the licensee
from the licensor shall be furnished by the licensor on such terms as may be
agreed upon by the parties hereto at tlie time of purchase.
8.3S76— 34— FT 6 12
1588 MUNITIONS INDUSTRY
Section 3. Whenever requested by the licensee, the licensor shall deliver
to it, with reasonable dispatch, f.a.s. port of New York, any and all standard
or special manufacturing equipment (including patterns, dies, machines, tools,
jigs, fixtures, gages, etc.) or material and any and all such finished or partly
finished parts as may be reasonably necessary or useful in the manufacture
of the licensed product by the licensee, and also complete drawings and
specifications for any and all such special equipment : Provided, That at or
before the time of delivery of any such equipment, material, or parts, as
herein provided, the licensee shall pay or cause payment to be made to the
licensor for the same at such prices as the parties hereto may agree \ipon
from time to time.
Article IV. — License Fee and Royalties
Section 1. In consideration of the license rights hereby granted to the
licensee, as set forth in article II hereof, the licensee agrees to make the
the following payments to the licensor :
(a) As and for an initial license fee, the licensee shall pay to the licensor
the sum of , the receipt of which sum is hereby acknowledged by the
licensor. The licensor agrees that the said sum shall be credited against the
first royalties payable by tthe licensee as herein provided.
(b) As and for royalties on the licensed product manufactured, sold, or
otherwise disposed of by the licensee, the licensee shall pay to the licensor the
following sums :
(i) For each licensed engine unit manufactured under the license granted by
this agreement, and leased, sold, or used by the licensee, or shipped by it from
its plant or plants, the sum of - — •: Provided, That such sum need be paid
once only with respect to any engine manufactured under the license granted by
this agreement : And provided, That for the six months' period ending September
30, 1933, and for each subsequent six months' period ending March 31 or Septem-
ber 30, as the case may be, during the term of the license granted by this agree-
ment, the aggregate net royalties payable under this subparagraph (i) shall
not be less than , irrespective of the actual number of engine units
leased, sold, used, or shipped during such period : Provided further. That any-
thing herein contained to the contrary notwithstanding, the aggregate amount
of royalties payable in accordance with the provisions of this subparagraph (i)
shall not, in any twelve months' period, ending on March 31 in any year, be in
excess of with respect to the first fifty (50) licensed engines leased, sold,
or shipped by licensee during such period and with respect to which no royalties
shall previously have been paid.
(ii) For any and all spare or replacement parts manufactured under the
license granted by this agreement, and shipped, used, sold, or leased by the
licensee during the term of this agreement, a sum equal to of the respec-
tive net sales and net rentals thereof received by the licensee : Provided, That
the term " net sales", as employed in this article IV, shall mean the net amount
received by the licensee from sales of parts, less returns and allowances, but
in no case shall net sales of parts be less than the factory cost of such parts,
determined in accordance with the licensee's usual practice, from time to time.
Section 2. Within thirty (30) days after the close of each six months' period,
licensee during such six months' period and not accounted for on any previous
shall render to the licen.sor a statement in such reasonable detail as the licensor
shall require (duly verified by oath of a proper ofl3cer of the licensee), showing
(a) the models and numbers of all licensed engine units manufactured under
the license granted by this agreement and shipped, sold, leased, or used by the
licensee during such six months' period and not accounted for on any previous
statement, and (b) all net sales and net rentals received by the licensee during
such period on account of spare and replacement parts manufactured by it
under the said license, together with the gross amount received by the licensee
during such period on account of sales and leases of such parts. Each such
statement shall contain such further information (if any) as may be reason-
ably requested by the licensor, from time to time, for the purpose of enabling
it to determine the amount of net royalties payable to it hereunder. Any state-
ment rendered by the licensee to the licensor, if not questioned by the licensor
within six months after the date of the receipt thereof by it, shall be deemed
to be final and incontestable as to both parties hereto.
Section 3. At the time of rendering each statement in the manner provided
in the foregoing section 2 of this article IV, the licensee sliall pay to the
licensor the full amount of the royalties payable in accordance with the terms
MUNITIONS INDUSTRY 1589
of this agreement, both with respect to the engine units shown by the said
statement to have been leased, sold, used, or shipped during the period covered
thereby (wliich amount shall not be less than the minimum net royalties if any,
payable with respect to such period as provided in subparagraph (i) of para-'
graph (b) of section 1 of this article IV) and with respect to the net sales and
net rentals of parts so shown to have been received by the licensee during
the said period: Provided, That such amount may be reduced by an amount
not in excess of the net aggregate amount of all credits accruing against
royalties as herein provided and not previously availed of by the licensee.
Section 4. The licensee shall keep full and accurate books with respect to the
licensed product manufactured, shipped, sold, or otherwise disposed of by
the licensee ; and such books shall be open at all reasonable times during
business hours to the inspection of the licensor, or its duly authorized agent,
for the purpose of verifying the statements to be rendered to it by the licensee
under this agreement.
Article V. New Models and Improveiments
Section 1. Whenever the Government of the United States of America shall
approve and consent to the commercial export into the licensed territory of any
new type or model of licensed engine during the term of the license granted
by this agreement, the licensor shall give prompt written notice thereof to the
licensee : Provided, That the licensor shall not be required to deliver to the
licensee any blueprint drawings, bills of material, specifications, operation
sheets, or other details with respect thereto, except upon prior receipt by it, in
payment therefor, of the respective sums specified in section 1 of article III of
this agreement.
Section 2. Whenever the licensor shall make any improvement in the design
or construction of any licensed engine, which improvement shall not, when
applied to such engine, create an engine of a distinct type or model within the
meaning of this agreement, the licensor shall give prompt written notice thereof
to the licensee: Provided, That the licensor shall not be required to deliver to
the licensee any drawings or specifications covering any such improvement,
except upon prior receipt by it, in payment therefor, of the sum specified there-
for in section 1 of article III of this agreement: And provided further, That if
the commercial export into the licensed territory of the engine or part, as the
case may be, affected by such improvement shall require the approval or consent
of the Government of the United States of America, the licensor shall not be
required to furnish to the licensee any of the particulars, drawings, or
specifications provided for in this section 2 until the said approval or consent
shall have been granted. Anything herein contained to the contrary notwith-
standing, it shall be sufficient compliance with tlie terms of this stction 2, if
improvements made during any six months' period ending March 31 or Septem-
ber 30, as the case may be, shall be notified to the licensee within thirty days
after the close of such period, unless service use of the engines of the type or
model affected thereby shall make necessary the earlier notification of any
such improvements, in which case notice of the improvements shall be given
as soon as practicable after they shall have been definitely adopted by the
licensor.
Article VI. Special Agreements of the Licensee
Section 1. Whenever the licensee shall make any improvement in the design
or construction of any of the licensed product, the licensee shall, as soon as
practicable, furnish to the licensor, without cost to it, full particulars of such
improvement, together with drawings and specifications completely disclosing
the same : Provided. That if the licensee shall be required by the Government
of the German Reich to obtain the approval or consent of the said Government
before making such disclosure, the licensee shall not be required to furnish to
the licensor anv of the particulars, drawings or specifications provided for in
this section 1 until the said approval or consent shall have been granted.
When such disclosure shall be made, all rights in and to such improvement
shall, subject to the license granted by this agreement, but without any act
by either of the parties hereto, pass to and vest in the licensor to the same
extent, for all intents and purposes, as if such improvement had been made by
the licensor. Nevertheless, if necessary to protect the licensor's interest therein,
the licensee shall make prompt and due application for a patent covering any
such improvement within the licensed territory, and shall diligently prosecute
1590 MUNITIONS INDUSTRY
such application to a couclusion, and, upon the granting of any such patent,
shall (unless it be granted directly to the licensor or it.s nominee) duly assign
the same to the licensor or its nominee, without requiring the payment of any
fee or royalty with respect thereto: Provided, That such patent shall relate
only to features peculiar to the licensed product: And provided, That the cost
of obtaining such patent shall be for account of the licensor.
The licensee agrees that, during the term of the license granted by this
agreement or of any license which may be granted to the licensee pursuant to
the provisions of section G of article VII hereof, the licensor shall at all times
have the free right and privilege to adapt to its own use and to ( mploy in the
design, manufacture or construction of any or all engines of any type or model
nor or hereafter manufactui'ed by it any or all principles of design, construc-
tion or operation which may from time to time during such period or periods be
embodied in, covered by or secured under any letters patent (of any government
or country) which may be owned or controlled, directly or indirectly, by the
licensee, and shall also have the right and privilege, without the payment of
any royalties, fees, or other charges therefor or with respect thereto, to manu-
facture, sell, lease, use, or otherwise dispose of, either in the United States of
America or elsewhere in any part of tlie world, subject to the terms and pro-
visions of this agreement, any and all engines embodying any or all such prin-
ciples of design, construction, or operation.
Section 2. The licensee recognizes the validity of any and all patents now
or at any time hei'eafter owned or controlled by the licensor covering the li-
censed product or any part thereof within the licensed territory.
Section 3. The licensee shall comply with all the licensor's reasonable require-
ments as to marking the product manufactured, sold or otherwise disposed of
by the licensee under the license granted by this agreement, and, among other
things, shall attach to each licensed engine shipped by it an appropriate legend
to the effect that such engine is manufactured under license from the Pratt &
Whitney Aircraft Company. The licensee shall not, liowever, employ the
licensor's trade mark, or any colorable imitation thereof, on any engine or part
thereof.
Skction 4. The licensee shall not make, manufacture, use, license, sell, or
otherwise dispose of, either during the term of the license granted by this
agreement, or at any time after the termination hereof, any type of model
of aviation engine, or parts therefor, embodying any of the principles of
design or construction peculiar to the design or constructiim of any engine
or any part thereof then manufactured liy tlie licensor, other than such engines,
or parts thereof, as may be manufactured either pursuant to the license granted
by this agreement or pursuant to other licenses (if any) granted to the licensee
by the licensoi'.
Section H. The licensee shall at all times use its best efforts to promote the
demand for and use of the licensed product within the licensed territory.
Section G. The licensee shall not at any time export any licensed engine
or licensed part out of the licensed territory or directly or indirectly cause or
procure the same to be so exported: Provided, That if at any time any person
not within the control of or in any way affiliated with the licensee shall, with-
out the procurement or consent of the licensee, export any of the licensed prod-
uct out of the I'censed territory, such exportation shall not be deemed to be
a violation of this covenant by the licensee.
Article VII. Termination — Right to nonexclusive license
Section 1. If at any time the licensee shall be in <lefault in making any
payment hereunder at the time and in the manner herein provided therefor,
or shall be in default in observing or performing any other agreement or condi-
tion herein on the part of the licensee to be observed or performed, and any
such default either in payment or in observance or performance shall continue
for a period of sixty (60) days afte.- notice thereof shall have been given
h.v the licensor to the licensee in the manner herein provided ; then, in any
such case, the licensor shall have the absolute and unconditional right, at its
option, to terminate this agreement by giving notice of such termination to the
licensee; and, upon the giving of sucli notice, this agreement and all rights
of the licensee hereunder sliall immediately terminate and come to an end,
except as here'n otherwise provided.
Section 2. If the licensee sliall fail to mak>\ sell, and ship at least one
licensed engine during the twelve months' period ending on March 31, 1935,
MUNITIONS INDUSTRY 1591
or during any other twelve months' period ending on any ]March 31 or Sep-
tember 30 thereafter, the licensor shall have tlie right, at its option, in its
absolute and uncontrolled discretion, to terminate this agreement at any time
within nine (9) months after the expiration of any such twelve months'
period, upon giving to the licensee at least six (6) months' prior written notice
of termination, which notice shall specify the date (which shall be not less
than six (6) months after the date of giving the notice) on which such termi-
nation sliall take effect. If, and when, such notice shall have been given, this
agreement and all rights and interests hereunder of the licensee shall termi-
nate and come to an end on the date so specified, except as herein otherwise
provided.
Section 3. Anything herein contained to the contrary notwithstanding, the
licensor shall have the right, at its option, in its absolute and uncontrolled dis-
cretion, to terminate this agreement on March 31, 1938, upon giving to the
licensee at least six (6) mouths' prior written notice of such termination; and
if and when such notice shall have been given, this agreement and all rights
and interests hereunder of the licensee sh;ill terminate then and come to an
end on the said date, except as herein otherwise provided.
Section 4. Upon the termination of this agreement, either at the expiration
of the term of the license hereby gi-anted or upon notice as provided in this
article VII, all rights to manufacture the licensed product, or any part thereof,
shall immediately cease, except that the licensee may thereafter ship, sell, lease,
or otherwise dispose of any of the licensed product manufactured or in course
of manufacture by it at the date of termination. No such termination shall
relieve the licensee of any of its obligations under article IV hereof either with
respect to the payment of royalties on any of the licensed product shipped,
sold, or leased by it, whether before or after the date of termination, or with
respect to the rendering of statements and the keeping of books. Upon any
termination of this agreement, the licensee shall forthwith return to the
licensor any and all drawings, blueprints, bills of materials, specifications,
operation sheets, and engineering data then in its possession with respect to the
licensed product; Provided, That the licensee shall have the right to retain two
sets of drawings (in the German language), one set for safe-keeping according
to German Government requirements and one set for overhaul and maintenance
puri>oses.
Section 5. In case of the termination of this agreement (either at the
expiration of the term of the license hereby granted or upon notice as provided
in this article A^II) before the aggregate net amount of royalties paid by the
licensee under subparagraph (1) of paragraph (b) of section 1 of article IV
shall have amoun:ed to the sum of , tlie licensee shall pay to the licensor
the unpaid balance of such amount immediately upon such termimition.
Section 6. Upon the termination of this agreement, either at the expiration
of the term of the license hereby granted or upon notice pursuant to the provi-
sions of either section 2 or section 3 of this article VII (but not in case of
termination upon notice pursuant to the provisions of section 1 of this Article
VII), the licensor, if thereunto requested in writing by the licensee not later
than thirty (30) days prior to the date of such termination, shall grant to the
licensee a new non-exclusive license to manufacture, sell, or otlierwise dispose
of any and all of the licensed product within the licensed territory, but not
elsewhere, for an indeterminate term, which new license shall embody sub-
stantially all the provisions set forth in articles IV, VI, VII, and VIII hereof
respectively, so far as in the judgment of the licensor the same shall be rea-
sonably applicable, excejit (i) the provisions of paragraph (a), section 1 of
article IV, (ii) the provisions of the first paragi-aph of section 1 of article VI.
(iii) the provisions of sections 2, 3. 5, and 6, respectively, of this Article VII,
(iv) the provisions of section 8 of article VIII hereof, and (v) the provisions
of article IX hereof : Provided, That, under such new license, the licensor shall
assume no obligation or responsibility to the licensee with respect to any of the
matters set forth in articles II, III, and V hereof, respectively.
Article VIII. Miscellaneous Provisions
Section 1. As one of the essential terms of this agreement it is hereby
expressly stipulated that the license granted hereby is limited to the manufac-
ture, sale, or other disposition by the licensee of licensed engines within the
licensed territory, and to the manufacture, sale, or lease within the said terri-
tory of spare and replacement parts for use in or in connection with the
1592 MUNITIONS INDUSTRY
operation of any licensed engines so manufactured, sold, or otherwise disposed
of within the licensed territory, and that nothing herein shall be interpreted
as authorizing the licensee to dispose of any engine parts for assembly by
unlicensed manufacturers into complete engine units or partially complete units
either in the licensed territory or elsewhere.
Section 2. The respective parties hereto will use their best efforts to prevent
the unauthorized distribution or use of licensed engines in unauthorized terri-
tories: Provided, That neither of the parties hereto shall be under any obliga-
tion to have recourse to the courts for such purpose.
Section 3. Anything herein contained to the contrary notwithstanding, all
prices of equipment, material, engines, or parts which may at any time be fur-
nished by the licensor to the licensee hereunder shall be f.a.s. port of New York,
and any and all payments which may at any time be made by the licensee to
the licensor hereunder shall be in New York City funds current at the time of
payment.
Section 4. In case any dispute, disagreement, or misunderstanding shall
arise between the parties hereto in connection with this agreement, or with
respect to the interpretation of any of its provisions, such dispute, disagree-
ment, or misunderstanding shall be referred to arbitration in the State of
Connecticut, United States of America, in the following manner :
Each party hereto shall appoint one arbitrator, and the two arbitrators so
appointed shall appoint a third arbitrator ; and the parties hereto agree to
accept, abide by, and carry out any decision arrived at by a majority of the
three arbitrators so appointed. The cost of any such arbitration shall be borne
by the respective parties hereto in such proportions as a majority of the
arbitrators may determine.
Section 5. In addition to any and all other remedies hereby or by law con-
ferred upon the licensor (whether for the recovery of damages in the case of
breach of this agreement by the licensee or otherwise), it is hereby expressly
stipulated that, in case of breach or threatened breach, directly or indirectly,
of any of the provisions of this agreement on the part of the licensee to be
observed or performed, an injunction may issue out of any court of competent
jurisdiction, upon the suit of the licensor, restraining the licensee, its suc-
cessors, assigns, and sublicensees, and their respective successors and assigns,
from any such breach or threatened breach.
Section 6. Any notice or communication herein provided to be given by the
licensor to the licensee shall for all purposes be deemed to be duly .aiven and
received, if sent by registered mail, postage prepaid, addressed to the licensee
at its principal place of business in Munich, Germany, or if sent by cable or
radio to the cable address " Bayermotor ", Munich.
Any notice or communication herein provided to be given by the licensee to
the licensor shall for all purposes be deemed to be duly given and received,
if sent by registered mail, postage prepaid, addressed to the licensor at its
principal place of business in East Hartford, Connecticut, United States of
America, or if sent by cable or radio to the cable address "Aircraft ", Hartford,
Connecticut.
Section 7. This agreement shall be interpreted in accordance with the plain
English meaning of lis terms, and the construction thereof sliall be governed
by the lav/s of the State of Connecticut, United States of America.
Section S. If at any time prior to the termination of this agreement the
licensor shall become willing to grant a license for the manufaclure, sale, or
other disposition within the licensed territory of any engine or spare or replace-
ment parts of engines not falling within the definition of licensed product, the
licensor, before offering such license to any other party, will offer the same \o
the licensee upon such terms and conditions as the licensor shall then be will-
ing to accept. If within sixty (60) days after so offering such license the
parties hereto shall have been unable to agree upon the terms and conditions
thereof, the licensor shall thereafter be free to offer such license to nny other
person, association, corporation, or governmental department within the licenj?ed
territory, or elsewhere, and in negotiating with such other person, association,
corporation, or governmental department shall be free to make any and all
such modifications in the terms and conditions of the license as theretofore
offered to the licensee as the licensor shall, in its discretion, deem advisable.
Section 9. All promises and agreements herein contained by or in behalf of
either of the parties hereto shall bind and inure to the benefit of the respec-
tive successors and assigns of such parties, whether so expressed or not : Pro-
MUNITIONS INDUSTRY 1593
vided, That the rights of the licensee hereunder shall not be assignable without
the prior written consent of the licensor.
Aeticle IX. Rescission of Previous Agreement
This agreement is entered into in substitution for the agreement dated March
28, 1933, heretofore entered into between the parties hereto, covering substan-
tially the same subject matter, which said agreement is hereby cancelled and
rescinded as to all its terms and provisions, as of the date of this agreement,
to the same extent, for all intents and purposes, as if the said agreement,
dated March 28, 1933, had never been entered into.
In witness whereof the parties hereto have caused this instrument to be
executed, in duplicate, by their duly authorized and empowered officers or
representatives, in the city of Munich, Bavarian Free State, German Reich, as
of the day and year first above written.
The Pratt & Whitneiy Aircraft Company,
Bayerischb Motoren Webke, A.G.
Exhibit 594
March 8, 1934.
Bayerische Motoren "Werke, A.C,
Munich, Germany.
(Attention of General Director Popp.)
Gentlemen : Referring to the agreement, dated March 29, 1933, between
Bayerische Motoren Werke, A.G., and the undersigned the Pratt <& Whitney
Aircraft Company, and confirming our oral understanding, we beg to advise
that, for the period of four (4) years, commencing April 1, 1934, and ending
Marcli 31, 1938, the Pratt & Whitney Aircraft Company consents to receive as
royalties on any and all licensed, engines manufactured, sold or otherwise dis-
posed of by you under the said agreement, the sum of ■ — in each year,
payable in the manner provided in section 3 of article VIII of the said agree-
ment in equal quarterly instalhnents of each, on the first day of each
of the months of April, July, October, and January during the said four-year
period, which payments will be accepted by the undersigned in lieu of the
royalty payments provided for in subparagraph (i) of paragraph (b) of section
I of article IV of the said agreement. Prior to April 1, 1934, and after the
expiration of the said four-year period, payments of royalties on licensed
engines are to be made as provided in the said agreement.
No modification is to be made with respect to the royalties payable under the
said agreement on spare or replacement parts manufactured under the license
granted thereby and shipped, used, sold or leased by you during the term
thereof.
We also confirm that, during the said four-year period, the Pratt & Whitney
Aircraft Company will waive compliance by you with the requirements of
sections 2 and 3, respectively, of article IV of the said agreement, insofar as
the same relate to licensed engines; provided, that all the provisions thereof
shall continue to apply, as heretofore, to any and all spare and replacement
parts manufactured by you under the said agreement.
We understand that in consideration of our consent and waiver as above
set forth, you have agreed to waive, during the whole of the remainder of the
term of the said agreement, the payment by the Pratt & Whitney Aircraft
Company of any and all royalties under the provisions of section 2 of article
II thereof, together with each and all of the provisions of sections 3 and 4
and 5, respectively, of the said article II.
Except as expressly modified by this letter, the said agreement is in all
respects confirmed.
If the foregoing conforms with your understanding, kindly confirm the same
on the accompanying carbon copy of this letter ; whereupon the said agreement
of March 29, 1933, shall for all purposes be and be deemed to be modified as
above set forth, as of this date.
Yours very truly,
The Pratt & Whitney Aircraft Company,
By , Attorney-in-Fact.
The understanding expressed in the foregoing letter is hereby confirmed.
Bayerische Motoren Werke, A.G.,
General Director.
1594 MUNITIONS INDUSTRY
Exhibit No. 595
[Copy]
OcTOi5ER 27, 1933.
Mr. Thomas F. Hamilton : This will confirm teloi)hone conversation with
Hamilton this afternoon. The following items were discussed :
1. I am cahling regarding his questions about relationship lietween power
of the S3DIG and the SDG in order that I did not waste time discussing
this over the phone.
2. I told Hamilton to be sure to advise B.M.W. tliat the D series small
diameter Hornet was available for them to manufacture if they desire and to
advise us if they wanted the drawings thereof. I explained that on the geared
model the only difference was in the length of the cylinders, pistons, push rods,
and intake pipes, hut that on the direct-drive model the crankshaft was different
and the main crankcase and main bearings were also different, as well as the
difference in cylinders, pistons, etc.
I explained tliat the Dl series was given to them on the assumption that it
was desired for commercial purposes and that they could expect better service
out of the longer piston and the lower compression ratio for 80 octane fuel.
Their situation has apparently changed and it is obvious that they desire en-
gines for military as well as commercial purposes and therefore the D series
small diameter with higher compression ratio and higher blower ratio may fit
into their picture. I wanted to make clear that there was no intention on
our part to withhold from them anything that we were giving to other people.
It is true, however, tliat we were not willing to furnish the small-diameter
series to anyone at the time B.W.M. requested the drawings and agreement
with them was entered into.
2. I advised Hamilton that we were' not willing to go to 15% and he advised
that he was not interested in doing so. He felt, however, that he should be
given ample leeway because the Wright Company was working very hard for
this business and promising the worl(J. I pointed out that there was practically
no margin of profit between our present cost and present selling price of the
geared Hornet, and that after taking the Export commission of 107o we were
well under cost. I pointed out that on the direct drive we had a somewhat
wider margin of profit, but after Export commission there was little or no
profit left. Mr. Hamilton raised the point that we were selling at much
lower prices to our own Government. I advised that the price was somewhat
lower, but that since it was below cost we anticipated higher prices to the
Government in the future.
I advised that we were not in a position to give a.way the 10% that now
goes to Export, as this was a United policy and must be referred to John-
son, who is not available at the moment. I promised Hamilton he would have
a wire in Paris tomorrow m'orning telling him how far he could go.
3. Mr. Hamilton emphasized the importance of delivery and criticized us
for not being prepared to make better deliveries. I pointed out that although
we had been forewarned we could under no circumstances anticipate or consider
deliveries of 100 engines in thirty days as he requested. The deliveries as
quoted we thought were very good and that we could start delivery on any
model selected within thirty days. Our telegraphic delivery quotations indi-
cated that we could deliver from 25 to 50 engines dependent upon the model,
by Feln-uary 1st, provided order was placed this week.
4. Mr. H imilton explained this matter would probably be clo.sed within the
next few days.
5. I pointed out that we were not interested in modifying the present B.M.W.
agreement and that we wou'd like to have a written request for such modifica-
tion with the reason therefor. Mr. Hamilton stated he knew the reason but
B.M.W. was not willing to put it in writing, that reason being that they did
not want to reveal the number of engines manufactured. This, of course,
we anticipated. I mentioned that $15,000 did not seem an.vwhere near adequate
and Hamilton pointed out that this was merely their offer and that he had
in mind at least be that much. I said I still thought that that was low con-
sidering the possibility of manufacturing 700 to 800 engines per year. He
said this was out of the (piestion and that he felt that we would sell them more
engines thaii they would ever build.
6. Mr. Hamilton stated that he disagreed with our desires to furnish #40
splined two-way controllables for the B.M.W. 6 engine. I told him that we
would h ive to design and build such a propeller and he wanted to know how
MUNITIONS INDUSTRY 1595
soon that could be clone. I said if we started on it it would take at least
ninety days to get the first one and asked why they wanted the 50 spline. He
stated that they are contemplating increasing the power output of the B.M.W
6 to about 800 hp. Hence the 50 spline. I replied that if they got that mucli
horsepower they should have a three-bladed propeller to keep the tip speed
down and get proper efficiency, and that we had a 50-spline three-wav control-
lable.
7. Mr. Hamilton referred to various cables and communication relative to
the demonstration in England and the essential points in the discussion were
that he desired the two-way propeller for the direct-drive engine to be used
in the " Fury", as among other things the item of expense would enter into the
picture. I pointed out that we recommended the three bladed as superior
from all angles of performance. I advised that the SDG was being shipped
very shortly and that we were following it up as soon as possible with the
SD for the " Fury."
I explained that unfortunately we did not have a controllable that we could
ship with the geared engine for use in the "Audax " and he reconunended that
we preiiare one for shipment as soon as available as in all probability the tests
that they contemplate undertaking immediately will be delayed for six or eight
weeks.
Mr. Hamilton criticized our comparative data because it showed no rate of
climb or time of climb to ceiling. I pointed out that the reason we could not
show this was that we had not received the data for the present plane, and
all the results computed were on the basis of comparison. He said he would
try to get this information.
8. "With relation to the demonstration in England which is primarily for
Major Arfa, he feels that this is extremely important as it will be witnessed
by the Finns and representatives from practically all European governments.
It is exti'emely important that we show superior performance to the Cyclone.
9. Mr. Hamilton is leaving Paris tomorrow evening for Munich and can be
reached at the Regina Hotel, Munich, until Monday afternoon, when he leaves
for Italy and sails on the Rex November 2nd from Italy for the United States.
10. We may exiject almost immediately an order for three CI Wasps and
three controUables for prompt delivery to Italy for a long-distance flight project
being arranged by General Balbo.
11. I advised Mr. Hamilton that Senator Agnelli had been here this morning
and is sailing from New York tomorrow on the Contc dc i^ai-oia. I pointed
out that the only opportunity to discuss Wasp Juniors with him was the
statement to him to the etfect that we understood he was interested in a quan-
tity of these engines and that we would be prepared to cooperate with him
to the fullest possible extent in shipping such engines disassembled or other-
wise, as was required by him.
12. Hamilton advised that the Bristol negotiations for controUables had been
postponed because of lack of support from the Air Minister. He attributed
this to the fact that the revised links which were mislaid by us were so long
in getting over to them.
C. W. Deeds.
c.c. : 2 Paris.
Exports.
Haines.
Exhibit No. 596
December, 4, 1933.
The United Aircraft Exports, Inc.,
230 Park Arcinie, New York, U.S.A.
Dear Sirs : We wish to ackno\\ledge receipt of your letter of November 9th
referring to an enquiry received from B. Grimm & Co., for 3, 6, and 9 P. »& W.
Wasp C. engines.
While we appreciate your quoting prices sufficiently high to assure us of no
close comiietition we wish to point out that this enquiry is without question
for information only and the prices quoted will be used quoting German com-
petitive engines and" not P. &, W.
This firm and other firms have used such methods with other companies
we represent, which has resulted in eventual loss of orders.
1596 MUNITIONS INDUSTRY
We know they have been tx"j'ing to interest the aviation in German engines
and we also know that tlie German Government are subsidizing German manu-
facturers to the extent of 20% if necessary against non-German competition in
all lines.
We have purchased certain engineering supplies in Germany, which, due to
prices, eliminated American products in this market.
Three weeks ago a member of the Ann of brokers used visited Bangkok and
advised us that on Government tenders they would meet any non-German
competition, provided we secured the name, nationality, and prices quoted for
them to submit to the German Government.
This fact should be known to American firms as we have recently noted that
the foreign funds impounded in Gennany are now used in financing such
subsidies.
It also creates a bad impression for the firm representing manufacturers to
have others quote for the items they represent.
We are not writing this in protest, but to warn you of competitors' prac-
tices which we have experienced and which if not known by American manu-
facturers should be made known through the proper agency.
Yours very truly,
The International Engineering Co., Inc.,
By H. F. ScHOLTz, Manager.
HFS/CTW
Exhibit No. 597
August 5, 1933.
Mr. HiCKERSON,
The Under Secretary:
1 called up the Aeronautics Trade Division of the Department of Commerce
this morning and asked whether they had any information in regard to any
recent purchase by the German Government of airplanes from American manu-
facturers. After they had consulted their record they reported that they had
no information in regard to such purchases, but that twenty airplane engines
had been exported from the United States to Germany within the last six
months.
Article 170 of the Treaty of Versailles reads in part as follows :
" Importations into Germany of arms, munitions, and war material of every
kind shall be strictly prohibited."
Article 19S of the Treaty of Versailles reads in part as follows :
" The armed forces of Germany must not include any military or naval air
forces."
Article I of the treaty between the United States and Germany Restoring
Friendly Relations, reads as follows :
" Germany undertakes to accord to the United States, and the United States
shall have and enjoy all the rights, privileges, indemnities reparations or ad-
vantages specified in the aforesaid joint resolution of the Congress of the
United States of July 2, 1921, including all the rights and advantages stipulated
for the benefit of the United States in the Treaty of Versailles which the United
States shall fully enjoy notwithstanding the fact that such treaty has not been
ratified by the United States.
Article II of the same treaty reads in part as follows :
" With a view to defining more particularly the obligations of Germany under
the foregoing article with respect to certain provisions in the Treaty of Ver-
sailles, it is understood and agreed between the high contracting parties: (1)
That the rights and advantages stipulated in that treaty for the benefit of the
United States, which it is intended the United States shall have and enjoy,
are those defined in section 1, part IV, and parts V, VI, VIII, IX, X, XI, XII,
XIV, and XV."
Articles 170 and 198 of the Treaty of Versailles are included in part V
referred to in article II, quoted above.
Violation of articles 170 and 19S by Germany would constitute, therefore,
not only a violation of Germany's obligations to the other parties to the Treaty
of Versailles, but also a violation of its treaty obligations to the United
States. The Department has so held in a letter of August 19, 1931, to the
Secretary of War,
MUNITIONS INDUSTRY 1597
Germany's legislation of 1921, pursuant to her obligations under part V of
the Treaty of Versailles, was not deemed satisfactory by the conference of
ambassadors of the allied and associated powers parties to that treaty. The
conference at various meetings in Paris drew up regulations interpreting part
V of the treaty. These regulations were agreed to by the German Govern-
menl. On August 21, 1926, the conference of ambassadors addressed a letter to
the Secretary General of the League of Nations, reading in part as follows:
" I have the honor to forward to you the documents listed below which con-
stitute the agreement concluded between the governments represented on the
conference of ambassadors and the German Government, with a view of the
application of article 198 of the Treaty of Versailles."
No. 2 of the annexed documents referred to in the preceding paragraph
reads in part as follows :
" The police may not possess aircraft. No other special air-police organization
shall exist in Germany."
As Germany accepted the decisions of the Conference of Ambassadors as
constituting her interpretation of articles 170 and 198 of the Treaty of Ver-
sailles, and as this Government, under the provisions of articles I and II of
the treaty between the United States and Germany restoring friendly relations,
enjoys all the advantages stipulated in articles 170 and 198, the importation
of military aircraft into Germany or the possession or use of aircraft by the
German police would constitute a violation of the treaty rights of this Govern-
ment.
In view of the treaty provisions referred to, there was included the follow-
ing sentence : " It is the policy of this Government not to encourage the sale of
arms, ammunition, and implements of war intended for export to Ger-
many * * * " in a confidential memorandum on the policy of the United
States in regard to restrictions on international traffic in arms, ammunition, and
implements of war, which was submitted by Mr. Stimson to President Hoover
in May 1931. This memorandum having received the approval of President
Hoover, has since that time been used by the Department as a guide in making
decisions on questions relating to the export of arms. In respect to the por-
tion of the memorandum quoted above, it has been the custom of the Depart-
ment, when occasion has arisen, to inform manufacturers and exporters that
the export of arms, ammunition, and implements of war to Germany would
not be regarded with favor by this Government. In view of the desire and
obvious interest of the manufacturers and exporters to do nothing contrary to
the wishes of the Government, this admonition is believed to have been suffi-
cient to prevent such shipments. It is possible, however, that some manufac-
turers, realizing that the export of arms to Germany was not definitely illegal
and could not be forcibly prevented, may have, unknown to the Department,
exported arms, ammunition, or implements of war to Germany.
It is suggested that Mr. Osborne be informed of the policy of this Govern-
ment in regard to the export of arms, ammunition, and implements of war to
Germany, and that he be further informed that, although this Government is
not legally empowered to prevent such exports to that country, nevertheless,
should the occasion arise, it would make every effort to dissuade airplane manu-
facturers from exporting military airplanes to Germany and that it is probable
that such measures would prove elfective.
Joseph C. Green.
Ukited Aircraft Exports Corporation,
East Hartford, Conn., November 19, 1934-
Mr. Stephen Eaushenrush,
Secretary, Special Committee Investigating the Munitions Industry,
Washington, D. C.
Dear Sir : As Indicated in Mr. D. L. Brown's letter of November 12 to you,
your letter of Novenilier 5 addressed 1o IMr. Brown was referred to this company
for reply.
As you are probably aware. United Aircraft Exports, Inc., predecessor to this
company, handled the entire export business of the various subsidiaries of the
United Aircraft & Transport Corporation. All of the sales records of such
export business are therefore in our hands.
We have reviewed these records and, in accordance with your request, submit
the following summary showinu'. to the best of our knowledge, that proportion
1598 MUNITIONS INDUSTRY
of the products of those companies which was sold abroad for commercial
purposes and that proportion which was sold abroad for military purposes : '
Total
Percent-
units
mercial
969
78
183
3
7
57
33
9
1
14
14
Percent-
age,
military
Hamilton Standard Propeller Co., propellers. 969 78 22
Chance Vought Corporation, airplanes 183 3 97
Sikorsky Aviation Corporation, airplanes 7 57 43
Boeing Airplane Co., airplanes 33 9 91
Hamilton Metalplane Co., airplan^-.- 1 100
Stearman Aircraft Co., airplanes
We trust that the foregoing information is in accordance with your reciuire-
ments.
Yours very truly,
United Aircraft Exports Corporation,
J. R. Miller, Treasurer.
^ The summary submitted covers the period from August 6, 1929, to August 31, 1934.
STATEMENT OF VIEWS OF THE UNITED AIRCRAFT CORPORATION
PERTAINING TO THE FORMULATION OF A NATIONAL POLICY
CONCERNING THE MUNITIONS INDUSTRY
OUTLINE
This industry's attitude toward the objectives of this inquiry 1600
Approach to the problem: The coordination of stimulants to interna-
tional peace with the requirements of our national security 1600
I. The military incentive of our national defense and the cooperation
of our Government with private industry are largely responsible
for the aeronautical development of this country " 1600
(a) The United States has heretofore led in aeronautical de-
velopment 1600
(6) The interlocking factors responsible for this development:
Government cooperation with private enterprise and
stimulus of individual initiative 1601
(i) The carriage of mail 1601
(ii) Private production of military equipment 1601
(iii) Industrial volume stimulated by technical progress;
governmental economies result from mass pro-
duction 1602
II. From a military viewpoint an aeronautical industry in private hands
subject to the incentive of competition and profits is a vital na-
tional need 1 602
Governmental monopoly of aeronautical development would sound
the death knell of aviation in this country 1 602
(a) The successful results of previous policy 1602
(b) The insufficient supply of our national defense equipment __ 1602
(c) Experience has uniformly shown governmental inability to
produce successful developmental results 1 603
(d) A private commercial foundation is a vital reserve against
national emergency 1603
III. The relation of export business to the American aircraft industry 1604
(a) Export volume contributes to development of American
industry, American pay rolls and lower costs of equipment
to our Government 1604
(b) What would be the actual results of a national policy of out-
right prohibition of exports? 1604
(1) Increased sales volume to competitive countries — 1605
(2) Foreign construction under American processes and
from samples of American products 1605
(3) Foreign exploitation of American patents 1605
(4) Stimulation of reprisals or new construction abroad
of armament-producing facilities 1605
(5) Convertibility of commercial products to military
uses 1 605
(c) Abuses in export practice should be eliminated 1605
IV. Summary of factors to be considered 1606
V. A suggested proposal for adequate governmental control of arms
exportation consistent with the requirements of our national
security, and for elimination of excess profits from any war in
which we may engage 1606
(a) Coordination of export control with national foreign policy-- 1606
(6) Determination of products and countries subject to export
control 1607
(c) Administrative power to forbid exportation, in furtherance
of congressional or executive policy 1 607
(d) Liaison between State, Army, Navy, and other departments- 1607
(e) Control of dissemination of technical knowledge having a
military value irnc
(/) Elimination of improper business practices _- 1608
ig) Elimination of profiteering from any war in which this
country may engage 1608
Conclusion 1^6U»
1699
1600 MUNITIONS INDUSTRY
United Aircraft Corporation.
East Hartford, Conn., November 21, 1934.
Hon. Gerald P. Nye,
Chairman, Special Committee Investigating the
Muni t ion s In dus try,
Washington, D. C.
My Dear Senator: At the recent hearings before the Senate Committee In-
vestigating the Arms and Munitions Producing Industries, you invited me to
submit the views of the oflBcials of the United Aircraft Corporation and of its
subsidiaries, in aid of the formulation of a national policy regarding those
industries and the aircraft industry in particular. I am happy to respond.
This Industry's Attitude Toward the Objectives of this Inquiry
I believe that I can speak for the entire aircraft industry in assuring you
of its whole-hearted sympathy with the advancement of the cause of inter-
national peace both here and abroad, which apparently is the principal ob-
jective of your committee. Apart from considerations of humanity and patriot-
ism, which demonstrably actuate in high degree the officers and members of
this industry, the good common sense of this industry can lead to no other
attitude. No aircraft executive who has envisioned, however partially, the
brilliant future of commercial aviation, both within and beyond our national
borders, can face without apprehension a possibility that these prospects may
be destroyed, or their realization be long postponed, by the dislocations of war.
Conversely, I feel confident that your committee must share our appreciation
of the vital importance to this Nation of an aircraft-producing industry with
suflficient trained personnel developed and maintained to the point of readiness
to meet emergencies of national defense.
The sorry condition of unpreparedness in which the declaration of war in 1917
caught this country, and the terrific waste, expense, and delays which that con-
dition caused, particularly in the supplying of materiel to our Army is too
easily allowed to dim in memory. We are not justified, however, in expecting
that in the event of another war we shall be as fortunate in having strong
allies in the field to hold the lines while America prepares, and to lend materiel,
airplanes, and supplies wherewith to enable our armies to defend the safety
and integrity of our country.
Our country is traditionally conspicuous among the great powers for its
maintenance of a small military equipment in peace time. This policy can only
be reconciled with a responsible attitude toward our national defense by the
coexistence of great peace-time commercial industries whose plants and trained
personnel can, in national emergency, be rapidly converted to the creation of
militar.v materiel and supplies.
Every nation should discourage wars. But, since no practical assurance of
world peace through concerted international action has yet been achieved, any
policy predicated upon a refusal to face the realitiies of a world which harbors
powerful, aggressive, nationalistic states, well armed and determined to alter
their present status, can only invite disaster to this country.
Approach to the Problem : The Coordination of Stimulants to Intebna-
TTONAL Peace with the Eequikeiments of Oub Nationai, Sexttrity
In approaching the problem which this committee is considering, therefore,
it seems to me essential that at all points the stimulants to international peace
must be coordinated with the needs of our national security.
In the hope of aiding this committee in the solution of this problem, I am
submitting at the conclusion of this letter a concrete proposal. In order,
however, that the factors which are reflected in that proposal may be clear
to you, I shall first review them bi'iefly.
I. The Military" Incentive of Our National Defense and the Cooperation
of OtTB Government with Private Industry are Largely Responsible fob
the Aeronautical Development of This Country
(a) The United States has heretofore led in aeronautical development
The American aircraft industry has been unquestionably the finest in the
world. It is operating transport and commercial lines over the entire extent
MUNITIONS INDUSTRY 1601
of both American Continents and througli a large area of Cliina. It is moving
rapidly toward the establishment of trans-Pacific and trans-Atlantic routes.
Passengers, mall, and express have been carried rapidly, safely, and with
scheduled regularity night and day for distances inconceivable 10' years ago.
Conditions of weather, altitude, topography, and climate, as diverse as can be
found between the Andes and the Caribbean, the Isthmus of Panama and
Alaska, have been met and successfully overcome. Ordinary cruising speeds
have been increased until our east and west coasts are but a day's trip apart,
and the farthest capitals of South America can be reached within a week.
Meanwhile, rates have dropped for all services until they compare very favor-
ably with those of older methods of transportation.
The most modem equipment in the world in propellers, engines, and planes
is in use on the American lines. Constant experiment and research is con-
ducted at the plants of the manufacturing companies, and the results are put
promptly to public use. Our pilots and mechanics have acquired over a period
of years a broad experience which is irreplaceable.
The volume of business being done and the size of pay rolls in the industry
have come to be significant factors in maintaining a part of the economic
life of the country. Increased patronage of mail, express, and passenger trans-
port is showing that the services of the air lines have already become indis-
pensable to the transaction of the Nation's business.
In short, the American aircraft industry has been brought to the point where,
not only because of its high intrinsic merit and its importance to our national
security, but because of its bearing upon all of our economic life, its continued
development must not be impeded.
(6) TJie interlackinff factors responsible for this development: Government
cooperation vyitJi private enterprise and stimulus of inclividu<il initiative
But this outstanding achievement in organization and engineering has not
been the result of accident. Other countries do not lack engineers of ability,
competent executives, and dependable pilots. Nor has it been the result of
governmental manufacture, operation, or monopoly.
This success has been the result of a carefully planned governmental policy,
which has balanced proper governmental assistance with individual freedom of
competitive development and operation in such a manner as to provide the best
possible conditions for the operation of private initiative. Unless that policy
be continued — unless indeed it be enlarged — we need not expect such success in
the future.
The component parts of this policy are inseparable. They are integrated in
the closest interdependence.
(i) The carriage of mail. — One of them is the system of air-mail contracts.
The early mail rates, which were relatively high while volume was low, were
responsible for the initial development of air transport, just as land grants and
other governmental concessions were responsible for the primary periods of
expansion of the railroads.
Through revenues derived from the carriage of mail, the lines have been able
to maintain a volume of business sufficient to take care of charges which com-
mercial transport alone could not begin to carry. These include heavy overhead
charges in conducting experimental developments, in obtaining and maintaining
modern equipment, in surveying and developing pioneer routes, and in operating
new routes prior to the development of paying traffic over them. The cost of
these services to the Government has been and is being steadily reduced. But
at present the lines must have governmental help.
(ii) Private production of military equipment. — Another element of our avia-
tion policy, perhaps even more fundamentally important in its favorable effect
on commercial development, is the system of private production of our military
aeronautical equipment. This link between commercial and military production
is a stimulus and basic cause of our success.
The exactions of military use are so great — the standards prescribed by the
military services are so strict — as to call forth continuously the greatest efforts
of the producer. The experience and technical discipline acquired in this work
l)ecome available immediately to the American public through commercial
aviation. The benefits of the discoveries made likewise become available to
commercial use as soon as some newer development and higher standard of
lierformance has been achieved for our national defensive services. The mili-
tary engine of today becomes the commercial engine of tomorrow. In this, as in
1602 MUNITIONS INDUSTRY
Other countries, the continual strivinji for perfection of military design and
equipment lias been the greatest stimulus to rapid progress in aviation.
(iii) Industrial volume sHmulated iy technical progress — Governmental econr
omics result from mass production. — ^The Government not only contributes to
marked technical impi'ovement and consequent increased volume of business
done by the manufacturers, but also makes possilile the more efficient function-
ing of their plants for all purposes. Conversely, the cost to this country of
materiel thus produced is handed back to the Army and Navy in the form of
reduced prices made possible through mass production proportionately to the
increased vfdume of commei'cial business thus stimulated. Airplane engines,
for example, are sold to this Government by the American industry at prices
ranging from $3,000 to $5,000 less per engine than engines of equivalent horse-
power have been sold to the Governments of Great Britain, France, and Italy
by their own national manufacturers.
Through design competitions, the protection of individual rights in discoveries
and inventions, and the negotiation of contracts (the Army and Navy having
full access to our cost records) which allow room for designing and experiment
and for the constant and rapid changes in productive equipment upon which
the possibility of making new models depends, the Government makes use of
individual incentives to the mutual benefit of the military services of this
country and the industry.
More can be done along this line. The policy can and should be adhered to
with greater consistency than in the past. For the Government does not have
to wait for a war or national emergency to let the public realize on its invest-
ment in military aircraft. Through quick adaptation to commercial needs, the
public utilizes it in the improved carriage of mail, passengers, and expres>s.
And, from the viewpoint of national security, there can be no question of the
rock-bottom soundness of this policy of governmental cooperation with private
industry in fostering the development of national resources against the even-
tuality of national emergency. The continuance and maintenance of the aero-
nautical industry at a high point of development is vital to our national de-
fense. This industry, none the less, in actual effect, is only secondarily a muni-
tions industry so far as the public benefit is concerned.
II. From a Military Viewpoint an Aeronautical Industry in Private Hands
Subject to the Incentive of Competition and Profits Is a Vital National
Need
governmeintal monopoly of aeronautical development would sound the
death knell of aviation in this country
(a) The successful results of preinous policy
The policy hereinabove outlined cannot be questioned from a military stand-
point. It has proved eminently successful to the Army and Navy of this coun-
try as well as to the development of the industry to the foremost place in
world competition. From last place among the air powers at the time the
policy was inaugurated, the United States reached a position of indubitable
preeminence in the quality of its military and naval planes, engines and acces-
sories, and in its technical skill and knowledge.
(ft) The insufjficient supply of our national defense equipment
It is true that our country lags behind in the quantity of first-line-defense
equipment in actual service. General MacArthur concludes his report as Chief
of Staff of the United States Army, 1933, by saying:
"At this moment the Army's strength in personnel and material and its
readiness for employment are below the danger line. I consider it of the most
urgent importance to the United States that this condition be I'ectified without
delay."
Deficiency in quantity can be remedied by providing the necessary funds.
This condition is unrelated to the existing system of production which has
proved Itself in practice. But this condition makes it doubly imperative that
adequate trained personnel and facilities for production be maintained at a
point of readiness to produce quantity when required.
MUNITIONS INDUSTRY 1603
(c) Experience has unifoiinly shoicn governmental inability to produce suc-
cessful developmental results
It has been demonstrated conclusively throughout the world that governments
cannot themselves design and produce the equipment of precision and per-
formance which under private initiative has given this country a preeminent
position in the aeronautical field. During the years since the war this Gov-
ernment has attempted developmental projects. It has maintained extensive
facilities and employed able men. It has spent vast sums of money. In the
past several years, however, governmental effort in this country has operated
within the limits of research, experiment, and criticism of design.
The Army and Navy officers assigned to this work have made a splendid
contribution to the advancement of aviation. But I believe it is the unanimous
conclusion of the Army and Navy officers themselves that the primary respon-
sibility and initiative should rest with private industry.
Our experience in this country has been paralleled in that of all the major
powers. The American aviation commission, which in 1919, under the in-
structions of the Secretary of War, made a personal survey in France, Italy,
and England, emphasizecl the unanimous opinion of its members that imme-
diate action was necessary to safeguard the air interests of the United States
to preserve for this Government some benefit of the great aviation expendi-
tures made during the period of the war and to prevent a vital, necessary
industry from disappearing, and recommended —
" That in view of the experience of England and France, it is dangerous
to allow the Technical Division to operate under normal or war conditions a
department of complete design in heavier-than-air machines or in motors, as
such competition results immediately in stopping private departments of
design. The Technical Division, therefore, should be a critic of, and supple-
mentary to, private design, rather than aim at design on its own account.
The policy of the Technical Division should be to maintain and encourage
a considerable number of well-manned and well-equipped private-design plants
and to cooperate with these plants in all undertakings that meet with the
approval of the Technical Division, and to place orders with these plants, at
fair prices, for design and for experimental construction of motors, planes,
and appliances. Competition of the Government with the industry should be
avoided ; the only allowable exception being cases where, either on account of
expense or for other cause, the Technical Division cannot obtain needed
material or design from existing sources.
" That careful thought shall be given to the establishment of competition in
motor, plane, balloons, and accessory design, and encouragement be offered
in every reasonable way to the promotion of competitive events and the estab-
lishment of standard records."
One may speculate uixm the reasons of this universal governmental failure —
the lack of incentive for the individual, the repressive effect of procedural red
tape, requisitional delays, and unwillingness to take risks which cannot be
compensated for in profits, the uncertainty of appropriations, the limitation
and earmarking of developmental appropriations, the fear of criticism of waste
resulting from the scrapping of expensive but unsuccessful developments. All
of these factors doubtless contribute their effect, but the resulting facts must
be taken as proved — that tiie Government is simply unable to achieve successful
results on its own account in this field.
There is in my opinion no question that if this country should pursue a policy
of developing aircraft in Government plants or of manufacturing them there,
either as a monopoly or in competition with the private industries, which
would be deprived of the governmental stimulus and assistance hereinabove
indicated, this policy would spell the rapid atrophy of aviation and ultimately
the end of successful aeronautical development in this country.
(d) A Private Commercial Foundation is a Vital Reserve Against National
Emerge^icy
In another way, commercial air operations and adequate air defense are
inextricably united. National air strength deiiends less on the actual number
of planes readv for immediate action than on the reserve facilities of the coun-
try in planes and men available from commercial life, in widespread tecluncal
competence, and in industrial capacity for production.
83876— 34— PT 6 13
1604 MUNITIONS INDUSTRY
The volume of commercial business stimulated by governmental cooperation
in design as outlined above, bears directly upon the readiness of this country
to throw itself into the manufacture of military aircraft and equipment in time
of emergency with an adequately trained personnel.
A well-developed system of operating commercial lines is the first requisite
of an adequate reserve air strength. The possibility of rapid expansion of
productive facilities, which implies numerous existing plants and well-trained
technicians, is another. Our World AVar experience is enough proof to the
infonned that only private industry is capable of such expansion. It is con-
firmed by the great activity of the war plans board (created by the Army) in
preparing a comprehensive inventory of American industry for use in case of
national emergency.
Experts agree that in the event of war aircraft will constitute our first line
of defense. The aeronautical resources of our country, as compared with those
of its opponents, available for military production at the outbreak of hostilities
may well be decisive of the outcome. The men and equipment necessaiy as a
nucleus must be maintained through the years of peace, and this is possible
only if the commercial foundation exists.
III. The Rbilation of Export Business to the American Aircraft Industry
(rt) Export volume contributes to development of American industry, American
pay rolls, and lower costs of equipment to our Govenuuent
Fully as important to American aeronautics as the air-mail policy and the
military-procurement policy, has been the attitude of the military departments
of the Government toward the export of aircraft and equipment. The great
importance of an adequate business volume, if research, experimental produc-
tion, and the opening of new commercial routes are to be continued, has ren-
dered a scmnd and growing export business absolutely indispensable.
In this field also American industry has been preeminent. Foreign competi-
tion has been steadily supplanted in South America, Europe, and. until recently,
in Asia. American planes and engines are being sold in practically all the
countries of the woi'ld. Foreign buyers are coming to our shores in increasing
numbers. Our success has been based squarely upon the quality and the price
of our products.
This export business is partly commercial, partly military. A few years ago
most all aircraft, aircraft engines, propellers, instruments, accessories, etc.,
which were exported were for military purposes. More lately the commercial
requirements in the export field have grown to tremendous proportions, and it
is hoped that, with a continuance of the former governmental policy, in the
future they will far exceed strictly military requirements.
The increase in volume brought to the American manufacturing industry
through the export market (military as well as commercial) contributes di-
verse benefits to this country :
(1) This export volume is reflected directly in the reduced costs of air-
craft products to our own Government, as increased volume means lower
cost.
(2) It is reflected directly in American pay rolls. For instance, the fig-
ures of the United States Bureau of Foreign and Domestic Commerce show
that the volume of export business done by the American aeronautical in-
dustry in 1933 amounted to $9,227,821. This export business provided work
and subsistence for thousands of American workmen and their families in
many industries throughout the entire country.
(3) This export volume also contributes substantially to the niiiintenance
of an established American aeronautical industry readily available to meet
the needs of a national emergency.
(&) WMt irouhl be the actual restirlts of a national policy of outrir/ht
prohibition of exports?
To what extent, therefore, do considerations of promoting international peace
call for a curtailment of that market and the consequent narrowing of the
breadth of foundation of our national preparedness? What practical furtherance
of international peace would accrue from a policy of governmental jn-ohihition
of the export of aircraft and kindred in-oducts at the present time? The national
MUNITIONS INDUSTRY 1605
and international interests of this country require tliat tliese questions be most
carefully considered.
The following are too real to be ignored as potential results of a national
policy prohibiting exports from this country:
(1) Increased sales volume to competitive countries. — In the absence of joint
international embargo rigidly enforced, a policy of prohibition on the part of
one nation might well result simply in an increase in the volume of exportation
from competitive producing countries at the expense of our own national
military foundations and economic welfare.
(2) Foreign construction under American processes and from samples of
American products. — No prohibition of military aircraft could possibly prevent
a country which desires to do so from obtaining samples or specifications and
designs of American planes and building its own equipment or having some
other country build its equipment from those samples, specifications, and de-
signs. Moreover, the State Department now permits technical observers of
foreign governments and of foreign arms-producing plants to visit and observe
the procedure of American manufacture in American plants.
Shall we by adopting a policy of export prohibition invite others to steal the
technical excellence of our American product and dump the benefits of Ameri-
can initiative and governmental cooperative aid into the laps of other coun-
tries and their producers?
(3) Foreign exploitation of American patents. — Under our present patent
laws, the price which an American inventor must pay for protection of the
results of his ingenuity is a public disclosure to the world (through publica-
tion of the Patent Office) of the details of his invention. Every military
secret, therefore, ceases to be a secret from the moment its inventor seeks legal
]n-otection. Under our patent laws our Government promptly publishes his in-
vention and disseminates its details to any nation or to any arms manufacturer
in the world who may be interested.
For this additional reason, prohibition of the export of such military devices,
even by joint international action, could not prevent the exploitation of Ameri-
can patents by foreign governments determined themselves to produce arma-
ments or to have their nationals or the nationals of other countries produce
armaments for them.
(4) Stimulation of reprisals or new construction abroad of armament-pro-
ducing facilities. — The possibility exists of embarrassment to this Government
through its prohibition of export to a friendly nation which desires aircraft.
Reprisals might well be provoked, to the injury of this country's trade and
foreign relations.
Moreover, might not joint international embargo stimulate countries which are
not now equipped for armament production to create and build up their own
armament-producing industries? And when built, they would naturally seek
volume. Is it not possible that even joint action on the part of the great arma-
ment-producing powers to the end of restraining export to weaker countries
might, as a practical matter, initiate a new type of race in armament-production
facilities and even in armaments?
(5) Convert it) il it y of commercial products to military uses. — Most commercial
aircraft engines, propellers, instruments, etc., are convertible to military uses
with greater or less facility, depending upon the technical ability and industrial
and financial resources of the country making the conversion and on the type of
military operations to be undertaken by it. This, however, is equally true of
almost any commercial product. Logically, if export of all aircraft were pro-
hibited, virtually our entire export trade should be prohibited.
An isolnted policy of prohibition would hardly achieve the withholding of aero-
nautical equipment from a nation determined to acquire it. In my view, what-
ever policy be adopte<l, in order to justify its sponsorship, must work in practice
and accomplish in fact the pacific purpose which it is intended to accomplish.
(c) Abuses in export practice should he climivated
As to the existence of questionable practices in the export field on the part of
some concerns, suggested by certain testimony which has been heard by you. my
reply is that these practices can be eliminated in the future by proper methods
of -control within the limits of our present system. It is my personal opinion
that their elimination wonld be heartily welcomed by the industry and by the
governments of the foreign importing countries.
1606 MUNITIONS INDUSTRY
I believe that wherever interiuitionMl cooperatiou in i-estrictive export pro-
visions can be procured, to the end of a concerted effort at promoting peace, or
in any specific instance where the Government of this country might determine
tliat the isolated restriction of export from this country would actually (and
not merely colorably) serve the ends of repressing combatant activity, it
can be done effectively through a system of export control correlated with our
foreign policy such as is hereinafter suggested. I believe that such a system
of control would be both workable and consistent with the requirements of
our national security.
IV. Summary of Factors to Be Considered
The creation of a government arms monopoly would greatly endanger our
national defense and would be deeply injurious to numerous vital peace-time
industries. An examination of the aircraft industry in its relation to our
nationiil needs both in time of war and peace reveals the complex inter-
dependence of military and commercial developments, domestic and export
operations, governmental assistance and private initiative — an interdependence
vital to our first line of defense in national emergency and one which has
produced phenomenally successful results under our present system.
Therefore, if the Government of the United States should dismember these
industries and attempt to monopolize their military activities it would strike
a death blow, not only to peaceful commerce and manufacture and to the
contribution to national economic well-being traceable to great industries, but
also to the peace and security of the Nation.
Report after official report of investigations into this subject by various com-
mittees of the Congress, and others under their direction, from the war days
to the present time, will corroborate my position. I shall not burden you with
a list of these reports, for you are undoubtedly as familiar with them as I.
A contemplated national policy (especially in the absence of joint inter-
national action) containing any element of prohibition against the exportation
of arms, aircraft, or other munitions or potential munitions should be carefully
scrutinized from the viewpoint of the results which as a practical matter
would accrue therefrom.
I am convinced that the drastic steps which have been considered would not
in fact promote international peace, but, on the contrary, would simply sup-
plant American sources of supply, transfer pay rolls from American to foreign
labor, invite foreign exploitation of American patents, processes, and products,
and other evasive practices, and quite possibly have the effect of a boomerang
on pacific objectives through stimulating new sources of manufacture and new
races for sales volume.
I am equally convinced that such drastic steps are utterly unnecessary in
order to insure the furtherance of our foreign policy, the observance of treaties,
the conduct of export business on the highest ethical plane, and the elimina-
tion of excess profits from any war in which this country should engage — all
without the necessity of causing to shrivel the enterprises and industries serv-
ing the purposes and uses of commerce and trade in peace time, upon whose
prompt convertibility into the manufacture of military materiel in war time,
the Nation must depend for its security.
Abuses can and should be eliminated within the framework of the present
structure without tampering with any of its integral parts or destroying any
element of its foundations.
v. A Suggested Proposal for Adequate Governmental Control of Arms
Exportation Consistent with thei Requirements of Our National Security,
and for Elimination of Excess Profits from Any War in Which We May
Engage
(a) Coordination of export control with national foreign policy
It seems to me that regulative control of the export of arms and munitions
might well be vested in a special division of the Department of State so that the
administration of such control may at all times be coordinated with our na-
tional foreign policy, much as is the case in Great Britain. I suggest a
special division of that Department for this purpose, staffed with permanent
officials, in order to insure the acquisition and application of experience and
MUNITIONS INDUSTRY 1607
continuity of policy free from the fluctuation and interruption of political
changes.
It the event that a Federal aviation administrative body should be createtl
at any time in the future, the administrative control of the export of aeronauti-
cal equipment could, I should think, well be vested in that body or in a special
division thereof, in which case such control division would cooperate closely
with the Department of State to the same end.
(&) Determination of products and countries subject to export control
The control division could be empowered by Congress to determine from time
to time —
(1) What products of American industry are of a military or potential
military nature, the export or import of which is consequently a matter of
administrative concern ; and
(2) What countries as potential importers of any such articles are the
subject of administrative concern.
These determinations undoubtedly should not be made public for obvious diplo-
matic reasons, but the control division clearly should inform each industry confi-
dentially of its determinations which pertain to the products of that industry.
Thus, each industry would be given such official information as would enable
it to cooperate with the Government to the end of observing the governmental
policy relative to exportation of its products.
These determinations and advices should undoubtedly be revised from time
to time to exempt products theretofore included as subject to control whenever,
because of obsolescence of design or for any other reason, they have ceased
to have any real relation to the objectives sought and, similarly, to exempt
countries to which the export of such products has ceased to interest the
Government.
(c) Administrative power to forbid exportation, in furtherance of congressional
or executive policy
Whenever any American company contemplates the export of any product
which it is so advised is subject to control, to a country similarly determined to
be subject to control, then such company should be required to give notice to
the control division of its intention to seek such order from such country. The
division will be vested with power to issue prohibitory orders forbidding the
contemplated exportation, within limits defined by the Congress. It would exer-
cise this power pursuant to policies of embargo from time to time enacted by
the Congress or proclaimed by the President.
The control division would insure the observance of treaties to which this
country is a party through its power of regulation, pursuant to Presidential
proclamation.
To preclude the possibility of governmental embarrassment, no affirmative
approval of any export shipment should be required. The control division
would simply exercise a veto power. It would seem practicable to provide
that, if the division should not expressly forbid such export within, say, 10 days
from the giving of notice as above provided, then the company so notifying
the division should be free to accept and fill the order.
Proper safeguards undoubtedly should be provided to insure that the division
could play no favorites as between competitive American companies. It would
obviously be grossly unfair to forbid one American company to export while
permitting another company to export similar products to the same countries
under substantially the same ciraimstances. A permanent personnel in the
division would, I think, contribute to the desired result.
{d) Liaison between State, Army, Navy, and other departments
The control division, moreover, should act in close cooperation with the War
and Navy Departments to insure the protection of military secrets, and its
control should be supplementary to the control of design release now exercised
by the Army and Navy. It might well also work closely with the Departments
of Commerce and Labor relative to the economic factors involved.
1608 MUNITIONS INDUSTRY
(e) Control of dissenUnation of technical Tmowledge having a militarif value
The same rules and administrative control should apply —
(1) To permitting technical observers of foreign governments or for-
eign manufacturers to have access to American plants ;
(2) To the giving of information concerning our methods of production
to the official technical representatives or nationals of other countries ;
(3) To the granting of rights under American processes for use abroad;
and
(4) To aiding foreign nationals or foreign governments in the construc-
tion of facilities for duplicating our products.
Your committee might deem it wise to recommend changes in our patent
laws to provide for protection without full public disclosure wherever devices
having a military purpose or value are concerned ; otherwise, the objective of
the suggested control might fail of accomplishment.
(/) Elimination of improper business practices
A procedure could be provided whereby the control division would conduct
hearings upon complaints of questionable practices, and in the event of a
finding that such practices have occurred would prohibit the offending com-
pany from exporting any products to the country affected for a specified period
of time, the duration of such penalty being proportionate to the gravity of
the offense.
The control division should be granted a limited power of investigation
and subpena in support of tlie administration of its control function, but
safeguards should undoubtedly be provided against the disclosure of informa-
tion adduced in such proceedings either to competitors or to countries where
such disclosure would cause diplomatic or trade repercussions.
(g) Elimination of profiteering from any tear in which this country may engage
Excessive war-time profits have been freely and loosely charged in the press
against the arms-producing industries. It is my personal conviction that the
entire aircraft industry would willingly accept a sound plan for the taxation
of excess profits, if any, in war time. Such a plan to be sound, however, should
be applicable to all other industries. In war time, shoes, beef, foodstuffs,
clothing, virtually every national resource, becomes a munition of war.
I do not pretend to be able to submit a ready-made plan for the taxation
of excess war-time profits. It would clearly require extensive study and con-
sultation. It seems clear, however, that the general principles api)licable
should be —
(1) The elimination of profiteering by a tax on those profits which
exceed fair normal peace-time rate of return on capital invested in that
industry ;
(2) The application of such a tax to all industry — not merely to the
producers of armaments and the direct materials of combat ; and
(3) The preservation of a sufficient profit motive to insure the exercise
of technical ingenuity and excellence from top to bottom and to provide
an incentive for intensive accomplishment, enterprise, and initiative, and
the undertaking of great risk. (These initiatives cannot be drafted.)
(4) provisions for governmental absorption of capital losses incurred as
a result of private expenditure on plant expansion. The Government clearly
must finance losses due to expansion in national emergency, especially when
profits on the capital devoted to such expansion are limited by taxation.
Without such Government financing, the necessary expansion would not
take place. Capital losses due to readjustment on account of such excess
plant facilities, which become useless after the conclusion of hostilities,
should be absorbed by the Government pursuant to a previously defined
policy.
Conclusion
I believe that a policy based upon the foregoing suggestions would give
the Government a thoroughly adequate conti-ol over the export of munitions,
MUNITIONS INDUSTRY 1609
would eliminate abuses, and would bring export practice into harmony with
congressional enactment, treaties, and executive proclamation.
The elimination of protiteering in wartime through a tax imposed upon the
excess war profits of all industries would insure that profits from war would
not exceed profits from peace.
Past experience and governmental investigation show that a policy of Gov-
ernment monopoly or of drastic i)rohibition of exports of military materiel
would be disruptive of our national eccmomic well-being and technical devel-
opment, and disastrous to our industrial resources available against a national
emergency ; and it is at least extremely doubtful whether they would in
fact accomplish anything concrete toward the elimination of war. Such policies
might, on the contrary, stimulate evasions, reprisals, or even new armament
races. A policy of wise control is capable of greater accomplishment than a
drastic policy of monopoly or prohibition.
One final thought is perha])s in order. The aviation industry is not primarily
an arms-proilucing industry, any more than ai'e the chemical, steel, or auto-
mobile-l)uilding industries. Those industries likewise have, through their
technical progress, made great contributions to our civilizaton. and at the
same time constitute an indispensal)le reserve of our first-line national defense.
As with those industries, the greatest opportunity of the aircraft industry in
the future lies in the commercial field. The fullest potentialities of our industry
can only be achieved proportionately to tlie maintenance of peace. But we are
sensible of the fact that the existence of a flourishing and technically competent
aviation industry is vital as a national resource against the occasion of a na-
tional emergency.
Though military requirements have always been of necessity a stimulus
to technique, we of the aviation industry know that our primary interest and
our best hope for prosperity lie in pressing forward to the perfection of the
peace-time work of air transportation.
Respectfully submitted,
Donald L. Brown,
President United Aircraft Corporation.
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