STOCKPILE INVESTIGATION MONDAY, MAY 7, 1962 U.S. SENATE, SUBCOMMITTEE ON THE NATIONAL STOCKPILE AND NAVAL PETROLEUM RESERVES OF THE The subcommittee (composed of Senators Symington, chairman; Thurmond, Engle, Cannon, Case of South Dakota, and Beall), met, pursuant to call, in room 235, Old Senate Office Building, at 10 a.m. Present: Senators Symington (presiding) and Beall. Also present: Richmond C. Coburn, chief counsel to the subcommittee; T. J. May, assistant counsel; J. H. Zimmer, assistant counsel; Edward O. McCue III, assistant counsel, and James J. Gehrig, special assistant to Senator Symington. Senator SYMINGTON. The hearing will come to order. I have a short statement this morning. A recent editorial in a metal trade paper stated that contracts for "copper producers to deliver metal to the national stockpile were signed by a Truman Democratic administration during the Korean war period." Of the nine national stockpile contracts listed in the table on copper diversions, four were executed in the Truman administration, five in the Eisenhower administration. In addition, all of the six DPA copper diversion contracts were executed in the Eisenhower administration. In any case, as has been previously stated, this subcommittee is interested in obtaining the facts, regardless of when they occurred. The editorial in question also states that the diversion of copper tonnage was "relatively small.” About 83,748,000 pounds of copper were diverted. This gave an excess profit totaling millions of dollars to those contractors favored by being allowed deferment. The editorial criticized this subcommittee for "attempting to suggest that certain copper producers reaped a profit 'windfall' in 1955." In a letter of May 27, 1955, from Director Flemming of the Office of Defense Mobilization to Mr. Al E. Snyder, Assistant Administrator of the General Services Administration, Dr. Flemming stated: In the light of the possible windfalls to the suppliers I feel that the authorization to cancel was a mistake and that the deferment of the deliveries would have been preferable. The profits occurred regardless of whether the contracts in question were deferred or canceled. One large company offered to purchase its copper contract from the Government on a basis that would have netted the Government mil lions of dollars. This was refused. Other copper companies, however, were allowed to cancel their contracts with the Government at no cost to them. Dr. Flemming was often unresponsive to the effort of counsel to locate the source of the recommendations for these deferrals. As example, when Counsel Coburn asked him, "Who was it that you consulted with on this subject that expressed an opinion in favor of deferrals?" Dr. Flemming answered: I told you that I consulted with the Defense Mobilization Board and the Defense Mobilization Board recommended that the deferrals take place. Mr. COBURN. Did you simply rely entirely on their recommendation? Mr. FLEMMING. I do not know whether I did or not. I mean I can't remember this particular instance ** Later, the colloquy ran on as follows: Mr. COBURN. I ask you that because I am wondering if you discussed the desirability of deferring, using that as a device to divert, with Secretary Weeks, for instance. Mr. FLEMMING. I do not recollect a conversation with him on it. Mr. COBURN. Or anyone else in the Commerce Department, at all, the head of BDSA or anyone in the Commerce Department? Mr. FLEMMING. I do not recall a conversation with them. Mr. COBURN. Your testimony is, then, you just do not remember having talked about the desirability—that is, the pros and cons of deferrals, with anyone? Mr. FLEMMING. My assumption is that I discussed it with the staff. Mr. COBURN. But you do not remember talking with anyone about it? Mr. FLEMMING. I will let my testimony stand on what I have just said. The subcommittee is indebted to the senior Senator from Delaware for contributing clarification to this matter. On Friday, April 27 last, Senator Williams placed in the record a letter to him from Dr. Flemming, dated April 2, 1955, in which Dr. Flemming said: All deferments of deliveries of copper to the Government have been authorized at the request of the Department of Commerce and after consultation with the Defense Mobilization Board. Turning now to another subject, an article in the Washington Daily News of April 30 reports that former Secretary of the Treasury George M. Humphrey stated recently: The Senate stockpile investigation shows signs of becoming "a personal vendetta against me." The record will show there is no justification whatever for any such alleged statement. The article also reports that Secretary Humphrey stated: Everywhere the committee has turned they have hit a stone wall. There just was no scandal. The subcommittee has not prophesied any scandal. It has consistently stated that its purpose was to bring out facts long concealed by classification. Secretary Humphrey is the one talking about scandal, not the subcommittee. In this same article, former Secretary of Commerce Sinclair Weeks is quoted as saying recently: It has always looked to me as though they (this subcommittee) are after political paydirt. I don't believe there is any. We regret this characterization of the efforts of this subcommittee and its counsel. In due course the subcommittee will give Secretary Weeks the opportunity to justify this charge. I ask unanimous consent that the article in question be placed in the record at this point. Senator BEALL. No objection. Senator SYMINGTON. Without objection. (The article referred to follows:) [From the Washington Daily News, Apr. 30, 1962] HUMPHREY SEES PROBE AS PERSONAL VENDETTA-WEEKS CRITICAL ALSO (By Vance Trimble) Former Treasury Secretary George M. Humphrey believes the Senate stockpile investigation shows signs of becoming "a personal vendetta against me." And former Commerce Secretary Sinclair Weeks also is sharply critical of the line of inquiry taken by the subcommittee headed by Senator Stuart Symington, Democrat, of Missouri. "It has always looked to me," Mr. Weeks said today, "as though they are after political paydirt. I don't believe there is any." These two Eisenhower administration Cabinet officers presumably will be the hearing's next big-name witnesses. The investigation was requested by President Kennedy who suggested there may have been heavy profiteering in buying the $9 billion stockpile of war-scarce materials. ASKED TO EXPLAIN Messrs. Weeks and Humphrey may be asked to explain their roles in highlevel policy decisions which appeared to favor stockpile suppliers at the expense of the taxpayers in the 1953-56 period. The hazy memory of Dr. Arthur S. Flemming, former Office of Defense Mobilization Director, has both irritated and frustrated the committee. He was unable fully to explain decisions that handed copper contractors $2 million in windfall profits when deliveries to the stockpile were canceled or deferred. Messrs. Weeks and Humphery sat on Mr. Flemming's advisory board. Thus, they could be expected to shed light on the decisions. Mr. Weeks, a letter in evidence discloses, vetoed the copper deferrals on March 10, 1955, but 2 weeks later attended a conference where they were authorized. R. C. Coburn, subcommittee chief counsel, said both could be asked to testify— "it just depends." Their names figure prominently in testimony on copper and rubber stockpiling. MORE INVOLVED Mr. Humphrey also is more directly involved. The Hanna Mining Co., subsidiary of a Cleveland industrial complex he headed, received a $103 million contract to supply nickel to the stockpile. This was signed January 16, 1953, 3 days before he became Treasury Secretary. "I know of no scandal in the program-from start to finish," Mr. Humphrey said by phone from his Cleveland office. "President Kennedy came out with a sensational statement, and I presume he had been told, 'we've got those babies over a barrel.' I don't think he realized that 90 percent of the stockpile was ordered in the Truman administration. "Mr. Kennedy apparently was misinformed. Everywhere the committee has turned they have hit a stone wall. There just was no scandal." Senator SYMINGTON. Mr. Counsel, you have witnesses this morning? Senator BEALL. Mr. Chairman, don't you think it would be a good idea when this comes up that we have the Congressmen, I mean Members of Congress who questioned Mr. Flemming, to withdraw these stockpiles back to private industries, those who wrote at that time in October 1954 and 1956; as I remember it at that time, there was some talk about Members of Congress who were requesting that the private industries have this stockpile. Senator SYMINGTON. Let me say to the able Senator I would appreciate his discussing this with counsel. We would want to call before the subcommittee any witnesses he felt should be called before the subcommittee. Senator BEALL. I don't mean to take the witnesses, but just the letters from Members of Congress who made this request. Senator SYMINGTON. Would you work with counsel and get the letters together you would like to have made part of the record? Senator BEALL. I do know that Members of Congress wrote them. I don't know what they are specifically. Senator SYMINGTON. Let us know what you would like to do in the matter and we will do it. Who is your first witness? Mr. COBURN. Mr. Chairman, Mr. William N. Lawrence is the first witness, and Mr. May, assistant counsel here, is prepared to examine Mr. Lawrence on one phase of his testimony so I will defer to Mr. May. Senator SYMINGTON. Fine. Will you proceed, Mr. May? Mr. MAY. Mr. Lawrence, you, of course, have appeared before this hearing and consider yourself still sworn and for the purposes of the record would you again identify the position that you presently hold with the Office of Emergency Planning? TESTIMONY OF WILLIAM N. LAWRENCE, ASSISTANT DIRECTOR OF MOBILIZATION ANALYSIS, OFFICE OF EMERGENCY PLANNING Mr. LAWRENCE. I am presently the Deputy Director of Mobilization Analysis of our Office of Emergency Planning. Mr. MAY. All right. Mr. Witness, during the course of these hearings, we have heard some discussion about the question of objectives, and as I understand it the testimony has been that objectives are established for each strategic and critical material, and that determines the amount of material that we are going to need, the quantity of that particular material that we need to stockpile for purposes of a war, is that correct? Mr. LAWRENCE. That is correct. Mr. MAY. Mr. Lawrence, how long have you been at the Office of Emergency Planning or its predecessors? Mr. LAWRENCE. Since 1947. Mr. MAY. During that period have you had responsibility at one time or the other for setting objectives or for participating in objectives for various materials? Mr. LAWRENCE. I have had-I have been in the participation of recommending objectives. Mr. MAY. You are familiar with the manner in which they are set; is that correct? Mr. LAWRENCE. That is correct. |