side of the company's business. You had been working for 2 years on the side on that. Mr. OLCOTT. I wish you were right, because that is exactly my opinion. I think he was entitled to it, but the attorneys said "No," and rather than be in a questionable position, Mr. Sherlock said, "No, sir; here it is back. I will wash my hands of it, and we will call the slate clean." Mr. BATES. Who are your attorneys, Mr. Olcott? Mr. OLCOTT. Cromelin, Townsend, Brooke & Kirkland. Mr. BATES. One firm? Mr. OLCOTT. Yes, sir; one firm. Mr. BATES. They do all your legal work? Mr. OLCOTT. Yes, sir. We never had an attorney up until a couple of months ago when a question of a contract came up and we went around and got this firm to act as our attorney and work on this contract. Mr. Townsend looked over our books and asked some questions, and I told him about this thing, and he said, "Oh, oh." The CHAIRMAN. You don't employ your attorneys on the same basis that you do work for the Government, though, do you? Mr. OLCOTT. No; not on a commission basis. I think it is a contingent fee, though. The CHAIRMAN. I think they are going to earn something before they get through with this case. Mr. HINKEL. I show you a letter, Mr. Olcott, signed by Mr. Sherlock, dated July 11, 1942, and ask you to identify that letter as having been received by you. Mr. OLCOTT. Yes, sir. Mr. HINKEL. The letter is dated July 11, 1942, Mr. Chairman. I offer it in evidence. Dated at Mount Lebanon, Pa. The CHAIRMAN. Wait 1 minute. What is this? Mr. HINKEL. It is a letter in the handwriting of Mr. Sherlock addressed to Mr. Olcott, dated July 11, 1942, with respect to these payments. It says: DEAR CHAUNCE: A short time ago you informed me that your attorneys had advised you that an officer of a company cannot properly receive money from one of the company's representatives even for special services actually performed. Since I did not know this previous to your telling me and in order to keep our relations both personal and official on a proper ethical and legal basis, I wanted to pay you back immediately all moneys you had given me. You stated that you felt I had earned this money honestly and that you did not want it returned and suggested that I wait until your attorneys had instructed you as to the proper course. In accordance with our phone conversation I am returning herewith all moneys you have given me for assisting you in your metallurgical problems. My check for $13,233.03 is enclosed. Sincerely, D. V. SHERLOCK. There is a photostatic reproduction of the check at the bottom. I offer it in evidence. (The letter was received in evidence and marked "Exhibit No. 523.") The CHAIRMAN. Anything else, Mr. Hinkel? Mr. HINKEL. Just one question. Mr. MAGNUSON. Let me ask one question. This came after your phone call, did it not? Mr. OLCOTT. Yes, I called him up and said, "The lawyers say you had better send that to me as soon as you can." Mr. MAGNUSON. He was the fellow on the nominal salary and so short of money, but he sent you right back cash. Mr. OLCOTT. He wasn't short of money; this fellow wasn't. Mr. MAGNUSON. The other fellow was short? Mr. OLCOTT. There was no real loan connected with this. Mr. HINKEL. Why did you write "loan" on the checks, then, and the check stubs? Mr. OLCOTT. Because when I wrote "loan" on the others The CHAIRMAN. You just couldn't stop writing it on all of them. Mr. OLCOTT. No, sir. I just went back and after I called him up he said, "I will send you the money right away." I said, "No; wait until we see what our lawyers tell us to do," then I put "loan" on there because it wasn't deductible. It wasn't engineering expense if he was going to send it back, and what else could it be but a loan? We gave him the money and he paid it back. Mr. BATES. Mr. Olcott, when Admiral Blandy was before this committee a few weeks ago discussing the armament program, and the advances that had been made in the science of armor plate and all that sort of thing, he seemed to lay great stress on the fine work of his Department. Mr. OLCOTT. They have done a wonderful job. Mr. BATES. Yes, in developing the processes, and I am just wondering, after your testimony here today, whether he stole your thunder. Mr. OLCOTT. No, sir; he didn't. Mr. BATES. Or whether you are the fellow who is responsible for these advances in the science of strong armor plate. Mr. OLCOTT. From the Government standpoint, the Bureau of Ordnance and Admiral Blandy's ordnance experts are responsible. In the commercial foundry end, Mr. Sherlock and I were largely responsible. The two work together. Mr. BATES. But where is the distinction here? You seem to lay the stress on the fact that you are the expert, together with this fellow representing the Union Steel Casting Division; as the result of your combined effort, you and this other fellow, Sherwood or whatever his name was, you have developed this formula which is making a better casting, and as a result of that you should have it patented but you just didn't do it, out of patriotic impulses, I suppose. Mr. OLCOTT. I don't say we should have. We shouldn't have under the circumstances. Mr. BATES. Who actually is responsible for the development? Is it you and this Sherwood; is it Admiral Blandy's Bureau of Ordnance? Mr. OLCOTT. Both. Mr. BATES. They couldn't have accomplished it, then, without your help and that of this other fellow; is that the thought you want to leave? Mr. OLCOTT. They probably could have but it would have taken them longer. Mr. BATES. You hastened it? Mr. OLCOTT. We were the first commercial concern in the United States to Mr. HINKEL (interposing). You say "we." You mean the Union Steel Casting? Mr. OLCOTT. Union Steel Casting was the first commerial foundry. Mr. BATES. You may have worked the process out at the suggestion of somebody in the Bureau of Ordnance. Did they develop the formula or did you develop it? Mr. OLCOTT. Both. There are a dozen formulas; two dozen formulas. We have tried all kinds of experiments. The Navy tried all kinds of experiments. We compared notes. We had conference after conference. They would make suggestions; we would make suggestions. We would work together on it. Mr. BATES. Then you would go back into the foundry- Mr. BATES. Were you there when that mix was made? Did you become part of it? Mr. OLCOTT. In many cases I was there; yes, sir. Mr. BATES. I see. Mr. OLCOTT. In a big development like that, no one man is responsible. You are developing something new that has never been done before on this ordnance stuff, and it takes the combined brains of a dozen of the best men that you can find. Mr. BATES. I was under the impression that we had about the best brains in the country in the Ordnance Department. Mr. OLCOTT. We have. Mr. BATES. I was wondering whether or not they were stealing your thunder. Mr. OLCOTT. No, sir; they are not. The best brains in the world are there. Mr. MAGNUSON. As a matter of fact, every steel company and every foundry in the United States is capable of trying to work out these same problems. Mr. OLCOTT. Yes; they are doing it now. Mr. BATES. Then, as a matter of fact, your suggestion of patenting that process was not altogether true. Actually, it did not belong to you, in fact. Mr. OLCOTT. At the very beginning when we first started, when Union first started-and as far as I know they were the first foundry to do any experimental work-there were some phases Mr. BATES (interposing). You don't mean that they are the first foundry to do experimental work on armor plate? Mr. OLCOTT. This isn't plate; this is cast armor. Armor plate has been made for generations by the three armor people, but when they tried to adapt that practice to casting practice in the foundry, as far as I know Union was the first commercial foundry to start the experimental work. Mr. BATES. Of casting plates? Mr. OLCOTT. Yes. Mr. BATES. I see. Mr. OLCOTT. In that particular period there were certain things. about the metallurgy of armor, particularly the heat treatment and the ability to get what they call fiber, that weren't generally known by people, had never been patented, had always been more or less secret, and that we believed, and I believe today, were patentable, but there was no thought on our part of trying to do it because we knew that the minute we or somebody else got a type of armor that was satisfactory, the Army and Navy had to have it right away and everybody in the country had to get in and make as much as they could. Mr. BATES. In other words, you and Sherlock take a large part of the credit? Mr. OLCOTT. It is patentable but we had no thought of getting a patent on it. Mr. HINKEL. One question to Mr. Shirley. With regard to the contingent fees that you received for these contracts, you testified that one reason for it was that some of the smaller companies could not maintain Washington offices; is that right? Mr. SHIRLEY. Yes, sir. At the time I started this, I don't know of anyone that got volume enough to maintain an office. Mr. HINKEL. I just wanted to ask you why it would not be possible to bill these people for the services rendered instead of putting it on a contingent basis of contracts received, because after all, you do render a service even though you don't actually receive the contracts sometimes; is that not right? Mr. SHIRLEY. Absolutely. Mr. HINKEL. Why couldn't you put it on the basis of billing them for services rendered in each instance? Mr. SHIRLEY. For the simple reason that machine tools are never sold that way. They are always sold on a commission. Mr. HINKEL. They are always sold on a commission basis? Mr. SHIRLEY. Every man I have ever heard of sells them on a commission basis. Mr. HINKEL. You didn't want to depart from the usual custom, did you? Mr. SHIRLEY. I didn't have to. The CHAIRMAN. Any further questions. Mr. HINKEL. I would like to introduce this, Mr. Vinson. This is a report from the Securities and Exchange Commission of the salaries rather the aggregate remuneration within a fiscal year for the leading officers of some of the big producing companies of the country. I would like just to file it and read just a few of them. (The report referred to was received in evidence, marked "Exhibit No. 524," and filed with the committee.) Mr. HINKEL. This tabulation shows that in the Chrysler Corporation, the president, Mr. Keller, as president-director received $100,950 for his services to the war program last year. The CHAIRMAN. And the colonel got how much? Mr. HINKEL. Two hundred and eight thousand dollars for the 6 months' period just ended. B. E. Hutchinson, chairman of the finance committee and vice president of the Chrysler Corporation, got $90,900. Mr. F. M. Zeder, vice president and director, got $85,450. Well, we will just skip around a little bit. Philco Corporation: James T. Buckley, president, received $49,499.98. The CHAIRMAN. And Mr. Olcott got $208,000 for 6 months' work. Mr. HINKEL. I just offer this, Mr. Vinson, to show the comparison. The CHAIRMAN. As far as I know, that is all right. Mr. SHIRLEY. May I ask, please, what their sales department cost in the selling of this stuff? Mr. HINKEL. I have no idea. That is just the aggregate remuneration received for the labors of these men. The CHAIRMAN. We are merely comparing your $200,000 with these people and the work they are doing. Mr. SHIRLEY. You are comparing our efforts as executives, sir, but you didn't compare the sales costs of these corporations. Mr. HINKEL. That is all. The CHAIRMAN. Let me ask you this question. Here are three examples where you have made some payments to executives. That is all you made, is it? Mr. OLCOTT. That is all. The CHAIRMAN. Anyone else Mr. OLCOTT (interposing). No, sir. The CHAIRMAN. Wait one minute. Anyone else outside of the Government service or inside the Government service that you made any contributions to? Mr. OLCOTT. Outside of the Government service; yes, sir. The CHAIRMAN. Besides these three? Mr. OLCOTT. Yes, sir. The CHAIRMAN. All right, what are those cases? Mr. OLCOTT. We have an engineer in our office that we pay regularly for engineering services. The CHAIRMAN. Oh, well, he is an employee. I am talking about anybody in the Government service. Mr. OLCOTT. No, sir. The CHAIRMAN. All right. Mr. BATES. Have you made a gratuity of any kind to anybody in the Government service? Mr. OLCOTT. No, sir. Mr. BATES. Or outside the Government service that assisted you in procuring-I am not talking about your own organization, I am talking about outside your own organization. Have you given a gratuity to anyone in the Government service or outside the Government service? Mr. OLCOTT. No sir. Mr. BATES. A gratuity of any kind? Mr. OLCOTT. No gratuities at all. The CHAIRMAN. Ör any payments, say? Mr. OLCOTT. Yes, sir. These people we have in these various locations around the Government that do this abstract work for us. The CHAIRMAN. You have somewhat of a chain-store set-up, haven't you? You have agents all over the United States. Mr. OLCOTT. Yes, sir; we have to give these companies service. The CHAIRMAN. You have agents in every procurement section, from the records here. Mr. OLCOTT. Yes, sir. The CHAIRMAN. You pay them for what business they get? Mr. OLCOTT. No, sir; we pay them simply for doing routine work. The CHAIRMAN. Routine work? Mr. OLCOTT. Yes, sir; routine work for us. The CHAIRMAN. And you pay them for getting certain information and sending it to you? Mr. OLCOTT. Yes, sir; for attending openings of bids, primarily, and sending us the abstract of the bids on public openings. Mr. BATES. We had one case of a stenographer here that got $45,000 a year. What do you pay your stenographers? |