Testimony of witnesses: Page Griswold, Roger Wilcott, Erie, Pa.; president, the Griswold Manu- 1041-1050 Griswold, Roger Wilcott, Erie, Pa.; president, the Griswold Manu- 1041-1050 Underwood, John A., Brunswick, N. J., assistant to the president, 1050-1057 INVESTIGATION OF THE NAVAL DEFENSE PROGRAM FRIDAY, MAY 29, 1942 HOUSE OF REPRESENTATIVES, NAVAL AFFAIRS INVESTIGATING COMMITTEE, Washington, D. C. The committee met at 10:12 o'clock, pursuant to adjournment on Thursday, May 28, 1942, in room 313, Old House Office Building, Representative Carl Vinson, of Georgia, chairman, presiding. Present: Representatives Carl Vinson, Georgia (chairman); Melvin J. Maas, Minnesota; William E. Hess, Ohio; Thomas A. Flaherty, Massachusetts; William S. Jacobsen, Iowa; William W. Blackney, Michigan; William H. Sutphin, New Jersey; William H. Wheat, Illinois; Ed. V. Izac, California; Arthur B. Jenks, New Hampshire; John Z. Anderson, California; George J. Bates, Massachusetts; and Michael J. Bradley, Pennsylvania. Also present: Edmund M. Toland, general counsel; William J. Shaughnessy, assistant general counsel; and Thomas S. Hinkel, assistant general counsel. The CHAIRMAN. Let the committee come to order. All right, Mr. Toland. Mr. TOLAND. Mr. Chairman and members of the committee, the matter to be presented to the committee today relates to Alexander Stone, of Washington, D. C., formerly an employee of the Federal Housing Administration, from which he resigned on November 19, 1940, and who has since been engaged as a representative of several corporations interested in obtaining contracts and awards from the Navy Department. His ordinary or usual type of contract calls for a drawing account of $150 per week from the companies he represents, which amount is included as part of a commission of 5 percent of the total amount paid by the Government to the contractor or contractors on any contracts which he has been instrumental in obtaining. This business has proven extremely lucrative, as the records will disclose. During the period from August 1, 1941, to March 4, 1942, he has earned, according to his contracts, but not received in its entirety on that date, the amount of $475,298.40, representing commissions from four companies. Mr. Stone solicits additional business and, apparently to impress the prospective clients with his connections with the Navy Department, has gone to the point of bringing the prospective clients to the Department, together with a copy of his proposed contract, and showing the contract to naval officers with an apparent desire to create an impression that the Department approves of such an arrangement. The CHAIRMAN. Who is your first witness? Mr. TOLAND. Mr. Underwood. The CHAIRMAN. Is Mr. Underwood here? Mr. TOLAND. Mr. Underwood has been subpenaed. Mr. SUTPHIN. Who is Underwood? Mr. TOLAND. Mr. Underwood is the former president of Manning, Bowman & Co. The CHAIRMAN. Where does Mr. Underwood reside? Mr. TOLAND. He comes from Meridan, Conn., and subsequent to the time he was subpenaed he resigned from Manning, Bowman & Co. as president, and is now connected with Johnson & Johnson, of New Brunswick, N. J. The CHAIRMAN. Is he required to be here this morning? Mr. TOLAND. Yes; he is under subpena. The CHAIRMAN. Come around, Mr. Stone. Hold up your right hand. The evidence you shall give the Naval Affairs Committee shall be the truth, the whole truth, and nothing but the truth, so help you God? Mr. STONE. Yes, sir. TESTIMONY OF ALEXANDER H. STONE, WASHINGTON, D. C. Mr. TOLAND. Mr. Stone, will you give the reporter your full name? Mr. STONE. Alexander Hart Stone. Mr. TOLAND. Where do you reside? Mr. STONE. 2480 Sixteenth Street NW. Mr. TOLAND. How long have you lived at that address? Mr. STONE. Since November 17, 1941. Mr. TOLAND. Tell the committee briefly what your prior business experience was, prior to the date that you left the Federal Housing Administration. Mr. STONE. Prior to that? - Mr. TOLAND. Yes. Mr. STONE. I have been in the mortgage business with two brothers. We are correspondents; we have been now for the past 20 years. Mr. SUTPHIN. Speak a little louder so the committee can hear you. Mr. STONE. Yes, sir. So, we have been mortgage correspondents for the past 25 years, representing various financial institutions in Newark, N. J.; and in 1934 I was called into Washington for the Federal Housing Administration at the time of its organization. Mr. SUTPHIN. In what capacity? The CHAIRMAN. Wait one minute. May I suggest, Mr. Toland, the following procedure. Let the counsel ask questions and we will all have a chance later on to ask all the questions we want, and in that way we will keep it in chronological order. Go ahead now. Mr. TOLAND. Tell us briefly your business experience prior to the time that you were employed by the Federal Housing. Mr. STONE. Mostly mortgage financing. Also, I have had some experience in manufacturing in the years 1928 and 1929. Mr. TOLAND. What type of manufacturing? Mr. STONE. Radio tubes. Mr. TOLAND. With what company? Mr. STONE. Our own company at that time, National Radio Tube Corporation. Mr. TOLAND. What was the extent of the size of that company? What was the volume of business that you did? Mr. STONE. Well, I would like to say at the time we were able to produce, the radio tube market just broke wide open, and there was very little business that we did do on an investment of about $30,000, which, of course, we lost. Mr. TOLAND. What is your schooling? Where did you go to school? Mr. STONE. I studied law for about 2 years. I had gone to school in Newark, N. J., and then had anticipated going to college at the time, and then unfortunately there were some reverses at home, and I had gone to New Jersey Law School. I had not graduated as I did not want to practice law. I wanted some business experience mostly. Mr. TOLAND. When was the first time that you were appointed to the Federal Housing? Mr. STONE. Officially on November 11, 1934. Mr. TOLAND. 1934? Mr. STONE. Yes, sir. Mr. TOLAND. What was your entrance salary at that time? Mr. STONE. At that time we were all on basic pay of $2,600-everybody was. We were attending a school at that time. Mr. TOLAND. How long did you remain as an employee at the Federal Housing? Mr. STONE. Almost 6 years. Mr. TOLAND. What was the effective date of your resignation as an employee of the Federal Housing? Mr. STONE. That was November 20, 1940. Mr. TOLAND. November 20, 1940? Mr. STONE. Yes, sir. Mr. TOLAND. You had accrued annual leave, had you not? Mr. STONE. Yes, sir; I had quite a bit of it. Mr. TOLAND. The fact is that your resignation did not become effective actually until the 6th day of March 1941; isn't that correct? Mr. STONE. I believe that is the day. I don't know that that is the exact date. Mr. TOLAND. While your active association with the Federal Housing terminated in November, you were still on the rolls of the Government and received your annual leave compensation up to the 6th day of March 1941? Mr. STONE. Yes, sir. Mr. TOLAND. Now, when was the first time that you decided to or actually solicited any company to represent it in connection with a Government contract? Mr. STONE. The Lionel Corporation was the first company. The CHAIRMAN. What one? Mr. TOLAND. Lionel. Mr. STONE. At Sager Place, N. J. Mr. TOLAND. Tell us how you happened to be connected with them and when it was. Mr. STONE. Yes, sir. A brother of mine was acquainted with the treasurer of the company. As I explained previously, we had been in the mortgage business in Newark, and the treasurer of the company |