Mr. CORCORAN. I think it was along sometime at the beginning of September.

Senator BALL. September? So you had worked off and on since January on it.

Mr. CORCORAN. Yes; as a matter of fact, it wasn't completely tied up until a few days ago.

Senator BALL. And your $25,000 fee was paid.

Mr. CORCORN. Oh, yes.

Senator BALL. You say here in one place that the British Purchasing Commission asked you to get into this and you and Guthrie withdrew once and then you got back in.

Mr. CORCORAN. That is right.

Senator BALL. Had you ever represented the commission before on any other work?

Mr. CORCORAN. No.

Senator BALL. How many days would you say you put on this whole thing?

Mr. CORCORAN. I don't know, Senator; it is very hard to tell; it was off and on, off and on, over a long period of time. Sometimes you would work 24 hours a day and 48 hours in a row and then the rest of the week you have to wait for a board to act. I would like to put in the record, if I may, several letters, one a letter of May 15 from Vimalert to the Chief of the Ordnance Department; another a letter of July 1 to the O. P. M., which at one stage had the power to pass on this contract. One of the difficulties was that in the beginning of the lease-lend operation it wasn't clear who really did have authority to work out these lease-lend purchases. Another one is a letter of July 8 to the Defense Aid Division in the Office of the Under Secretary of War, and another to the assistant to the Under Secretary of War. The CHAIRMAN. These letters will be made a part of the record. (The letters referred to were marked "Exhibits Nos. 341 to 344" and are included in the appendix on pp. 4227-4234.)

The CHAIRMAN. Was Mr. Guthrie also paid $25,000?

Mr. CORCORAN. Yes, sir.

The CHAIRMAN. The attorneys' fee in this case then wound up at about 5 percent of the total contract.

Mr. CORCORAN. Well, I don't know. These things weren't figured on a percentage basis.

Senator BALL. Fifty thousand is 5 percent.

Mr. CORCORAN. Arithmetically that is right.

Senator BALL. O. K. That is all, Mr. Chairman.

The CHAIRMAN. Senator Hatch, did you have any questions? Senator HATCH. No; I wasn't here this morning, Mr. Chairman, and I very much object to a Senator's coming in at the last moment and attempting to cover all the ground that has been covered. I am reading the testimony now, trying to catch up with it. I may want to ask some questions after all.

Senator BREWSTER. The only question I had was about rumored connections with the British before you became connected with the Vimalert.

Mr. CORCORAN. No; I had no connection.

Senator BREWSTER. Had you any conversations with them!

Mr. CORCORAN. No; I met the British in the course of the conversations representing Vimalert.

Senator BREWSTER. But prior to January 4, 1941, you had no conversations of any character concerning this affair?

Mr. CORCORAN. No.

Senator BREWSTER. With the British or anyone else?
Mr. CORCORAN. No.

Senator HATCH. I do want to ask just a general question, Mr. Corcoran. I have noticed already here, as far as I have read, referring to contract brokerage and things like that, and you mention "influence" here, it is hard to define, and those things. I think we both understand what each is talking about. What has been the nature of your practice since you left the Government? Has it been as a lawyer?

Mr. CORCORAN. Yes; it has been as a lawyer.

Senator HATCH. Or broker?

Mr. CORCORAN. No. As I think I have made clear to the committee this morning, the only way I can answer that is to go through the facts of each case.

Senator HATCH. That is right.

Mr. CORCORAN. And I don't know what a broker is, either.

Senator HATCH. I could not be here this morning, as I say, and I did want to hear your testimony very much, and I will wait and let you develop it and then perhaps we will have some questions.

Senator BALL. Mr. Corcoran, in your preliminary statement you said you had never dealt directly with procurement agencies. In this case, I realize that you state you originally came in to draft the contract which had already been agreed upon, but later you actually did negotiate the final contract for the Vimalert Co., the revised contract?

Mr. CORCORAN. I moved between both sides, between the British and the Vimalert. Of course, the British passed that contract as it had been negotiated between them and Vimalert.

Senator BALL. But you were actually representing Vimalert in negotiating that final contract?

Mr. CORCORAN. Well, with the British.

Senator BALL. And the Army?

Mr. CORCORAN. Well, when it got to the Army it was the British negotiating with the Army.

Senator BALL. Yes?

Mr. CORCORAN. The British put their contract in the form of a requisition; from then on the British were negotiating with the Army. Senator BALL. What I am getting at is in this final $1,000,000 contract you actually did the negotiating for the Vimalert Co.?

Mr. CORCORAN. Yes; after the British and Vimalert had agreed. Senator BALL. And in this case your fee must necessarily have come out of this million dollars.

Mr. CORCORAN. Let me put it this way. The same price would have been paid no matter what my fee was. The price was fixed by the Army. Now, I don't deny that my fee came out of the company, what the company got out of the contract, but I am saying the price to the War Department and the price to the British would have been the same whether the company had paid me or the company hadn't paid me.

Senator BALL. That is probably a true statement, but that is also true of almost any negotiations, but nevertheless the final terms of the contract quite often depend on the negotiator.

Mr. CORCORAN. I am sorry, maybe you and I are trying to make different points. What I am trying to say is that what I took out of this contract didn't increase the cost to the parties, either to the United States or to the British.

Senator BALL. Oh, yes; that is true.

Mr. CORCORAN. Magnesium is next.

The CHAIRMAN. Magnesium. Proceed.

CONNECTION OF THOMAS G. CORCORAN WITH HENRY J. KAISER MAGNESIUM

SYNDICATE

Mr. CORCORAN. From January to June of this year I was employed by a group which had become interested in a new process that they thought would produce metallic magnesium at a new cost and of a new high purity and desired to build an experimental reduction plant, together with a fabricating plant large enough to handle its output.

The enterprise was undertaken as a joint venture by several interests. one of which was the Todd Shipyards Corporation of New York. My employment was for the latter company and its associates-through attorneys who regularly represented Todd. (As has been previously testified by representatives of Todd Shipyards before this committee, I have not been employed by this corporation in connection with its shipbuilding contracts.)

The significant fact about this venture is that the private parties bore all of the risks involved in constructing the first plant, at a cost of upward of $3,500,000, which would prove or disprove the feasibility of the process. If it worked the United States would have the jump on the world in the production of this war time metal. If it failed the entire loss would fall on the collateral the private parties deposited with R. F. C. There was no commitment of any kind for defense orders for the product.

Many defense plants and extensions are built at the risk of Government funds, either through a so-called Defense Plant contract or, at an earlier stage, through a so-called Emergency Plant Facilities contract. The construction of the test unit of this plant through this unusual risk of private funds was undertaken after a request for the building of a plant under an Emergency Plant Facilities contract under the management of the same syndicate had been refused by the Government. In that request I had no part.

As the plan for the use of private funds was worked out, the long process of the organization of the venture included as two incidents two relationships with the Government. The first was the issuance of a so-called certificate of necessity. This is a privilege to amortize the cost of the facilities for tax purposes over a period of 5 years. It is a privilege freely granted to any worth-while enterprise in the defense effort, particularly if the enterprise is risking its own money in the new facilities.

The second relationship with the Government was the obtaining from the Reconstruction Finance Corporation of a fully collateralized loan.

The loan was a construction fund loan, drawn down against construction as completed. The commitment was for $3,500,000.

The security was an assignment of fees amounting to $4,800,000 payable by the British Government to the borrower, a California shipbuilding corporation, the corporation's patents and a mortgage

on the plant. The loan was negotiated personally by Mr. Jones with the chief parties in the syndicate, who had had other business relations with R. F. C. long before the matter of this loan ever came

up.

The quality of the loan is attested to by its subsequent history. On February 21, 1941, the original commitment of $3,500,000 was made.

On June 30, 1941, the Reconstruction Finance Corporation increased the loan by $5,750,000 to double the size of the plant.

On November 10, 1941, the R. F. C. further increased its loan by $12,500,000 to quadruple the size of the original plant, refunding the earlier commitments of $3,500,000 and $5,750,000 in a single new loan of $21,250,000.

I sat in conferences between the principals of the syndicate and Mr. Jones in the course of the negotiation of the first loan of $3,500,000.

So far as it is charged that political influence or my influence, rather than the quality of the loan, determined the granting of the commitment for $3,500,000, I think the cold arithmetic of the subsequent history of the loan speaks for itself.

Neither the application for the certificate of necessity nor the application for the loan to the R. F. C. constituted the difficult spots of the enterprise in which many men spent time and energy and imagination together.

The undertaking started from scratch. Far more difficult than the relations with the Government were the acquisition of basic patents, clearance of relations with inventors, organization of the engineering force-we had to send to Europe for one man-the internal arrangements and relations between syndicate members, the adaptation of the collateral to put it in form acceptable to the R. F. C., the obtaining of priorities on materials, and the plans for commercial utilization of the patents.

This undertaking has been recognized as perhaps the most significantly daring risk of private funds in the defense program. I like to think I played some part in the decision to dare.

My compensation was paid to me by the lawyers who retained me to assist them and who were in turn paid by their own clients. No part of their compensation nor my compensation for my services in the enterprise was paid out of the proceeds of the loan from the Reconstruction Finance Corporation, nor out of any other funds of the applicant to the R. F. C., nor otherwise out of Government funds.

The CHAIRMAN. Senator Herring, any questions?

Senator HERRING. No, Mr. Chairman.

The CHAIRMAN. Senator Ball?

Senator BALL. This is the Henry J. Kaiser Co. syndicate?
Mr. CORCORAN. That is right.

Senator BALL. Who were the lawyers?

Mr. CORCORAN. Fitzgerald, Stapleton & Mahon, in New York.
Senator BALL. And they were attorneys for the syndicate?

Mr. CORCORAN. Yes, sir.

Senator BALL. What was your fee on that?

Mr. CORCORAN. To date, on that I have had $65,000.

Senator BALL. And for that, what did you do for this firm of lawyers?

311932-42-pt. 10- -12

Mr. CORCORAN. I have done nothing for this firm of lawyers. I had known them for a long, long while.

Senator BALL. I mean for that fee of $65,000; what services did you render?

Mr. CORCORAN. For that fee of $65,000 we started from scratch to organize this enterprise as a private venture after the application to organize it as a public venture had failed. I worked in the entire operation from the beginning of acquiring the patents right straight down through. It was the kind of organization work I used to do for-a Wall Street banking house when there were enterprises and Wall Street banking houses 15 years ago.

Senator BALL. Then you weren't concerned only with negotiating this loan?

Mr. CORCORAN. Oh, no; the loan wasn't hard to negotiate, Senator, because the loan was too well collateralized to be hard to negotiate. Senator BALL. But they had been turned down once before by the Emergency Plant Corporation.

Mr. CORCORAN. No.

Senator BALL. I thought I read that in your statement.

Mr. CORCORAN. What I meant was this. They had been turned down going to the Government asking the Government to build a plant for them.

Senator BALL. I see.

Mr. CORCORAN. Which they would manage-that is, a plant which was to be built with Government funds.

The CHAIRMAN. On the same basis as the aluminum plants have been built.

Mr. CORCORAN. That is right.

Senator BALL. Well, these lawyers were hired by the Todd Shipbuilding Co., or by the whole syndicate, this firm that hired you! Mr. CORCORAN. As I understand the situation, Senator, the syndicate arranged with Todd Shipyards to hire Todd Shipyards' lawyers to be the syndicate's lawyers. My relations were with the Todd Shipyards' lawyers.

Senator BREWSTER. That was the basis of the statement here of the Todd people that they had never employed you.

Mr. CORCORAN. I said they had never employed me with relation to any shipbuilding contract. The only relationship of employment that I have had with them, indirectly or directly, is in connection with the magnesium enterprise.

Senator BREWSTER. That is the basis of their testimony before us, that they had not retained you.

Mr. CORCORAN. That is right.

Senator BALL. When were you retained on this?

Mr. CORCORAN. Very early in January. I should say it wasn't later than January 10.

Senator BALL. Then you are still on it, or when did you finish? Mr. CORCORAN. No; after the first loan was finished, it was signed about the middle of May, I left the picture.

Senator BALL. Did you have anybody working with you on it? Mr. CORCORAN. No; I worked, as I testified earlier, in combination with these other law offices. I worked in combination with that office in New York, and there were four or five other lawyers in the