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 opening 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 filed.

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

Norman Gieseler issued a second invitation for bid for "lot No. 79" under the same title as the withdrawn No. 89, "miscellaneous ordnance hardware."

(Exhibit 28 is Extract listing item No. 79, Spot Bid 65-35X, bid opening date February 9, 1965.)

Mr. Gieseler included in the second IFB the same items, but the total acquisition cost of Lot 79 was reduced by the precise original acquisition cost of the five range finders, $48,215.

Levy Auto Parts of Toronto, Canada, was the successful bidder. CID investigation revealed that along with "miscellaneous ordnance hardware and repair parts" the firm also received from lot No. 79 $8,957.42 in fire control equipment, such as periscopes, telescopes and mounts, all items which are not supposed to be sold as items but only as scrap after they have been properly demilitarized.

(Exhibit 29 is statement of Mr. Mentges, dated April 5, 1966.) (Exhibit 29a is statement of Agent Crosman, dated May 6, 1966.) The mystery of the five missing range finders was solved. Isaac Moradi, an Iranian who owned Universal Auto Parts, New York, said he found them among miscellaneous scrap lot purchases he had made. But he had no proof. He shipped the range finders to Antwerp where he sold them to Levy Auto Parts. Four of the five range finders were then sold by Levy to the West German Army.

Chairman MCCLELLAN. Do you know what they got for them?
Mr. JOHNSON. No, sir; I don't.

Chairman MCCLELLAN. Why wasn't he asked about that? Were you not able to find out?

Mr. JOHNSON. I could find out, sir. I just don't have it at hand.
Chairman MCCLELLAN. All right.

(Exhibit 30 is statement of Mr. Moradi, unsigned, dated December 19, 1966.)

(Exhibit 30a is letter of Mr. Moradi, dated March 25, 1966.)
(Exhibit 30b is letter of Mr. Moradi, dated December 24, 1964.)

Exhibit 30c is telegram of Mr. Moradi, dated December 28, 1964.) Exhibit 30d is letter of Mr. Speyer, dated February 5, 1965.) (Exhibit 30e is letter of Mr. Speyer, dater February 19, 1965.) (Exhibit 30f is letter of Mr. Bradshaw, dated July 15, 1965.) Mr. JOHNSON. Annemarie Sauerwein, assistant property disposal officer at Hanau, helped Wegfahrt prepare the fraudulent inventory adjustment report on the $839,897 in fire control equipment. She gave an affidavit to the subcommittee January 26, 1972.

She said:

I would like to include that while I worked at the PDO from 1962 until 1966, accountability for property from the Mainz Maintenance Plan was not always adequate, however, it is very difficult for me to remember what has happened so many years ago. It was very difficult for us to ascertain by looking at the documents to know whether or not an item was munitions list or required demilitarization, unless the document stated this fact. I personally did not even know what a range finder looked like until after the investigation began.

While I worked at the PDO, Mr. Wegfahrt was the yard foreman and he was supposed to be technically qualified to recognize munitions list items and to determine what items required demilitarization. Also Mr. Gieseler, the proprety disposal officer, was knowledegeable of what munitions list items were and what items required demilitarization. Mr. Gieseler and Mr. Wegfahrt also were responsible to insure that property at the PDO was properly secured against theft and properly segregated and described when offered for sale.

(Exhibit 31 is affidavit of Miss Sauerwein, dated January 26, 1972.) Helmut Wegfahrt, still employed in his 24th year at Hanau, also gave the subcommittee a sworn statement January 26, 1972:

I would like to furnish additional information to support the sworn statements made earlier by me in connection with the investigations conducted by the Hanau property disposal office relative to the lack of accountability for property. During these investigations I was told at one of the interviews that Mr. Gieseler, the former property disposal officer at Hanau, had informed investigators that he was of the opinion that the fire control equipment and related parts from the Mainz Maintenance Plant was being demilitarized when it arrived in Hanau and that he was not aware of any large accumulation of property of this type during 1963 and 1964. I cannot understand how Mr. Gieseler could have made a statement like this because I am sure that he was aware that the property had arrived and he was aware that it was not being demilitrized.

I know he was knowledgeable of the arrival and accumulation of the fire control equipment and related parts because we discussed the problem of demilitarization several times during the period the property was coming in and I asked Mr. Gieseler if we couldn't try to sell the property to friendly nations. Also the property was stored right outside the property disposal office in an open unsecured area, where everyone in the office could see it every day.

Mr. Gieseler also saw the documentation that came in relative to the property and knew it was all marked "F"" meaning it was classified as Fire Control Equipment.

I am sure Mr. Gieseler was aware of demilitarization requirements because he was the contracting officer for Military Assistance Program Property sold from Hanau and part of his duties were to certify demilitarization for sales of MAP property.

(Exhibit 32 is affidavit of Mr. Wegfahrt, dated January 26, 1972). I would like to read the next case. We call it the Boeblingen case because it transpired at Boeblingen.

An important factor in managing a property disposal yard is how the depot sorts its materiel and lots it. If segregation and lotting are disorganized, munitions list items which should be demilitarized often are found under piles of genuine scrap.

Moreover, if the scrap dealer knows that the lot is not all scrap, he knows that he can get a larger profit. Sometimes the scrap dealer buys the lot, takes from it the items which are not scrap and abandons the rest in the depot.

Segregation and lotting are factors in the case I will now discuss, which dramatized the incredible ineptitude with which many depots are run. In this case, we note a property disposal employee with some responsibility who could not read, an employee charged with the duty to demilitarize periscopes who had never been briefed on how to do it, an entire PDO operation that conducted only one demilitarization procedure in several years and, in general, an incompetent organization of personnel unqualified for PDO work.

The case centered around four lots of "miscellaneous standard hardware," including components to the Honest John rocket system, spare parts to small arms and components and spare parts for vehicles.

The Honest John rocket is a surface-to-surface, free-flying missile used as an artillery weapon. Soldiers can aim it and fire it at a target but they cannot guide it.

The Honest John rocket is still an Army weapon, but some Honest John rocket launchers and other components have been declared excess or unserviceable and sent to property disposal yards where they are to be rendered scrap.

On February 28, 1966, the CID began an investigation into allegations that components to the Honest John rocket system and other war materiel had been improperly offered for sale at Boeblingen.

Investigation by the CID revealed that excess Honest John rocket system components and other equipment had been sold February 9, 1966, at Boeblingen. The materiel was classified as "miscellaneous standard hardware." Total original acquisition value was $416,442.52. (Exhibit 33 is extract of invitation for bids 61-514-S-66-68X and list of end items for parts in lots 161-164, IFB 66–68X.)

The missile system components, Honest John rocket ground handling equipment, had an acquisition price of about $26,000.

Honest John components and spare parts for small arms are munitions list items and must be demilitarized and reduced to scrap before sale.

The munitions list items were not demilitarized. They were sold to Herman Fink, a surplus buyer. Fink bought the four lots for $9,395.22. This figure was a 2.2 percent return on the original acquisition price. CID investigators found that demilitarization was virtually nonexistent at Boeblingen. Since January of 1961 demilitarization of surplus property had been performed once.

Rocco Martella said he was "acting property disposal officer" at Ludwigsburg. There was some doubt, even among other employees, as to just what his job was.

Mr. Martella, who had been employed at Ludwigsburg since September of 1962, stated demilitarization was rarely done at Ludwigsburg. Mr. Martella, an Italian national, said in a March 23, 1966 statement to the CID:

Since I have been employed at the plant the only two items that I can recall (being demilitarized) are periscopes and some machine gun barrels. All other items except some vehicles which were cut in four parts have been sold without demilitarization.

Later on in the same statement, Mr. Martella said:

To my knowledge the only item screened and demilitarized since I came to work here was the vehicles which were cut into four parts.

Mr. Martella explained he was uncertain which items required de militarization. He discovered on his own that periscopes required demilitarization.

(Exhibit 34 is statement of Mr. Martella, dated March 23, 1966.) Franz Augustin, a German, received and classified materiel at Boeblingen. He was handicapped because he could not read.

However, Mr. Augustin did know that periscopes should be demilitarized, but nobody told him how to do it. Consequently, he demilitarized by smashing the lenses and mirrors of the periscopes, which does not affect their usefulness once repaired or their value in the armament black market.

(Exhibit 35 is statement of Mr. Augustin, dated Mar. 23, 1966.) The parts and components that comprised lots 161, 162, 163, and 164 were received at the Boeblingen yard between October 13, 1963, and November 26, 1964. They were not put up for sale until February 9, 1966.

Franz Thoma, a German, worked as a yardman at Boeblingen. Mr. Thoma, interviewed by the CID March 23, 1966, was asked why the four lots were kept for more than a year before being sold.

He said: