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Chairman McCLELLAN. I have here pictures which I understand are pictures of those rangefinders that you referred to.

Mr. JOHNson. Yes, sir. I would like to get those into the record.

Chairman McCLELLAN. That may be received as an exhibit and appropriately numbered

(The photographs referred to were marked "Exhibit No. 91" for reference. One of the photographs follows and the other one may be found in the files of the subcommittee.)

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Chairman MCCLELLAN. Proceed.

Mr. Johnson. The next case we refer to by its location, the Hanau Case.

We investigated two matters at the Hanau property disposal Ciepot at Grossauheim/Main.

First, an inexperienced Army lieutenant ran the Hanau depoi. He relied on his German subordinates to manage the yard according to Defense Department regulations.

Second, valuable articles of warfare-undemilitarized rangefinders, for example—were concealed beneath miscellaneous scrap piles.

Third, an inventory adjustment report declared valuable fire control equipment was scrap although no physical damage was performed on it.

A civilian property disposal officer—the lieutenant's predecessor, allowed nondemilitarized fire control equipment to accumulate. He left Hanau without providing for the demilitarization and disposal of the fire control equipment and without briefing his successor, the young lieutenant, avoui it. Consequently, the equipment, worth more than $800,000 is still unaccounted for.

82-422 0—72—pt. 1—9

Principals involved at Hanau were:

Norman Gieseler, American civilian employee, who left Hanau to become contracting officer at Kaiserslautern. As property disposal officer he was the top official of the Hanau depot. Kaiserslautern had control over Hanau for contracting. Mr. Gieseler was promoted in January 1965 to contracting officer for the U.S. Air Force Redistribution and Marketing Center at Mainz-Kastel.

Army First Lieutenant Harold Ellis Massie, Jr., Mr. Gieseler's successor at Hanau.

Helmut Wegfahrt, German national, the property disposal assistant at Hanau and an employee there since 1948.

Annemarie Sauerwein, German national, also property disposal assistant at Hanau.

Ulrich Buerger, German national, representative of arms dealer Ernest Bertram.

Isaac Moradi, Iranian national, owner of Universal Auto Parts, 163 Exterior Street, New York.

From 1963 to 1964, Norman Gieseler allowed at least $839,897 worth of serviceable fire control equipment to accumulate.

(Exhibit 21 is “Inventory Adjustment Report,” dated October 5. 1964.)

Mr. Gieseler went to the Kaiserslautern depot in May or June of 1964. Kaiserslautern was given control over Hanau.

In June or July of 1964, Hanau started providing Kaiserslautern reports on the value of all property on hand.

One early report gave an accounting of fire control equipment accumulated at Hanau.

During August or September of 1964, a man named Groebel from Kaiserslautern called Hanau several times to ask why so much fire control equipment was stored at Hanau.

(Exhibit 22 is "Statement of Mr. Kauffeld,” dated December 8, 1965.)

Helmut Wegfahrt and Annemarie Sauerwein prepared an inventory adjustment report on the fire control equipment October 5, 1964.

(Exhibit 23 is “Statement of Mrs. Sauerwein,” dated September 21, 1965.)

(Exhibit 23a is "Statement of Mrs. Sauerwein," dated December 8, 1965.)

(Exhibit 23b is “Statement of Mr. Wegfahrt,” dated December 8, 1965.)

(Exhibit 23c is “Statement of Mr. Viel,” dated December 7, 1965.)

The report was signed “Lieutenant Massie.” He later told the CID that he was on leave from October 3 to October 18, 1964, and could not have signed the document until October 19.

The inventory adjustment report listed $839,897 worth of fire control equipment as 69 short tons of scrap.

The inventory adjustment report was fraudulent. The fire control equipment was not reduced to scrap, but was still serviceable and very much in demand in the weapons market. No evidence indicated that the fire control equipment was destroyed. It has never been accounted for. Lieutenant Massie became property disposal officer at Hanau in July 1964.

He was inexperienced, with little knowledge of property disposal. He did not know he had inherited a large inventory of fire control equipment.

Massie did not initially order an inventory because he was “told by personnel in the Quartermaster Section” that an inventory was made in May 1964.

In October 1965, Massie was shown the inventory adjustment report which declared the fire equipment scrap. He said the signature appeared to be his but he did not remember signing the document.

He said he did not sign it on October 5, 1964, because from October 3 to October 18, 1964, he was on leave "getting married.” He could have signed it, he said, on October 19.

Lieutenant Massie said he had to take the word of his German subordinates and that he did not ave time to examine situations and circumstances described by his staff.

Chairman McCLELLAN. The inventory adjustment report showed the fire control equipment to be 69 short tons of scrap.

Is there any other way to describe or identify that fire control equipment other than by tonnage?

Mr. Johnson. Yes, sir. It should have been identified by items and then destroyed.

Chairman McCLELLAN. How many items were involved?
Mr. Johnson. I don't have that figure at hand. I can get the figure.

Chairman MCCLELLAN. Anyway, the cost of that equipment was some $839,000 ?

Mr. Johnson. That is right.
Chairman McCLELLAN. It was sold for junk?
Mr. Johnson. No, sir. We don't know what happened to it.

Chairman McCLELLAN. The inventory was updated and didn't account for it?

Mr. Johnson. He was short that.
Chairman McCLELLAN. You don't know what it was sold for?
Mr. JOHNSON. No, sir.
Chairman McCLELLAN. But it disappeared ?
Mr. JOHNSON. Yes, sir.

Chairman McCLELLAN. It was either stolen or improperly sold for some other purpose ?

Mr. Johnson. Yes, sir.

Chairman MOCLELLAN. There is nothing to show it was demilitarized ?

Mr. Johnson. No, sir.

Chairman MCCLELLAN. Is that pretty valuable to get into the hands of an arms dealer?

Mr. JOHNSON. Yes, sir.

Chairman McCLELLAN. What was paid normally for 69 tons of scrap?

Mr. Johnson. The scrap value at that time was about a hundred marks a ton for heavy steel scrap. 6,900 marks would be the value of scrap if it were actually reduced to scrap and was all heavy steel. I imagine if it got into the hands of an arms dealer, it brought very close

Chairman McCLELLAN. I mean if it had been sold as scrap, it would be what?

Mr. JOHNSON. About 6,900 marks.
Chairman McCLELLAN. What would that be in dollars?
Mr. JOHNSON. About $1,700.

Chairman MCCLELLAN. So there was some over $800,000 worth of fire control equipment that would have sold for about $1,700 as junk that was completely lost?

Mr. Johnson. Yes, sir. Chairman McCLELLAN. From the inventory? Mr. JOHNSON. Yes, sir. Chairman McCLELLAN. You don't know what became of it? Mr. Johnson. No, sir. Chairman McCLELLAN. All right. Mr. Johnson. Lieutenant Massie said: Due to the area and amount of property involved, I did not always inspect the property being reclassified. Many times I had to rely on my staff. There is a possibility regarding the property in question, that if my staff answered my questions to my satisfaction, I did not inspect or demand further proof.

(Exhibit 24 is statement of Lieutenant Massie, dated Oct. 27, 1965.)

CID agents could not determine what happened to the fire control equipment after it was declared scrap. Supposedly some had been burned, but no records were found.

Burning does not demilitarize fire control equipment, which can be made usable again after burning. Proper demilitarization by burning would require melting the equipment.

Exhibit 25 is statement of Agent Crosman, dated Feb. 1, 1966.)
Exhibit 25a is statement of Mr. Lind, dated Sept. 30, 1965.)
Exhibit 25b is statement of Mr. Humm, dated Oct. 6, 1965.)
The CID's final report asserted :

“* * * Failure to properly separate property that could be sold from the property requiring demilitarization resulted in a substantial loss to the U.S. Government as many of these items were new and a requirement existed for them by firms rebuilding equipment for NATO countries."

The accumulated fire control equipment had been stored in a section of the Hanau yard that “permitted systematic pilferage.” Pilferage leads directly to the second phase of the Hanau inquiry.

Fire control equipment disappeared from the records at Hanau, but we may never know what happened to it.

Ernst Bertram, a German national, is a successful arms trafficker. Testimony about his operations will be presented later.

Ernst Bertram will (1) sell weaponry to anybody anywhere who meets his price. Most of the weaponry, weapon components and spare parts he sells are originally U.S. issue. Among the articles of war valuable to him are rangefinders, which enable gunners in armored vehicles to shoot straight.

Bertram's clients include nations relying heavily on armored vehicles for military strength. They must have rangefinders. Mr. Bertram maintains large inventories of spare parts and components for armored vehicles.

In early November 1964, Ulrich Buerger, Bertram's representative, went to the Hanau PDO to check on items offered for sale. At the

office he checked turn-in documents to determine what was offered. A turn-in document is the standard form used to itemize property being turned in to a supply depot or a PDO. Lot 89 was supposed to contain rangefinders. He checked the lot and found the rangefinders were missing. He complained to Mr. Wegfahrt, the property disposal assistant.

(Exhibit 26 is statement of Mr. Buerger, dated February 14, 1966.)

(Exhibit 26a is statement of Mr. Wegfahrt, dated February 3, 1966.)

Wegfahrt and Buerger could not find the rangefinders. Wegfahrt notified Norman Gieseler, the contracting officer.

Mr. Gieseler approved Mr. Wegfahrt's request to cancel the sale of lot No. 89.

These developments were highly irregular and they should have strongly indicated serious improprieties.

Lot No. 89 was put up for sale in an invitation for bid, (FB) No. 65-49, issued by Norman Gieseler. The IFB didn't mention five rangefinders.

(Exhibit 27 is extract listing item No. 89, spot bid 65-49, bid opening November 10, 1964.)

Many questions arise about the missing rangefinders. Why didn't Wegfahrt simply tell Buerger that rangefinders were not in lot No. 89 because they weren't supposed to be? Instead, Wegfahrt called upon Gieseler to cancel the auction because the rangefinders were missing

Why did Gieseler agree to the cancellation of the auction? Perhaps he had to since the advertised lot weight had now changed, but he should have said that the rangefinders were not missing because they weren't supposed to be there. As a senior PDO officer, he should have reminded Wegfahrt that it was contrary to policy to sell rangefinders.

Rangefinders are sensitive and valuable components. They are to be sold in Europe, according to Defense Department regulations, only in country-to-country transactions between the United States, its allies and friends.

PDO yards cannot sell rangefinders, but must reduce them to scrap metal.

These events certainly would appear to have put the upper PDO officials on notice that there were serious breaches of policy and procedures.

Mr. Wegfahrt told the CID:

On the day of the sale, November 10, 1964, I informed Mr. Gieseler, a representative of the USAFE/Germany Redistribution and Marketing Center who was conducting the sale, that the rangefinders were missing and that lot No. 89 should be withdrawn. Lot No. 89 was withdrawn from the sale and the remaining property was later reoffered as lot No. 79, IFB 65–35 X, bid onening February 9, 1965, after the acquisition cost and weight of the five rangefinders had been deducted from the total value and weight of the lot.

Later events are equally questionable.

No one reported to the CID that five rangefinders, with an original acquisition cost of some $48,000, were missing. A serious incident report should have been filer.

The reason the CID went into the case 9 months later was because of information provided by an informant.

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