AMOUNT REQUESTED

It is estimated that this Office will require an authorization of $690,000 for 1962, the same amount as will be needed in 1961. This will provide for the maintenance and operation of this activity on the very minimal level necessary to carry out the orderly liquidation of its program.

GENERAL STATEMENT

During the fiscal year 1962 the Office of Alien Property, on behalf of the Attorney General, will be charged with the responsibiltiy for more than $250 million of vested property involved in suits and other judicial proceedings in various Federal and State courts or in administrative claims before the Office which are required to be processed in accordance with the standards of the Administrative Procedure Act.

The claims and litigation burdens will remain substantial during fiscal 1962. Although only some 241 debt claims will be left for processing, final schedules will be issued against four or five insolvent accounts involving several thousand claims. The applicable statute requires that copies of final schedules be sent by registered mail to all claimants concerned, thus creating a clerical task of major proportions. The issuance of several thousand payment orders will likewise constitute a major task. Judicial review of final schedules is provided for by statute. It is estimated that 20 suits for such review will be pending on July 1, 1961, as a result of final schedules previously issued and that additional suits for review will be filed by claimant in the course of the fiscal year. These actions for review, some of which will ultimately reach the U.S. Supreme Court, involve over $21 million. They cover a wide range of complicated legal questions including the effect of the confiscation of Americanowned bank accounts and personal property by the Japanese and German Governments during wartime and the rates of exchange applicable to various types of yen and mark obligations.

Approximately 2,502 title claims will remain for disposition on July 1, 1961, exclusive of 1,245 JRSO claims (which may be disposed of by legislation in the 87th Cong.) and inclusive of the 1,838 so-called Kaufman intervenor claims which are connected with the Interhandel suit for the return of vested General Aniline & Film Corp. stock. The processing of title claims requires extensive investigation and correspondence and also raises a wide variety of legal issues involving both domestic and foreign law.

Although most debt and title claims will ultimately be disposed of by summary proceedings, those involving contested issues of fact or law must be tried before hearing examiners. It is estimated that 91 contested claims will be pending in the administrative agency on July 1, 1961, and that 69 will be terminated between that date and June 30, 1962. Of the contested claims which will remain for completion during or after fiscal 1962, one is for the return of approximately $18 million, and involves transactions in Germany, Switzerland, and other European countries and Mexico. More than 12,000 documents have already been accumulated by the Office of Alien Property attorneys preparing this claim for hearing. A dozen other claims involve complex arrangements to conceal enemy ownership of property in this country and 15 raise difficult issues of foreign law requiring expert opinion. Other claims present questions of title to vested property which will require investigation beyond that which has already taken place. After the trial and briefing of a claim before a hearing examiner, he issues a recommended decision. The Director or Deputy Director must then review the record of the claim, consider the exceptions and any briefs filed with them either by the claimant or the Claims Section of the Office, then prepare and issue the decision of the Office. In all, there are many millions of dollars of vested property involved in these hearing cases which will become available to the war claims fund in the Treasury only to the extent that the claims are successfully defended.

The Office will be engaged in approximately 162 judicial proceedings at the beginning of fiscal 1962 in addition to the debt claims in litigation mentioned above. About 70 of the cases will be in the Federal district and appellate courts and 92 in the State probate or appellate courts. A scattering of cases will be in the Court of Claims and elsewhere.

The proceedings in the Federal courts, broadly speaking, fall into two categories: (1) Section 9(a) suits which are filed by litigants seeking the return of

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vested property; and (2) section 17 actions which are initiated by the U.S. Government seeking to obtain possession of vested property.

For the most part, alien property litigation raises unique and complex questions of law and fact arising out of the interpretation of treaties, the nature and application of foreign law, the attributes of legal entities unknown to American law and foreign accounting methods and business practices. The difficulties of proof are enormous. The witnesses and documents are usually not available in this country and, consequently, discovery proceedings must be held abroad involving testimony which is bilingual, and in some cases trilingual. It is also necessary to locate and employ foreign law experts as well as technical experts familiar with foreign banking and business practices.

In the probate courts of the States, the Office is faced with problems of will construction, proof of heirship, the effect of war on testamentary and inter vivos powers of appointment, estate tax questions and our right to vest contingent remainders. The Office also has the usual problems of compelling an accounting, objecting to an accounting and surcharging fiduciaries, as well as the timeconsuming conferences necessary to obtaining equitable distributions in kind where such distributions are proposed. Most of these cases are handled by attorney-members of our staff. U.S. attorneys are reluctant to handle alien property cases in the State courts because of the specialized field of law involved. In those cases in which they agree to appear for the Attorney General, this Office is called upon to prepare the pleadings and furnish the briefs and legal memoranda necessary for the proper presentation of the cases.

The I. G. Chemie case has now reached the point where preparation for trial must proceed with dispatch. This case involving General Aniline & Film Corp. stock worth over $120 million, has now reached a point where the district court is insisting that the preparation for trial proceed with dispatch. At a meeting in Judge Pine's chambers, Mr. Wilson, counsel for Interhandel, informed the judge that his client was establishing a budget for the preparation of this case for trial and that such budget had been fixed at a sum well into six figures. He has rented five offices in his building, has furnished and equipped those offices, has brought here a staff which has been recruited in New York with some personnel from Switzerland and has begun preparation of the case for trial. Mr. Wilson acquiesced in the opinion then expressed that it will take approximately 2 years to prepare the case for trial. Mr. Jaffe, chief Government counsel for this case, has estimated that only with the concentrated and full-time attention of seven attorneys, including himself, to the complex and voluminous evidence already obtained and discovery proceedings yet to be pursued can the Interhandel case be prepared so that the Government will be ready to proceed to trial in approximately 2 years. The depositions of witnesses and the discovery of additional books and documents will entail several trips abroad for perhaps two or three attorneys at a time, during the next 2 years. In accordance with his request, Mr. Jaffe and his staff of six attorneys, one translator, and three clerical employees have been relieved of all duties not related to the Interhandel and Duisberg cases.

The business interests to be administered by the Office on behalf of the Attorney General during fiscal 1962 will consist of the 97 percent vested stock interest in General Aniline & Film Corp. and controlling interests in 16 dormant enterprises being liquidated and dissolved. Members of the staff of the Office serve as the directors and officers of these latter corporations and perform all of the functions required to complete the liquidation and dissolution, such as the payment of corporate creditors, taxes and refunds to the Office of Alien Property for administrative expenses, and, finally, the payment of final distributions to the stockholders. The necessary documents to be filed with the various State secretaries, proper minutes and resolutions are all prepared by this Office.

Other assets to be administered on behalf of the Attorney General during fiscal 1962 will include approximately 378 blocks of miscellaneous domestic and foreign securities, together with any additional blocks which may be received as distributions from trusts or decedent's estates, or as distributions from foreign governments under the provisions of intercustodial agreements. Most of these will be sold through established brokerage firms on the New York or other stock exchanges or in the over-the-counter market. A few of the securities which are not actively traded will be sold by negotiation or through public advertisement. The Attorney General will hold approximately 28 items of real property or interests in real property at the beginning of fiscal 1962, including mortgages, mineral leases, and commercial, residential and farming properties, which, for

the most part, will be sold at public sale. All of the documents, including deeds, assignments and bills of sales, are prepared by the staff of this Office. The staff handling all these management, sales, legal and liquidation matters has been reduced to two liquidators under the direct supervision of the Deputy Director. The Attorney General, through the Office of Alien Property, continues to be responsible for the custodianship of thousands of copyrights, patents and trademarks and contract interests therein. Further, he is responsible for the licensing, royalty collection and protection from infringement of all this property. Although most of the vested patents will have expired by July 1, 1961, there will remain thereafter the resolution of disputes over some 20 vested patent contract interests. In addition, the copyright and trademark programs will continue unabated through the fiscal year, and, in the absence of legislation, for many years in the future.

Under existing law, the Attorney General must continue for an indefinite period to administer present and future interests in trusts and decedent's estates. Approximately 492 such interests will remain on July 1, 1961. This program results in the receipt of more than $2 million per year in income and principal distributions of cash or property in kind; i.e., real estate and miscellaneous securities, which must be liquidated by the Office.

Pursuant to Public Law 857, 81st Congress, the United States has entered into intercustodial agreements with Belgium, Canada, Denmark, Luxembourg, the Netherlands, Honduras, Cuba, Haiti, Nicaragua, and Norway. All except Norway are signatories to the Brussels Intercustodial Agreement. A separate agreement has been entered into with Norway. There is another agreement with Canada entered into in 1945. A separate or supplemental agreement dated 1950, as amended 1952, has also been entered into with Denmark. There will remain to be resolved as of July 1, 1961, approximately 108 foreign government claims against the Attorney General by the Netherlands, Belgium, Denmark, and Canada, valued at $3,500,000, including securities, currency, bank cover accounts, estates and trusts, business enterprises and nonenemy interests in Germanorganized corporations. The Attorney General's claims against foreign governments will number four and are estimated to be in the total amount of $670,000. This entire program is handled by the Deputy Director.

In the past year the Attorney General requested the Treasury Department to take over the foreign funds control functions involving the continued blocking of assets owned by persons in certain European areas behind the Iron Curtain. Since the Treasury Department declined to do so, the Office of Alien Property must continue to administer this program. The work thereon includes the processing of applications for the unblocking of property and the handling of a large volume of correspondence pertaining to blocked property.

The Office of Alien Property carries a considerable burden of legislative work. In addition to the usual task of reporting on the 50 to 60 bills affecting alien property which are introduced in each Congress, the Director or Deputy Director is called upon to testify two or three times a year with regard to various of such bills. Also a significant amount of work is occasioned by the continuing Senate Judiciary Subcommittee on the Trading With the Enemy Act.

Subsection 202(b) of Public Law 285, 84th Congress, authorized the divesting of the net proceeds of property vested under the Trading With the Enemy Act which was directly owned at the date of vesting by natural persons who on that date were residents of Bulgaria, Hungary, and Rumania. The net proceeds are divested to blocked accounts with the Treasury unless the divestee is resident outside the Iron Curtain in which case the property is directly divested to him. Each divesting involves a great deal of detail. Approximately 93 divestings will remain for fiscal year 1962. In addition, there will be the necessity of processing requests for release of the blocked Treasury accounts as owners come into Western countries and as the countries of the owners' residences are unblocked pursuant to negotiations by the Department of State, as was recently the case with Rumania.

The completion of the Philippine program and the turnover to the Philippine Government of the funds remaining after payment of claims and costs and expenses of administration is dependent upon the termination of the few cases still pending in both the United States and Philippine courts and upon the end of the debt claim program with respect to the payment of debts from insolvent accounts which contain certain funds derived from vestings both in the United States and in the Philippine Islands. It is anticipated that this program will be virtually completed during fiscal 1962.

The accounting and auditing work of the Office will, of course, continue to the very end of the alien property program. This work includes not only accounting for vested property, but the resolution of disputes over State and Federal taxes, the maintenance of statistical data, deposits with the Treasurer of the United States of funds received for the account of the Attorney General and the auditing and payment of claims allowed by judicial decree or administrative decision. In addition, the Office closes out to the war claims fund in the Treasury all vested German and Japanese accounts which are free from claims and litigation. The Attorney General has heretofore advanced to the war claims fund from his account in the Treasury a total of $228,750,000, which must be recovered from such vested German and Japanese accounts. Up to June 30, 1960, 27,917 of these accounts with balances totaling $172,236,623.32 have been closed out. As of June 30, 1960, there were 6,028 German and Japanese accounts containing estimated balances of more than $300 million, which remain open and ultimately must be closed out either by transfers to the war claims fund or by returns and payments to successful litigants and claimants. It is estimated that about 5,000 such accounts will remain open as of July 1, 1961. Furthermore, there will be about 300 accounts other than German and Japanese to be closed out either through returns and payments to nonenemies, transfers to the Treasury Department for deposit to the Bulgarian, Hungarian, and Rumanian claims funds or payments for other purposes.

Finally, it should be noted that the Office of Alien Property administers title II of the International Claims Settlement Act of 1949, which was enacted by Public Law No. 285, 84th Congress. In addition to the divesting proceedings mentioned above, it is necessary for the Office to process claims and litigation instituted under title II. Although the vesting program under this title will be completed during the current fiscal year, the claims and litigation work will coninue in fiscal 1962.

From the foregoing it will be seen that the Office of Alien Property, on behalf of the Attorney General, has continuing responsibilities which are numerous and in a large part burdensome. Moreover, these responsibilities require the representation of the Government in matters involving property worth over a quarter of a billion dollars. The work of the Office has been seriously affected by the drastic reductions in force between July 1, 1959, and June 30, 1960, which cut personnel from 170 to 80. The proposed 1962 budget of $650,000 (plus the cost of the recent pay raise) is a barely adequate budget, particularly in view of the magnitude and complexity of the matters to be handled by the Office. It is imperative, of course, that the Government's interest in the Interhandel suit, involving property whose present book value is at least $117 million, and which may bring on the market anywhere from $150 million to $200 million, be competently represented. In this connection, it is worth noting that at hearings held by the Subcommittee of Commerce and Finance of the House Interstate and Foreign Commerce Committee in connection with the Interhandel suit, the chairman, Mr. Mack, and another member, Mr. Hemphill, expressed concern lest the Government's case be harmed by the inadequacy of funds and the consequent loss of a competent staff to handle the case.

In the light of the expense of maintaining a top-notch experienced staff to devote its full efforts to the Interhandel suit and in the light of the other expenses to be incurred in preparing that case alone for trial, the figure of $690,000 as an authorization for the whole of the alien property program in fiscal 1962 is austere to the point of danger. Anything less will surely result in neglect of the Government's interests and in the unnecessary prolongation of the alien property's program.