Ridge Corporation owns 13.7 percent and the Chicago Corporation owns 2.3 percent and other stockholders own 5 percent. Mr. MAAS. Are you or the Harrimans interested in any of these other minority groups? Mr. RIPLEY. Not in any way whatever. Mr. MAAS. Do you have any interest in the Blue Ridge or Chicago corporations? Mr. RIPLEY. None whatever, nor have the Harrimans. Mr. HESS. How did they come into the picture? Did they own mortgages? Mr. RIPLEY. Blue Ridge and Chicago? I will tell you exactly how they came in. Mr. H. B. Baker, who is a very good friend of mine, is president of Blue Ridge Corporation, and when he saw and heard that I was working on this transaction, after the underwriting that Harriman & Ripley had made, Baker asked if we would care to have him take an interest in the matter. I said that I would be delighted to have him take an interest in the matter if he would put some added capital into the Cramp Co. itself, the new Cramp, because at that time I was having great difficulty getting performance and payment bonds. Among other things, the Navy had required me to get $5,000,000 of performance and payment bonds from surety companies and at that time I needed some more capital in the new company, so I said to Baker. "If you will put some capital into the new company I will be glad to have you do it." It ended up by Baker being unwilling to take unregistered stock for all of his commitments, so Baker, together with the Chicago corporation, bought a total of 35,000 shares of Cramp stock, of which 25.000 shares came from Harriman, Ripley, and 10,000 shares added stock issued by the Cramp Co. itself, which gave me another increment of capital which I simply had to have at that time, and at the same time I had to go to Roland Harriman to get him to put another $110,000 in, which he did. Mr. HESS. What about this 5-percent interest? Was that sold on the open market? Mr. RIPLEY. Not at all. Mr. HESS. You don't have to go into detail. Mr. RIPLEY. I will do it just as briefly as I can. American Ship & Commerce owned 88 percent of the general mortgage bonds of the old Cramp Co. In those general mortgage bonds there was what we call an indeterminate equity. Nobody knew the exact value of the property of the old Cramp Co. Hence our counsel told us, and I agreed entirely, that we simply had to make an offering of all new money stock to the people who held those bonds. In other words, the people who held the 12-percent minority had to have their first right to subscribe, and we gave them that first right for a period of 2 weeks on a prospectus put out under aegis of the Securities and Exchange Commission, so they had 2 weeks to look at all the facts and the picture, and decide whether they wanted to put up the money instead of us, and some did. Seven percent of the total offering was taken by the public, and we, Harriman & Ripley, took 93 percent, sold some to Blue Ridge, which left us where we are. Mr. TOLAND. Was there any stock distributed with your knowledge to anyone that was not a purchaser at the time of the reorganization of this company? Mr. RIPLEY. Certainly not, if I understood your question. The stock was issued in exchange for the entire first mortgage plus the tax lien on Petty's Island, plus $260,000 cash that the Harrimans put up. That was one block of 59,000 shares of stock. Next, another block of about 40,000 shares of stock was issued to the holders of the general mortgage bonds of the old company in exchange for their bonds. That makes approximately 100,000 shares of stock. Next, approximately 100,000 shares of stock were offered to the general mortgage bondholders of the old company for subscription at $11 a share with Harriman, Ripley underwriting it. Then come the two blocks of 10,000 shares each, which I had to have as added capital to get the performance bonds of $5,000,000, and the Harrimans took one of those blocks of 10,000 shares, putting the money into the new Cramp Co., and Blue Ridge took the other. There is your approximate total of 219,000 shares. Mr. TOLAND. That still isn't the answer to the question that I asked you. I said: Do you know of any stock being given to anyone, or being held as a nominee for someone else, for any services that they may have rendered to the company in connection with the reopening of this yard? Mr. RIPLEY. No. Mr. TOLAND. Was there any understanding on your part that anyone was to receive at any time any shares of stock in the new company for the services that they rendered in connection with the promotion of the reopening of this yard? Mr. RIPLEY. Absolutely none; zero. Mr. TOLAND. None? Mr. RIPLEY. None. Mr. TOLAND. Well, I will excuse you now, Mr. Ripley, and finish with Mr. Masterson. The ACTING CHAIRMAN. Are you going to be long? Shall we adjourn until 2 o'clock? Mr. TOLAND. This will take 5 minutes. Mr. Masterson, I show you some checks, apparently made out in your handwriting, to the Condenser Service and Engineering Co. during the months of April and May 1939, and ask you if you can recall the purpose for which these checks were drawn? Mr. MASTERSON. Yes, sir. Mr. TOLAND. Will you state for the record? Mr. MASTERSON. They were to cover men on the labor pay roll who were reimbursed by Condenser Co. so that we could provide for the Social Security law and retirement laws, and everything, rather than take out a bond ourselves; just for the short time we were going to be there, we reimbursed Condenser, plus a small percentage for handling the account for us. Mr. TOLAND. How many laborers or laboring people did you have? at the most. Mr. TOLAND. Instead of paying the laborers direct, you sent the money to the Condenser Service & Engineering Co.? Mr. MASTERSON. They sent the checks down to the individual, and we reimbursed Condenser for what they sent to us. Mr. TOLAND. Who made that arrangement? Mr. MASTERSON. I believe Mr. Smith made that arrangement in New York. Mr. TOLAND. Mr. Smith? Mr. MASTERSON. W. T. Smith. Mr. TOLAND. It was done so you would not have to take out, or make out, social-security forms, is that it? Mr. MASTERSON. To comply with the law. Mr. TOLAND. You paid the company a bonus for handling it? Mr. TOLAND. Ten percent, was it? Mr. MASTERSON. I believe it was 10. In fact, I know it was. Mr. TOLAND. All these checks that you have identified have been signed by Commander Weyerbacher? Mr. MASTERSON. Yes, sir. Mr. TOLAND. I offer them in evidence. (Eight checks were received in evidence, marked "Exhibit No. 236 A through 236 H," and are printed in the appendix of this volume.) Mr. TOLAND. Mr. Masterson, what were your duties when you were first employed at the Cramp Shipyards? Mr. MASTERSON. I was brought down from Rhode Island to start organizing the clerical force. I opened up the mail section, I opened up the central files, the stenographic section, and went in and put the filing system and the Navy system that was desired in the purchasing department. Then, after everything was organized, I went down with Commander Weyerbacher as administrative assistant. Mr. TOLAND. Did you have anything to do with purchasing? Mr. MASTERSON. No, sir. Mr. TOLAND. Nothing at all? Mr. MASTERSON. No, sir. Mr. TOLAND. Wasn't Commander Weyerbacher the first purchasing officer at Cramp Shipyards? Wasn't he in charge of the purchasing department? Mr. MASTERSON. Yes, sir. Mr. TOLAND. Were you his assistant at that time? Mr. MASTERSON. No, sir. Mr. TOLAND. You were not? Mr. MASTERSON. No, sir. Mr. TOLAND. Have you ever on behalf of Commander Weyerbacher interceded on behalf of Mr. Rohleder to get a contract with Cramp Shipyards? Mr. MASTERSON. Never. Mr. TOLAND. Have you obtained any bids in connection with any contract at the Cramp Shipbuilding Co.? Mr. MASTERSON. No, sir. Mr. TOLAND. Have you ever interviewed contractors? Mr. MASTERSON. No, sir. Mr. TOLAND. That is all. We can recess now, Mr. Bradley, if you want. The ACTING CHAIRMAN. The committee will stand in recess until 2 o'clock this afternoon. All witnesses who have been subpenaed today return here this afternoon. (Whereupon, at 12:20 p. m., a recess was taken until 2 p. m. of the same day.) AFTERNOON SESSION Following noon recess, the committee reconvened at 2:15 p. m., Representative Michael J. Bradley, Pennsylvania, presiding. The Acting CHAIRMAN. The committee will come to order. Mr. TOLAND. Mr. Masterson, this morning I showed you this file and asked you to go through it before I excused you, to pick out the papers that you had prepared. Will you identify those that you prepared? Mr. Ripley (recalling Mr. Ripley to stand). You prepared that, Mr. Masterson? Mr. MASTERSON. Yes, sir. Mr. TOLAND. The X means that it was prepared by you? Mr. MASTERSON. It is the only one in there, and all this batch in here. Mr. TOLAND. I would like to offer in evidence the document identified by the witness as prepared by him in connection with the employment of Commander Weyerbacher by Merchant-Sterling; it is to be filed and not printed. (The letter dated March 31, 1939, bearing an X, was received in evidence, marked "Exhibit 237," and is filed with the committee.) Mr. TOLAND. Who is Mr. George Ward? Mr. MASTERSON. He is our machine-tool specialist. Mr. TOLAND. Was he the George Ward employed March 1 and paid $65? Mr. MASTERSON. Yes, sir. Mr. TOLAND. And later was employed by Cramp? Mr. MASTERSON. That is right, sir. Acting Chairman BRADLEY. Is this the Mr. Ward that testified earlier? Mr. MASTERSON. No, this is another one. Mr. TOLAND. What was the nature of the professional services that you rendered; just salary? Mr. MASTERSON. That is right. Mr. TOLAND. And what is the professional services for the month of March, $375? Mr. MASTERSON. That is the commander's salary and his expenses. Mr. TOLAND. Was the salary $500 a month? Mr. MASTERSON. Well, I am not sure. Mr. TOLAND. I would like to have those filed. The Acting CHAIRMAN. What are those papers? Mr. TOLAND. Those are statements of accounts in connection with the employment of Commander Weyerbacher by Merchant-Sterling. (The statements of accounts referred to were received in evidence, marked "Exhibit No. 237A," and are filed with the committee.) Mr. TOLAND. NOW, Mr. Ripley, I asked you this morning what you knew, if anything, about the employment of Commander Weyerbacher, and my recollection is that you answered that Mr. Smith had recommended or employed him; is that correct? Mr. RIPLEY. I said that that was my understanding of it when I learned of it a month ago. Mr. TOLAND. Who is Mr. Smith, Mr. Ripley? Mr. RIPLEY. Mr. Smith is president of the old Cramp Co., called the William Cramp & Sons Ship & Engine Building Co. Mr. TOLAND. What connection, if any, does he have with MerchantSterling? Mr. RIPLEY. None to my knowledge. Mr. TOLAND. Does he have any connection with the American Ship & Commerce? Mr. RIPLEY. I think he was president of the American Ship & Commerce. Whether he is now, I don't know. Mr. TOLAND. I would like to show you this memorandum dated February 27, 1939, from W. T. Smith to Mr. J. J. FitzGerald, and ask you if you ever saw that? Mr. RIPLEY. No. Mr. TOLAND. Mr. Chairman, I would like to offer this memorandum in evidence, together with the file of correspondence. (The memorandum was received in evidence and marked "Exhibit No. 238.") (The file of correspondence was received in evidence, marked “Exhibit No. 238A" and is filed with the committee.) Mr. TOLAND. The memorandum reads: Messrs. W. A. and E. R. Harriman have authorized an expenditure not to exceed $25,000 to make certain investigations of the facilities of the William Cramp & Sons Ship & Engine Building Co. at Philadelphia. Requests will be made from time to time for payments against this amount. Now, who is Mr. FitzGerald, Mr. Ripley? Mr. RIPLEY. Mr. FitzGerald is an officer of Merchant-Sterling. I don't know just what officer. Mr. TOLAND. He is treasurer, is he not? Mr. RIPLEY. I think that is probably right. May I see that thing? Mr. TOLAND. Yes, sir. Mr. RIPLEY. Did you read whom that was from? Mr. TOLAND. From Smith to FitzGerald; yes, but Mr. FitzGerald is the treasurer of Merchant-Sterling. Mr. RIPLEY. I say he is an officer of Merchant-Sterling. I don't know exactly what officer. Mr. TOLAND. The funds were received from Merchant-Sterling that were deposited by and on behalf of Welerbacher? Mr. MASTERSON. All funds were received by W. T. Smith. He forwarded them to us and we did all our corresponding with him. Mr. TOLAND. Isn't it a fact that the first check was for $3,000, from Merchant-Sterling Corporation, signed by W. W. FitzGerald? Mr. MASTERSON. Yes, sir. Mr. TOLAND. Is that right? Mr. MASTERSON. That is right, but I had nothing to do with that. |