(The document was handed to the witness.)

The CHAIRMAN. Did you receive that letter?

Mr. HSIA. Yes, sir.

The CHAIRMAN. Very well.

The letter may be printed in the record at this point. I notice a postscript on this letter which reads as follows:

Please do not classify in your files the personal letter like this one lest the controls by AID authorities. The oversales amounts would be registered by your accounting department as a contribution to our office expenses.

This letter is dated June 27, 1962. Did you handle this in accordance with these suggestions?

Mr. HSIA. No, sir.

The CHAIRMAN. What did you do?

Mr. HSIA. We played dumb to them and wrote back saying:

We are puzzled by your postscript and it is not our practice to hide any letters. Our records are subject to Government inspection and we will not follow your ideas.

(The letter referred to follows:)

MAGNUS MABEE AND RENARD, IND.,

New York-13 N.Y. (U.S.A.)

GENTLEMEN :

SAIGON, June 27th, 1962.

Bus. 11.-2500 lbs pippermint oil triple distilled.-CF $9650.—

Your letter dated May 2, 1962.

Please confirm us that our COME will be increased with 2¢ in order to permit us to pay immediately to the customers 2¢×2500: $50.

The clients will open the credit in a few days.

Bus. 12.-We have already paid to the customers $45.50.

Our COME will be increased with $45.50.

Bus. 14.-Only % of the quantity is allowed to be imported and this business becomes:

573 lbs menthol large needle crystals in 5 lbs cans.

On this business, please confirm that our COMB will be increased with $0.20 per lb. i.e. COMB plus $114.60.

Please reply us quickly permitting us to pay to the customers $114.60.

Very truly yours,

L.T.L.

P.S.-Please do not classify in your files the personal letter like this one lest the controls by AID authorities.

The oversales amounts would be registered by your accounting department as a contribution to our office expenses.

The CHAIRMAN. I hand you another letter, apparently dated December 19, 1962. I will ask you to examine it and state if you identify it.

(The document was handed to the witness.)

Mr. HSIA. Yes, sir.

The CHAIRMAN. Do you identify that letter?
Mr. HSIA. Yes, sir.

The CHAIRMAN. It may be printed in the record.

I note the closing paragraph says:

We must also add that we have splitted our commission with the clerks of our Government occupied with the issue of the import licenses and with the inspection of the material at its arrival in the Saigon harbor. We are fearing that if

78-726 0-67-pt. 1—14

you are doing business directly with DCV, which is not acquainted with the transactions of this kind, you will not obtain the success anticipated.

What does that mean?

Mr. HSIA. I would interpret that to mean that they wanted us to do the business through them as our representative instead of dealing with the importer direct. Senator, there is, as you probably know, a feeling of rivalry and jealousy among businessmen in different parts of the world, particularly in that part of the world. Le Thi Luong, who wrote the letter, the predecessor of Doanh Tin Cuoc, wanted to get the business and wanted to earn commission from us.

(The letter referred to follows:)

Re: Messrs D.C.V.

MAGNUS, MABEE & REYNARD, INC.,

New York-13 (N.Y.-U.S.A.)

GENTLEMEN :Your letter dated December 13, 1962.

SAIGON, December 19th, 1967.

At the beginning, we have promised to reserve the exclusive use of the term "Peppermint crystals" with DCV the agreement from DCV to pass out to you three orders of about $10,000 per quarter.

But, as DCV is a liar and do not fulfill his engagement, we must extend the arrangement to other clients.

Unfortunately, at this moment, the exchanges are exhausted and we must await another release of exchanges.

You see that you have no interest to do business exclusively with this firm.

Please abstain from writing to DCV as our Government authorities have an eye on this establishment which uses to write to all the suppliers for exacting, abatement, commission, etc. . . . and postal censorship is inspecting the correspondence exchanged between DCV and all the suppliers. So, please abstain from dealing with them with abatement, commission, risturn.

We must also add that we have splitted our commission with the clerks of our Government occupied with the issue of the import licenses and with the inspection of the material at its arrival in the Saigon harbour. We are fearing that if you are doing business directly with DCV, which is not acquainted with the transactions of this kind, you will not obtain the success anticipated.

Very truly yours,

L. T. L.

The CHAIRMAN. He was indicating that he split commissions and paid off officials, and so forth, to get the transactions through?

Mr. HSIA. He did say that.

The CHAIRMAN. That would be my interpretation of it.

Mr. HSIA. Right.

The CHAIRMAN. Did you do business with him after that?

Mr. HSIA. Yes, we did.

Mr. DUFFY. Have you severed your relations from this individual? Do you intend to sever your relations from this particular importer, based on the testimony you have heard here today?

Mr. HSIA. We have talked about it, but we haven't taken any definite action yet.

The CHAIRMAN. Do you still want to become an American citizen? Mr. HSIA. My wife is an American citizen

The CHAIRMAN. I didn't ask about your wife.

Mr. HSIA. And I intend to be an American citizen some time.

The CHAIRMAN. Do you have any application in now?

Mr. HSIA. No, sir.

The CHAIRMAN. I am not commenting upon the gravity of this situation particularly, other than to indicate to you that if it becomes

established that you are dealing with people who are engaging in improprieties and law violations, doing something knowingly, it might reflect adversely when you do come up for citizenship. I just suggest that to you. You might want to think about it.

Mr. HSIA. Thank you Senator. But I should like to say whatever I do, I do as an employee of an American firm, who provides me with a living in this country.

The CHAIRMAN. You are not doing any business yourself?

Mr. HSIA. No, sir. I am a salaried employee. I was educated at Harvard.

The CHAIRMAN. I am trying to follow you. You don't have the authority, then, to stop doing business with them?

Mr. HSIA. No, sir.

Mr. BRADNER. I was about to make that comment, Senator, but now the witness has said it himself.

The CHAIRMAN. I am trying to keep the record clear.

What is your position with this firm?

Mr. HSIA. I am in charge of the export business, the Export Department.

The CHAIRMAN. So it is not your firm at all?

Mr. HSIA. It is not my business at all.

The CHAIRMAN. I would like to know if you have contacted the owner of this establishment.

Mr. DUFFY. We have reviewed the correspondence and it indicates that Mr. Hsia is the only one who deals with these individuals.

The CHAIRMAN. Who are the true owners of this business?

Mr. BRADNER. Senator, it is a gentleman named Harry Foreman, who owns a great deal of the stock. We are talking of the BFM Corp.. which acquired this about 2 months ago. This whole situation has exploded in our face, if you will.

I think I can assure you, Mr. Chairman, that the management, the new management, will take very prompt action with respect to this area. We first learned about it, I think, a week ago when Mr. Duffy appeared in the office.

Formerly, the company was owned by a gentleman, I think primarily, Mr. Magnus, whose name appears in the firm name, who sold his stock to our client.

The CHAIRMAN. I would like to establish, since this has come into the hearing, who is responsible for countenancing these transactions. (At this point, Senator Mundt withdrew from the hearing room.) The CHAIRMAN. Whom have you been working for?

Mr. HSIA. I have been working for Magnus-Mabee-Reynard since September 1951. Prior to that, I was an official of the Bank of China. I was manager of the New York office. I was manager of the London office. I gave up my post in the London office after the conditions changed in China.

The CHAIRMAN. I am trying to find out whom you were working for? You said you worked for somebody else. Whom?

Mr. HSIA. I did not say I worked for somebody else. I am an employee of Magnus-Mabee-Reynard.

The CHAIRMAN. If you are an employee, you are working for someone else.

Mr. HSIA. Do you mean who is my immediate superior?

The CHAIRMAN. Yes; and who is his superior, if there is another

one?

Mr. HSIA. I look after the export business under the direction of the president of the firm, Mr. Percy Magnus, whose name was just mentioned.

The CHAIRMAN. He is the president of the firm?

Mr. HSIA. He was the president of Magnus, Mabee & Reynard, Inc. The CHAIRMAN. Until when?

Mr. HSIA. Until the end of February, this year, when the business was acquired by BFM Corp.

The CHAIRMAN. Was he the president at the time you received these letters?

Mr. HSIA. Yes, sir.

The CHAIRMAN. And you were working for the firm. He was the president of it?

Mr. HSIA. Yes.

The CHAIRMAN. It is a corporation; is it?

Mr. HSIA. It is incorporated.

The CHAIRMAN. Do you know about that, counsel?

Mr. BRADNER. Both the Magnus-Mabee firm and BFM, of course, is incorporated. They are two different corporations, Senator.

The CHAIRMAN. I have another letter I will show you, one dated April 4, 1962. I will ask you to identify it.

(At this point, Senator Mundt entered the hearing room.)

(The document was handed to the witness by Senator Mundt.) Mr. HSIA. Yes, Senator.

Senator MUNDT. That is from the files of your company?

Mr. HSIA. Yes, sir.

The CHAIRMAN. That may be printed in the record at this point. (The letter referred to follows:)

[Telegram]

LT MAGLAUR, New York:

LE THI LUONG, Saigon, April 4, 1962.

CLOVE BUD EUCALYPTUS 80/85 CINNAMON LEAF OILS OFFERED BY FELTON 1.27 0.55 1.27 LB FAS CABLE OFFER SIMILAR QUALITIES SAMPLES PRODCHIM WRITING

Comptoir des Produits Chimiques.-In order to avoid OSB procedure, we are dealing with the clients in order to introduce a first license request of $9,800 followed by another license request then a third request.

You know that the license request of $10,000 or more must pass by OSB procedure and must be published in AID bulletin. As competition is very keen in the field of essential oils and owing also to Taiwan competition, finally, we have decided to persuade the clients to apply for 3 different requests instead of one request of $30,000 and more.

Senator MUNDT. I will read the translation.

Mr. HSIA. Senator, that is not a translation. That is confirmation of a cable they sent and at the bottom they typed those few lines. Senator MUNDT. All right. I will read them.

You know that the license request of $10,000 or more must pass by OSB procedure and must be published in AID bulletin. As competition is very keen in the field of essential oils and owing also to Taiwan competition—

That is your old home

finally, we have decided to persuade the clients to apply for three different requests instead of one request of $30,000 and more.

I point that out because I was mentioning yesterday when the AID people were here that it is obvious if they are going to continue to have these contracts and orders of less than $10,000 unchecked, unpublished, handled privately and secretly, they have created an invitation to skulduggery over at the other end of the transaction because of the fact that there is no way-they have had 29,000 licenses, Re: Vietnam-a tremendous number of them, and if really they want to protect the taxpayers' money and make the program work, AID has the responsibility of discontinuing a practice which is an invitation to corrup

tion.

Now we have additional evidence. They recognize at the other end of the transaction that this is a great loophole and they are just announcing the obvious fact that they are going to take advantage of it. I think this falls within the direct responsibility of AID. Either they are going to do something about it or they will continue to be lethargic, inattentive to their responsibility, and let this continue.

I don't know that you are a competent witness to pass judgment on that, except I would like to find out from you whether most of the business in which you were involved with Vietnamese associates was above the $10,000 limit or below the $10,000 limit, per order.

Mr. HSIA. We have so far a couple of transactions exceeding $10,000. Senator MUNDT. How many have you under $10,000?

Mr. HSIA. Most of the transactions are under. When we started to make arrangements with the people over there, we said we wouldn't want to handle anything less than $1,000 because it doesn't pay. Most of the transactions are for $3,000, $4,000, $6,000, $7,000, some $9,000. Senator MUNDT. Were quite a few of them between $9,000 and $10,000?

Mr. HSIA. Very few.

Senator MUNDT. About how many transactions would you say you have had altogether under the $10,000 limitation?

Mr. HSIA. Roughly speaking, over what period of time, Senator? Senator MUNDT. The full period of time, since AID. I am talking about AID-connected transactions.

Mr. HSIA. I believe we had AID transactions even before these people came with us.

Senator MUNDT. Before who came with you?

Mr. Hs. Before Le Thi Luong, 1962.

Senator MUNDT. I am not particularly concerned about that_particular company, but I am talking about the general policy. I am talking about the AID-associated transactions in South Vietnam. About how many have you had altogether under $10,000?

Mr. HSIA. I cannot give you an exact figure. I can make a guess. Senator MUNDT. That is all I am asking.

Mr. HSIA. Over 100.

Senator MUNDT. And you have had a couple, you say, and if you and I understand the American idiom the same, that means probably two or three above $10,000?

Mr. HSIA. That is right.

Senator MUNDT. Thank you.