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(The following members were present at this point: The chairman, Senators Symington, Ervin, and Bender.)

(The witness conferred with his counsel.)

Mr. SCHLESINGER. Mr. Chairman, insofar as I can see, it appears to be the same, except for the covering page which I do not have. The CHAIRMAN. Except what?

Mr. SCHLESINGER. Except this covering page, which is not included in mine.

The CHAIRMAN. The covering page is not included. The other parts of the document appear to be a copy of the contract that you now have with the Government?

Mr. SCHLESINGER. Yes, sir.

The CHAIRMAN. This copy will be filed as exhibit No. 93, for reference only, not for printing in the record.

(Exhibit No. 93 may be found in the files of the subcommittee.)

I hand you another document, Mr. Schlesinger, and ask you to identify it as being a copy of what?

(Document handed to witness.)

The witness conferred with his counsel.)

Mr. SCHLESINGER. Yes, sir; this appears to be a copy of a letter I received.

The CHAIRMAN. A copy of a letter that you received from whom? Mr. SCHLESINGER. From the Navy Purchasing Office.

The CHAIRMAN. From the Navy Purchasing Office?

Mr. SCHLESINGER. That is right.

The CHAIRMAN. That letter will be made exhibit 94, and will be printed in the record. According to this letter, you are in default in delivery of goods under the present contract, is that correct? (Exhibit No. 94 will be found in the appendix on p. 1145.)

Mr. SCHLESINGER. I would say I am slightly delinquent.
The CHAIRMAN. You are slightly delinquent?

Mr. SCHLESINGER. That is right, sir.

The CHAIRMAN. You have not yet delivered any goods under the contract, have you?

Mr. SCHLESINGER. No, sir. We are in the course of production now. The CHAIRMAN. This letter which will be printed in the record, and I do not need to read all of it, says that deliveries under contract, and it gives the number, for services, labor, and material, cutting and manufacturing caps, service, blue, enlisted men's, are delinquent. The records indicate that satisfactory preproduction samples and components have not yet been approved, although the contract award date was April 14, 1955.

You have not yet submitted samples of the product for approval, is that correct?

Mr. SCHLESINGER. I have had almost all of my components approved. We are now making the samples for approval.

The CHAIRMAN. Were they approved since this letter was written on June 14?

Mr. SCHLESINGER. Most of them were approved before that date. The CHAIRMAN. The letter says that they had not been approved. Is the letter in error?

Mr. SCHLESINGER. Would you read that part again, Mr. Chairman?

The CHAIRMAN. The records indicate that satisfactory preproduction samples and components have not yet been approved, although the contract award date was April 14, 1955. The letter says that they have not yet been approved.

Mr. SCHLESINGER. Some components had been approved prior to the receipt of that letter.

The CHAIRMAN. I beg your pardon?

Mr. SCHLESINGER. Some of my components had been approved prior to the receipt of that letter.

The CHAIRMAN. All of them had not?

Mr. SCHLESINGER. I believe everything except the end product itself. The CHAIRMAN. The end product itself? No sample has been yet produced or presented for approval?

Mr. SCHLESINGER. That is right, sir. Usually that is-we usually take that out of production, so that they will be honest samples and not hand samples made for the purpose of examination.

Senator BENDER. Mr. Chairman, has he made his records available to the Internal Revenue Bureau?

The CHAIRMAN. He says no.

Senator BENDER. You have not made the records available to the Internal Revenue Department?

Mr. SCHLESINGER. No, sir.

Senator BENDER. Have you paid off any United States Government officials to get contracts?

Mr. SCHLESINGER. I have not.

Senator BENDER. I beg your pardon?

Mr. SCHLESINGER. No, sir.

Senator BENDER. Are you sure of that?

Mr. SCHLESINGER. I am quite sure.

Senator BENDER. You are sure you don't know some people that you have paid off, either with money or with gifts?

Mr. SCHLESINGER. I don't know of any that I have paid off, sir. Senator BENDER. How much does each of these hats, according to your contract, cost the United States Government?

Mr. SCHLESINGER. Are you talking about my present contract? Senator BENDER. Yes.

Mr. SCHLESINGER. In the vicinity of 85 cents.

Senator BENDER. Eighty-five cents. What is the total amount of the contract?

Mr. SCHLESINGER. I don't know offhand, sir.

Senator BENDER. How many thousand hats do you have? 50,000? Mr. SCHLESINGER. 50,000.

Senator BENDER. It is about $42,000?

Mr. SCHLESINGER. Approximately.

Senator BENDER. This is one of a series of contracts you have had with the Government; isn't it?

Mr. SCHLESINGER. Yes, sir.

Senator BENDER. How long have you been doing business with the United States Government?

Mr. SCHLESINGER. I, personally, for about 10 years.

Senator BENDER. For about 10 years?

Mr. SCHLESINGER. Right, sir.

Senator BENDER. In the course of 10 years' time, how much have

you produced?

Mr. SCHLESINGER. I have no idea, sir.

Senator BENDER. What is your best estimate?

Mr. SCHLESINGER. I couldn't take an estimate.

Senator BENDER. Would you say $10 million worth of merchandise? Mr. SCHLESINGER. No, sir.

Senator BENDER. Not that much?
Mr. SCHLESINGER. No, sir.
Senator BENDER. $5 million?
Mr. SCHLESINGER. No, sir.
Senator BENDER. $3 million?

Mr. SCHLESINGER. That would be a round figure.
Senator BENDER. A round figure?

Mr. SCHLESINGER. That is right.

Senator BENDER. Mr. Chairman, is the Navy aware of the fact, beyond their having representatives of the Navy here today-are they aware of the fact that this man has been under investigation? Are they conversant with the fact that this man is taking the fifth amendment beyond what they have heard this morning?

The CHAIRMAN. I don't know whether the Navy was advised that he took the fifth amendment in executive session last Tuesday. I assume they have been advised. Of course the purpose of this public hearing today is to give the witness an opportunity to respond to this subpena, to give him another opportunity to do so, and also to question him in a public hearing with regard to his actions. Certainly the Navy, if not fully informed, will be after this morning of the man's attitude as a contractor with the Federal Government. One of the purposes of the hearing, of course, as my distinguished friend knows, is to ferret out these things and expose them where there is corruption or inefficiency or fraud is being practiced on the Government. Here we have a man who has been doing business with the Government for a number of years. When we go to investigate the circumstances associated with his relations with the Government, he takes the fifth amendment with respect to his records. He says that if they are produced, they contain information that might tend to incriminate him. I think the public is entitled to know as well as the Navy, and the American people are entitled to know, that there are people who feel it is necessary to protect their rights, as they say. and protect their interests, it is necessary that they withhold their records from the Government, because if disclosed, if made available. they contain information that might tend to incriminate them. I think one good thing can come out of this hearing, at least: We can alert the contracting officials of the Government, the procurement officials, they are doing business with a man who has to resort to those tactics to do what he says is to protect his rights. My opinion isand I simply raise the question-my opinion is that this contract ought to be immediately canceled, and he should never be permitted to make another contract with the Federal Government for any services or sale of goods. That is the Chair's opinion about it.

Senator BENDER. Mr. Chairman, I wholeheartedly agree with your sentiments, and particularly since this witness, when he was asked the first question, snickered. He seemed to regard this pretty much as a joke. We had one of these wise guys before us last week, or so, or the week before. Some of these fellows need to understand and

appreciate that we are not here because this is a Sunday school picnic. This is serious business. We are dealing with the taxpayers' money. The CHAIRMAN. Mr. Counsel, you may proceed.

Mr. KENNEDY. Mr. Schlesinger, do you deposit all of the money from your company

Mr. SCHLESINGER. May I make a comment first, please, Mr. Chairman?

The CHAIRMAN. You may answer the question.

Mr. KENNEDY. Do you deposit all of the money from your company in bank accounts?

Mr. SCHLESINGER. On advice of counsel, I respectfully decline to answer the question on the constitutional ground that such answer is connected to my income now under Treasury investigation and, as such, might tend to incriminate me.

Mr. KENNEDY. An answer to that question might tend to incriminate you; is that right?

Mr. SCHESINGER. Yes, sir.

Mr. KENNEDY. Where are your bank accounts?

Mr. SCHLESINGER. On advice of counsel, I respectfully decline to answer the question on the constitutional ground that such answer is connected to my income now under Treasury investigation and, as such, might tend to incriminate me.

Mr. KENNEDY. Do you have safe-deposit boxes?

Mr. SCHLESINGER. On advice of counsel, I respectfully decline to answer the question on the constitutional ground that such answer is connected to my income now under Treasury investigation and as such might tend to incriminate me.

The CHAIRMAN. Senator Symington?

(The witness conferred with his counsel.)

Senator SYMINGTON. How can saying whether or not you have a safe-deposit box interfere with your constitutional privileges? Isn't that a little silly?

Mr. SCHLESINGER. May I consult with counsel, please?

Senator SYMINGTON. Yes.

(The witness conferred with his counsel.)

Mr. SCHLESINGER. Mr. Symington, my counsel advises me that under present court interpretations that answer might be a waiver of my rights and therefore I must decline to answer that question.

Senator SYMINGTON. Under present court interpretations, the fact that you have a safe deposit box might impinge on your rights as an American citizen?

Mr. SCHLESINGER. The answer might.

Senator SYMINGTON. Do you believe that is true, yourself?

Mr. SCHLESINGER. Well, I feel it might have some connection. I might jeopardize some of my rights.

Senator SYMINGTON. As to whether or not you had a safe deposit box?

Mr. SCHLESINGER. Answering the question.

Senator SYMINGTON. Why would that jeopardize your rights? (The witness conferred with his counsel.)

Mr. SCHLESINGER. Pardon me, sir.

Senator SYMINGTON. You don't have to ask your counsel about that. You must know whether you have something in the safe deposit box,

if you have one, that is not right. Otherwise, why would it jeopardize your rights?

(The witness conferred with his counsel.)

Mr. SCHLESINGER. Well, without waiving my previous objection, sir, I do not have a box.

Senator SYMINGTON. Thank you, Mr. Chairman.
The CHAIRMAN. Go ahead.

Mr. KENNEDY. You have no safety deposit box?

Mr. SCHLESINGER. Without inferring any waiver of the privilege, I do not, sir.

Mr. KENNEDY. That is a decision you have to make. To waive or not to waive is up to you. Do you have any safe deposit box?

Mr. SCHLESINGER. Without waiving my previous objections, sir, I do not.

Mr. KENNEDY. You do not. Did you ever have a safe deposit box? Mr. SCHLESINGER. Without waiving my previous objection, sir, I never did.

Mr. KENNEDY. You never had a safe deposit box?

Mr. SCHLESINGER. Without inferring any waiver of the privilege, sir, I did not.

Mr. KENNEDY. Did any member of your family have a safe deposit box?

(The witness conferred with his counsel.)

Mr. SCHLESINGER. On advice of counsel, I respectfully decline to answer the question on the constitutional ground that such answer may be connected to my income now under Treasury investigation and, as such, might tend to incriminate me.

Mr. KENNEDY. Does your wife have a safe deposit box?

Mr. LIPSON. Mr. Kennedy, may I discuss that point with my client? (The witness conferred with his counsel.)

Mr. SCHLESINGER. Yes, sir; my wife has a safe deposit box.

Mr. KENNEDY. Does any other member of your family have a safe deposit box?

Mr. SCHLESINGER. No, sir.

Mr. KENNEDY. Where is your wife's safe-deposit box?

Mr. SCHLESINGER. I don't know, sir.

Mr. KENNEDY. You don't know where she keeps it?

Mr. SCHLESINGER. No, sir.

Mr. KENNEDY. Is it in a bank?

Mr. SCHLESINGER. I assume so. I am not sure.

Mr. KENNEDY. Do you take money out of your company and give it to her to put in the safe-deposit box?

Mr. SCHLESINGER. On advice of counsel, I respectfully decline to answer the question on the constitutional ground that such answer is connected to my income now under Treasury investigation and, as such, might tend to incriminate me.

Mr. KENNEDY. Is that one of the methods you use to hide the amount of income you make?

Mr. SCHLESINGER. On advice of counsel, I respectfully decline to answer the question on the constitutional ground that such answer is connected to my income now under Treasury investigation and, as such, might tend to incriminate me.

62915-55-63

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