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There was another point at issue, Captain Wente said:
It cannot be stressed too strongly that the initial dereliction of duty on the part of U.S. Government employees (criminal or negligent) enabled the outlined chain of evenis to occur. * * * This file indicates that property disposal regulations are not being followed, and that proper supervision is not being implemented.
(Exhibit 13 is legal opinion of Captain Wente, dated June 28, 1966.) Rudolf Schreurs did not pay for electronic components. He paid for mixed scrap. The estimated scrap weight was 549.056 short tons. Schreurs, as the successful bidder, contracted to pay 231 deutsche marks or $58 a short ton, a total of about $31,845.
On September 15, 1965, the demilitarization of all 408 missiles was reportedly completed. All the scrap was removed.
(Exhibit 14 is certificate of Mr. Dahan, dated September 15, 1965.)
Mr. Schreurs submitted weight slips for only 377.091 short tons of scrap. The invitation for bid had estimated 549.056 short tons. The difference was 171.965 short tons or 31 percent.
CID agents established that the Schreurs had falsely said one missile container weighed 1,276 pounds, when it actually weighed about 1,924 pounds.
Using the false weight of this container, the Schreurs set the weight of all 412 containers. (Four containers contained no missiles.) At the contract price of 231 deutsche marks per ton, the Schreurs cheated the United States out of 30,885 deutsche marks or $7,721.
The Schreurs reached a compromise with the R. & M. Center of 20,384.36 DM. When they paid this sum on November 23, 1966, they were maintained as accredited bidders.
Chairman McClELLAN. Were they maintained notwithstanding the fact they did not demilitarize that property?
Mr. GRAHAM. Both. They had not demilitarized it and by falsification of weight they had cheated the Government.
Chairman McCLELLAN. They had cheated on weight. Also they had not demilitarized that equipment. Is that correct?
Mr. GRAHAM. They had not completely demilitarized it, that is correct; yes, sir. They had not demilitarized it. They had simply disassembled it.
Chairman McCLELLAN. They had not demilitarized this sophisticated equipment, had they? That is what they were trying to sell in France. Is that right?
Mr. GRAHAM. That is correct, sir.
Chairman McCLELLAN. Notwithstanding this breach of contract, when they were supposed to demilitarize it, and his willful defrauding of the Government, notwithstanding that, he was still retained as an eligible bidder for scrap?
Mr. GRAHAM. Yes, sir; he was. Chairman McClELLAN. Can we pinpoint who made that decision and who was responsible for that situation continuing?
Mr. GRAHAM. The R. & M. center administers all contracts. Chairman McCLELLAN. Sir? Mr. GRAHAM. The Redistribution and Marketing Center administers all contracts. Any action initiated against or in favor of any contractor would start there.
Chairman McCLELLAN. Whoever made that decision, if these were the facts, should receive a very serious reprimand or punishment in my judgment. That is inexcusable.
Mr. Johnson. May I offer something, sir?
Mr. Johnson. The R. & M. center, the sales people reached an agreement with Mr. Schreurs where they paid back some 20,000 deutsche marks.
Chairman McCLELLAN. I know, but they defrauded willfully. That is getting part of what the Government was entitled to then.
Mr. JOHNSON. Yes, sir. Chairman McCLELLAN. From there on, they knew they were dealing with someone who would defraud them if he had an opportunity to do it.
Mr. Johnson. That is very true.
Chairman McCLELLAN. Yet they maintained him as an eligible contractor on bidding.
Mr. Johnson. That is right.
Chairman McCLELLAN. In spite of the fact they were never able to get all the property demilitarized as the contract provided, is that right? Mr. Johnson. That is right.
Chairman McCLELLAN. That is worse than malfeasance in office. That borders on the corruptible to me.
Senator PERCY. Mr. Chairman, may we ask the final question: Why?
Mr. GRAHAM. I can offer my own opinion why. I have heard from people at the R. & M. Center that their space is limited, they cannot store this property for a great length of time because it accumulates so quickly. Some sales are based simply on, “Let us make room for something else,” in effect.
Senator PERCY. Do you mean that they get rid of it regardless of all the reasonable and prudent business practices that should be adhered to in checking whom you are going to sell it to and so forth?
Mr. GRAHAM. I don't agree with what they think. I think they should follow accepted business practices, but I do know, having talked to them on occasions, that they need the space and they will make a sale sometimes, perhaps not in this particular case, simply to make room for other accumulations.
Chairman McCLELLAN. All right. Let us proceed.
Senator PERCY. Is it true that the Air Force is the cognizant responsible service in this case?
Mr. GRAHAM. Yes, sir.
Mr. GRAHAM. In closing the case, the CID alleged that the Schreurs had breached their contract by failing to demilitarize the missiles, by reporting incorrect weight figures, and for reselling the materiel not as scrap but as electrical equipment.
The other targets of CID criticism were U.S. employees.
John Francis Tierney, property disposal officer at the Kaiserslautern depot, was derelict in his duties when he failed to detect the discrepancy between the weights of the scrap recorded by the Schreurs and the IFB estimates.
Paul Guy Dahan, property disposal agent at Germersheim, was derelict in his duties when he failed to properly supervise the demilitarization of the missiles.
Staff Sergeant Robert Louis Reed, quality assurance inspector at Germersheim, was derelict in his duties when he failed to note that the missiles were not being properly demilitarized.
The CID declared that Alfred Herrmann was derelict in his duties when he failed to properly account for missiles and related equipment and to assure that property removed by the Schreurs was correctly weighed. Mr. Herrmann was also criticized for giving the Schreurs 50 55-gallon scrap drums which could have been sold.
Mr. Dahan and Sergeant Reed received administrative nonpunitive oral reprimands. Mr. Herrmann received an administrative oral reprimand from his supervisor, Mr. Tierney. Mr. Tierney was to receive a letter of reprimand.
Mrs. Schreurs was suspended from May to November of 1968. She was again suspended in December of 1969, and that suspension was lifted in March of 1971. Neither suspension was related to this case.
Chairman McCLELLAN. All right. Take the next case.
On October 22, 1965, an informant reported to the CID that two American Army rangefinders were stored in the home of Walter Weber in Rolandswerth.
Rangefinders are valuable fire control equipment. They enable tank gunners to fire on target. Rangefinders are much in demand among arms traffickers. U.S. Defense Department regulations require that surplus rangefinders be destroyed so that their sole future use can be only as scrap metal. There were two rangefinders in Mr. Weber's home. They were in
Each rangefinder had an original acquisition price of $9,643. They needed repairs. Their lenses were cracked, but they were by no means demilitarized.
I would like to point out a rangefinder is an item that requires demilitarization. You have to reduce it to nothing.
Their lenses were cracked, but they were by no means demilitarized. They were still valuable and after repair would have been serviceable.
The finding of the rangefinders in Mr. Weber's garage demonstrates the inefficient and careless procedures for demilitarizing surplus armaments and sophisticated components.
This case also adds weight to an assertion we will make later in another case that many contractors who purchase scrap generated by the military are not interested in scrap. In fact, they often lose money on such transactions. However, this is the price they must pay for access to depots.
Herbert Teichmann calls himself a scrap dealer, but he prefers armaments. On August 5, 1964, Mr. Teichmann was awarded the contract on "heavy iron and steel scrap" from the demilitarization of two "Trainer Tank Gunnery T18" and components.
The contract was awarded at the Kaiserslautern depot by the contracting officer, Norman Gieseler.
(Exhibit 15 is invitation for bid 91-569-s-64-106, dated June 22, 1964; exhibit 15a is notice of award, release document and statement, dated Aug. 5, 1964; and exhibit 15b is sale of Government property, bid and award, dated July 16, 1964.)
Teichmann was to perform the demilitarization, under PDO_supervision, at the Army depot at Germersheim. Representing the U.S. Government in the demilitarization was Walter Ceglarek, 56, a German national, who was asked in a December 8, 1965, CID interview if, when he certified the demilitarization of the tank trainers, he had noticed the rangefinders.
(Exhibit 16 is statement of Mr. Ceglarek, dated Dec. 8, 1965.) Mr. Ceglarek answered:
No, I did not notice the range finders. I only saw scrap. However, it is quite possible that the range finders were hidden underneath the scrap. Wasn't it his job to look underneath the scrap for just such hidden devices ?
To that, Mr. Ceglarek said: No. Furthermore, we do not have the technical equipment, such as cranes, personnel, etc., at the PDO, Germersheim.
Mr. Ceglarek, who had been employed at the Germersheim depot since 1948, explained how he certifies the demilitarization of war materiel.
He said: Mr. Herrmann of the PDO telephonically informs me that certain items which have beea demilitarized are ready for inspection.
I then proceed to the PDO, usually accompanied by an American soldier, to inspect these items. I am not positive, though, that I took a GI along when I inspected the (two tank) trainers.
Subsequently, Herrmann takes me to the property which has been demilled. I then inspect and determine whether it has been demilled in accordance with TB Ord 412. If this is the case I take all the paperwork to my office and make out a demil certificate.
This certificate authorizes the contractor to take the property out of the depot. I do not have a copy of the contract which prescribes the way parts have to be demilled.
The Herrmann Mr. Ceglarek referred to was Alfred Herrmann, a German national employed at Germersheim since 1951.
Interviewed by the CID on December 8, 1965, Herrmann said he remembered the two tank trainers and the rangefinders. He recalled that the lenses were broken. He stressed that he had no demilitarization responsibilities. He was to let Mr. Ceglarek know when to make his inspection.
Mr. Herrmann noted that because of crowded conditions in the yard the two tank trainers were stored in an open, unsecured area instead of in a secured, fenced-off region.
(Exhibit 17 is statement of Mr. Herrmann, dated Dec. 8, 1965.)
Mr. Weber was interviewed by the CID on November 16, 1965. He said he helped Teichmann remove the rangefinders from the tank trainers. A firm named Fahnenschreiber tried to sell them to the German army for about 39,000 deutsche marks (about U.S. $10,000), Mr. Weber said, but the Germans rejected the offer and the rangefinders were then stored in his garage.
In other words, Mr. Weber was acting as agent for Mr. Teichn ann. He went to a third party to induce him to sell the rangefinders. The German army rejected the offer and Mr. Weber took control of the things and returned them to his garage.
(Exhibit 18 is statement of Mr. Weber, dated Nov. 16, 1965; exhibit 18a is letter of firm P. H. Fahnenschreiber and Son, dated Aug. 24, 1965; exhibit 18b is photograph of M-12 rangefinder; and exhibit 18c is photograph of T41 rangefinder.)
The CID interviewed Mr. Teichmann December 13, 1965. He said he and Mr. Weber removed the two rangefinders during demilitarization of the tank trainers. Mr. Weber was to find a buyer for them.
Mr. Teichmann said he paid for the rangefinders as scrap, transporting the fire control components out of the Germersheim depot in a load of “heavy iron and steel scrap.".
Mr. Teichmann said he had bought fire control equipment under the guise of scrap on other occasions. He made that admission to the CID:
Question. On 10 May 1965 you offered a quantity of fire control equipment to the Zeiss company in Oberkochen. When and where did you obtain these items!
Answer. I bought this fire control equipment in various lots. I cannot recall any longer when and where I bought these items.
Question. At the time you bought this fire control equipment didn't you know that these items had to be demilled also?
Answer. No, I didn't know this at that time but I think that the U.S. Army should know what property has to be demilitarized. Actually items like this should not be in the lot.
(Exhibit 19 is statement of Mr. Teichmann, dated Dec. 13, 1965.)
WO Maxwell C. Payne, who was a CID agent at the time, checked on the sales of scrap he took from the two tank trainers.
Teichmann had sold 17 tons of scrap to Alfred Wetzka for 90 deutsche marks a ton or a total of 1,534.86 deutsche marks, or about $400.
CID Agent Payne also found that Teichmann had paid the U.S. Government 135 deutsche marks a ton for the scrap.
Thus, he sold for 45 marks a ton less than he paid originally. Mr. Teichmann entered into that contract for one thing only-fire control equipment. Scrap was his cover.
On December 28, 1965, Mr. Teichmann returned the rangefinders to the custody of the Kaiserslautern PDO.
The rangefinders were offered for sale to the German army, which was said to be in need of fire control equipment for its forces. We do not know if the German army bought them.
(Exhibit 20 is investigator's statement by Agent Payne, dated Jan. 31, 1966.)
The CID's report of February 9, 1966, concluded:
Teichmann did, at U.S. Army Depot Germersheim, Germany, on or about November 1964, breach contract [on tank trainers] by failing to perform the prescribed demilitarization of ... two rangefinders.
No action was taken to suspend or debar Mr. Teichmann or his employees from further purchases at the surplus depots. The firm was still on the accredited bidders list the time I checked, about the first of April, 1972.
Chairman McCLELLAN. What do they have to do to get off the eligible list, to get debarred? Did you find any instances where they were?
Mr. Johnson. This firm, no, sir.
Mr. JOHNSON. Yes, sir; we have found instances where they have been debarred.
Chairman McCLELLAN. But the debarment was not effective because they were able to bid through agents, is that correct?
Ňr. Johnson. Yes, sir, through the agent principle.