I wish to make it clear that under no circumstances do I think that there should be entered into any agreement to retain any lobbyist with respect to proposed legislation.

In other words, under no circumstances will I vote for your Corporation to spend a cent in the manner of fees to some presumably high-powered lobbyist for any legislative purposes, either directly or indirectly through any association or otherwise. I think that such propositions generally are nothing but shake downs by certain New Deal hangers-on who seem to be very expert at that business.

I have always taken this stand in the past and I shall clearly take this stand in the future.

I am only keeping one copy of this letter and you may destroy your copy or do with it as you see fit, but this is in order that you may have advance information as to how I feel in the matter.

(The letter was received in evidence and marked "Exhibit No. 177.")

The CHAIRMAN. Who is that from?

Mr. TOLAND. That was from the president, Mr. Breech, to Mr. Bendix. I would like them both to be printed.

The CHAIRMAN. What company was that?

Mr. TOLAND. General Motors. He is now president of Bendix. Have any of you, after seeing those exhibits, any recollection as to who the undisclosed individual is?

Major FLEET. No; those memoranda didn't come to me. I didn't get copies of them.

Mr. BENDIX. That is where our interest stopped in the matter. The CHAIRMAN. After the gentleman from General Motors wrote the letter and you got the answer, that was the end of it. Let me ask you this hypothetical question-any one of you. If a profits limitation bill was on the books today and you gentlemen felt that it was not in the interest of your companies, from what happened here this morning, do you think it would be necessary to enlist the aid of anyone except the labor organizations to get repeal?

Mr. BRADLEY. I would be interested in the gentleman's answer. Major FLEET. I might say, Mr. Chairman, that while I am not a stockholder of any aviation company now, any domestic aviation manufacturing company, my interest in this legislation still exists, good and strong, and I feel, gentlemen, that if you conduct a hearing of this kind and I should be so timid, so fearful, so guarding of my own self, say, as to fail to bring this to your attention, even at the possible expense of adverse publicity, I would be failing to bring to my country's attention something that should be done; because how in the world can aviation be developed in this country under a law enacted in 1926?

And I want to tell you gentlemen that I pioneered the flying boat in this country, and for the first 48 that I built for my Government, I paid very dearly for the privilege, but by furnishing 16 to others, we managed to keep alive.

The CHAIRMAN. But Mr. Fleet, we have made very good progress in the advancement of aviation under the procurement bill. I don't remember all of the details of the procurement bill, but I remember the former chairman of this committee appointed myself and others of the Military Affairs Committee, and we wrote the McSwain bill. Now following that, we wrote the limitation of profits, and of course that has been suspended, and the majority of this committee no longer want any limitation on profits.

Mr. BRADLEY. Mr. Chairman, I object to that. I don't think that is a true presentation.

The CHAIRMAN. Every man had a speech to make this morning: Mr. BRADLEY. Mr. Chairman, I don't think you are being fair to the members of this committee by continually repeating that phrase which I don't agree with at all, and I hope you present profit-limitation legislation tomorrow morning.

The CHAIRMAN. The gentleman from Pennsylvania had an opportunity this morning, and he went with the Virgins with oil in his lamp. Mr. BRADLEY. The gentleman from Pennsylvania refused to allow himself to be maneuvered into a position where, through a subterfuge, other legislation was going to be put out from this committee. The CHAIRMAN. Are there any further questions?

Mr. TOLAND. Yes; Mr. Chairman, I have some more questions and documents.

I would like to offer in evidence a memorandum to Mr. Bendix dated January 4, 1939, from Mr. Cassels. I won't bother to read it. (The memorandum was received in evidence, marked "Exhibit No. 178" and is printed in the appendix of this volume.)

Mr. TOLAND. I also have a letter from Mr. Nicholls to Mr. Bendix, and a memorandum from Roy T. Hurley, both regarding the repeal of the Vinson-Trammell Act.

(The letter was received in evidence, marked "Exhibit No. 179" and is printed in the appendix of this volume.)

(The memorandum was received in evidence, marked "Exhibit No. 180" and is printed in the appendix of this volume.)

Mr. TOLAND. Now, Mr. Chairman, I have a great many documents taken from the files of Mr. Fleet. I would like to say at this time that Mr. Fountain, whom I am going to question next, went with several members of the staff to the Consolidated Aircraft. The books and records and files were made available to them. The fullest cooperation was extended to all of these members of the staff while they were there, and I don't want to take the time of going through these documents.

The CHAIRMAN. What is the objective you are seeking to prove by those documents?

Mr. TOLAND. They show a continued activity on the part of Major Fleet, different from the previous episode, but a continued activity on his part in connection with the repeal and suspension of the VinsonTrammell Act.

Mr. MAAS. There is nothing illegal about that.

Mr. TOLAND. Not a bit.

The CHAIRMAN. The major admits his activity and the Congress has suspended it, the Vinson-Trammell Act. It was suspended on the theory pointed out by the major, that it was probably forcing people to take Army contracts when they might be taking Navy contracts. The Congress felt the act ought to be suspended, so I hardly see the pertinence of all of those documents.

Mr. MAAS. I would like to have it show in the record that we suspended the Act on the advice and recommendation of the Navy Department.

The CHAIRMAN. That is right.

70533-42-vol. 2- -7

Mr. TOLAND. I think the Major will admit that up until 1941 he was active in that connection, which he had a perfectly lawful, legal right to do.

Mr. BATES. He made that statement this afternoon.

Mr. Chairman, just a question. In that file, Mr. Toland, do you find anything that in any way incriminates Mr. Fleet?

Mr. TOLAND. Not the slightest.

Mr. BATES. Then why read it?

Major FLEET. Thank you, sir. I hoped someone would make such a statement, Mr. Chairman.

The CHAIRMAN. That is all right, Major.

Mr. TOLAND. Mr. Fountain, will you take the stand and be sworn? The CHAIRMAN. The testimony you shall give this committee shall be the truth, the whole truth, and nothing but the truth, so help you God.

Mr. FOUNTAIN. Yes, sir.

TESTIMONY OF CHARLES RISDEN FOUNTAIN, MEMBER OF STAFF OF HOUSE NAVAL AFFAIRS INVESTIGATING COMMITTEE

Mr. TOLAND. What is your full name?

Mr. FOUNTAIN. Charles Risden Fountain.

Mr. TOLAND. You are an employee of the Federal Trade Commission?

Mr. FOUNTAIN. I am.

Mr. TOLAND. You have been loaned to this committee since when? Mr. FOUNTAIN. Since the first part of May 1941.

Mr. TOLAND. At my direction, and the direction of the chairman. of the committee, you went to the plant of the Consolidated Aircraft at San Diego?

Mr. FOUNTAIN. I did.

Mr. TOLAND. Together with other members of the staff?

Mr. FOUNTAIN. Yes, sir.

Mr. TOLAND. You made an extensive and thorough investigation of the books and records of the company?

Mr. FOUNTAIN. I did, sir.

Mr. TOLAND. You have made extensive reports of the results of your efforts?

Mr. FOUNTAIN. I have, sir.

Mr. TOLAND. Will you state for the record briefly, file your report in the record as an exhibit, what you found with regard to contracts and profits, without giving the prices or the amounts of the contracts? Just briefly state what you found.

Mr. FOUNTAIN. We went into all the contracts from 1939 up to September 1941. We investigated all costs; that is, we spot-checked material costs to see whether the materials charged to Navy contracts were also charged to other contracts, either Army, foreign, or commercial. We checked the method of labor distribution and the method of overtime distribution. We made very extensive checks into the overhead.

Mr. TOLAND. Tell us quickly and briefly the results of your investigation and analysis of the books and records, with regard to what the company claimed was the profit they realized on the individual contracts.

Mr. FOUNTAIN. We felt that the profits as shown by the company records were very low, that the overhead had been overstated and items included as overhead which should not have been there as a part of Government cost.

Mr. TOLAND. That is all set forth fully in your report?

Mr. FOUNTAIN. That is right.

Mr. TOLAND. Have you also analyzed the questionnaires of the company that have been submitted to the committee?

Mr. FOUNTAIN. I have.

Mr. TOLAND. I show you these analyses of the questionnaires and ask you if you made them?

Mr. FOUNTAIN. I did, sir.

Mr. TOLAND. Did you make comparative analysis of the questionnaires with the records you have of the investigation you made of the books and records of the company?

Mr. FOUNTAIN. Yes, sir, but the figures here represent the records of the company and not as revised by the committee's staff.

Mr. TOLAND. What does the result of your revision show as against the figures of Major Fleet's company?

Mr. FOUNTAIN. On the profit on one contract, No. 70496, which, incidentally, I don't think has been completed at this time, the company reports on the questionnaire a profit of 6 percent, whereas a statement made by Reginald S. Fleet, the budget director for Consolidated, on September 30 as to total completion, projecting the cost up to total completion showed an estimated profit of 9.3 percent. Mr. TOLAND. Did you find any contracts

Major FLEET (interposing). May I comment on that?

Mr. TOLAND. May I continue?

Major FLEET. Please let me comment before I forget all these things.

Mr. TOLAND. Did you find anywhere that there was a loss?

Mr. FOUNTAIN. Not in the recent contracts. We did find some contracts that showed a loss.

Mr. TOLAND. You did?
Mr. FOUNTAIN. Yes, sir.

Mr. TOLAND. How much were the losses? How high did they go? Mr. FOUNTAIN. One loss, the one the Major referred to, was on one of the flying boats, an experimental boat, on which the company's costs show $1,200,000 and for which they received only six-hundred-some-odd-thousand dollars.

Mr. MAAS. Let Mr. Fleet go ahead before he forgets, because his memory is not too good. [Laughter.]

Mr. TOLAND. And not just Major Fleet's.

The CHAIRMAN. He is an "expert" witness here.

Major FLEET. This contract, as your auditor stated, has not been completed yet. Now the profit which the company estimated it would make, we state was 6 percent, whereas Mr. Reginald Fleet, who is the budget director, estimates we would make 9 percent, or something. Now, Mr. Reginald Fleet is a grand fellow but never saw the airplane business until about a year ago, and I finally got him down there to help me out; he is our budget director as I couldn't carry all the load. We have built up to 40,600 men from 1,146 in 2 years, which is the biggest build-up that anybody in America has had to do.

The CHAIRMAN. How much?

Major FLEET. We have been building up in San Diego alone to 40,600 men, from 1,146, in 2 years, to say nothing of having to design a plant, the second largest plant in the country, at Fort Worth, Tex., and with a duplicate at Tulsa, Okla., for Douglas. We made a deal with Henry Ford for several hundred millions, and we have had $2,300,000,000 of business. I had to, gentlemen, take greenhorns. This contract is not finished yet.

Our books are always audited, every single year, by Haskins and Sells, the third largest certified public accounting firm in the world. All our accounts are sworn to, and I swore to them when I gave them here.

(The tabulation entitled "Tabulation of Consolidated-Vultee Transactions, December 19, 1941," was received in evidence, marked "Exhibit No. 181" and is printed in the appendix of this volume.) The CHAIRMAN. Of course, you are not with the company right

now.

Major FLEET. Yes, I am with the company but am not a stockholder.

The CHAIRMAN. Have there been any renegotiations on the part of the company?

Major FLEET. No, sir.

The CHAIRMAN. Áre there any contracts in the process of being renegotiated?

Major FLEET. I am not sure about that, Mr. Chairman. As far as I am concerned, I finished up the calendar year of 1941 with the company as its general manager, as its president, as chairman of its board. The prices that we had for the articles that we had under contract amounted at that time, say, to pretty close to $2,000,000,000.

The mortal doesn't live who can tell how much the aircraft are going to cost. Every dollar's worth of business that Consolidated Aircraft Corporation ever got from the United States Navy we bid for. We not only bid for it, but we were determined by the United States Navy to have the best design and to be the cheapest in price. And yet, we show exactly what our profit limitations were and we have never had to return, under our audits, one dollar to the United States Navy under all those contracts, under the Vinson-Trammell Act, which I felt was pretty good for a company doing such an enormous business as we have.

Mr. TOLAND. You personally did pretty well over a period of 18 years with this company.

Major FLEET. This company represents certain things. My average earnings, including the return on stock interest, amount to $122,000 a year. Mr. Girdler, who is now serving as chairman of the board in my place, draws $175,000 a year from the Republic Steel Corporation and nothing from Consolidated.

Four or five men are now taking my place. If you were to add the salaries of those gentlemen together, you would find that they figure out at least twice, maybe three times my average earnings from this company of $122,000, including interest on my money and my investment.

I face you gentlemen with pride, because I made a go of a company through 18 years and 7 months, throughout a period in the history of our country where I saw over 1,000 companies in this line of business