Now, here is the letter. Put it in the record. Put this letter in the record. All right, now go ahead, Mr. Connolly. Mr. CONNOLLY. Am I not coming through to the chairman on this microphone? The CHAIRMAN. Something is wrong somewhere down there. Mr. SMART. Nothing is wrong. STATEMENT BY JOHN L. CONNOLLY, ST. PAUL, MINN., ON BEHALF OF MINNESOTA MINING & MANUFACTURING CO. Mr. CONNOLLY. I appear on behalf of the Minnesota Mining & Manufacturing Co. Its principal offices are in St. Paul, Minn. I am secretary, general counsel, and a member of its board of directors. I am also secretary and general counsel for the Midland Rubber Corp., which is the present operator of Plancors 611, located at Torrance, Calif. And Midland Rubber is a wholly owned subsidiary of Minnesota Mining. Paragraph 2: In the interest of time, I will ask the reporter to place that in the record. It states the business that Minnesota is presently engaged in and how long it has been in the business. The CHAIRMAN. All right, put that in the record. (The paragraph follows:) Minnesota has been engaged in the manufacturing business since 1902 and, at the present time, among other things, it manufactures and sells surface-coated abrasives, pressure sensitive adhesive tapes, adhesives and coating, graphic arts products, electrical insulating products, miscellaneous coated products such as sound-recording tape, decorative ribbons, and the sale of coated granules for use in the roofing and siding industries. Mr. CONNOLLY. Minnesota has been interested, either as a stockholder in corporations organized to manage and operate Governmentowned synthetic-rubber plants, or as one of the operators of a synthetic-rubber plant, since November 1942. We favor the disposal of all of the Government-owned synthetic-rubber facilities, all rubber facilities. In the main, Mr. Pettibone, Chairman of the Commission, and his associates, performed a difficult task well. We offer our congratulations to them. But to only prove that they are human, we feel that they made a mistake in improperly recommending the sale of Plancors 611, 929, and 963 to Shell Chemical Corp. for the reasons hereinafter set forth. Now, this, members of the committee, is not a question of whether Minnesota was personally damaged or if it could prove damages before this committee. This is a question that any citizen is authorized to bring before your committee. The sole question is: Did the Commission follow the law setup and whether or not Minnesota was damaged or whether or not any of the other unsuccessful bidders on those facilities were damaged is beside the question, in my opinion. The CHAIRMAN. We agree with you on that. Mr. CONNOLLY. Now, I would like to also ask the reporter, in the interest of conserving time, if he would put into the record the provisions on page 2, in which I cite certain sections of the act. Section 7 of the act prescribing the procedure to be followed in selling the plants requires that: (b) Proposals shall be in writing and shall contain, among other things (4) The amount proposed to be paid for each of the facilities, The plain language of section 7 (b) (4) requiring specification of the amount proposed for each of the facilities is written in mandatory terms. It does not leave any discretion to the Commission. There was no controversy over section 7 (b) (4) throughout the entire legislative history of the statute. It appeared in the same form in S. 2047 as introduced and as amended in the Senate, in H. R. 5425 as introduced in the House, in H. R. 5728 as introduced and as amended in the House, and in the act as finally passed. The House committee report stated that: subsection 7 (b) is extremely important for this provision states that which must be contained in the bids. This is a protection for the Government as well as the bidder (H. Rept. No. 579, 83d Cong., 1st sess., 7 (1953). The report described subsection 7 (b) (4) as— mechanical in nature and requiring the bidder to indicate the amount proposed to be bid for each of the facilities * ** ((id. p. 9); see also S. Rept. No. 579, 83d Cong., 1st sess., 3 (1953)). The requirement that proposals contain the amount bid for each facility is an integral part of the overall congressional scheme for disposal of the facilities at the highest price obtainable. Therefore, Congress provided in section 16 of the act as follows: In arriving at its recommendations for the disposal of the facilities, the Commission shall use as the basis for negotiating the sale for each facility the highest amount proposed to be paid for each facility *** provided * * * that in using such highest proposed amount as a basis for negotiations the Commission may negotiate with respect to any facility with any person who submitted a proposal on that or any similar facility and may recommend sale of any facility to any person who submitted a proposal on that or any similar facility at a price which is equal to, higher than, or lower than the highest amount proposed to be paid for each facility as the Commission determines will best effectuate the purposes of this Act. As this section shows, Congress believed that the best method for achieving the "full fair value" of the facilities was to use the highest bid for each facility as the basis for negotiations. Further evidence that Congress contemplated the negotiation on a plant-by-plant basis may be found in the following colloquy on the floor of the Senate between Senator Capehart, the chairman of the committee in charge of the bill, and Senator Johnson: Mr. JOHNSON of Colorado. I wish to ask whether all of the plants other than the three alcohol butadiene plants, will be sold in a single package, or whether they will be sold plant by plant, on bids on a plant-by-plant basis? Mr. CAPEHART. They will be sold on the basis of plant-by-plant proposals; and the sales will be made plant by plant. Referring to the other memorandum which you have before you, I wish to state that a memorandum opinion by Mr. Courtney, special counsel, has been introduced into the record by the chairman of this committee, which opinion expresses the view of Mr. Courtney to the effect, firstly, that the quoted language is not mandatory but is directory, and, secondly, that the 3 separate facilities or plants covered On November 25, 1953, the Commission issued release No. 1, paragraph 4 of which reads in part as follows: 4. Proposals shall state the amount proposed to be paid for each of the facilities. Where a proposal contemplates acquisition of several facilities for integrated operation, it shall state separately the aggregate amount proposed to be paid for such facilities on such an integrated basis, and the amount otherwise proposed to be paid for each of the facilities in question on an individual basis * * The Commission's invitation for proposals stated: In accordance with the terms of the act, negotiations for the sale of each type of plant (i. e., GR-S, GR-I, butadiene, etc.) will be limited to those persons having submitted a proposal for the purchase of such type plant. The Commission pointed out to prospective purchasers the mandatory provisions of the act. And I want to say to the members of this committee Minnesota's counsel and its associates' counsel considered very, very carefully what provisions should be contained in their bid. And they consulted with the attorneys for the Commission to see that they were complying with the proposed regulations issued by the Commission and the law as passed by Congress. Now, Minnesota, Midland, and Edwin W. Pauley submitted to the Commission a time proposal, without qualification, and no strings attached to it, for the purchase of Plancor 611, at a price of $2,500,000, which on negotiation with the Commission, was increased to $3 million. Now, I want to say on that particular plancor we were not the high bidder, but I want to call your attention, members of this committee, that the high bid was not the sole criteria as to whether or not you were to have the plant. The Commission received a proposal from Shell for the purchase of Plancors 611, 629, and 963, for a lump-sum package price of $27 million, and I understand on negotiations it was raised to $30 million and was recommended. Now, let me call your attention to this provision in Shell's proposal: We do not state any order of preference for the purchase of the foregoing facilities for the reason that we do not propose to purchase individual facilities * * * We do not state the amount we propose to pay for any of the facilities on an individual basis as we do not propose to purchase individual facilities. Public Law 205 was enacted after full hearing in both Houses of Congress and all of its provisions were considered very carefully. In our opinion, Shell's proposal to purchase did not comply with the provisions of Public Law 205, in that Shell failed to state the amount to be paid for each of the facilities proposed to be purchased, namely, Plancor 611, 929, and 963; that Shell's proposal in failing to state the amount to be paid for each of the facilities cannot be considered; that Shell was not eligible to negotiate with the Commission for the purchase of any of the facilities offered for sale; that Shell was not eligible to purchase said facilities, and that the Commission's recommendation that these facilities be sold to Shell is improper and a nullity. Compliance with section 7 (b) is mandatory. We quote the following from the House Committee Report 593, pages 7 and 9: 7 (b) is extremely important, for this provision states what must However, to end all argument on this particular point let us turn to the words of Mr. Pettibone, Chairman of the Commission, speaking before the Senate Subcommittee on Banking and Currency last week. On page 302 of the transcript of proceedings, volume II, dated March 9, and because Senator Capehart and other Senators had evidenced concern about this particular matter, Mr. Pettibone stated frankly and I quote: Now, before I proceed with the charts, I might simplify 1 or 2 issues. As to the matter of whether the California complex was ever regarded by the Commission as one unit, we never regarded it so. We regarded it as 4, 3 involved in the Shell and 1 in the Standard Oil. Now, this should put at rest and conclusively settle for all time that "each facility" does not mean a combination of two or more plancors. It simply means exactly what it says that each facility is a numbered and separate plancor or facility. Now, let us turn to the other point raised in Mr. Courtney's opinion: Whether the word "shall" which is used twice in the first sentence of section 7 (b) is mandatory or directory. Section 7 (b) begins as follows: Proposals shall be in writing and shall contain, among other things— (1) Identification of the person in whose behalf the proposal is submitted; (2) The facility or facilities which are proposed to be purchased and the order of preference if more than one facility is proposed to be purchased; (3) The arrangements of plans, if any, formal or informal, for the supply of feedstock to and the disposition of the end products of the respective facilities proposed to be purchased; (4) The amount proposed to be paid for each of the facilities, and if such amount is not to be in cash, then the principal terms of the financing arrangement proposed; (5) The general terms and conditions which the prospective purchaser of a copolymer plant would be willing to accept in order to make the end product of such facility available for sale to small business enterprises, and the general terms and conditions which the prospective purchaser of a butadiene or styrene facility would be willing to accept in order to make the end product of such facility available for sale to purchasers of copolymer facilities; and (6) Such other information as the Commission in its notice of advertisement for proposal shall require, etc. In Mr. Courtney or any one else is correct in his conclusion that the word "shall" is not used in a mandatory sense in section 7 (a) and section 7 (b), then the Congress left to the discretion of the Commission whether the rubber producing facilities should be sold or not sold because section 7 (a) begins by stating: The Commission shall invite, upon adequate notice and advertisement, proposals for the purchase of the Government-owned rubber producing facilities, # ** If "shall" be not mandatory, then the Commission had the discretion as to whether to invite proposals in the first place. Again, if "shall" be not construed as being mandatory, then under (b) the proposals did not need to be in writing, but could be made orally. It would not be necessary under section (b) (1) for the person to identify himself but he could bid anonymously. Under (b) (2) the Commission could in its discretion waive the identity of the facility or facilities which are proposed to be purchased. 55066-55-No. 10-7 In the conference on the Senate and House bills, this was deemed unfair, and I quote from page 17. The language that was stricken out and added to the bill, committee comments, as follows; This language will permit a bidder on a copolymer facility to negotiate for the purchase of another copolymer facility or it will permit a bidder on a butadiene facility to be considered for the purchase of another butadiene facility, but it will not permit a bidder on a copolymer facility to be considered for the purchase of a butadiene facility on the basis of that bid, nor will it permit bidders on an expensive catalyst plant to negotiate for other much more expensive facilities. The provision was changed to require that as a prerequisite to negotiation with any person, that person had to have submitted a proposal on that or a similar facility. Minnesota and its associates, having complied with the act and submitted a valid proposal to purchase Plancor 611, a copolymer plant, were eligible to negotiate with the Commission on Plancor 611, or any other copolymer plant offered for sale, but were not eligible to negotiate for the purchase of a butadiene or styrene plant, or to purchase any butadiene or styrene plant. In other words, gentlemen, we were confined to the purchase of a copolymer plant. Congress evidently wanted all interested parties to commit themselves in a manner that could be used by the Commission as a basis for intelligent negotiation. Unallocated lump sum package bids are not in accord with this policy because the Commission is unable to determine the highest bid for any facility covered by such a bid and may thus be unable to negotiate intelligently. It is no accident at all successful prospective purchasers, with the exception of Shell, did state separately the aggregate amount proposed to be paid for the facilities proposed to be purchased by them on an integrated operation, and stated separately the aggregate amount proposed to be paid for each of the facilities proposed to be purchased on an individual basis. For example, Standard Oil Company of California submitted a proposal for the purchase of four different plants and stated: Purchaser offers to pay the sum of $16,600,000 for all the facilities defined in the proposal. The price proposed to be paid for each of the facilities except Plancor 611 on an individual basis is set forth in purchaser's alternative proposals. The price otherwise to be paid for Plancor 611 on an individual basisis $3,500,000. And in addition thereto, an examination of Standard's proposal will show that the total aggregate amount which it proposed to pay for each facility separately totaled $16 million. In addition, Standard submitted a lump-sum package bid for all four of the facilities and offered to pay $16,600,000 under its combination bid, which amount was $600,000 in excess of the total of the separate amounts, which indicates to us and should have indicated to the Commission that it was important to know what a buyer would pay on a lump sum, and to also know what he would be willing to pay on an individual basis. Phillips bid upon two facilities. It specified the amount proposed to be paid for each facility separately. It stated its preference between the 2 facilities, and in addition, Phillips proposed to pay a lump sum for the 2 facilities in an amount which was $1,001,000 greater than the aggregate amount proposed to be paid for the 2 facilities separately, which again bears out what I just told you, that in a lump-sum |