Mr. MELLETT. My opinion is that there is not anything of that kind that Congress cannot do. It has full power. I am not a lawyer, but I think you surely have the power to stop it. The CHAIRMAN. Suppose the contract is actually signed, which I understand it to be, it is already signed by the contractor, would the Congress then have the right to nullify that contract? Mr. MELLETT. It is a contract by the Public Buildings Administration for a temporary building, the use of space in which will be allocated by the Public Buildings Administration. I do not know whether I can answer your question or not. The CHAIRMAN. Suppose work is started on it, do you suppose then Congress could stop it? Even though the contract is made, there would be a question of damages, I understand, by the contractor for whatever loss he incurred. Mr. MELLETT. I understand so. I suppose that would be the case of any temporary buildings built on the Mall and elsewhere. The CHAIRMAN. I am assuming that a contract has been made. I was informed yesterday that the contract has not been signed by the agency of the Government but had been signed by the contractor. I am just asking you about the legal situation, as to whether or not the Congress could prohibit the building from being built. If the Congress would prohibit the building from being built, I assume then it could not be built. Of course, the money has already been appropriated, the allocation from the joint funds? Mr. MELLETT. For the building itself. The CHAIRMAN. That fund has been appropriated? The CHAIRMAN. Senator George or Senator McKellar, who are lawyers, could tell more about that. Senator MCKELLAR. There is no inhibition against the Government, as I remember the Constitution, Senator George. It is that no State shall impair the obligations of a contract. It does not apply to the United States, but, as a matter of fact, the United States Government, when it makes a contract, is, as we all know, in duty bound to live up to it. If it terminated it, as it would have a right to do, in decency and in good order and good conscience it should make good the contractor's out-of-pocket expenses, at any rate. That would seem to be my view of it. Mr. MELLETT. Would any legal question be raised, sir, by the fact that Congress has voted the President this sum for his own uses, $100,000,000 for his own uses for defense, and he has, under that authority, allocated this sum for that purpose? Senator MCKELLAR. In my judgment he would have a perfect right to use it as he pleases. The CHAIRMAN. Would Congress have the right to repeal any part of the allocation? Senator MCKELLAR. It could take any action of that kind, I believe, but certainly under the present law he has a right to use that personal fund in any way he wants to. The CHAIRMAN. I have no way of knowing at all what Congress would desire to do. The only protest I want to make against it is that Congress has not had an opportunity to pass on it. It has been done with the knowledge of the fact, apparently, that Congress certainly did not signify its approval of the project. The proposition was presented to the Congress and Congress declined, or the Senate, rather, declined to include it in the appropriation bill. Senator MCKELLAR. Well, the House joined in that declination. The CHAIRMAN. Are there any further questions of Mr. Mellett? (No response.) The CHAIRMAN. Thank you very much, Mr. Mellett. The committee was to hear this morning representatives of the Todd Shipyards Corporation in regard to excessive profits. Mr. Barnes, will you come forward? STATEMENT OF J. E. BARNES, WASHINGTON REPRESENTATIVE, TODD SHIPYARDS CORPORATION The CHAIRMAN. Mr. Barnes, will you identify yourself for the record, please? Mr. BARNES. I am J. E. Barnes. Senator MCKELLAR. Talk a little louder, please. Mr. BARNES. J. E. Barnes, the Washington representative of the Todd Shipyards Corporation. The CHAIRMAN. Mr. Barnes, you were asked to appear before the Naval Affairs Committee, I think, to make a correction of some testimony that you had given before the Truman Committee? Mr. BARNES. Yes, sir. The CHAIRMAN. Did you appear there with the approval of your company? Mr. BARNES. To answer that question, yes, sir. The CHAIRMAN. Now, Mr. Barnes, there is one matter that I want to mention before you start your testimony. My attention has been called to the fact that on page 49 of those hearings you deleted part of the question, part of your response to a question that I propounded to you. Do you go over your testimony and make changes in it? You frequently appear before committees of Congress. Mr. BARNES. I try to correct some English in it. The CHAIRMAN. This was not English. Mr. BARNES. What page is that on? The CHAIRMAN. That is on page 49. The clerk of the committee has given me the original. The question was: Senator BYRD. What the committee wants to know and certainly I am most concerned about is this: What is the total amount of what you have done, that is what percentage of profits haye you made on that work? You replied: I was not called for that information, so I do not have it, but I will furnish it to you. 'Now, that was deleted, so the clerk of the committee says, the agreement you made to furnish the information. Mr. BARNES. I think that may have been done because I called the clerk of the committee and told him that that information was all in the hands of the Vinson committee. The CHAIRMAN. I do not think you should take a statement of fact out of the hearings. I am not especially concerned about it, because we will get the information; but I think, especially with respect to the hearings before this committee, while you have the right to make any amount of typographical changes, you will not be permitted to change any testimony. Mr. BARNES. Senator, could I say a few words? The CHAIRMAN. Yes. Mr. BARNES. You will notice by the statement that I handed you last week, right after I testified before the committee I went to Florida with a sinus trouble that I have. I have been criticized by the company, as you see in that statement that the company gave you, for certain testimony I gave. It seems like I had promised so much, not only in giving the profits back but other information, that I have kind of gotten in deep water. The CHAIRMAN. Here is what happened: You appeared before the Naval Affairs at your own request, you agreed there to furnish certain information, then you deleted from the record the promise that you had made, and that information was not furnished. I have waited a month for it, and I called you up and then asked you to appear before this committee. Senator MCKELLAR. Mr. Chairman, right there, I think it would be well for our stenographers before this committee to be instructed that no changes of substance shall be allowed at all, only for typographical errors, and things like that. We had to adopt that rule in the Committee on Appropriations several years ago, Senator Glass, as you recall. It has been the rule for quite a while. It is a rule which is very valuable, and I think it ought to be a rule in this committee. What say you, Mr. Chairman? The CHAIRMAN. I think that certainly should be done. I want to notify Mr. Barnes in advance. Mr. BARNES. I thought it was in my report. The CHAIRMAN. You did not give it; I have not received it yet. You said you were going to furnish it. I just want to give you notice now that you will not be permitted to make any changes of a material character in your testimony. It should not have been done in that other instance. Now, the Naval Affairs Committee has received a brief signed by your company in which they take issue with you on certain parts of your testimony, claiming that the testimony you gave was not correct. Will you state to this committee in what particular, if any, your testimony was inaccurate before the Naval Affairs Committee? Mr. BARNES. In my testimony before the Naval Affairs Committee, when a number of the questions were asked, I stated very plainly I did not have the information. A lot of my testimony was estimating and guessing from my knowledge. The CHAIRMAN. But you have been representing this company for many years in Washington, the Todd Shipyards Corporation, and your superiors say: Mr. J. E. Barnes, Washington representative of Todd Shipyards Corporation and its subsidiary companies, requested permission to appear before the Naval Affairs Committee of the United States Senate to make clear certain testimony he gave before a committee of the United States Senate under the chairmanship of Senator Truman. This permission was granted. Mr. Barnes appeared before the Naval Affairs Committee on February 4, 1942. Before Mr. Barnes could make the clarification for the purpose of which he appeared before the committee, he was interrogated as to a number of matters as to which he was not only unprepared to testify but as to which he could not possibly have had adequate information and as to which extensive analysis and study of a vast amount of data and records would have been required to permit the giving of accurate information. 69657-42-pt. 4- -13 What I would like to ask you is whether any specific statement you made before the Naval Affairs Committee was inaccurate, as to the amount of profit and other questions of that kind? Mr. BARNES. The actual figures of profits that I gave were taken from the report of the Vinson committee on individual ships, and those figures had been furnished by our organization. The CHAIRMAN. Well, then, insofar as the figures relating to the amount of profit are concerned, there were no inaccuracies, so far as you know, in your testimony? Mr. BARNES. I do not know anything about that. Mr. Strenz here is the treasurer and he may know where those inaccuracies in figures on the profits came in. He signed the statement. Mr. STRENZ. Senator, I am The CHAIRMAN (interposing). Mr. Barnes, for the moment, should answer. I want it from Mr. Barnes, who is accustomed to appearing before committees. Mr. BARNES. One inaccurate statement of mine was my guess on the volume of business in the repair yards. I had that overestimated. The CHAIRMAN. What about the actual profits? I understand you said on one contract a 62-percent profit was made. Mr. BARNES. Well, I made a mistake there, because the report shows in the Vinson committee that it was 72. The CHAIRMAN. Then, the 72 figure was correct? Mr. BARNES. That is the one I underestimated. The CHAIRMAN. In any instances, did you overestimate any profit? Mr. BARNES. Not to my knowledge, sir. Senator MCKELLAR. That is the only one you underestimated? Mr. BARNES. That is a very small one, and I just slipped on that, Senator. Senator MCKELLAR. A 72-percent profit is a pretty fair profit to make out of a government that is at war with mighty nations, is it not? Mr. BARNES. I hope the Senator understands those are all being paid back voluntarily. Senator MCKELLAR. I do not know whether they are or not. I do not understand that. Is that true? Mr. BARNES. That is true. Senator MCKELLAR. The profits are being paid back or have been paid back? Mr. BARNES. I would like to have you ask Mr. Strenz. It is my understanding that they were being paid back, all over 10 percent. Senator MCKELLAR. If the chairman will permit me, I would like to know if any of the 72-percent profits made on that contract have been paid back, or do you intend to pay them back? Mr. STRENZ. I cannot answer on that specific job, Senator, but we agreed to give the Navy back everything over 10 percent from November 1, 1941, and on two very large jobs the Todd-Seattle gave them everything back from the beginning of the contract. Senator MCKELLAR. How much money have you paid the Navy? Mr. STRENZ. We have not paid them anything yet. Senator MCKELLAR. How have you given it back, unless you paid the money? Do you pay in anything else? Mr. STRENZ. I cannot give it back to them until the Navy orders are completed. That order is in process right now. The CHAIRMAN. What will that refund amount to? Mr. STRENZ. In Todd-Strenz we estimated around $1,000,000. In the other companies, I do not know the figures yet, Senator. Senator MCKELLAR. Well, now, you have got various contracts estimated to aggregate $688,337,000, and Mr. Barnes said $50,750,000 of that was profit. How much of that $50,750,000 do you propose to pay back? Mr. STRENZ. I do not think that statement was correct, Senator. Mr. BARNES. I do not remember making that statement. Mr. STRENZ. From July 1, 1940 The CHAIRMAN (interposing). Senator McKellar is reading from your testimony before the Truman committee. Senator MCKELLAR. Yes; I am reading from your testimony before the Truman committee. Mr. BARNES. That is under the shipbuilding. Mr. BARNES. And the total estimated profit it was possible to make` is $50,000,000-I wasn't going to deduct the profit-$50,750,000, of which the Todd Shipyards Corporation's share would be $23,587,134; that is, if we got the total profit it would be possible to make under these contracts. The profit on the 225 of the so-called victory fleet goes as low as $75,000 per ship. The most optimistic person in our organization figures that would be the limit of our profit. The CHAIRMAN. At the beginning of the examination what I wanted to get very clear was that your testimony as to figures of profits, or amount of profits, given before the Naval Affairs Committee was inaccurate, so far as you know, in only one instance, namely, the profit was 72 percent instead of 62 percent, and that you had an opportunity to go over the testimony which has been shown by the fact that you went over it carefully because you deleted a part of the testimony. So, notwithstanding this brief by your company, you still stand on your testimony with respect to the figures when you testified before the Naval Affairs Committee? Mr. BARNES. The actual figures that I gave were to the best of my knowledge; yes, sir. The CHAIRMAN. Before we get into the discussion of the capital invested, and so forth, how much did your company pay to Bill Mann, who acted as an attorney? Mr. STRENZ. May I answer that question, Senator? The CHAIRMAN. Yes. Mr. STRENZ. $100,000 and disbursements. The CHAIRMAN. How much were the disbursements? Mr. STRENZ. A thousand-odd dollars. Todd Shipyards paid the bill which was rendered to Henry Kaiser as president of the ToddCalifornia Co. That was for services in connection with the Magnesium, Inc. The CHAIRMAN. Now, as to Mr. Corcoran, did he receive pay directly from your company or through Mr. Mann? Mr. STRENZ. I understand Mr. Mann engaged him. The Todd Shipyards Corporation's share was 35 percent, which was our percentage as a stockholder in the Todd-California Co., and the other 65 percent was paid by the so-called west coast group. The CHAIRMAN. What did Mr. Corcoran receive? |