Mr. FLAHERTY. Mr. Chairman, I have one question I would like to ask Mr. Griswold. Did you or any of the members of your own organization attempt to negotiate with the war agencies before you hired Mr. Stone?

Mr. STONE. Didn't your sales manager, or a gentleman in New York

Mr. FLAHERTY (interposing). Were there any negotiations between your company and the Navy and War Departments before Mr. Stone was placed under contract?"

Mr. GRISWOLD. After the war started, you mean ?

Mr. FLAHERTY. When you started in Government business.

Mr. GRISWOLD. Yes; I have been in there myself, in the War Department, having to do with heavy cooking apparatus, that's right, and we had gotten some business from them.

Mr. FLAHERTY. There was no lack of cooperation on the part of the Navy or Army Department with your organization at all?

Mr. GRISWOLD. I am very glad to say that in all the district offices, that is, the ones I have been in-Cleveland-and our men have been in Pittsburgh and down here in Washington-all these men have been very, very obliging an attentive. I'll say that frankly—absolutely. Mr. FLAHERTY. There wasn't any lack of cooperation between the officials?

Mr. GRISWOLD. No; but we wanted someone to keep after this thing morning, noon, and night; to refer these jobs to us if we could make them, otherwise we would shut that plant up and call it a day.

Mr. FLAHERTY. The reason I asked the question was because I wondered whether any lack of cooperation from the Army or Navy officials forced you into such an agreement as you have with Mr. Stone.

Mr. GRISWOLD. No.

Mr. JACOBSEN. Mr. Griswold, are the contracts that you have with the Government on a lump sum or a negotiated basis?

Mr. GRISWOLD. They have been on a bid basis so far. I am sure they have been on a bid basis.

The CHAIRMAN. Competitive bid contracts?

Mr. GRISWOLD. To the best of my recollection, that is the case.

Mr. TOLAND. You have not received any contracts as a result of Mr. Stone's activities, have you?

Mr. GRISWOLD. No; the business we have had with him is the one I mentioned.

Mr. TOLAND. But the contracts you are talking about now with Mr. Jacobsen have nothing to do with the contracts you have received because you have received none through Mr. Stone.

Mr. GRISWOLD. That is right.

Mr. HESS. Was there ever a survey made of your plant by the Army Ordnance Department or by naval inspectors?

Mr. GRISWOLD. That is right, we had a survey.

Mr. HESS. A survey was made?

Mr. GRISWOLD. Yes; I think they came from Cleveland.

Mr. HESS. That was prior to the time that this contract was made? Mr. GRISWOLD. Yes; some time ago.

Mr. HESS. So they knew what your plant was in a position to make? Mr. GRISWOLD. Yes; I am sure it was the Navy-one of the depart

ments.

Mr. HESS. And it was subsequent to that inspection that Mr. Stone's brother came down and inspected your plant?

Mr. GRISWOLD. That is right.

Mr. TOLAND. Mr. Chairman, along the lines of the statement of the witness, I would like to bring to the attention of the committee exhibit No. 473 which is a letter dated December 15, 1941, addressed to Alexander Harris, Art Metal Works, Inc., Newark, N. J., one of the companies the witness has a contract with.

The CHAIRMAN. Are you through with Mr. Griswold? Thank you very much.

Mr. JENKS. Before he leaves I would like to make one observation. During the last war I was in business and did a good many million dollars worth of business with the Army and the Navy. We had a man from our own plant-a salesman-come down here and take orders. It was a long time-a comparatively long time before he was able to break in-if I may put it that way-to get business; and we considered whether it would be better to have him continue to come down here or to hire somebody who was acquainted with the department down here.

Men were men then and they are men now, and I don't see any difference between the way that business is being done today from the way it was done then. I want to tell you that I have heard my salesman say many times that he could work in an office down here and pass by a whole string of salesmen selling shoes and get to the buyer, the man who was going to place the order. So, I am telling you that friendship and acquaintanceship have a lot to do with a man getting in to the throne, and it is just the same in ordinary business. We did volumes of business with Sears, Roebuck and those big concerns where it would be almost impossible for another salesman to get in even with a better product.

The CHAIRMAN. That is true, Mr. Jenks, and if you sent your salesman to a new territory he would have to get acquainted; and just as soon as he got acquainted he could do business. But you didn't have to go out and get some local man to be the salesman for that community because your goods were selling on their merits as much as on friendship, and you didn't have to come down to Washington and hire some special agent to get an opportunity to present the matters to the Navy Department or the War Department.

Mr. JENKS. If I felt, as I think Mr. Griswold felt, that it was a sort of a blind game and he just didn't know how to go about it-there have been plenty of manufacturers that would have been glad to do business with the Government if they had known how to go about it. The CHAIRMAN. I think the industry of the country is well acquainted with how to go about doing business with it.

Mr. GRISWOLD. What are you going to do about a business predicated on patterns, jigs, and tools? It is all out of it. You have to go fast or you peter it out with the overhead. That is what we are confronted with today.

The CHAIRMAN. I have no criticism of Mr. Griswold or any manufacturer who tries to have his own sales agent come down here. My only criticism is that they are not justified in employing these special brokers to get the business.

Mr. JENKS. You would have employed any man who could have gotten the business for you if you wanted.

Mr. GRISWOLD. I will tell you one thing now. We have several men who get 10-percent commission and some who get 20-percent commission on certain kinds of work on a straight-commission basis.

Mr. TOLAND. Mr. Chairman, I am going to call a witness now who refused to fall for it.

Mr. Underwood.

The CHAIRMAN. Hold up your right hand, Mr. Underwood. Do you solemnly swear the evidence you shall give to the Naval Affairs Committee shall be the truth, the whole truth, and nothing but the truth, so help you God?

Mr. UNDERWOOD. Yes, sir.

TESTIMONY OF JOHN A. UNDERWOOD, JOHNSON & JOHNSON, NEW BRUNSWICK, N. J.

Mr. TOLAND. Mr. Underwood, will you give the reporter your full name?

Mr. UNDERWOOD. John A. Underwood.

Mr. TOLAND. Where do you reside?

Mr. UNDERWOOD. I am in the midst of transferring from Connecticut to New Jersey. I formerly lived at 45 Dover Road, New Britain, Conn.

Mr. TOLAND. At that time you were connected with Manning, Bowman & Co. of Meriden?

Mr. UNDERWOOD. I was president of that company.

Mr. TOLAND. You are now connected with Johnson & Johnson?

Mr. UNDERWOOD. In New Brunswick, N. J.

Mr. TOLAND. What position do you have?

Mr. UNDERWOOD. I am assistant to Mr. Johnson and Mr. Smith, the president and executive vice president.

Mr. TOLAND. Do you know Mr. Stone who is siting on your left? Mr. UNDERWOOD. Yes, sir.

Mr. TOLAND. You heretofore met Mr. Stone, did you not?

Mr. UNDERWOOD. Yes, sir.

Mr. TOLAND. Will you tell the committee briefly in your own way just exactly how you happened to meet him; what he said to you and what transpired?

Mr. UNDERWOOD. Mr. Stone originally contacted our vice president in charge of our New York office, Mr. Mirrielees.

Mr. STONE. Which Stone?

Mr. UNDERWOOD. I think Mr. Mirrielees informed me it was you originally. But in any case, Mr. Mirrielees called me up-this was early in December 1941 and we had been working to obtain defense production—and said that he would like me to meet Mr. Stone, and Mr. Stone was anxious to have me come to New York and talk with him about obtaining war production.

I did not go down, but as a result, a little later Mr. Mirrielees called our factory superintendent and said that Mr. Stone's brother and another gentleman, whose name I don't remember, would like to come up and survey our plant. They did that early on December 7-the day of Pearl Harbor. Our superintendent and our secretarytreasurer, Mr. Hartnett, took Mr. Stone and the other gentlemen through our plant, and the next day when I came to the office, they

told me of the visit and said that Mr. Stone and his friend had stated that undoubtedly production could be obtained with our equipment in Washington.

As a result of that, I made an appointment and met Mr. Stone in New York, at our New York office, a little before Christmas, 1941, and we had a discussion at that time. I told him that I felt, number one, that adding 5 percent commission to the cost of war production was a little too much, and that I believed the Government frowned upon it, that I would be very hesitant about committing our company to such a course. He told me that he felt that I had the wrong interpretation, that a fully accredited representative to a company would be recognized by the Government as having the right to represent any manufacturer. He said that if I would come to Washington, he would take me to the Judge Advocate General's office, and he felt that I would be satisfied by what I was told there, that there was nothing irregular about employing him to represent us.

I asked him to send us in writing the form of contract that he wanted, and told him that I would talk it over with my directors when I went back up to Meriden, which I did. Well, we were unanimous there that we didn't think it was the right thing for our company to do, and I so wrote Mr. Stone, I think early in January. Mr. TOLAND. Wasn't that late December?

Mr. UNDERWOOD. It may have been, Mr. Toland. I have the letter here.

Mr. TOLAND. It was December 29 that you decided not to take any further action?

Mr. UNDERWOOD. That is right. You are correct, sir. December 29 I wrote Mr. Stone and told him we had decided.

Mr. TOLAND. Then will you tell the committee what, if anything, happened after that date?

Mr. UNDERWOOD. Well, I received a reply from Mr. Stone on January 1, in which he said that-I will read this if you want me to.

The CHAIRMAN. Read it out.

Mr. UNDERWOOD. "Thank you for your letter of December 29. Your brochure will be sent to your New York office by the end of this week." That referred to a presentation book we had gotten up of our plant and departments, which we left at the various Government procurement offices so that they would be more familiar with what Manning, Bowman had to make. Mr. Mirrielees gave a copy of it to Mr. Stone.

I want you to know that I appreciate your attitude, as well as that of the directors, in seeking clarification of the Government's ruling in regard to representation. As stated when I saw you, I would suggest that you communicate with Mr. Francis Reed, in the office of Charles Evans Hughes, Jr., and if you come to Washington I shall be glad to accompany you to the Judge Advocate's office. It is advisable for our mutual interests that both these suggestions be followed, if possible, as I am almost positive I can use the facilities of your company. Should you decide to come to Washington, will you please notify me a few days in advance?

With kindest personal regards and best wishes for a happy new year, I am, Sincerely yours,

A. H. STONE.

Mr. TOLAND. Then, thereafter did you consult with a representative of the Navy Department?

Mr. Underwood. Yes. I talked with Mr. Frank M. Folsom in the Navy Department.

Mr. TOLAND. He is in charge of procurement, under Admiral Robinson, is he not?

Mr. UNDERWOOD. I think that is true. He is a member of the War Production Board.

Mr. TOLAND. As a result of your conference with him, what, if anything, happened with regard to Mr. Stone?

Mr. UNDERWOOD. Mr. Folsom asked me to contact Mr. Stone, and said he thought that I should find out whether or not he was correct in stating that the Judge Advocate's office would recommend his form of agreement and whether or not he would be a desirable representative for us. I called Mr. Stone and met him at his apartment, and he and his brother

Mr. TOLAND (interposing). That was on the 29th day of January? Mr. UNDERWOOD. That was about the 29th. It was the latter part of January. I have forgotten the exact date.

Mr. TOLAND. Go ahead. Tell us what Mr. Stone said to you on that date.

Mr. UNDERWOOD. Well, Mr. Stone had several blueprints of Navy war material there that he had recently obtained, and he stated that he had made a contract with the Griswold Manufacturing Co., of Erie, that he had obtained approximately $7,000,000 worth of business for the Lionel Corporation and, I believe, referred to the Lee Tire & Rubber Co., of Conshohocken, Pa. I asked him if he would, as he promised, take me to the Judge Advocate General's office, so we drove to the Navy Department and went into the Judge Advocate's office and talked with Lieutenant Commander Perry. The lieutenant commander was noncommittal on the matter. He did not make any statement that was either favorable or unfavorable, and said that in any case, his opinion couldn't bind the Judge Advocate General's office as to the correctness or incorrectness of Mr. Stone's agreement. So we left there and called on Captain Lee, but he was out. Then we called on Commander Hubbard, and he was cordial. I explained to him our desire to obtain war work, and that was about all the conversation there. Then we left.

Mr. Stone explained that he could introduce me to other naval officers, but he thought I had probably seen enough to convince me that he knew his business and was in position to get war production. So I told him I would have another discussion with my directors in Meriden and would let him know later-and I did. But our attitude there was still the same, that if we got war production work we ought to get it under our own power and with our own men, and I am glad to say we have.

Mr. TOLAND. Then you reported the complete incident to the Navy Department, did you not?

Mr. UNDERWOOD. Yes, sir; I did.

Mr. TOLAND. I would like to state for the record, Mr. Chairman, that as a result of the report of Mr. Underwood to the Navy Department, the matter was referred by the Navy Department to me for investigation as to the activities of the witness. I would like to offer in evidence, not to be printed, the report, letters, and communications. (Letter from Mr. Underwood to Mr. Frank M. Folsom, dated February 2, 1942, with attached correspondence relating to Mr. Stone, was received in evidence, marked "Exhibit No. 478," and is filed with the committee.)