but I have said that I would think the Navy could give us another EPF contract to rebuild the other half of the yard. It seems to me we could do that job without imposing too big a load on you men; and then at a later date the Navy could give us either a contract for more of the same type cruiser or, if we have progressed far enough with our organization problems, a contract for some other kind of ship-but preferably for the cruisers. From the standpoint of national defense, leaving Cramp entirely out of consideration, it does seem to me that the other half of our yard should be rebuilt, with construction starting at an early date, so that it will be available if the emergency becomes more critical. If you men agree in general with the foregoing, I would suggest you say so if asked. If you do not agree with me, I hope you will give me a memorandum telling me what you think our position should be, if asked by the Navy, as I think we will be very shortly. JPR: W. J. P. RIPLEY. EXHIBIT NO. 309 [ Office copy] AUGUST 29, 1940. Personal. Rear Admiral W. G. DUBOSE, U. S. N. National Defense Council, Federal Reserve Building, Washington, D. C. DEAR BILL: While attending the night launching at the Moore Shipyards last night, Hank Gleason told me, with a great deal of assurance as to its reliability, that Vickory was going on the retired list and be appointed to the Maritime Commission vice Wiley, and that you were going over there to work with Jerry Land. Without disclosing any of my reasons for believing to the contrary, I mildly questioned the accuracy of his information which, he said, came directly from Crisp, the new manager at Mare Island who succeeded Ikie Yates there. In view of our discussions during my recent flying trip to Washington and subsequent understandings, I would like to be in a position to confound our positive friend Hank, if you will please give me the low-down on this whole situation. As you know, the Cramp proposition is awaiting the action of the Pennsylvania Supreme Court which, it is hoped, will be taken some time next week. Meantime, best personal regards. Sincerely yours. JR: jm DEAR JERRY: Very confidentially, what the hell? Please note the enclosed clipping from the Daily Commercial News of San Francisco today, and also I suggest you have your Publicity Department show you the clipping which they probably have from the Chicago Journal of Commerce of August 21 along these same lines. I am unable to advise as to how this publicity got under way. EXHIBIT NO. 312 THE ADVISORY COMMISSION TO THE COUNCIL OF NATIONAL DEFENSE, Memorandum. Washington, D. C., December 28, 1940. To: Admiral Wm. G. DuBose, Cramp Shipbuilding Company, Philadelphia, Pennsylvania. From: Captain J. O. Gawne, U. S. N., Bureau of Ships, Navy Department, Washington, D. C. In reply to your memorandum of December 20, I am enclosing herewith a list of the shipyards with the amounts of the facilities required for the 70% increase of the Navy Building Program. 70533-42-vol. 3-30 You will note that these amounts in some cases are larger than cleared originally. With kind regards. Very sincerely yours, Letter goes out asking for quotation (would be received by vendor next day). Answer comes in giving quotation and is promptly marked "received too late" by purchasing division. Quotations received from one Company and giving price. Quotations received from another Company and giving a higher price-next day another letter comes in from these people saying "in line with telephone conversation we quote This second quotation is usually at a lower price. ** * Note: This second quotation in many cases does not get back to the files. What happens to 2 quotes from same firm? Is first quote destroyed? If so, by whom? (Get examples.) The memorandum of which this is a photostat was typed by me for Mr. James Reed. The penciled notation on the bottom I recognize as being in Mr. Reed's handwriting. FRANK J. REISER. I recognize the penciled notation on the memorandum of which this is a photostat as being in the handwriting of Mr. James Reed. 11-19-41. MADELEINE J. MALONE Witness: Vincent A. Burns as to Miss Malone & Mr. Reiser. MEMORANDUM Concerning a memorandum of June 4, 1941, with a pencil notation at the bottom which has been identified by Frank Reiser and Miss Malone as being the handwriting of James Reed, Reiser informed me that Mr. Reed was disturbed about the method of handling bids and quotations in the Purchasing Division. Mr. Reed asked Reiser to keep his eyes and ears open in an effort to learn the cause of apparent irregularities. Reiser further informed me that as a result of a conversation with Mrs. O'Brien, he made the attached memorandum and submitted it to Mr. Reed. Reiser has agreed to meet with Mr. Randall and myself, accompanied by Mrs. O'Brien, in an effort to obtain more details concerning this same matter. VINCENT A. BURNS. 11/19/41. EXHIBIT NO. 316 SUPREME COURT-KINGS COUNTY John J. Laver, suing on behalf of himself and all other similarly situated stockholders of American Ship & Commerce Corporation, Plaintiff, against Emil Eckhardt, R. W. Hart, E. P. Farley, R. H. M. Robinson, W. T. Smith, W. Averell Harriman, E. Roland Harriman, J. W. Powell, G. A. Ellis, Joseph P. Ripley, American Ship & Commerce Corporation, Harriman Ripley & Co., Inc., Orama Securities Corporation, Merchant-Sterling Corporation, and Cramp Shipbuilding Company, Defendants. All the issues in this action having duly come on for trial and having been heard before the undersigned, one of the Justices of this Court without a jury at a Special Term Part III thereof on April 16, 1941, and thereafter, and the proofs of the allegations of the parties having been duly presented, and the plaintiff having appeared by Arthur Newman, Esq., his attorney (Mortimer Hays and Lloyd B. Kanter, Esqs., of counsel), and the defendants R. W. Hart, E. Roland Harriman, W. Averell Harriman, Orama Securities Corporation and Merchant-Sterling Corporation, having appeared by Proskauer, Rose & Paskus, Esqs., their attorneys (Joseph M. Proskauer, J. Alvin Van Bergh and Eugene Eisenmann, Esqs., of counsel); defendants Joseph P. Ripley and Harriman Ripley & Co., Inc., having appeared by Davis, Polk, Wardwell, Gardiner & Reed, Esqs., their attorneys (Ralph M. Carson and Russel S. Coutant, Esqs., of counsel), and defendant American Ship & Commerce Corporation having appeared by Clark, Carr & Ellis, Esqs., their attorneys (Paul A. Crouch, Esq., of counsel) and plaintiff's demand for recission having been withdrawn prior to the trial, and plaintiff after the commencement of the trial having applied for leave to discontinue the action, and said application having been denied; upon all the pleadings and proceedings herein, and the proofs of the parties having been adduced, and due deliberation having been had, I do hereby find and decide as follows: FINDINGS OF FACT 1. Plaintiff is the owner of 450 shares of the capital stock of American Ship and Commerce Corporation, which he acquired in July and September 1940. 2. American Ship and Commerce Corporation is a corporation duly incorporated under the laws of the State of Delaware on or about July 18, 1919. Its principal office for the transaction of business was and is in the City, County, and State of New York. 3. The business of American Ship and Commerce Corporation has always been the holding and acquisition of securities of corporations engaged in the business of manufacturing and operating ships and related activities. 4. For many years prior to October 4, 1940, American Ship and Commerce Corporation owned 93,845 shares of the common stock of Wm. Cramp and Sons' Ship and Engine Building Company constituting 61.59% of the capital stock of said company and $2,075,000 principal amount of the General Mortgage 6% Bonds of Wm. Cramp and Sons' Ship and Engine Building Company, and it held an additional $125,000 face amount of said bonds of said Wm. Cramp and Sons' Ship and Engine Building Company as collateral for an obligation of said company. 5. Wm. Cramp and Sons' Ship and Engine Building Company is a corporation duly organized in 1872 under the laws of the State of Pennsylvania; was for merly engaged in the shipbuilding and marine manufacturing business but, since 1927, has been wholly inactive. 6. The following individuals who are named as defendants herein were directors of American Ship and Commerce Corporation during the following periods: E. P. Farley. R. W. Hart_- R. H. M. Robinson_. W. T. Smith_. W. Averell Harriman_ J. W. Powell.. G. A. Ellis___. October 27, 1938-September 5, 1940. June 17, 1920-to date. December 18, 1925-to date. June 4, 1920-to date. March 27, 1931-November 4, 1940. Of these named defendants, only defendants R. W. Hart and W. Averell Harriman have been served or have appeared in this action. 7. Defendant Harriman Ripley & Co. Incorporated, is a New York corporation engaged in the business of underwriting and distributing securities; was organized on June 16, 1934; has outstanding 50,000 shares of preferred stock and 204,750 shares of common stock. All of the preferred stock and 196,000 shares of its common stock are subject to an irrevocable ten-year voting trust created on October 24, 1938, of which George A. Ellis, Joseph P. Ripley and Edwin S. S. Sunderland are voting trustees. Defendants W. Averell Harriman and E. Roland Harriman own or have a legal or equitable interest in the voting trust certificates. Neither W. Averell Harriman nor E. Roland Harriman is or has been at any time since October 24, 1938, a stockholder, director or officer of Harriman Rilpely & Co. Incorporated, and neither participates or has participated in its management. 8. Defendant Joseph P. Ripley is the President of Harriman Ripley & Co. Incorporated; is a stockholder of said corporation and a voting trustee under the voting trust agreement of October 24, 1938, and is the chief executive officer of said company. 9. Cramp Shipbuilding Company is a corporation (originally known as Shipyards, Inc.) existing and duly organized under the laws of the Commonwealth of Pennsylvania on or about July 16, 1940. Said corporation has not been served, nor has it appeared in this action. 10. Defendants Merchant-Sterling Corporation and Orama Securities Corporation were at all the times mentioned in the complaint and still are Delaware corporations of which the capital stock is owned in equal proportions by defendants W. Averell Harriman and E. Roland Harriman. 11. Defendant American Ship and Commerce Corporation had in July 1940 and has at the present time 591,271 shares of capital stock outstanding, of which defendant W. Averell Harriman was and is the beneficial owner of 20,083 shares and defendant Merchant-Sterling Corporation was and is the beneficial owner of 103,622 shares. 12. Neither defendants W. Averell Harriman nor E. Roland Harriman nor any of the other named defendants had anything whatever to do with the organization of American Ship and Commerce Corporation or of Wm. Cramp and Sons' Ship and Engine Building Company; the said Harrimans first acquired a stock interest in said corporation in 1920 for cash, and all of the stock interest of said defendants Harriman and Merchant-Sterling Corporation in American Ship and Commerce Corporation was acquired for cash. 13. In July 1940 the principal assets of American Ship and Commerce Cornoration consisted of $2,075,000 principal amount of Wm. Cramp and Sons' Ship and Engine Building Company General Mortgage Bonds which had cost $1,958,600, 93,845 shares of Wm. Cramp and Sons' Ship and Engine Building Company which were carried at nominal value of $1.00, 131,427 shares of Cramp-Morris Industrials, Inc., which were carried at nominal value of $1.00, 7,019 shares of Hamburg-American Line which were carried at cost of $3,323.839.48, certain demand notes receivable of Wm. Cramp and Sons' Ship and Engine Building Company which were carried at $1.00 for which American Ship and Commerce Corporation had as collateral $125,000 principal amount of Wm. Cramp and Sons' Ship and Engine Building Company General Mortgage 6% Bonds, and certain other assets carried at less than $5,000. 14. All of the shares of stock and bonds owned by American Ship and Commerce Corporation, as well as the bonds which it held as collateral, were pledged by American Ship and Commerce Corporation to defendant Merchant Sterling Corporation as security for demand notes which, as of July 31, 1940, aggregated the principal amount of $3,798,279 plus accrued interest of $1,469,370, making a total of $5,267,649. 15. Other than its obligations to Merchant-Sterling Corporation, defendant American Ship and Commerce Corporation has no obligation to creditors. 16. In 1940 and for many years prior thereto American Ship and Commerce Corporation had no funds with which to pay off its obligations to MerchantSterling Corporation and no means of raising such funds. 17. Wm. Cramp and Sons' Ship and Engine Building Company was in 1940, and had for many years prior thereto been hopelessly insolvent, its only substantial asset being real properties formerly used for drydock and for shipbuilding purposes in the city and harbor of Philadelphia. 18-19. As of July 31, 1940, certain of the more important properties of Wm. Cramp and Sons' Ship and Engine Building Company were subject to liens held by the Government of the United States amounting to $1,108,333; all of the properties of said company within the city of Philadelphia (which constituted almost its entire property) were subject to liens for real estate taxes owned to the City and School District of Philadelphia amounting to $1,378,140; all of the properties of said company were subject to the lien of an overdue first mortgage of $600,000, the principal amount of which with 6% accrued interest, as provided in the bond, then aggregated $1,060,500 and which was owned by defendant Orama Securities Corporation; all of the properties of said company were subject to a second mortgage to secure $2,499,500 principal amount of General Mortgage 6% Gold Bonds which, with accrued interest thereon, amounted to $4,306,520; and in addition thereto, said company had other obligations in excess of $1,500,000. 20. In 1940, and for many years prior thereto, Wm. Cramp and Sons' Ship and Engine Building Company had been wholly without liquid assets or means of raising funds to satisfy its first mortgage; the value of the assets of said company was substantially less than the amount of its obligations to creditors, and a sale of its assets would not realize sufficient to pay its first mortgage or its obligations to the City and School District of Philadelphia or to the United States Government. 21. For many years diligent efforts had been made by directors and officers of American Ship and Commerce Corporation to find means of selling the assets of Wm. Cramp and Sons' Ship and Engine Building Company, with no success. 22. In 1940 the land and buildings of Wm. Cramp and Sons' Ship and Engine Building Company in Philadelphia were assessed at $1,500,000 and the fair and reasonable value of said property was not in excess of said sum. 23. In June 1940 the Secretary of the Navy of the United States informed defendant W. Averell Harriman that the interests of national defense made it the duty of said defendant to find means of immediately rehabilitating the shipyards owned by Wm. Cramp and Sons' Ship and Engine Building Company, so that warships might be built. Said W. Averell Harriman was at that time connected with the Defense Advisory Commission and is at the present time in Great Britain as Special Representative of the President of the United States with the rank of Minister. 24. In June 1940 defendant W. Averell Harriman informed defendant Joseph P. Ripley of the urgent request of the Secretary of the Navy, and asked said Ripley to see what could be done about rehabilitating the Cramp yards and providing means for financing. 25. Ripley immediately made an investigation and was advised by representatives of the United States Government that the United States would award a contract for the building of light cruisers to any responsible company with finances and management satisfactory to the United States, which acquired, free of all liens and claims, the properties then owned by Wm. Cramp and Sons' Ship and Engine Building Company, if such requirements were promptly met. 26. Ripley was advised by representatives of the United States Government that, in order to obtain the proposed contract for the building of light cruisers, the corporation must be able to furnish performance and payment bonds aggregating $5,000,000 and must have adequate working capital. 27. The financial situation of Wm. Cramp and Sons' Ship and Engine Building Company and of American Ship and Commerce Corporation made it wholly impossible to raise money on their behalf. 27a. At a meeting with the Secretary of the Navy Knox and other officials of the United States Government in the early part of July 1940, W. Averell Harriman offered to turn over to the United States all interests which the Harrimans had, directly or indirectly, in the Cramp situation, at any price that might be |