Enclosure C JACK & HEINTZ, INC. MARCH 30, 1942. To: Bureau of Aeronautics, Navy Department, Washington, D. C. GENTLEMEN: Referring to your letter of March 26, the entire subject has been covered in our letter of March 28 addressed to the attention of Captain Miles of the Bureau of Aeronautics. Please review the contents of this letter, and if there are any further questions we shall be pleased to come to Washington. Reductions as covered by the above letter absolutely bottom minimum at this time. I am sure you will agree that we have gone the limit. Very truly yours, JACK & HEINTZ, INC., (The above letters were received in evidence and marked "Exhibit No. 87.") The CHAIRMAN. That winds up all of the Jack & Heintz matter, does it not, Mr. Toland? Mr. TOLAND. In addition to eliminating the excessive salaries, we have saved to date on renegotiated War Department contracts $9,500,000; the amount saved by the Navy Department has not as yet been estimated. The secretary to Mr. Jack, Miss Bowman, is no longer going to receive anything except $6,000 a year; further, the wage scale for employees will be the wage scale of the locality and not as determined by the contractor. The CHAIRMAN. Now, Mr. Toland, have all of the exhibits of Jack & Heintz printed in the record of the investigating committee. You and your staff deserve the thanks of the Naval Affairs Committee for the manner in which you have conducted that inquiry and the great saving that you have brought about in the renegotiation of the contracts. So that, for the time being, that concludes it as far as we are concerned with Jack & Heintz, Inc. Mr. TOLAND. Exactly. The CHAIRMAN. Mr. Toland, have you any evidence here to show how much has been saved to the Government as a result of the renegotiation of contracts based upon the questionnaires, or based upon this committee's existence as an investigating committee? Mr. TOLAND. Well, our report and the information we have to date shows that the actual dollar savings on contracts that this committee can properly say that it played a part in the renegotiation of, as of this date, is approximately $33,000,000 for the Navy Department. I am advised by the Department, by a high official, that the amount of renegotiated contracts, including those where the renegotiations are completed, in the process, or presently contemplated, is somewhere in the neighborhood of $150,000,000. The CHAIRMAN. That is, since the existence of this Committee? Mr. TOLAND. Yes, sir; since the existence of this committee. I may say, for the record, that this committee, from its inception, and while it has only held one hearing in the course of a year, from its very inception has worked with the Department to work out a plan of renegotiating contracts wherever it appeared to the committee or to its staff from the questionnaires that profits on contracts were too high. One of Judge Patterson's assistants said that the Jack Heintz hearing was one the the best things that could have happened, because, partially as a result of it, Continental Motors renegotiated a contract with the War Department giving the Department credit for $40,000,000. The North American Aviation Co., which has not answered our questionnaires to date, renegotiated a contract with the War Department saving $14,000,000, and in this morning's paper it is stated that $60,000,000 in addition to the $14,000,000 would be saved to the Government as the result of the reduction in the unit price of the training planes. Therefore a great many of the things we have done are intangible. You cannot find the definite amount, but the Department recognizes the saving. The CHAIRMAN. All of these negotiations have taken place and have been accomplished since the existence of House Resolution 162? Mr. TOLAND. Yes, sir, since April 13, 1941 The CHAIRMAN. Thank you very much, Mr. Toland. Tomorrow morning when we finish with Secretary Knox we will take those other matters up. Mr. TOLAND. There is a great deal of available material that I think in the consideration of your bill you should have for the record. I submit herewith a brief statement of certain contracts that have been renegotiated with the Navy Department during the period of the existence of this Committee. I do not believe that this covers all of the contracts that have been renegotiated, but this is a part of them. (The statement referred to is as follows:) Total monetary saving from Navy Department Letters of March and April 1942 This amount will be greatly increased when pending negotiations, especially in the Bureau of Ships, are completed. Todd-Seattle Dry Dock, Inc. (repair work). Preliminary report-Additions Todd Shipbuilding Co. (ship construction). Newport News Shipbuilding & Dry Dock Co. (ship construction). Curtiss-Wright Corporation, Curtiss Airplane Division 3, 418, 109. 00 15, 940, 434. 00 32, 913, 615. 99 Total.. Grand total.......... (The above statement was received in evidence and marked "Exhibit No. 88.") In addition, I would like to file and have printed an editorial printed in the Boston Post dated March 26, 1942: STOP THE LEAK If one were called upon to name the five outstanding events since we entered the war, it would not be difficult. Four places would be quickly filled with four happenings which have become a part of history—the Battle of Bataan, the prowess of American Tiger flyers in Burma, the devastation wrought by our Navy on the Marshall and Gilbert Islands, and the arrival of MacArthur in Australia. After the soul-searing treachery of Pearl Harbor, these occurrences were proud, heart-lifting things. They renewed our faith in our men at arms in the field and in the fleet, assuring us we not only could, but would, pay back the infamy of December 7, in the manner our President asked, with compound interest. But the fifth event is of a different stamp. From pride and patriotism, our emotions are turned to anger and hurt by the revelation that a girl secrtary of an Ohio war plant earned $39,365 last year. At the rate she was being paid for the first 10 weeks of this year she would have garnered $100,000 when December ends. It was no isolated case. Testimony also revealed that men making $2,500 in 1940, jumped into the $25,000 class last year, and men who made $75,000 a year had their earnings doubled in 1941. Once again the people remembered the war millionaires of 1918. Once again they recalled the fierce fight, for a compensating bonus, that men who had fought that war for $30 a month, were forced to make. And more than one person began to ask what became of those plans and promises, made in the years of peace: "In the next war, capital and labor as well as the soldier, shall be drafted for service, on the same basis." Amazed and stunned as we may be, that some Americans have been making preposterous profits out of our effort to make the world free, we can still be grateful that this bonanza business was dragged into the open in the third month of the war. It might have gone on indefinitely, but it cannot continue now. On this issue the people are not indifferent or complacent. This is something which cannot be shelved, whitewashed, or put aside until the war is over. Rationing, bond buying, higher taxes, and conservation, which are urged on the people, will become a mockery unless the opportunities to amass fortunes at the expense of the people are curtailed-and at once. The American people do not oppose legitimate profit. They do not object to adequate pay for long hours and hard work. But those who are watching their sons willingly enter the services at less than $1 a day, demand a new system of letting contracts for war material or any kind of war work. They want no squandering nor wasting of money. It is their money and they have a right to ask that it not be thrown away. They are confident that the President and Congress will sew up the holes in the national pocketbook. (The editorial was received in evidence and marked "Exhibit No. 89.") Mr. TOLAND. I would like to offer in evidence, not to be printed, the bank statements of William R. Jack. We were unable to obtain these statements in time to introduce them in the previous hearings. (The statements were received in evidence, marked "Exhibit No. 90" and are filed with the committee.) The CHAIRMAN. We'll take a recess until 10 tomorrow morning. (Thereupon, at 1:05 a. m., the committee recessed until tomorrow, Tuesday, April 14, 1942, at 10 a. m.) APPENDIX EXHIBIT No. 4 MEMORANDUM Subject: Questionnaires No. I showing profit as computed by the committee from 25.1 to 119 percent. There are submitted herewith 14 questionnaires No. I, with comments attached thereto, showing the basis used in computing profits where they were not given by respondent. All percentages of profit are arrived at by dividing the profit by the cost. Profits realized by contractors on Navy contracts during period Oct. 1, 1939, ending Apr. 30, 1941, as reported in questionnaire No. 1 received by committee from Nov. 1 to Dec. 31, 1941 Contractor (1) American Machinery & Foundry Co., Brooklyn, N. Y. (2) Bantam Bearings Corporation, South Bend, Ind. (3) The Bearings Co. of America, Lancaster, Pa.. (4) Crane Packing Co., Chicago, Ill. (5) Delano & Aldrich, New York City. (6) Diamond Power Specialty Corporation, Detroit, Mich. (7) The Fellows Gear Shaper Co., Springfield, Vt. (8) Jones Motorola Sales Co., Stamford, Conn. Kieckhefer Container Co., Camden, N. J. (10) Liquid Carbonic Co., Chicago, Ill. (11) Service Tool & Engineering Co., Dayton, Ohio. (12) Kollsman Instrument Division of Square D Co., Elmhurst, N. Y. (13) Wellington Sears Co., New York, N. Y. (14) Wollensak Optical Co., Rochester, N. Y. EXHIBIT No. 7 FREQUENCY DISTRIBUTION OF PROFIT CONTRACTS ON WHICH PROFITS IN EXCESS OF 10 PERCENT WERE REALIZED In the preliminary report of the House Committee on Naval Affairs Investigating the National Defense Program, attention was called to the fact than on naval aviation contracts losses were sustained on 221, or 30.78 percent, of the 718 prime and subcontracts tabulated (p. 17 and table 5). It was also pointed out that profits of $15,466,561 were realized on prime contracts, amounting to $341,255,304; an average profit of 4.75 percent on cost and profits of $387,691 were realized on subcontracts, amounting to $19,883,469; an average profit of 1.99 percent and an average profit of 4.9 percent was realized on both prime and subcontracts. While the profits on both prime and subcontracts range from a loss to a 141 percent profit (second tabulation) as pointed out in the preliminary report, further study of the profit contracts reveals that exorbitant profits were realized on an unusually large number of the 718 contracts tabulated. For instance, there were four contracts on which profits in excess of 100 percent were realized. The names 113 of the companies holding these contracts and the percent of profit realized are as follows: Bell Aircraft Corporation.. Bendix Radio Corporation (Towson and Baltimore plant) Percent 105. 6 122 120.9 141. 1 There were 9 contracts on which profits realized ranged from 50 to 75 percent. In other words, profits in excess of 50 percent were realized on over 4 percent of the total number of naval aviation contracts. Profits ranging from 40 to 50 percent were realized on 18 contracts and profits from 30 to 40 percent were realized on 43 contracts. Profits in excess of 30 percent were realized on 13 percent of the total number of contracts. There were 56 contracts on which profits ranging from 20 to 30 percent were realized, or a total of 147 contracts out of 718 on which profits were in excess of 20 percent of cost. This indicates that on 1 out of every 5 profit contracts, a profit in excess of 20 percent was realized. If this There were 78 contracts which fell in the 10 to 20 percent profit range. number be added to those on which profits in excess of 20 percent were realized, it would be noted that profits in excess of 10 percent were realized on 31 percent of all the contracts. With an average of only 4.59 percent profit on all contracts, it naturally follows that there were a considerable number on which losses were sustained. The following list of contracts show in the questionnaire submitted by the contractors that they made 50 percent or more on the cost. They are correctly printed in the preliminary report, with the following exception: On page 240 of the preliminary report, the amount of percent is not printed in italics on contract No. 63629 of the Bell Aircraft Corporation, Buffalo, Ñ. Y. |