Mr. SHAUGHNESSY. And your net income?

Mr. WARD. $75,763.81.

The CHAIRMAN. $30,000 that year to do business?

Mr. WARD. It cost me $28,533.04.

The CHAIRMAN. How many more clerks did you have in 1939 than you had in 1938?

Mr. WARD. About the same, I should say.

The CHAIRMAN. Did you increase the salaries?

Mr. WARD. Yes, sir.

The CHAIRMAN. What percent did you increase the salaries?
Mr. WARD. 1941 we are talking about now, against '37?

The CHAIRMAN. Against '39, against '40; talking about 1941 against 1940.

Mr. WARD. Salaries in '39 were $7,268.79.

The CHAIRMAN. What were they in 1940?

Mr. WARD. 1940, $10,415.

The CHAIRMAN. You went up about $3,000.. How much in 1941? Mr. WARD. $17,536.91.

The CHAIRMAN. All right.

Mr. SHAUGHNESSY. For salaries alone?

Mr. WARD. Yes, sir.

Mr. SHAUGHNESSY. How much did you charge off for sales expenses during those years?

Mr. WARD. We haven't got that. It says "See letter attached" and we haven't got it for '39.

Mr. SHAUGHNESSY. Do you have it for 1940?.

Mr. WARD. Sales expense, $3,577.19.

Mr. SHAUGHNESSY. For 1941 how much did you charge off to sales expense?

Mr. WARD. $5,600.80.

Mr. SHAUGHNESSY. Do you have it listed there by the month?
Mr. WARD. No, sir.

Mr. SHAUGHNESSY. I have a tabulation taken from the books and records of the witness and made by the accountants on the staff showing that in the month of December 1941 there was an item under "Sales expense" of $1,338.87. Perhaps you can explain why your sales expenses were so much greater during the month of December 1941 than they were in November of the same year and January of '42, when they were roughly between five and six hundred dollars.

Mr. WARD. I haven't gotten that broken down.

(Photostat of income tax returns were received in evidence, marked "Exhibit No. 536," and are filed with the committee.)

Mr. SHAUGHNESSY. Isn't it a fact that during the month of December you arranged for large entertainment?

Mr. WARD. It didn't cost me any such money as that, I don't think. Mr. SHAUGHNESSY. You charged half of the party to sales expense, didn't you?

Mr. WARD. Yes, sir.

Mr. SHAUGHNESSY. Is there any connection between the invitation list as shown in this document taken from your files and a statement that you make in a letter of April 8, 1941, addressed to Ker ath Manufacturing Co., wherein you stated, "We occupy a different relationship to the Coast Guard than to any other department and

when I tell you that I can do something in the Coast Guard, I mean just that and no more or less, and you should treat the Coast Guard differently from any other department because as I say, we are closer to them than to any other department."

Mr. WARD. Is that the question?

Mr. SHAUGHNESSY. That is the question. Is there any relationship between the guest list as shown in your yuletide party and tickets purchased to these heavyweight championship prize fights?

Mr. WARD. None whatever.

Mr. SHAUGHNESSY. What do you mean by "we occupy a different relationship to the Coast Guard?"

Mr. WARD. They are a small, compact organization, and there aren't so many people to see in connection with negotiations of

contracts.

Mr. SHAUGHNESSY. I show you a photostatic copy of a letter taken from your files, and ask you to identify it.

Mr. WARD. Yes, sir.

Mr. SHAUGHNESSY. It is dated April 8, 1941, addressed to the Kermath Manufacturing Co., 5890 Commonwealth Avenue, Detroit, Mich., attention Mr. H. P. Hellmuth.

DEAR HENRY: I love problems, especially on Monday morning.

The answer

to the first question is "Yes, probably," but you can obtain an extension of time if other priorities make it impossible for you to make delivery.

As to the second problem anyone would be foolish to bid under these conditions. You probably have reference in your letter of April 3 to my somewhat caustic memorandum about the Coast Guard situation. We occupy a different relationship to the Coast Guard than to any other department and, when I tell you I can do something in the Coast Guard, I mean just that and nothing more or less, and you should treat the Coast Guard differently from any other department because as I say, we are closer to them than to any other department. When you receive this I hope you will feel better, as I do, because we now understand one another.

Cordially,

HORACE WARD.

I would still like an explanation of what you mean when you say that you can "do something in the Coast Guard."

Mr. WARD. I mean in a quicker time and more easily.

Mr. SHAUGHNESSY. I offer the letter in evidence.

(The letter was received in evidence and marked "Exhibit No. 537.")

Mr. SHAUGHNESSY. Mr. Chairman, I have documents here that I don't want to introduce into the record.

The CHAIRMAN. All right. I will take them.

Have you finished?

Mr. SHAUGHNESSY. I would like to take up something else.

Mr. BATES. What does he mean by "quicker and more easily"? The CHAIRMAN. You do a great deal of entertainment among Coast Guard officers and Naval officers, do you not?

Mr. WARD. I wouldn't say a great deal, Mr. Chairman.

The CHAIRMAN. Well, you would at least try to be sociable with some of them?

Mr. WARD. Do what, sir?

The CHAIRMAN. You at least try to be sociable with some of them, do you not?

Mr. WARD. Yes, sir.

The CHAIRMAN. And all the parties that you give you charge against your expense account, carrying on your business?

Mr. WARD. That is correct.

The CHAIRMAN. Then, you consider the giving lunches to Coast Guard officers and Naval officers and presents at Christmas as a part of your expenses?

Mr. WARD. Yes, sir.

The CHAIRMAN. And in that way it keeps you in close touch with the Naval Department or the Coast Guard or the Army Department? Mr. WARD. No, sir; that is not so.

The CHAIRMAN. Then, what is the motive of giving those?

Mr. WARD. Because I am socially inclined.

The CHAIRMAN. You are socially inclined?

Mr. WARD. Yes, sir.

The CHAIRMAN. You are socially inclined only among people you are doing business with. I don't find where you are socially inclined with anybody up here in Congress.

Mr. WARD. I don't know anybody in Congress.

The CHAIRMAN. Then, you are only socially inclined among these Coast Guard officers and naval officers with whom you have contracts. Mr. WARD. Because I have no opportunity of making any other friends, Mr. Chairman.

The CHAIRMAN. You have given quite a number of dinners and parties to various officers, and you charged that as a part of your

expense.

Mr. WARD. Which is, Mr. Chairman, a recognized business practice in a sales organization.

The CHAIRMAN. Then, when you gave a dinner or a party to this or that officer, the motive was not friendship but business?

Mr. WARD. No, sir; that didn't enter my mind.

The CHAIRMAN. Well, that is what you said.

Mr. WARD. I'm sorry, sir. I wish to be corrected.
The CHAIRMAN. What was the motive?

ship.

You said it was salesman

Mr. WARD. I said it was a recognized practice among sales organizations to do entertaining among the people with whom they do

business.

The CHAIRMAN. And the motive that prompts it is to create and engender a good feeling between the people with whom you do business and yourself? That is your motive.

Mr. WARD. Possibly.

The CHAIRMAN. Don't you know that you wouldn't have entertained these various officers in here unless you consider it beneficial to your business to have done so?

Mr. WARD. No, sir; I am honored by their friendship,

The CHAIRMAN. Is that it?

Mr. WARD. Yes, sir. Now, there are some high

The CHAIRMAN (interposing). I am not going to introduce into the record all these expense accounts that you have charged for your various lunches, but I am going to send all this down to the Secretary's office, and I want the Secretary to read all of these expense accounts, and these parties that you have been giving for officers who came in contact with you or you came in contact with them.

All right, go ahead.

Mr. SHAUGHNESSY. Are you in the habit of soliciting clients?
Mr. WARD. Not in late years.

Mr. SHAUGHNESSY. But you formerly did?

Mr. WARD. Yes.

Mr. SHAUGHNESSY. I show you copies of communications taken from your files-a letter dated June 11, 1937, to John Reiner, 29 Howard Street, New York, N. Y., attention Mr. John Reiner, signed by you, and ask if you didn't cause the same to be sent to John Reiner & Co.?

Mr. WARD. Yes, sir; I wouldn't call this solicitation. That is a suggestion of my good friend, Mr. Cooper.

Mr. SHAUGHNESSY. Well, is he connected with the John Reiner Co.?

Mr. WARD. No, sir; he is a customer of theirs.

Mr. SHAUGHNESSY. Nevertheless, you contacted John Reiner & Co. and proffered your services, whether at his suggestion or at the suggestion of anyone else.

I would like to offer that in evidence, Mr. Chairman.

(The letter was received in evidence, marked "Exhibit No. 538," and follows:)

Mr. SHAUGHNESSY. It is a copy of a letter dated June 11, 1937, to John Reiner & Co., Inc., 29 Howard Street, New York, N.Y., attention: Mr. John Reiner.

DEAR MR. REINER: Mr. Charles G. Cooper, of Cooper-Bessemer Corporation, suggested that I get in touch with you with a view to making arrangements to represent your house before the Government. I am naturally not acquainted with your set-up for handling this type of business, and am not familiar with your product except such information as is contained in the pamphlet which Mr. Cooper kindly gave me showing the Diesel marine auxiliary units.

If you have no arrangement for direct representation before the Government, I believe that the market among the various departments of the Government can be developed, as your line would fit in nicely with other products which I represent which are not competitive with you.

If you are interested in this proposition, I shall be glad to go fully into the matter with you, and shall give you such references as to my ability and integrity which you may require.

The basis of compensation would be commission on business secured.

Very truly yours,

HORACE WARD.

I show you a communication dated April 6, 1939, addressed to the Fulton Lawnmower Co., and signed by you, and ask if you didn't cause the same to be sent to the Fulton Lawnmower Co.

Mr. WARD. That is correct.

Mr. SHAUGHNESSY. It is a letter dated April 6, 1939, to the Fulton Lawnmower Co., 2436 North Grand Boulevard, St. Louis, Mo.

GENTLEMEN: It has been suggested to me that the extent of your business with the Federal Government justifies employment of a special representative before the Government, and I offer my services and those of my organization for this purpose.

It is generally recognized that Government contracts are in a specialized field and that this work should be under the management of a specialist.

My experience over a period of more than 25 years fully justifies this statement. Compensation can be arranged for either upon a fee or commission basis or

both.

Should you be interested, I shall be glad of the opportunity to go into the subject with you, such discussion entailing no obligation on your part.

I am addressing you thus under the impression that you have no representative before the Government. If you are so represented, you should ignore this letter as it is contrary to my ethics to solicit accounts already represented.

Very truly yours,

HORACE WARD.

(The letter was received in evidence and marked "Exhibit No. 539.")

Mr. SHAUGHNESSY. What value do you place upon your time, Mr. Ward, in this business?

Mr. WARD. I don't know that I place any direct value upon it. Mr. SHAUGHNESSY. Your personal time.

Mr. WARD. I couldn't say that.

Mr. SHAUGHNESSY. Just to represent one company among, we'll say, 20 or 25 companies?

Mr. WARD. It depends upon what their product is.

Mr. SHAUGHNESSY. I show you a letter dated October 14, 1940, addressed to the Reeves Steel & Manufacturing Co., Dover, Ohio, signed by you, and ask if you didn't cause the same to be sent. Mr. WARD. Yes sir; that is correct.

Mr. SHAUGHNESSY. It is a letter dated October 14, 1940, to Reeves Steel & Manufacturing Co., Dover, Ohio, attention Mr. A. J. Krantz.

DEAR MR. KRANTZ: I have your note of the 10th instant advising me of reduction in commission, and I assume that this will apply to future bids and not to those already opened or already awarded.

Under ordinary circumstances the rates which you mention would not make the business profitable to me because of large overhead with which I am burdened and the rate is much less than I receive from any other source; but in view of the prospective expansion in the program, the commission developed by the new rate will probably have as much money value or more money value than the previous rate.

I hope you realize that I spend more time on the Reeves account than on any other individual principal whom I represent, and I am striving always to further the interests of Reeves, which are, of course, my interests.

It should be remembered also that my traveling expenses are heavy. For example, the cost of the trip just made to San Antonio was in excess of $200 as against a commission of approximately $400. During the last month I personally made two trips on Reeves' behalf on which the expense was about $200. My personal time is calculated on $100 per day. I am giving you these facts not in the nature of a complaint, but in order that you may see my side of the proposition as well as your side. You may be assured of my future cooperation as you have been assured of my cooperation in the past. With kindest personal regards, I am

Cordially,

HORACE Ward.

(The letter was received in evidence and marked "Exhibit No. 540.")

Mr. SHAUGHNESSY. Now, Mr. Chairman, I would like to offer in evidence

The CHAIRMAN (interposing). Read the letter of May 18, 1938, to the Acme Electric Heating Co., wherein the witness stated that commissions on small orders of hot plates should be 10 percent rather than the regular 5 percent, and the company replied if he could get the Government to take care of the 5 percent, why it is all right for them to give him 10 percent. It is a letter dated May 18, 1938, to the Acme Electric Heating Co.

Mr. SHAUGHNESSY. Yes; this is merely a copy of an interoffice communication.