Senator MUNDT. The last date was May 15, 1962. I think that is the last one. Secretary FREEMAN. I believe it is. I am sure the Senator is reading the figures accurately. Senator MUNDT. I would not have brought that in but it is in your statement and anything in your statement is something to discuss. You may hold to your theory as long as you care to that net income is more important than parity. I am going to continue to hold to mine. I think parity is the more important figure because the net income is meaningless unless transmitted in terms of what it will buy for the farmer. Net income shows what he has left after his farming operation is over. Parity shows what he can get with that net income. I think it would be shameful now if the Department of Agriculture downgrades parity because it shows the farmer is worse off and glorifies net income. The farmers have had enough trouble under either figure. Maybe we had better settle for that and try to find a good answer. Going now to your statement, Mr. Freeman, on page 5, there I find some encouraging information and on that I want to ask you some questions. I was called out of the room once and was late in getting here. Maybe you have answered some of these but I have a serious question concerning the changes which have been brought about. At the bottom of the page you say- Illustrative of the nature of administrative actions taken within USDA to tighten up management and increase efficiency I would cite the following: 1. An office of Management Appraisal and Systems Development, established last December, that would be December 1961. 2. The establishment of a data processing center in Kansas City." and you did not give us the date. I wish you would supply the date when you set that up. Do you up? have it, sir, available to you now or do you want to look it Secretary FREEMAN. May I present it for the record? (See exhibits 16 and 17 on pp. 232-237.) Senator MUNDT. (reading): 3. Department reorganization to coordinate economic research and statistic reporting. Secretary FREEMAN. That took place early in the spring of 1961. Senator MUNDT. Can you supply us the memorandum or the document which set that in motion so we can study? Secretary FREEMAN. Yes, sir. (See exhibit 18 on pp. 237-238.) Senator MUNDT. You will supply that for the record? Senator MUNDT. Thank you. Centralized payroll operations. Secretary FREEMAN. This is in the mill now. It will not begin to go into effect until the end of this year. It will be done through the medium of a day-to-day processing center at New Orleans and we will consolidate 87 payrolls presently-137 payrolls in the Department of Agriculture into 1 which will be reduced to antic tape. Senator MUNDT. This is in process and has not yet actually been done? Secretary FREEMAN. Yes, sir. Senator MUNDT. This is in the statutes of the 2-month reforms I suggested-one about memorandums at the meeting and the other of trying to find a better way to be sure that the county people get the information. 5. A directive to require analysis and presentation of budget request in toto. I don't suppose that is related to any of the problems in this investigation. That is something internal? Secretary FREEMAN. Only to the extent when you start going back to zero to review programs you have an opportunity to look at their administration as well. Senator MUNDT (reading): Steps to coordinate and consolidate field office activities. That is very pertinent to this. What date was the memorandum dated, to set that up? Secretary FREEMAN. I would have to get that, too. (See exhibit 21 on pp. 243-244.) Senator MUNDT. Will you get the date and memorandum and submit them both, so we will have them? Those will be very helpful as we start out in the real meat of the coconut in the hearing and start talking to people and field folks and so forth. 7. Steps to coordinate, strengthen, and tighten up bonding policies and procedures, including I think that is basic. What date did you issue the memorandum on that, do you recall? It would be very helpful if you had the dates in the statement. Maybe you didn't think they were important, but we ought to have them. Secretary FREEMAN. They will be supplied for the record. Secretary FREEMAN. That is correct. Senator MUNDT. These are what do you call them—not memorandums, Executive orders or Federal Register? Secretary FREEMAN. These were issued internal Executive order and will be submitted for the record. (See exhibit No. 22 on pp. 245-246.) Senator MUNDT (reading): Review of all bonds over $200,000 for grain warehouse. Those details will be brought out in the internal Executive order. 8. Steps to strengthen the supervision of local committee and other field operations to insure faithful performance of duty, et cetera. That is what I was talking about and trying to get done-what steps have you taken and the date when they were issued and the details of what has been requested? Do you have that available now? Secretary FREEMAN. This was reviewed at some extent by Senator McClellan when we opened the hearing here this morning. You will note, and I think the record has in it, the directive (a) under 8, presently in the record. nator MUNDT. What date is that? Secretary FREEMAN. What date? Senator MUNDT. What date? I didn't get the answer. Secretary FREEMAN. No, they are actions that have been taken in the relatively recent period. Senator MUNDT. Since our investigation may have gotten underway? Secretary FREEMAN. In this instance, yes; (b) is in the record, the review of the Washington office of all acreage allotments May 8, if I recall the date properly, is now in the record. As to a, the creation of this subcommittee to review communications generally has been discussed. It was appointed several weeks ago, although announced by a press release which was issued the other day on June 27. Senator MUNDT. It has not been finalized yet. It is in the process of study? Secretary FREEMAN. The report has not been completed, no. On 10, this was announced on June 25 and is in process of implementation now. Senator MUNDT. June 25 of last year? Secretary FREEMAN. June 25, 1962. Senator MUNDT. Almost this week. Secretary FREEMAN. But as I pointed out this has been one of the 480 projects, 60 of which have been completed that had been taken under consideration by the management appraisal and systems development office, and has been under consideration and study for a considerable period of time. Senator MUNDT. The rest you will supply for the record? Secretary FREEMAN. Yes, sir. Senator MUNDT. With the date and the particulars so that we can have them. Thank you. May I ask just one question in connection with this bonding procedure? I received a letter this morning-I think I brought it with me-from a friend of mine out in South Dakota who is in the grain bin manufacturing business. I may not have brought it. I will come to it later; if I do. I can paraphrase what he said. He said this may just be a stupid question from an ordinary taxpayer, but he said, "Will you find out from the Secretary, or from somebody, if anybody ever took a look at the Dun & Bradstreet report on Mr. Estes. He tried to do business with me and the first thing I did was to send to Dun & Bradstreet and get an estimate of his financial situation." He said, "I would not have touched him with a 10-foot fishpole." Is that part of the procedure you utilized in determining the size of a bond? Do you have that done? Secretary FREEMAN. In some instances, yes. Senator MUNDT. How about the insurance case? Secretary FREEMAN. The Dun & Bradstreet reports had been brought to the attention of Mr. Miller, and he had, as I understand it, called them to Mr. Estes' attention when he was reviewing the matter. Senator MUNDT. Here is the letter. At the risk of showing my ignorance, I want to point out to you the informati: that is available from Dun & Bradstreet reports regarding this operation. credit department turned down an opportunity to sell a large volume of gra storage bins to the Estes account basing their decision on the Dun & Bradstreet reports. I am sure your committee would be especially interested in the October X 1960, Dun & Bradstreet report. Do you have that report? Secretary FREEMAN. As a matter of fact, Senator, on May 11 cf 1960, Mr. Moseley of the Dallas commodity office wrote to Mr. Mile and enclosed a Dun & Bradstreet report showing that Mr. Este affairs were complex and that there was heavy indebtedness, and a result of this, and conferences held, it was determined that M: Estes' bond should be increased at the rate of 10 cents a bushel, and it was increased in various steps, then, from the legal maximum f $200,000 up to $700,000 by the end of 1960. So, as early as May 11, 1960, we did have these reports at hand. Senator MUNDT. Was the Estes bond ever increased after 1966! Secretary FREEMAN. It did not increase over the $700,000. Senator MUNDT. It never went beyond that, despite the fact that subsequent Dun & Bradstreet reports continued to show a deterioratio: of his situation and more confusion and more complexity I canno imagine any accounting firm would come up with a rating on s operation like this, and would be a little cautious. Secretary FREEMAN. I would concur with the Senator's observation that Mr. Estes' affairs were complex. Senator MUNDT. Over on page 13-I am a little bit confused about these figures and what they imply on grain storage. I recognize keeping a statistical yardstick on this operation is very difficult. Every time the Department comes up with a set of figures they differ somewhat from the previous one. I am not too critical f that because it is very complicated and it is very elastic and so forth. I am curious to understand exactly what this means when you say that "when his house of cards collapsed"-you are talking aber Estes, I am sure-"some 33 million bushels of Government grain were stored in the Estes warehouse." Over on page 16 of the statement, if you care to turn to that, you are talking about the same Mr. Estes and you are talking about May 1962. In the second paragraph, Mr. Freeman, about halfway throug you say "this operation will involve a total between 40 and 50 milk: bushels." This would seem to me to be that between the end of March 192 which was after Estes had been arrested because he was arrested the 29th of March, and May 22, somewhere between 7 and 17 millio additional bushels of grain were put into his elevators. I wonder if you want to comment about the reasons for that? Secretary FREEMAN. Yes, Senator. I appreciate your calling ths to my attention, because on the face of it, it seems to be contradictor What I said yesterday was not Estes' houses, as I read it, but United Elevators. United Elevators are the elevators where we know to st Estes had exclusive ownership. In the later reference to the amort that had been tied up and would be moved out, it included some addtional grain houses which Estes apparently has an interest in which were not his by way of exclusive ownership. Senator MUNDT. I have no idea what you include as a basic factor for your figures. I have to take them as you gave them. I think you should prepare a supplementary statement which clarifies this because it doesn't look good from your standpoint, or from the standpoint of the Government, that after a man has been arrested there should still be an increment of between 7 and 17 million bushels of grain into his property. If there are other properties involved, I think you should revise your figures on page 13 and on page 16, and spell out the details as to where this grain was, which kind of elevators, what you mean by "Estes' houses" and what you mean by the other statement which was used, which is this operation. Reading that, I would come to the conclusion that this is the same situation. Secretary FREEMAN. I think the Senator has made a very good point. I will send down a detailed statement explaining this. Senator MUNDT. If you will clarify that, it will be helpful in determining these various factors involved. The CHAIRMAN. I think for the purpose of continuity, it would be well that the supplemental statement be printed in the record at this point when received. Secretary FREEMAN. All right, sir, thank you. The CHAIRMAN. It is so ordered. (Secretary Freeman subsequently submitted the following supplemental statement:) I am supplying for the record at this time a table showing that the total capacity of the warehouses owned by Estes is 54 million bushels, and 33 million bushels of grain were stored in those warehouses. The figure of 33 million bushels is referred to on page 13 of my statement. If the capacity of the warehouses in which Estes is believed to have an interest is included, Estes has a total capacity of 87 million bushels, and the load out of all of the houses owned or believed to be partially owned by Estes will involve a total of between 40 to 50 million bushels, as stated on page 16 of my statement. Warehouses owned by Estes (54,078,504 bu. of capacity) and those partly owned or of questionable ownership (33,008,620 bu. of capacity) May 17, 1962 Date on which Billie Sol Estes acquired controlling interest of Corporation. 87,087, 124 |