Mr. BROOKS. Yes, sir. Mr. COBURN. And the grand total of windfalls to all contractors, both Defense Production Act and stockpile contractors, is how much? Mr. BROOKS. $2,993,302. Mr. COBURN. This table does not include any figures at all with reference to Calumet & Hecla ? Mr. BROOKS. It does not. Mr. COBURN. Nor does it include the advantages that Miami Copper Co. enjoyed because of it being deferred during the early part of the contract when prices were high and then canceling out when prices were low? Mr. BROOKS. That is true. Mr. COBURN. I have no further questions, Mr. Chairman, of this witness. Senator SYMINGTON. Were any of these companies started by loans or grants from the Government? Mr. BROOKS. I do know offhand that in the case of Banner Mining Co. several hundred thousand dollars was advanced by GSA to help with the construction of the facilities involved in the contract referred to here. I believe also that in the case of Sherritt Gordon Mines that there were rather substantial progress payments made during the initial construction period of that company's facilities. These payments were made on work in progress before completion of their refinery. There may have been in some of the other cases but I do not have any figures with me and I am speaking from memory. Senator SYMINGTON. You might look that up, if you will, and supply it for the record. Mr. BROOKS. Yes, sir. (Information requested is as follows:) Advance payments, Banner Mining Co., $473,665. Senator SYMINGTON. The next question would be: Were the loans or were the grants repaid? Mr. BROOKS. I am certain, in both cases, all advances were repaid. Yes, sir. Senator SYMINGTON. If they were not repaid, then you would figure that amount of money per pound and the price actually would be that much more, would it not? Mr. BROOKS. It certainly would; yes, sir. Senator SYMINGTON. But to the best of your knowledge, in no case in the copper picture; is that correct? Mr. BROOKS. I believe that is correct. Mr. BROOKS. Yes, sir. Mr. MAY (continuing). I notice here that in the third column you have the quantities that are delivered, and I assume that that means over the entire period of the contract, the final quantity that was delivered to the Government Mr. BROOKS. Yes. Mr. MAY (continuing). Under the Defense Production Act contract. And apparently for Appalachian Sulphide you had a firm quantity of 12 million pounds but only 4 million pounds were delivered. Is that right? Mr. BROOKS. That is true; yes, sir. Mr. MAY. And for Banner you had 3 million pounds short. For Howe Sound you were short some almost 3 million pounds. The International Nickel contract was short, apparently 5 million pounds and we know that Miami Copper was short. Were these canceled or why was there a shortage finally in all of these contracts? Mr. BROOKS. These differences you are referring to, sir, relate to cancellations which took place without reference to the diversion program. Some of these cancellations, such as in the case of Appalachian, occurred before the period of diversions began. In other cases, like International Nickel Co., they were cancellations which occurred some years later. They are totally unrelated to the diversion program. Mr. MAY. All right. Now, I am referring specifically to Banner. Are you familiar with the circumstances around which Banner was terminated? It is my understanding that GSA received a telegram, requesting termination of the contract, and within a day or 2 days a telegram was sent back by Mr. Walsh, of GSA, saying, "We agree to cancel." Do you have any knowledge whether any staff consideration was given to whether or not this contract should be canceled? Mr. BROOKS. I believe that staff consideration was given to that; yes. Mr. MAY. Well, it must have been rather rapid since the answer was sent out, apparently, within a day of the request for cancellation. Would that indicate there was ever any opportunity to consult with ODM about this cancellation? Mr. BROOKS. I would not know offhand whether there was consultation with ODM. Mr. MAY. Now, as I understand it, Banner was an expansion contract; that part of the purchase for Banner, as well as getting copper for the stockpile, was to expand the production facilities for the production of copper. Is that correct? Mr. BROOKS. Yes, sir, I believe it was. Mr. MAY. So that when the Banner Mining contract was permitted to be terminated, when you still had 3 million pounds to receive, this was a direct frustration of part of the purpose of the contract, was it not? That is, since the mine would then shut down and you would have lost the producing facility? Mr. BROOKS. Well, the circumstances, I believe, that were considered at the time of the termination of the Banner contract was that although this was nominally a 31-cent contract the fact is that there had been included, by subsequent amendment, during this restoration period that we discussed a short while ago, a condition that the replacements of diverted copper be at the lower of contract price or market. In this instance, the market price had declined on the date the request to terminate was made from its high point of 46 cents to 261⁄2 cents a pound, and this was 4 cents below the contract price. The contractor pleaded hardship resulting from continued production at a price of 2612 cents. Since it was, essentially, at that time a market price contract, in reviewing the matter I believe I would say that GSA no doubt considered that it could, if desired, obtain an equivalent quantity of copper elswehere for the same price it could from Banner. Therefore it was not put at a disadvantage in the cancellation of the Banner contract. Mr. MAY. Yes, but that is why I make the point. The purpose of this contract, being a Defense Production contract and an expansion contract, was not simply to get copper but to have a producing facility and to maintain a producing facility. Now, Banner had just made, according to your estimate, $879,000 more by being permitted to divert than they would have made if they had been required to deliver to the Government. So they were $879,000 to the good. Now, when the market price drops down to a point where it is disadvantageous for them to deliver to the Government apparently they request to terminate and immediately their request is granted, even though that termination would directly frustrate a main purpose of the contract, which was to have a continuous producing facility, a new producing facility for copper. Senator SYMINGTON. You are not an authority on the contract yourself. Mr. BROOKS. That is true, sir. Senator SYMINGTON. Who would be the one to discuss this with GSA? Who would have the most knowledge of the details of the operation of the contract? Mr. BROOKS. Well, I imagine that is a question which should be taken up with the Commissioner of Defense Materials Service. I do not believe I could recall offhand which individual would be most familiar. Senator SYMINGTON. Will you put that in the record, what the name was of the gentleman in that position at the time you are talking about? Mr. BROOKS. Yes, sir. (Information requested is as follows:) The Commissioner (Acting) of Emergency Procurement Service at the time was Mr. Russell A. Heddleston. The officer who administered the contract was Mr. James V. O'Dwyer, of the Contracts Administration Branch, Materials Division, Emergency Procurement Service. Senator SYMINGTON. Thank you, Mr. Brooks. Mr. BROOKS. Thank you, Mr. Chairman. Senator SYMINGTON. Mr. Counsel, for the record, when do you plan your next hearing? Mr. COBURN. A week from today at 10 o'clock. Senator SYMINGTON. And what is it going to be on? Mr. COBURN. Rubber; natural rubber. Senator SYMINGTON. There has been quite a little discussion of memoranda written to and from Dr. Flemming. Do you plan to have him before the committee? Mr. COBURN. Yes, sir. He will be before the committee on a week from Wednesday, when we will question him about the cancellation and the deferrals that have been gone over today. Senator SYMINGTON. As I understand it he would have been with us today but it was inconvenient to him and you agreed he could appear at his convenience. Is that correct? Mr. COBURN. That is correct, sir. Senator SYMINGTON. And that will be a week from Wednesday? (Whereupon, at 3:29 p.m., the hearing was adjourned to reconvene on Monday, April 23, 1962, at 10 a.m.) |