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were not required to provide any more details after that. There was no indication, for example, where they would sell the scrap and to whom or to what specific uses the spare parts were to be directed.
We found very few indications that PDO officials followed up on validity of end-use certificates to make sure contractors were telling the truth. End-use certificates enabled PDO officials to point out they had end-use controls but they did not constitute adequate controls.
9. PROBLEM SOLVING
Here we had no adequate Defense Department rules, regulations or directives to refer to or with which to measure honesty and efficiency in PDO operations. What we looked for was an attitude, a spirit, if you will, that motivates responsible officials to want to improve their operations, to make them more efficient and more responsive to the mission they are supposed to fulfill. We found an attitude all right. But it was not a good attitude.
It was an attitude that said, in effect, there is nothing wrong with our operations. Our contractors, this attitude seemed to be saying, are honest and straightforward and when they say they are in the scrap business that is the business they are in. Their assertions of propriety should be taken at face value.
(At this point Senator Percy entered the hearing room.)
Nr. Johnson. The attitude seemed to say that PDO managers and executive yard personnel are all conscientious and knowledgeable and are running surplus operations strictly by the book. And the foreign employees are efficient and hard working and would never be compromised.
In short, the attitude said, hear no evil, see no evil, speak no evil.
PDO officials accepted end-use certificates without checking them. They relied on integrity and reliability checks that were certainly not accurate. There seemed to be a presumption that everyone was operating in good faith.
Contractors were stealing from and cheating PDO depots. Rarely was anything done to protect American interests. Rarely was a crooked contractor barred from future sales. Rarely were compromised employees fired. Property disposal operations in Western Europe were inefficient, wasteful and corrupt, and little effort was made by PDO officials to correct these conditions.
Chairman McCLELLAN. You want to skip to page what?
Mr. JOHNSON. I would now like to turn to page 48, Mr. Chairman. Mr. Graham will read the conclusions and give some updates.
Chairman McCLELLAN. We will now go to page 48 and then we will return to the specific cases and let you identify them and comment on them. You may read your conclusions.
Mr. GRAHAM. Mr. Chairman, the many problems of CID found in the mid-1960's in property disposal operations were not corrected. They were allowed to continue through the late 1960's and into the 1970's.
The extent to which the improper conditions were allowed to continue is seen in the documents, exhibits mentioned before.
The documents are:
1. An “in-depth crime prevention survey" begun in 1970 by the CID at the direction of the Department of the Army.
2. Department of the Army cables of late 1971 listing defects in the property disposal operation.
3. A survey in February 1972 showing that debarred contractors still had access to PDO depots.
4. Subcommittee review of operations at the PDO depot at Ludwigsburg
The crime prevention survey:
On July 23, 1970, Maj. Gen. Kenneth G. Wickham, the Adjutant General of the Army, acting on behalf of the Secretary of the Army, directed the CID to conduct an immediate "in-depth crime prevention survey” into property disposal activities throughout the world.
In Europe, the responsibility for this survey was given to Detachment A, 9th Military Police Group (Criminal Investigation), U.S. Army/Europe and 7th Army Headquarters, Heidelberg, Germany.
Wo Robert W. Moody headed the survey group. I was the operations officer of A Detachment at the time Mr. Johnson was the commanding officer of the detachment. Since I had experience in property disposal matters, I worked with Mr. Moody on the survey under the supervision of Mr. Johnson.
All PDO depots and satellite yards in Germany were studied. The survey is completed. But only the study of the Ludwigsburg PDO has been written up. Therefore, we will quote from the final report on Ludwigsburg in this presentation.
Then we will summarize selected sections of the working papers from the survey of other PDO depots. These working papers were written by Mr. Moody, by myself, and by other CID investigators.
CID inquiry at Ludwigsburg in connection with the survey began November 14, 1970, and was concluded March 5, 1971.
The findings included assertions that:
1. Ludwigsburg employees ignored regulations on the correct documenting of property as it was turned in to the depot. Major discrepancies existed in recording of quantity, condition, and description of surplus property as it arrived at the depot.
2. Segregation of property and scrap was poor. Property was not stored in orderly fashion as required. High-value scrap was combined with scrap of lower value. This mixing resulted in reduced financial return to the United States.
3. Contractors were permitted to enter and move about the yard without escort.
4. Contractors stole property.
5. Weigh-in procedures were inefficient. Security of weight tickets and supervision over the scalemaster was lax. Control over railshipment weigh-ins was inadequate.
6. The barbed wire fencing and lighting system were inadequate and did not provide sufficient security.
7. There was no key-control system. Possession of keys to the depot and critical facilities was not limited to selected employees.
8. Serious pollution and fire hazards existed due to the improper storage of wet-cell batteries and used engine oil.
9. At the Ludwigsburg satellite yard in Nellingen, Germany, improper conditions also existed as it was noted that:
(a) Barbed wire fences did not provide security. (6) Internal security lighting did not exist.
(c) No system of key-control was used.
(e) Contractors were allowed to cannibalize spare parts and components from the chassis and bodies of military type automotive vehicles.
CID investigators spoke with one contractor who told them that security was so poor at Ludwigsburg and thievery so easy to accomplish that collusion between contractors and depot personnel was not necessary (exhibit 83 is survey, dated September 2, 1971).
The crime prevention survey working papers: Improper procedures and conditions were found in other depots. The Ludwigsburg situation was the rule, not the exception.
It was noted, for example, that the depot personnel at the Germersheim PDO depot were grossly negligent and indifferent to existing regulations on demilitarization of munitions list items.
On munitions list items, an inspector is required to be present and witness the demilitarization of each item. The inspector then signs a demilitarization certificate. But at Germersheim, this procedure was sidestepped.
One inspector, Sp5c Donald Hood, Jr., in a sworn statement May 27, 1971, told the CID how he and other Germersheim personnel conducted demilitarization procedures. At this point in the interview, Specialist 5 Hood was discussing the responsibilities of a Sergeant Quales, the noncommissioned officer in charge of demilitarization.
Following are the questions and Mr. Hood's answers:
Q. Did you ever have occasion to take any demilitarization certificates to him (Sergeant Quales)?
A. Yes, two times ...
Q. Can you cæplain to me what reason you had for taking these certificates to Sergeant Quales?
A. They told me that since I was going down to DQ to take them down to Sergeant Quales which I did. While I was there I gave them to Sergeant Quales. When I gave them to him, these items, he told me he didn't have an inspector's stamp with him and he asked me to stamp them for him and then he signed the certificates.
Q. When you placed your inspector's stamp on these demilitarization certificates, what did this represent?
A. This represents that the inspector was physically there and seen them cut these items up.
Q. Was this the policy in effect at this time that the inspector would stamp the demilitarization certificate saying it has been cut and that the demilitarization NCO would sign it later?
A. All the time I was there we never did really go by the policy they had set up, the SOP. Ain't nobody gone by it.
Q. These items he asked you to stamp which were reflecting that you had seen the items demilitarized, were they in fact demilitarized?
A. This I don't know because I never saw the items.
Q. So if I would find a number of demilitarization certificates with your stump number 65, this would mean in actuality that you never did see them demilitarized, is this correct?
A. Right, I just stamped them and he signed them. (Exhibit 84 is statement of Specialist 5 Hood, dated May 27, 1971.)
One noncommissioned officer at Germersheim, S. Sgt. Baltazar F. Garcia, refused to go along with the improper demilitarization procedures. In a statement to the CID, May 27, 1971, Sergeant Garcia said that during the previous November he has been approached by a Mr. Rueffel, who worked in the Germersheim inventory division.
Mr. Rueffel asked him to certify to the demilitarization of certain property listed on 200 documents, Sergeant Garcia said, adding that Mr. Rueffel then explained that this was standard procedure. He again refused to certify.
The sergeant reported the incident to Colonel Rudd, the depot commander. Sergeant Garcia said Colonel Rudd told him to certify to demilitarization procedures only on those items he had actually observed being demilitarized.
(Exhibit 85 is statement of Agent Lehrmann, dated September 8, 1971.)
The situation at the Kaiserslautern depot was no better. For 6 months, in fact, demilitarization procedures were stopped completely.
Gerhard Fries, an inspector for excess materiel and for demilitarization work at Kaiserslautern, gave CID a sworn statement July 27. 1971. CID questions and Mr. Fries' answers follow:
Q. Can you explain to me in your own words how the demilitarization program operated at the KAD (Kaiserslautern Army Depot)?
A. The demilitarization program in this depot was a stepchild, meaning that it was neglected inasmuch as there were not enough people, transportation and equipment available for it. There was no control and paperwise we couldn't keep up with it. It has happened that for a six-month period nothing was done at all on the whole program. There was no demilitarization for a six-month period. Then all of a sudden the depot commander or someone would see all the stuff awaiting demilitarization and then at random they would take people from here and there, whoever was available, and for a two week period nothing was done except demilitarization. Then, of course, the paper work had to be caught up on so 500 or 1,000 documents were prepared and stamped at the same time and went with the scrap to the salvage yard.
Q. If the documentation on the materiel to be demilitarized was processed to PDO, how could you keep control of the items left at the demilitarization point!
A. The whole section had no control over what was going on and if there were any questions later on, no one could answer it with the exception of large and bulky items such as trucks or tanks. In those cases they kept the documents as long as the item was there at the demil point.
Q. Also in security warehouse they keep missile components and they require demilitarization. Did you also stamp the documents on the missile components reflecting that they were demilitarized when in fact you did not actually see them demilitarized? A. That is true, too.
(Exhibit 86 is the statement of Mr. Fries, dated July 27, 1971.) Sgt. Dale D. Winkler was the noncommissioned officer in charge of the warehouse at Kaiserslautern. Sergeant Winkler gave a sworn statement to the CID on July 28, 1971.
Sergeant Winkler said a large quantity of weapons that were supposed to have been demilitarized were placed in a corner of the warehouse without being demilitarized. The numbers grew as the weapons accumulated for a year.
In addition, he said, demilitarization certificates were signed and sent to the U.S. Army/Europe Materiel Command (MATCOM) that asserted the materiel has been demilitarized and shipped to property disposal yards.
Here are excerpts from the CID interview of Sergeant Winkler:
A. That's a hard question to answer because so far as I know, I myself have never known what's physically in the warehouse. I couldn't give you a quantity on anything there.
Q. In other words what you're telling me is you really don't have accurate records of what weapons you physically have in the warehouse.
A. That's true sir. That's definitely true.
Q. How about the records which are maintained by the inventory division which reflects what you should have in the warehouse? Are these accurate? A. No, sir, definitely not. (Exhibit 87 is statement of Sergeant Winkler, dated July 28, 1971.)
The CID survey working papers reflect the fact that four German nationals employed at Germersheim accepted gratuities from contractors. The employees, in sworn statements, said they received gratuities ranging from 5 Deutsch Marks to 1,500 Deutsch Marks.
CID investigators also asserted that:
Substantial shortages of copper wire, zinc, and battery lead were discovered at Ludwigsburg in November of 1970. Investigation revealed that copper wire, zinc, and battery lead contracts were won by contractors who had bid substantially higher than they could expect to sell the property for. This indicated the contractors could show a profit only if they were taking from the depot more copper wire, zinc, and battery lead than they were paying for. This lent credence to allegations contained in an anonymous letter found in the Ludwigsburg files that the scalemaster at the depot was manipulating weight slips in favor of certain contractors.
A review of more than 300 sales contracts pertaining to sale of property from Ludwigsburg disclosed gross discrepancies in tare Tempty truck) weight of contractors' trucks. It was found that in 66 contracts inflated tare weight had been reported and that 17 sale contractors had probably taken scrap metals of a value of 195,619.80 Deutsch marks (about $55,000).
Problem areas cited by Department of the Army:
The staff of the investigations subcommittee arrived in Europe November 17, 1971. Shortly after their arrival, the Department of the Army began sending out directives calling for reform and improvement in nronertv disposal operations worldwide.
A December 17, 1971, wire from the Department of the Army to the U.S. Army/Europe and to other commands throughout the world said:
A review of survey reports on disposal activities worldwide substantiates the need for intensified surveillance and management.
Then the wire listed those property disposal procedures which were inadequate. They included depot security, demilitarization, receipt and storage, secrregation and lotting of property, weigh-in, bidding, property condition coding and control of military assistance program (MAP) property.
A second wire on property disposal onerations went out from the Department of the Army December 18, 1971, to the U.S. Army/Europe and to other commands worldwide.
The wire called for command reviews of property disposal operations "to insure that they conform” to Army Department policy and regulations regarding more staff visits to PDO depots, improved inventory procedures, more responsiveness to the need for corrective actions as cited by the CID and audit reports, better depot security, strengthened personnel training program and more efficient depot organization and review of end-use checks.
The wire concluded by saying: