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96. Affidavit of Charlotte Lipporte, dated January 28, 1972. 97. Chart showing property disposal organization in

Europe... 98. Thirty-six photographs taken at the Mainz-Kastel

Property Disposal Yard showing stacks of material; property being loaded on trucks; and demilitarized tank

turret rings99. Five photographs of cartons of aircraft parts and

photographic equipment.-100. Photographs and descriptive lists of material found

in PDO yards located in Germany 101. Redistribution and marketing breakout sheet for

transactions in calendar year 1971.. 102. Worldwide disposal sales statistics fiscal year 1970

through third quarter fiscal year 1972.--103. Reference map and index listing locations of major

PDO yards and satellite facilities in Europe..
104. Memorandum dated August 11, 1970, for the Assistant

Secretary of Defense (I. & L.) prepared by Joseph C.
Zengerle, Jr., Deputy for Supply Maintenance and
Transportation re reassignment of property disposal func-

tions..
105. Statistical data on local and third country nationals

employed by USAREUR/USAFE and a listing of non

American employees of PDO facilities in Europe. 106. International traffic in arms regulations, August 1969.. 107. International traffic in arms regulations, January 1967. 108. Department of Defense Demilitarization Manual,

September 1970 109. Department of Defense Scrap Yard Handbook, June

1966.-
110. Department of the Army manual entitled “Disposal of

Supplies and Equipment; Reporting, Utilization, and
Redistribution of Installation, U.S. Army, Materiel
Command, and Oversea Command Excess, Personal

Property,” March 1967.-
Proceedings of:

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July 26, 1972
July 27, 1972

July 28, 1972.
* May be found in the files of the subcommittee.

1 51 155

U.S. MILITARY SUPPLY SYSTEMS: TRAFFIC IN SURPLUS

WAR MATERIEL

WEDNESDAY, JULY 26, 1972

U.S. SENATE,
PERMANENT SUBCOMMITTEE ON INVESTIGATIONS
OF THE COMMITTEE ON GOVERNMENT OPERATIONS,

Washington, D.C. The subcommittee met at 10 a.m., in room 3302, New Senate Office Building, pursuant to section 4, Senate Resolution 258, agreed to March 17, 1972, Senator John L. McClellan (chairman of the subcommittee) presiding.

Members of the subcommittee present : Senator John L. McClellan, Democrat, Arkansas; Senator Abraham A. Ribicoff, Democrat, Connecticut; and Senator Edward J. Gurney, Republican, Florida.

Members of the professional staff present: John P. Constandy, chief counsel; Philip W. Morgan, chief counsel to the minority; La Vern J. Duffy, assistant counsel; William M. Knauf, investigator; Ruth Young Watt, chief clerk; Walter S. Fialkowicz, detailed employee from the Bureau of Narcotics; Richard A. Helmer, detailed employee from the General Accounting Office; James R. Johnson, C.I.D., U.S. Army; James D. Stickler, C.I.D., U.S. Army; Thomas E. Graham, C.I.Ď., U.S. Army; and Heinz K. Naumann, C.I.D., U.S. Army.

Chairman McCLELLAN. The committee will come to order.

(Members of the subcommittee present at time of convening: Senators McClellan, Ribicoff, and Gurney.)

Chairman McCLELLAN. The Chair will make an opening statement preceding the calling of witnesses.

The hearing which the subcommittee begins today is the introductory phase of an investigation of the complex worldwide operations of the U.S. military supply systems, including the systems through which property originally costing hundreds of millions of dollars is sold as surplus. During this week of hearings we will examine principally the Army's property disposal yard operations in Europe.

Our time available for hearings is obviously restricted by events which affect the working time of the Senate this year, but at appropriate times in future months we will seek to conduct hearings on matters relating to the supply systems and to property disposal. We expect to examine: the international traffic in these surplus armaments that we have sold; the manner in which property made available to other nations under the terms of the military assistance program is disposed of once it is returned to us; and whether collusion and bribery have been an influence in any of these transactions.

(1)

We also hope to determine in later hearings whether there are deficiencies in the inventory and accountability of the wholesale military supply systems.

An important question to be examined during these and future hearings is whether our governmental practices in the disposal of surplus U.S. military property are consistent with our national policies. There are a number of agencies in the executive department other than the Department of Defense which exercise a degree of control over the distribution of war materiel, including the five agencies in three departments which administer the U.S. export and import controls.

We should recognize at the outset of these hearings that throughout the world there are countries which have a constant demand for war materiel and its availability is limited. Our Nation has policies and procedures designed to control the flow of this materiel.

One of these procedures prohibits certain items to be sold by property disposal offices without demilitarization, which is the destruction of the item's possible military application. The kinds of war materiel which are in demand are not only tanks or armored vehicles or complete weapons. Components of such items and their spare parts are as important commodities in the international arms marketplace as are the items themselves. Included within the hundreds of millions of dollars of property we sell annually are many of these much sought after complete items, components and parts.

The proliferation of the arms traffic and the huge increases in armament stocks among the world's nations since the end of World War II obviously are matters of grave international concern. The traffic and the stockpiling apparently are amplified and extended by the escape of serviceable war materiel through property disposal outlets of the American armed services.

Once sales of, usable arms and equipment have been made to dealers and traffickers, adequate control over the materiel is lost, and the property-weapons, tanks and tank components, armored vehicles, and thousands of kinds of spare parts can go to nations anywhere in the world, including some whose national policies may not be in accord with our own.

The importance of the arms traffic, whether the transactions are legitimate or illicit, makes examination of our surplus property disposal practices imperative in this inquiry into the military supply systems. We must determine whether there is impropriety or mismanagement in our disposal operations. We must identify the buyers of our military surplus and find out whether they are disposing of their purchases in the international black market in arms.

In our work thus far we have learned that to some extent property is sent to disposal yards while there still exists a need for it. We will seek to determine in these hearings the degree to which such surplus materiel in new or usable condition does wind up in property disposal yards and is then sold at low returns for the taxpayer. The reasons for such economic losses have been found to be the failure of personnel to adhere to regulations, haphazard recordkeeping and slipshod performance of duty by responsible personnel.

In October of 1971, we initiated the preliminary inquiry into allegations of improprieties, corruption, waste and inefficiency in the disposal of surplus military supplies in Europe, with particular emphasis on munitions list items.

Early in the inquiry it became apparent that the charges relating to policies, practices and procedures in property disposal operations had some basis in fact. Economic losses to the United States had been suffered, seemingly through deficiencies within the military supply systems. It was alleged also that usable munitions list items, and components and parts of such items were improperly being made available to arms dealers for worldwide sale.

The deficiencies in the systems sometimes manifested themselves in the sale or destruction of serviceable military materiel declared surplus without sufficient screening to determine whether it could be used elsewhere, and the sale, as scrap, of serviceable munitions list supplies without demilitarization.

Our hearings this week are centered upon the operation and administration of U.S. Army property disposal yards in Europe and we expect to hear testimony that major problem areas in the yards themselves include the continued employment of personnel of low capabilities, the lack of appropriate training for disposal employees, and the frequency of larcency, corrupt practices, falsification of documents, and other improprieties.

We expect that the testimony will indicate that deficiencies and improprieties in property disposal operations in Europe had been reported piecemeal for years through routine GAO, Army and Department of Defense audits and through criminal investigations and surveys conducted by the Army's CID.

There was insufficient reaction to these warning signs until the subcommittee started its preliminary inquiry last year. Property disposal, which is not within the mainstream of military service activities, generally has been considered by the Armed Forces as a "junk” operation.

The subcommittee reviewed a large number of criminal cases investigated by the CID during the past several years in Europe. We sought to determine in our inquiry whether the illicit activities were continuing. We selected from many cases six which will be discussed in these hearings. The testimony about them will relate generally to sales of weapons, vehicles, equipment, components of such items, and spare parts for them.

The sessions this week will also raise questions about other aspects of the complex sales process. I wish to assure members of the subcommittee that later hearings will provide the opportunity to study these related activities.

Our investigation has been unusual in one respect I would like to comment on. From its beginning, a unique relationship was developed and maintained with the Department of Defense and the several military services. This relationship of mutual trust, cooperation, and participation, by both the subcommittee's staff and officials of the services, has already produced significant corrective programs which ultimately will save the taxpayers a considerable amount of money and will provide the services with improved management control over an inventory of many billions of dollars.

The form which the arrangement took went well beyond simply accommodating the subcommittee's staff in a wide variety of requirements and readily making available the persons and documents nec

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