The AAA people conducted an audit and issued a report which estimated that inefficient management of the Fuerth Depot resulted in a $300,000 loss to the U.S. Government during fiscal year 1966. The AAA report found "effective procedures were not established to control the removal of Government property from the yard."

The audit noted that post engineer scale tickets had been found in the possession of Karl Zink. This referred to our seizure of the weighin tally sheets. The report went on to say:

We also found completed scale tickets which showed significant differences between the official registered truck weight and the tare weights printed on scale tickets of the same contractor's trucks. This also leads to the conclusion that the government scale was improperly used.

The AAA cited 200 military trucks which had been classified scrap by the Fuerth Depot. There were 125 212-ton trucks. Originally, the United States paid a total of $791,000 or $6,324 each. As scrap, the trucks were sold for a total of $32,000 or $253 each, a 4-percent return. Seventy 34-ton trucks had been bought originally for $264,000— about $3,771 each. As scrap, the trucks were sold for $3,600 or $52 each, a return of 1.38 percent.

There were five 5-ton trucks bought for $56,000 or $11,200 each. Proceeds from their sale were $3,000 or $764 each, a return of 6.77 percent.

Overall, the 200 trucks had an acquisition price of $1,111,000 with the proceeds coming to $39,400 or a 3.5-percent average return.

The AAA was critical of the manner in which the Fuerth Property Disposal Office had managed the matter:

. . . During January and February of 1965, 200 military trucks which had been determined to be uneconomically repairable but were in most instances complete with engines, transmissions, transfer cases, axles, and wheels, and with tires, were transferred to the PDO from the Nuernberg Equipment Maintenance Center (NEMC). While the vehicles, due to the required military specifications, exceeded the repair limitations, it is reasonable to conclude that the completeness and condition of these vehicles, even considering the necessity of repairs, would have qualified their sales for commercial use.

Responsible personnel of the NEMC stated that the trucks were inspected prior to the transfer to PDO, but inspection results were not available because inspection reports, which are normally retired, were in this case destroyed. Although as a result of the initial inspections the vehicles were classified as unserviceable, uneconomically repairable, we are also informed that the trucks were in operative condition in that many of them were driven from the NEMC to the PDO yard by personnel assigned to the Nuernberg Post.

In its summary, the AAA report stated:

... the operations of the (Fuerth PDO) were not effectively managed. sufficient internal controls were not maintained to assure reliable accounting and reporting.

the Government's financial interests were not protected because the available resources were not used to achieve maximum dollar returns. This opinion is based upon the operating results of the Nuernberg (Fuerth) Property Disposal Activity which showed a sales return of only $363,916 for FY 1966, generated through the sales of 10,034 tons of various property commodities, and represented about 8.3 percent of the $4.4 million worth of property sold during FY 1966. We believe, based upon our review of selected property commodities, that an additional return of at least $300,000 could have been realized by the Nuernberg Property Disposal Activities if effective management practices were used.

(Exhibit 59 is U.S. Army Audit Agency Report of Fuerth PDO, prepared by Mr. Kleinlein, undated.)

(Exhibit 59a is statement of Mr. Frank, dated January 9, 1967.) (Exhibit 59b is statement of Mr. Frank, dated January 12, 1967.) On November 1, 1966, Mr. Walther talked about collusive bidding:

Q. I believe that you have had past conversations with Mr. Maukisch, an investigator of the CID, concerning the possibility of bid-fixing by contractors. I believe that you commented to him that bid-fixing apparently does occur. Can you comment on this?

A. Actually, it is obvious that something like that did happen. Of course, by talking to these bidders it has come out that they get together at some hotel up in Wiesbaden before they submit their bids and get together on what they are going to bid.

Q. Have you been told directly that this is being done, or have you gathered this through conversations you have heard and comments that have been made by bidders?

A. I have gathered this through conversations I have overheard and by comments made by bidders.

Q. Have you heard also that these bidders get together after the sales to divide up the property they have bid on?

Q. You mentioned earlier that you had heard conversations and heard comments being made about bid-fixing and meetings in Wiesbaden. Do you recall any of the contractors who made such remarks?

A. I believe that I heard Mr. Karl Zink and Felix Endzweig make such comments in general conversations.

We closed our case in the spring of 1967. The U.S. Army/Europe logistics people were advised of the findings of the investigation. brothers were not debarred, although the firm was suspended in November of 1967 and reinstated 2 months later.

Chairman MCCLELLAN. I have here some pictures of trucks-photographs. Do you recognize these as trucks to which you have alluded in your testimony?

Mr. JOHNSON. Yes, sir.

Chairman MCCLELLAN. They may be submitted as exhibits and appropriately identified.

(The photographs referred to were marked "Exhibit No. 93, 93A, 93B and 93C" for reference. Exhibits 93, 93A, and 93C follow and exhibit 93B may be found in the files of the subcommittee.)