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So we asked him who it was, and they told us. We had never heard of the H. K. Ferguson Co.

Mr. FULTON. Öf Cleveland?

Mr. OMAN. Of Cleveland, and in about 30 minutes Mr. H. K. Ferguson and Mr. A. K. Ferguson appeared, and we were introduced to them in that office. They asked us to go out and see if we could agree between ourselves on doing a job. We didn't know what kind of job it was then. They asked us to come back and bring them a letter that we would be willing to perform a joint venture on a project in Tennessee, in west Tennessee. I don't think, as I remember, that Milan or Wolf Creek ordnance plant or anything like that was ever mentioned, because I don't think it had even been named at that time.

Mr. FULTON. It was just an ordnance plant.

Mr. OMAN. That is right. So we went to the hotel and we were trying to check up on H. K. Ferguson and I imagine he was trying to check up on us, and time was so short we didn't have time to do it, but at 6 o'clock that night we brought a letter back stating that we would be willing to associate with each other for this venture. They also told us that, "This does not mean that we are giving you a job. We just want this information so that we can pass it on."

We gave them that letter. As I remember, we left that night. My father and I left and went back to Nashville, and they said they would let us hear from them if they wanted us. Then I believewait a moment, I may be wrong-I think that is right.

Mr. H. K. FERGUSON. That is right.

Mr. JOHN OMAN, Jr. They called us again on, I think, the 30th of December, or asked us to be there the day before the 30th. We came up there. Then we had a meeting with Mr. Loving and his committee.

Mr. STIRTON OMAN. That is right. I didn't know whether we had it then.

Mr. FULTON. You see, there are two committees. One is the committee of Mr. Dresser to select, I think, three contractors or three possible contractors to recommend, and Mr. Loving and his committee, from those, would acecpt one of the recommended contractors or contractor combinations for the job. You were asked to see Mr.

Loving?

Mr. STIRTON OMAN. We were not asked at that time. As I remember it, father and I went on back to Nashville that night.

Mr. JOHN OMAN, Jr. That was on the 13th of December. Then we came back again on the 30th.

Mr. STIRTON OMAN. Father came back on the 30th, and I was sick at that time, I had just had "flu," and it was the last day of the year, I believe, that father called me back in Nashville and asked me to come on up here, that they were trying to negotiate this job, but the item of equipment and equipment rental for the contractor-owned equipment had come up and he asked that I come right on up. I got out of bed, caught a train within 45 minutes after that, got in here on Sunday afternoon, and Monday morning we met with Mr. Loving and a Major

Mr. H. K. FERGUSON. Hadley.

Mr. STIRTON OMAN. Hadley, yes; and Mr. Newman I believe was in on that meeting. Present at that meeting was Mr. Ferguson, Mrs. Ferguson, Mr. Short of Procter & Gamble, and Mr. Dinsmore, chief counsel of Procter & Gamble, Mr. Atkin, and John Oman, Jr. and myself, and we had a long discussion about how we were going to do this job. Up to that time we had no indication as to what the fee would be. We didn't know, and that was the last thing when the meeting was closed, they told us how much they were going to give us. Mr. FULTON. In other words, the fee is determined by the War Department's prepared schedules as to amounts rather than by negotiation as to how much you would be willing to take or might be asking. Is that it?

Mr. STIRTON OMAN. We were disappointed in the amount, I'll tell you that.

Mr. FULTON. In any event, you didn't set the fee.
Mr. STIRTON OMAN. No, sir.

Mr. FULTON. Or any part of it.

Mr. STIRTON OMAN. No, sir; we didn't set it.

Now, one other thing I would like to make clear right there. Our business is generally road grading and drainage, electric power lines, water and sewer system, and not as a building contractor. This job seemed to be an imposition on the Oman Co. due to the rates of rental that were set up on our equipment. We protested the amount of that rental price because we were right busy then, engaged in a lot of other work where we were getting several times the amount that this contract was going to allow the prime contractor for his equip

ment.

Mr. FULTON. Was any of that work Government work?

Mr. STIRTON OMAN. Some of it was. Some of it was private work. I would say it was contract bid-price work, unit price.

VALUATION OF EQUIPMENT

Mr. FULTON. Now, with respect to your equipment, how much was the valuation which you reported to this committee that you had on your equipment when we asked you some weeks ago? I think it was in the neighborhood of $150,000; was it not?

Mr. H. K. FERGUSON. You mean the amount of equipment on this project that was actually used?

Mr. FULTON. Of his company.

Mr. FERGUSON. That was actually used on this project?

Mr. FULTON. Yes.

Mr. STIRTON OMAN. At the time?

Mr. H. K. FERGUSON. That is the figure you gave me. how much did you actually use on this project.

He means

Mr. MANIER. Do you mean the report made to this committee here or made to the committee at the time?

Mr. FULTON. I think your company sent us information concerning that. I believe it was in the neighborhood of $150,000; was it not? Mr. STIRTON OMAN. Mr. Fulton, you have this.

Mr. FULTON. I had it in the Memphis hearing.

I thought maybe you had it.

Mr. OMAN. I thought maybe you had the statement we sent you.

Mr. FULTON. I did have, and it would be among our records, but does your memory recall?

Mr. STIRTON OMAN. I think that we reported to your committee that we had $159,510 worth on the job, from the records that we had in the Nashville office at that time. We have on this project replacement value-this is the correct amount, that other was the first contract that we had in the Nashville office and we didn't have the information that was from the job because our contracts are not like third party contracts; they just take one and keep adding pages to it, and the price is set out in the negotiations as to what we get for it. Mr. FULTON. I was not so much interested in the price you set in your negotiations as in the price that you people carried this equipment at on your own books, which I thought was what the $159,000 figure was. Isn't that carrect?

Mr. STIRTON OMAN. Here is the way we carry it on our books. We have never wanted to be uncertain about how we stood financially, and we have always carried our equipment at the lowest possible figure that we could, because equipment is a means that we have of making a livelihood, and for banking purposes we have never needed a financial statement. Our financial statement has always been such that we could get whatever we needed, and we carry our equipment at the actual value that we have in it. For instance, if a shovel, has depreciated off of our books and we trade that shovel in on another one, we only set up on our books the actual cash difference that we pay, because the other machine has depreciated off the books, and this new value that we set up is the money that we pay out. Now, for instance, we have on this job a shovel that I put the purchase price in from memory as $21,000. The replacement value of that shovel is twentynine thousand some hundred dollars.

Mr. FULTON. You mean that is the value at which you put it in when you put it on the project?

Mr. STIRTON OMAN. No, sir. I put it in at $15,000 as the actual value then.

Mr. FULTON. And you paid $21,000? You think it is worth $29,000. You put it in at $15,000. Is that it?

Mr. STIRTON OMAN. No, sir; we didn't pay $21,000 for it. I merely put that down as what I remembered we had paid for it. These figures were not taken from actual bills of sale because we had no idea that the Government was going to exercise the recapture clause. We didn't want them to recapture any of our equipment.

Mr. FULTON. Had anyone told you that the Government would not recapture it? Had you been discussing recapture? As I understand, some contractors had, some of them say they were more or less led to believe there would be very little recapture.

Mr. STIRTON OMAN. We were led to believe that our equipment would come back to us, due to the very low price that we were being paid for it. For instance, we would get $187.50 a month for a D-8 tractor, and it takes a long time for that tractor to work out to pay the recapture price. Now, we have gotten notification that the Government is recapturing quite a bit of our personal equipment, which we don't like at all because we would like to have it back. You can't get new equipment now.

But going back to this shovel proposition, I would like to state that we paid $11,900 cash; and another machine, which the dealer sold for exactly the amount that we traded in on it, which was $7,500, for that machine had depreciated off our books, so the value of this machine on our purchase price as shown in the statement that we sent out—you wanted us to give you a statement as our books showed it, and that is just exactly what we did.

Mr. FULTON. It is what you would have to do.

Mr. STIRTON OMAN. That is right. But it makes it look mighty bad from your standpoint to see you get $15,000 for a machine that we only show on our books at $11,000, but that machine could be sold today for the price that we put it in at, and I have an affidavit from the dealer stating that that machine will bring from $15,500 to $16,000 today, and he is familiar with the machine. We keep our equipment up in good shape.

Mr. FULTON. I notice that there are several different figures that come up. Of course, that is probably true in one sense. If you depreciate your machinery on your books fast during years preceding the sale, you would thereby be decreasing the amount of profits on which you pay income tax, and many equipment dealers have pointed out to us, not doing anything illegal, but by taking the limit of the amounts that they could depreciate, they got themselves in the position where their machinery on their books was, in their opinion, depreciated too much. Is that somewhat the same problem that you had? Mr. STIRTON OMAN. We depreciated it as fast as we could.

Mr. FULTON. Do you think it is depreciated too much on your books? Mr. OMAN. I wouldn't say that.

Mr. FULTON. But within the limits, however, which the income-tax authorities have allowed.

Mr. OMAN. Yes, sir. They set that up about 12 or 14 years ago. as to how we would handle our income tax, and it has been handled that way. Now, that is working to our disadvantage this year.

Mr. FULTON. And to your advantage in preceding years.

Mr. OMAN. Well, we have always had to pay a whole lot of income tax. I don't know why, but we have always had to pay it.

Mr. FULTON. Now, that $159,000 figure-the thing that I noted about that was that when you listed your equipment with the War Department in applying for this job, you put a value on it even lower than that $159,000 figure.

Mr. STIRTON OMAN. We bought some more equipment since then. Mr. FULTON. I mean item by item. Looking at the items that you have there and the items that you reported to the committee, I note that in some cases there are additions of more than a thousand dollars, even on your so-called depreciated book value, that you put on the equipment

Mr. OMAN (interposing). Are you referring to this negotiation? Mr. FULTON. Yes.

Mr. OMAN. I think you will note that that was stated in therethat that was made up from memory in Washington.

Mr. FULTON. And that is stated, I think, on the last page. Now, why was it that those items are lower rather than higher than the amount that you had then? had then? Was it your desire to have it appear as reasonable as possible?

Mr. OMAN. We wanted to be absolutely honest, and I would rather be safe than to make a misstatement on it.

Mr. FULTON. But you would have been more safe if you had put that in at more than you intended to charge the Government for it rather than less; wouldn't you?

Mr. OMAN. Well, are you referring to this?

Mr. FULTON. Yes.

Mr. OMAN. Well, this was made up in June, and this other was made up the 31st day of December last year, and we figured that 6 months' depreciation or use of equipment-I mean it was worth more money 6 months ago than it was at this time.

Mr. FULTON. Did you call that to the attention of the negotiating committee that you were revaluing your equipment at higher prices than the amounts that you had put down in your application? Mr. OMAN. No, sir; we didn't do that.

Mr. FULTON. Didn't you do that?

Mr. OMAN. No, sir.

Mr. FULTON. You have added to almost every item?

Mr. OMAN. No, sir. This first contract was dated December 31, 1940, and these prices in this schedule were value as of that date. Now, on the first of June, or the last day of May when this second contract was negotiated, that is a lower price than the price we put in 6 months before, and that is the reason for that difference, Mr. Fulton.

Mr. FULTON. The point I make is that you got the contract on representations, including representations as to valuation of equipment, which you thereafter changed by increasing the equipment without calling it to the attention of the negotiator. Isn't that true? Mr. OMAN. No, sir. We didn't put any values—

Mr. FULTON (interposing). Will you show me any schedule that you submitted to the Army before you got this contract, wherein you stated it was your intention to revalue that equipment and put higher prices on it?

Mr. OMAN. We didn't put any prices on the first contract. We just stated that we had so many pieces of equipment, so many tractors, and in that I think, if you will recall the contract, we stated that we had a lot of equipment on other projects and if and when that equipment was released we would put it on this job.

Mr. FULTON. Very little of that was ever put on this job, was it? Mr. OMAN. It was recaptured by the Government on other jobs. Mr. FULTON. Such as what camps?

Mr. OMAN. Claiborne; Polk.

Mr. FULTON. You had rented quite a bit of equipment as a third party renter on other jobs.

Mr. OMAN. Yes, sir.

Mr. FULTON. And was it because of the rents you were receiving there that you thought this equipment was worth more money and should be valued higher on the ordnance project?

Mr. OMAN. No, sir. We valued it lower on this project than we could have gotten anywhere else.

Mr. FULTON. What did you value it at on the project?

Mr. OMAN. Oh, this project?

Mr. FULTON. That was the figure you were about to give us.

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