was interested in, in the last analysis, was determining its power to interfere as a Federal court in the workings of an administrative agency. Now, it is axiomatic that the Government cannot be run if every Federal judge can interfere with the exercise of judgment. It is true, however, as we maintain, that there is not only bad judgment but circumstances of such a character as to warrant an interference by this body. The issue is not whether the court could interfere with it but whether you gentlemen could interfere with it.

Mr. HOLIFIELD. I understand the case as this last gentleman has presented it, that the action of the Federal court was an action which sustained the administrative right of the AEC and of Roane-Anderson to do what it did under the law, and did not go into the equity of the situation as far as judging as to the merits in the awarding of the lease. But it did sustain the action of eviction which was started by the Roane-Anderson and AEC group. Is that right?

Mr. EUGENE ROTH. That is our position, sir. It sustained their right. It more than sustained it. It constituted the eviction action in itself, you see.

Mr. HOLIFIELD. Yes.

Mr. EUGENE ROTH. Because we were in, and this was the order of the court under which we were pushed out.

Mr. HOLIFIELD. And if there were any criminal actions or any civil damages to be obtained by the Taylor group, they must go to the courts to determine that.

Mr. EUGENE ROTH. Yes; we concede that.

Mr. HOLIFIELD. And the fact of their coming to us is for the presentation of damages which they have incurred as the result of misuse of administrative powers. Am I stating that correctly?

Mr. EUGENE ROTH. Yes; we would be in the courts instead of here, otherwise.

Mr. HOLIFIELD. That is the point I wanted to get clear.

Mr. LEVITT. Congressman Holifield, to bear out what you said, the judge, in his memorandum issued when he made his final decision, made the statement-I don't remember the exact words; it was in the paper-that he was not determining the merits of whether we should or should not have the lease. Now, you understand that, and he used the term "fair or unfair." In other words, he was not discussing the things that we are discussing.

Mr. HOLIFIELD. That is the reason I have these two lawyers on the committee at my side.

Mr. KILDAY. The theory of the Federal court indicates that the court went into the whole thing. He recites here the number of people who advertised for bids, and that sort of thing, and then he had something to say about the defendant having no vested right to have his business accepted in preference to others, and so on.

It offered testimony which tended to show that Roane-Anderson Co. had orally promised that defendant would receive preferential treatment as to extension of its concession because of expenditures which defendant undertook to make in adding fixtures and otherwise improving the facilities to be used under the concession agreement. There is marked inconsistency between any promise of that kind and the specific language of the written concession agreement which provided for amortization of those expenditures at the expense of the Government's agent, Roane-Anderson Co. Had there been a promise to give defendant such preferential treatment as to obligate Roane-Anderson Co. to recommend acceptance of defendant's bid regardless of comparative merit, there would have been no bona fide reason for inviting bids from other firms, to say nothing of the objection to such an arrangement on grounds of public policy.

The opinion all the way through indicates that he had all of the evidence with reference to preferential treatment, the equities of improvements made, and that sort of thing.

Mr. EUGENE ROTH. I didn't maintain that that wasn't so.

Mr. HOLIFIELD. I conceive it to be the duty of this committee to proceed and find out whether the manner in which this was handled was fair. In view of that purpose, I would like to ask Mr. Cook:

Do you wish to testify on some of those points, or do you wish to have Mr. Winfrey testify?

Mr. Cook. I would like to have Mr. Winfrey go through his data, and then if there are any questions which are not answered, either he or I can answer them.

Prior to his starting, I would like to insert in the record the Policy and Procedure for Selection of Award of Commercial Leases at Oak Ridge, Tenn.

Mr. HOLIFIELD. That will be accepted and made a part of the record.

(The material referred to is marked "Exhibit 4" and will be found in the appendix at p. 119.)

Mr. HOLIFIELD. Mr. Winfrey, what is your position?

TESTIMONY OF C. M. WINFREY, MANAGER, RENTAL DEPARTMENT, ROANE-ANDERSON CO., OAK RIDGE, TENN.

Mr. WINFREY. My position is that of manager of the rental department of the Roane-Anderson Co., agent of the United States Atomic Energy Commission.

Mr. HOLIFIELD. Now, what relation does Mr. White bear to that? Is he your superior?

Mr. WINFREY. He is my superior.

Mr. HOLIFIELD. In the same department?

Mr. WINFREY. He is the manager of the division which handles not only rentals but subcontracts, and so forth. I have largely the rental contracts.

Mr. HOLIFIELD. Then you take full responsibility for the manner in which you handled the lease as far as the Roane-Anderson Co. is concerned?

Mr. WINFREY. I do, sir. I might point out that I originally negotiated with the Darling Stores on the first agreement, at the time it was under the administration of the USED. And I have prepared here a short résumé of the history of that entire operation, if I may read it.

Mr. HOLIFIELD. I wonder if it is entirely relevant. There has been no contest as to that. You may put it in the record, but unless my colleagues here desire to go back into the history of the original leasing I would say in order to save time you might place that in the record, unless you feel it is entirely relevant.

Mr. WINFREY. We feel it is pertinent in this respect, that it carries us through the entire negotiation. It takes up the original negotiation, where there was no inference of a long-term agreement anticipated, and brings it to date through the negotiation with their real-estate agent, the Marx Realty & Improvement Co. And furthermore, to substantiate it, the record, correspondence, and telegrams, are referenced in my statement. It is very condensed, and I believe will

answer most of the questions which you gentlemen might ask. It should not take over 5 minutes.

Mr. KILDAY. Is not the important thing the question of any negotiations and conversations leading up to the question of the renewal? The first contracts were placed in writing, and all the negotiations, of course, were merged in that. So I think you could put that into the record and get down to the matter of renewal.

Mr. HOLIFIELD. I think that is wise, because we will have trouble keeping our committee together unless we proceed rather rapidly at this point.

Mr. WINFREY. May I state this, then:

1. At all times during these negotiation proceedings, beginning as early as April 1949, the referenced concessionaire was fully advised of the procedure necessary wherein any reduced rental payment to the Government was involved in any way whatsoever.

2. The fact that anticipated volume was never reached and that each year's operation materially declined in volume was mutually recognized by both interested parties. It was Taylor's contention that this condition was primarily due to their inability to secure qualified subleases by reason of their short-term agreement. This same reason was advanced as the cause of their reluctance to promote sales and good will by proper advertising and the installation of such normal department-store conveniences as delivery service and charge

accounts.

3. In order to overcome these difficulties, the agent endeavored to renew the expiring agreement under the same rental percentage but containing an acceptable minimum guaranty to the licensor for a period of 1 year only. This, in our opinion, would permit the concessionaire to continue in operation until such time as the firm leasing program was officially approved. The concessionaire, however, was insistent upon the inclusion of optional renewal privileges covering three full years for the licensee's benefit only. To this action, the agent was opposed by reason of the performance record of this operation through the preceding 3 years.

4. In August of 1949, official approval was received enabling the agent to execute firm leases under prescribed conditions. The concessionaire's agent was immediately advised of this policy and was offered an extension to his then expiring agreement for a period of 6 months under exactly the same terms and conditions of rental payment. This offer eliminated any provision for payment of a minimum guaranty or any reference to renewal beyond the extended expiration date. The agent for the concessionaire, after consultation with his client, advised this office that such an extension to January 31, 1950, of their original agreement would be acceptable. The Roane-Anderson Co. then executed such a modification with Taylor's Oak Ridge Corp.

5. The Roane-Anderson Co. advised the concessionaire's agent of its intention to advertise the subject premises publicly for rental under the terms of a lease in lieu of a concession-type agreement and to solicit qualified and recognized department-store operators to submit a proposal for entering into such a lease where possible.

6. The basic features to be considered in making a recommendation for awarding the proposed lease were as follows:

a. The general character of the operation proposed, that is, whether or not it envisioned a true department-store operation in the generally accepted sense of the definition, such as Miller's, Inc., S. H. George & Sons, Proffitt's, Loveman's, Inc., Davison Paxon's, and so forth, who operate the store in its entirety with a few subleased departments, such as shoes, photo shop or fountain, or whether it would consist almost entirely of subleased departments with the lessee directly operating only one phase, such as women's and children's ready-towear, or whatever it chanced to be.

b. The term of the lease proposed.

c. The percentage offered, the minimum guaranty to be made, and the relationship of these factors to reasonable assumptions of potential volume based on the applicant's past-performance record.

d. The indication of the applicant's aggressiveness in merchandising, such as, but not limited to, the installation of a charge account and daily delivery service, the installation of proper air conditioning, the willingness to promote good will and volume by extensive advertising, seasonal and promotional sales, and so forth.

(The historical résumé of department-store operation at Oak Ridge, Tenn., is marked "Exhibit 5," and will be found in the appendix on p. 126.)

Mr. HOLIFIELD. Now, may I ask you, Mr. Winfrey, if those criteria were given to the applicants?

Mr. WINFREY. To all applicants; yes, sir.

Mr. HOLIFIELD. In verbal form, or written?

Mr. WINFREY. Verbal and written.

Mr. HOLIFIELD. In other words, the criteria by which you judged the lease were given to the Taylor people?

Mr. WINFREY. Yes, sir.

Mr. HOLIFIELD. And Loveman's; the same criteria to each?

Mr. WINFREY. The same to each.

Mr. ELSTON. When were the criteria agreed upon?

Mr. WINFREY. At the time we advertised. We sent letters to 500 stores, and we interviewed them, such as R. H. Macy and Gimbels. Mr. ELSTON. When was that?

Mr. WINFREY. In October of 1949.

Mr. HOLIFIELD. And the criteria were enclosed in those letters? Mr. WINFREY. Basically; yes, sir.

Mr. EUGENE ROTH. Could I ask that the record show the communications to Loveman's and to Taylor's Oak Ridge with those criteria in them?

Mr. HOLIFIELD. I think it is in order that that be supplied, if you gave it to them.

Did you make the statement that you gave that in writing, or verbally?

Mr. WINFREY. No, we gave that verbally to Loveman's, because we contacted them and they came up. We gave it verbally to Darling's. We have one letter in the file which refers to that, under date of September, I believe, in which Mr. Sanford requested from Mr. White the method of operation, and that letter is a matter of record. Mr. HOLIFIELD. And it does contain those criteria? Mr. EUGENE ROTH. Those criteria; yes, sir.

63888-50- -4

Mr. ELSTON. You said a moment ago that you gave it substantially, or basically. Did you not have it written out so that it was in the language you have just given us?

Mr. WINFREY. Basically, we went over the entire thing verbally, with people like Mr. Moore of J. C. Penny Co., who was in charge of the real estate, and it is not their practice to put in charge accounts, and it is not their practice to have delivery. And we didn't want to eliminate people of that character who might want to bid, by making it a written part of the proposal, any more than the minimum guaranty. We desired a minimum guaranty. You could submit a proposal with or without. We would consider all proposals received. Mr. ELSTON. Did you consider the proposals in the nature of sealed bids?

Mr. WINFREY. No, sir; we have never considered them in the nature of sealed bids. We have considered them as proposals which would be submitted to us prior to a dead-line date and reviewed in the light of what they are proposed to do. We could hardly define all of the things that we wanted in a normal form of specification.

Mr. ELSTON. Now, some figures were given to us today which would indicate that the Government is going to lose some money on this Loveman contract, as distinguished from the Taylor contract, in the event they had received it. What have you got to say about that?

Mr. WINFREY. Well, I think, there, that the accent all the way through was placed on the minimum guaranty and the percentage which the Darling Stores offered us, as being the best that we had received. In our opinion the minimum guaranty was nullified in both proposals by reason of the right to terminate, if the population should decline, or if the proposed new commercial center was built. With that right, they could terminate, and we could not, and of what value was the minimum guaranty for a period of 5 years or 10 years? The 3 years before which they increased the minimum guaranty from $25,000 to $36,000 is about the approximate time we figured it would take to build a new commercial center if it were to be built. In that event, they had the right of cancellation. We did not. In the event it was not built, the minimum guaranty in our opinion became inconsequential.

Mr. ELSTON. Why did you put it in the lease if it does not mean anything?

Mr. WINFREY. Simply because it has been a policy given to us by the Atomic Energy Commission that they want a minimum guaranty which, in a measure, as fully as possible, covers the Government outof-pocket expense. By that I mean the furnishing of municipal services, because there are no taxes in Oak Ridge.

Mr. ELSTON. Then the minimum guaranty does mean something, if they are insistent?

Mr. WINFREY. It does in the matter of that coverage, and that is the reason we like to obtain the minimum guaranty.

Mr. EUGENE ROTH. Mr. Chairman?

Mr. HOLIFIELD. We will have to have some order in this hearing. You may make notations, Mr. Roth, of anything you wish to refute, and later on you will be given that opportunity; but we must have order in the way it is presented.

Mr. ELSTON. Mr. Chairman, I want to ask one more question on this. According to the testimony given to us today, Loveman's