taken in the preparation of the prospectus and advertisements for its sale. I further urge that this asset be sold at public auction, with provision for each competitive bidder to increase his offer during the auction of this property. Such provision will eliminate future complaints or criticism that favoritism existed or that the asset was sold for less than its true value. This view seems to me to be within the letter and spirit of section 12 of the Trading With the Enemy Act, as amended. A private or negotiated sale of this asset should be prohibited.

I am of the firm opinion that every prospective bidder should have access to all the pertinent facts concerning the administration of this vested asset, its potentials, and its current value at the time of the sale.

Please furnish me at the appropriate time with copies of all advertisements, prospectus, etc.

With kind regards, I remain
Sincerely yours,

OLIN D. JOHNSTON, Chairman.

MARCH 31, 1959.

Hon. OLIN D. JOHNSTON,

U.S. Senate, Washington, D.C.

DEAR SENATOR: This will acknowledge your letter of March 23 advising that you have received inquiries with respect to a possible sale of General Aniline & Film Corp.

As you know, section 9 of the Trading With the Enemy Act prohibits the sale of vested property while a suit for return is pending and such a suit is now pending in the District Court for the District of Columbia (I. G. Chemie v. Rogers). In view of the pendency of this litigation there is no present prospect of a sale of the vested shares unless the Congress should enact into law one of the various pending bills which would amend section 9 to permit the sale of vested property despite the pendency of the suit for return or unless the litigation is dismissed or settled. The Department of Justice has supported bills to enable the United States to sell the stock it now holds and to hold sufficient proceeds to pay off any claims.

I have stated on numerous public occasions, and I am happy to repeat it again, this property, when and if sold, will be offered at public sale to the highest bidder after full and adequate public advertisement.

The procedure which will be followed is set forth in section 12 of the Trading With the Enemy Act and by section 501.25 of the Regulations of the Office of Alien Property (8 CFR 501.25). Every prospective bidder, of course, would have access to pertinent facts concerning the vested asset, business secrets expected, and such information will be disclosed in the prospectus and registration statement which will be issued prior to sale. This procedure is the one which has been followed in the cases of other vested assets disposed of by the Office of Alien Property.

At no time has any consideration been given, and none will be given, to a negotiated sale of the stock of General Aniline & Film Corp., now owned by the United States. Sincerely,

WILLIAM P. ROGERS,
Attorney General.

STATEMENT OF OSCAR R. HOUSTON, NEW YORK CITY, N.Y.

Mr. HOUSTON. My name is Oscar Houston. I have a written statement. We can include it all in the record.

Senator JOHNSTON. I am the only one of the committee here. If you file it in the record, it will get before all of them.

Mr. HOUSTON. Very good. I will file a memorandum that I have prepared with my statement.

Senator JOHNSTON. Your statement, as I understand it, concerns the American marine insurance companies?

Mr. HOUSTON. That is right.

Senator JOHNSTON. We will hear you along that line.

Mr. HOUSTON. That is correct. I represent a number of the marine companies that paid losses on the ships.

Senator JOHNSTON. I believe, of the total losses you had at that time, you cut it to about a 10th. A great deal of insurance could not be gotten by the Government.

Mr. HOUSTON. That is right.

Senator JOHNSTON. So you may proceed.

Mr. HOUSTON. Many of you will remember what a dreadful time there was on the Caribbean and the east coast of the United States during the winter of 1941 and 1942. Hitler sent every submarine he had over here to interrupt the lifeline that brought our copper, our aluminum ore, and our oil from Venezuela and South America, for the war effort.

Now, it was a terrible holocaust. I have a book which was recently published, "Fire on the Beaches" by Theodore Taylor of North Carolina, that gives the whole story. With your permission, I would like to file it with you; not for the record, but if anyone wants to read it

Senator JOHNSTON. What is the name of the book?

Mr. HOUSTON. "Fire on the Beaches."

Senator JOHNSTON. I have read that.

Mr. HOUSTON. It is a very readable book.

Now, when that happened, there was this situation. The lifeline for our supplies had to be kept open. No shipowner could afford to send his ships in that hazardous trade without insurance. The Navy was caught unprepared by Pearl Harbor, and for a year, they were not able to give protection to our ships and our ships were sitting ducks all down the coast. Somebody had to carry that risk. The U.S. Government, through the War Shipping Administration, was the logical body to carry it but they could not because there was a statutory provision in our neutrality law-the days when we thought we could keep out of European war-we had a provision that authorized the War Shipping Administration to insure ships provided, however, they could not insure any ship that carried contraband. Well, everything they carried there, the vital things, were all contraband. The War Shipping Administration was paralyzed. Somebody had to carry that risk.

The marine insurance people had been insuring regularly up to that time, they could not increase their rates to make them compensatory. They could not get a fair rate without upsetting values and prices. So they stood by their guns and they insured this hazardous lifeline at rates from a half percent to 2 percent which is a ridiculous price for the conditions that existed. And they knew they were losing money. They had meetings every 2 days with their directors and every day all the losses came in and they saw they were losing money and they went ahead and they held the fort. Now, that is the justification for what they are asking. It is not a new thought on our part. In 1948, Congress created a War Claims Commission and one of the duties they laid upon that Commission was to make recommendations about claims and the Commission filed an elaborate report in 1953 which I may say, is largely the basis of all subsequent bills. They reviewed the underwriters' actions, substantially as I have given them to you. This is their conclusion:

It is the view of the Commission that the underwriters have valid war claims for the losses they sustained under their war risk contracts of insurance. In their behalf, it must be said that but for the contracts of insurance they wrote, many ships engaged in the commerce of the United States would not have taken to the sea and the United States and its Allies would have been denied vital material in shipments to their destination which underwriters made possible. I understood Mr. Gillilland of the Foreign Claims Settlement Commission echoed very much that sentiment this morning.

Now, I want to make it plain that ordinarily, underwriters of war risks would have subrogation rights against the wrongdoers. Germany and Japan are wrongdoers. There can be no doubt about that. Therefore, they were liable for every ship they sank. If the ship was uninsured, they should pay for it to the owner. If it was insured, they should pay the insurance company.

Now, that was the way it was settled at the end of the First World War, by subrogation, because Germany was paying the bill. If that were the position today, I would be here claiming something over $190 million, the losses that we paid. However, I realize the position is different. The United States has forgiven Germany all her obligations in respect of the war; all reparations are forgiven. So we have only the moral claim that we are presenting here today and what we are presenting is what the War Claim Commission recommended; namely, our net losses.

Now, I have drawn a clause to effect that. The provisions are already in two bills pending before you and it is in three bills in the House. The language is a little different, so I have drawn a form which I hope you will incorporate. It is particularly drawn to fit into bill S. 672 but it will fit into almost any of these bills, and I have been over this with some of your legal advisers, and I hope we can get this particular language in.

Now, so far, I referred to American marine insurance companies. Senator JOHNSTON. We have to close pretty quickly. I hate to cut you off but I have others too, you see, from out of town.

Mr. HOUSTON. May I file this memorandum?

Senator JOHNSTON. Yes, sir. Put it in.

(The memorandum is as follows:)

In my preceding remarks I have referred to "American marine insurance companies" and to the "American Marine Hull Insurance Syndicate." I wish to call attention to the fact that these general terms of reference include (and are so intended to include) eight insurance companies which, although incorporated under the laws of various States of the United States, have as their respective principal stockholders British insurance companies also admitted to do business in the United States. These British-owned companies have been a part of the American Hull Syndicate since the date of its formation in 1920 and they have been identified with the American marine insurance market for an even longer period. As such they participated in the war risk insurance on hulls to the extent of approximately 72 percent and joined the rest of the American companies in keeping American ships at sea and supporting American trade in the same way as companies wholly owned by American interests.

Notwithstanding the foregoing identification of these British-owned American companies with the American marine market, the technical effect of the clauses appearing in the above-mentioned bills and the clause which I have proposed for insertion in S. 672 would be to exclude their claims by reason of noncompliance with the "American nationality" test. In our opinion this is an improper result not only because of the identical merits supporting their claims but also because of the fact that the "American nationality" test is applied by such clauses in the first instance to the owners of the lost vessels who, but for

the fact of insurance, would have been eligible as claimants under the proposed legislation, thereby making it unnecessary to apply a similar nationality test to the insurance companies which are the successors in interest.

I might add that the same British-owned American companies participated in war-risk insurance during the First World War and were treated for all purposes as American nationals in the settlement of War Claims Act of 1928. One of such companies was incorporated by act of Congress in 1831 and has been doing business in this country ever since. Another was incorporated in this country and has been doing business here for 127 years, another for 91 years, another for 82 years, and several for over 60 years. These companies are not mere corporate shells acting as instrumentalities for foreign interests but are generally a part of the American insurance business giving full employment to thousands of U.S. citizens and independent insurance agents. As companies incorporated in the United States, they are required by law to maintain fixed amounts of capital and surplus and also to maintain in the United States reserves commensurate with the business done here, their entire operations being subject to regulation by the insurance departments of the several States.

The above-quoted portion of the report of the War Claims Commission in 1953, in speaking of the "American Hull Syndicate" and the validity of war claims of marine underwriters, makes no distinction with reference to the ownership of American marine companies but emphasizes that American marine insurance made it possible for the United States and its allies to receive vital wartime material. We believe the spirit and purpose of the Commission's language and the spirit and purpose of the proposed legislation should include the claims of British-owned American insurance companies.

In order to accomplish the result which we believe is intended, it will be necessary to amend the clauses appearing in the above-mentioned bills, including the clause recommended for insertion in S. 672, by adding the following sentence at the end of each such clause:

"Notwithstanding any other provisions of this title the term 'insurance companies' as used in this subsection (C) shall include companies incorporated in the United States whose principal stock ownership is by other insurance companies incorporated outside the United States but admitted to do business within the United States."

I would respectfully recommend that such additional sentence be added to the clauses in question.

Mr. HOUSTON. As part of my speech and I have done my duty. Senator JOHNSTON. Not that we want to be discourteous, but we will look into that phase of it, of course, in your statement there. I will say this. The Government would not insure, and so you more or less had to insure.

Mr. HOUSTON. That is the picture. The Government threw up their hands.

Senator JOHNSTON. I realize the situation. It is a little different from ordinary insurance where you generally say, well, you are paid for the amount of whatever it was they charged them to carry the insurance and they would take the risk. Then they ought to pay it. This is a little bit different in war. We will be glad to look into it.

Mr. TAWNEY. I might add, Mr. Chairman, because Mr. Houston did not point it out, that the claims he speaks of are not claims for reimbursement for indemnities paid on a particular policy. He is speaking in terms of overall compensation for net losses. That is an overall proposition. If they paid out $10,000 on a particular insurance policy, they would not have a claim for $10,000.

Senator JOHNSTON. Oh, no. You paid somewhere in the neighborhood of $190 million?

Mr. HOUSTON. Over $190 million. we got on American ships, less our the net that we are claiming in here.

And we deduct all the premium, reasonable expense. It is only The net on the hulls where we

can prove they were purely American hulls. You cannot prove it on cargo and God knows who owns the cargoes, but the hulls, we can prove, and that is what we are asking.

Senator JOHNSTON. That is the reason it was cut down to such a low figure, when you consider what you lost.

Mr. HOUSTON. That is why we have such a low figure.

Senator JOHNSTON. Why have you put a limitation in there of $16 million?

Mr. HOUSTON. That is the estimate of the War Commission. The War Claims Commission looked into it. They are the only people that have made an examination of it.

Senator JOHNSTON. You had them to look into the actual amount. Of course, it is just a matter of estimating the loss.

Mr. HOUSTON. It is a matter of estimating. We showed them the records that existed, but, of course, they did not examine the proofs that we will have to submit before the Commission.

(The statement of Mr. Houston is as follows:)

My name is Oscar R. Houston. I am a lawyer having my office at 99 John Street, New York City, and I represent a number of the American marine insurance companies that insured American-owned ships against war risk during the late war. On their behalf I want to recommend to you that in whatever bill you report, you incorporate among the American claims that are allowable, the claims of American insurers for net losses incurred in insuring American-owned vessels during the period in which the Government of the United States was prohibited from writing such insurance. By net losses I mean the operating loss (as distinguished from the insurance loss) which is computed by deducting from the gross loss sustained under insurances on American-owned ships, the premium received from all such insurances after allowing for the usual overhead expense. This very limited right has been recognized in the following pending bills:

S. 744, introduced by Senator Young.
S. 2005, introduced by Senator Wiley.

H.R. 2485, introduced by Congressman Harris.
H.R. 2005, introduced by Congressman Younger.

H.R. 5636, introduced by Congressman Wainwright.

I have appended hereto a suggested form which is substantially like the clauses appearing in the above-mentioned bills and, I feel, is suitable for insertion in S. 672, as amended, which was introduced by Senator Johnston. Suggested clause for insertion in section 202 of S. 672 (present (c) to be renumbered (d)):

"(c) Net losses under war-risk insurance or reinsurance policies or contracts, incurred in the settlement of claims for insured losses of ships owned directly or indirectly by nationals of the United States at the time of the loss, damage, or destruction of such ships and at the time of the settlement of such claims, which insured losses were a direct consequence of military action by Germany or Japan during the period beginning September 1, 1939, and ending September 2, 1945; such net losses shall be determined by deducting from the aggregate of all payments made in the settlement of such insured losses the aggregate of the net amounts, after deducting expenses, received by any such insurance companies on all policies or contracts of war-risk insurance or reinsurance on ships owned directly or indirectly by nationals of the United States."

You all will remember, in addition to the losses of several American-owned ships prior to Pearl Harbor, that promptly after Pearl Harbor, Hitler concentrated all his available submarines in an attack upon American and other Allied shipping sailing in Caribbean, North Atlantic, and U.S. east coast waters. Much of this trade consisted of oil, copper, bauxite (the ore from which aluminum is made), and other materials important in war. It was essential to the war effort that our country maintain a steady flow of these critical materials supplied by our South American neighbors in exchange for U.S. products required by those countries. It was, also, extremely urgent to keep our allies supplied because many of their former sources of supplies had been cut off by the Axis advances. In 1941 and early 1942 the situation of the Allies was