Mr. TOWNSEND. Well, it might bring more because it would carry control, but you would have to look at your proportionate prices, look at your earnings.

Senator JOHNSTON. Well, you can tell what it is worth today. If it is going to change, that would be its worth on another day. Mr. TOWNSEND. You can't say.

Senator JOHNSTON. You are going to pass on its worth when it comes time to sell are you not? You are advocating that it be sold. Mr. TOWNSEND. I don't know what it is going to be worth when it is sold; nobody knows that. You can see what it will bring and look over the bids, and if they are too out of proportion to the earnings, and so on, you reject them.

Senator KEATING. Mr. Chairman, I call your attention to the fact that it might be very prejudicial to the interest of the Government to try to have any witness today say what the property is worth. If the estimate is low, it might discourage bidders from going higher. If it is too high, it might discourage bidders from making a bid. How could he tell today what the value of this property is going

to be in a sale?

Mr. TOWNSEND. You couldn't possibly, Mr. Chairman.

Senator KEATING. And I think it would be highly prejudicial to the issue if he should answer the question.

Senator JOHNSTON. Well, it might help to have his estimate today. It might cause the price to rise because if it is higher than the public's estimate, I think the price would probably come up to his estimate. You know more about it than anybody else—at least, you should; you have been dealing with it for a long time.

Mr. TOWNSEND. I have. I have been dealing with it day-in and day-out. I keep up with its earnings and developments and progress, and so on.

Senator JOHNSTON. Then it appears you have considerable knowledge of what it is worth. We hear all kinds of prices on what it is worth. Some say it runs into the hundreds of millions of dollars, and other people say it is very low. I would like your opinion.

Mr. TOWNSEND. Well, I have never made any public statement in regard to what I thought it was worth. I do not do this in any case; I can't begin to do it here.

Mr. WOOD. Colonel, do you have any possible objection to a public auction sale of the GAF to the highest competitive bidder?

Mr. TOWNSEND. Do you mean apart from sealed bids?

Mr. Wood. I mean a public auction, sold under the hammer, as you would auction off anything else to the highest bidder.

Mr. TOWNSEND. I have no objection to that method of selling it at all. It is a little more cumbersome than sealed bids. When you get sealed bids, we submit the names of the bidders to the Antitrust Division and they do a lot of things you can't do so well with auctions.

Senator JOHNSTON. You mean if you don't require the prospective bidders to file?

Mr. TOWNSEND. It can be done.

Senator JOHNSTON. And then let you pass on that before you allow them to bid at the auction?

Mr. TOWNSEND. I have no argument on that at all. I am perfectly willing to have a sale at a public auction, but after all, the

decision is the Attorney General's; but we could have, under the law, a public auction. The law is wide enough to include that power. Mr. WOOD. Don't you think, Colonel, as a practical matter, that screening your prospective bidders in advance and employing a competent salesman to sell this, a competent auctioneer to sell this under the hammer, giving a right to competitive bidding, that you possibly could get more for it than you could by accepting sealed bids, that is, A not knowing what B was bidding, and B not knowing what C was bidding for this?

Mr. TOWNSEND. I couldn't tell. It is possible, but I should have to consider that very carefully.

Mr. WOOD. Are there not some advantages to public auction sales rather than private sales?

Mr. TOWNSEND. Well, heretofore, we have had public sales on sealed bids. You can imagine, I assume, a situation in which you would have prospective, good bidders, and yet they would hesitate to come out in public auction; they would rather not do it that way.

I would take either method I thought would get the highest price, and there are points in favor of what you just suggested, an auction sale. There are certain considerations.

Mr. WOOD. That would certainly leave an unquestioned record for the future, so far as this subcommittee is concerned and so far as your administration of the Office of Alien Property is concerned, in the sale of the largest single vested asset, would it not?

Mr. TOWNSEND. I think the sale by sealed bids leaves just as good a record, as far as that goes. You issue a prospectus and everybody gets the same information, and that includes engineeringwise and everything else; everybody has a chance to bid on it. You have two classes of prospective bidders here; one is the underwriting syndicates, and at the present time there is a very favorable market, and probably your highest bid would come from there. Now, there are syndicates of corporations very much interested in this bididng. They are looking at it from a slightly different point of view; they are looking toward investment and integration, and so forth. There you are likely to have some antitrust questions which you couldn't resolve in a moment if you had an auction going on. It would take a little more time.

Mr. WOOD. Those antitrust questions would be resolved in advance? Mr. TOWNSEND. You would have to know who was bidding. Mr. WOOD. I say, your prospectus could call for prospective bidders for examination as to their eligibility to compete in auction sales? Mr. TOWNSEND. We could issue questionnaires to be filled out before the auction. That is a matter of mechanics, I think.

Mr. Wood. It might be helpful also, would it not, Colonel, if you accepted sealed bids and also followed those sealed bids up by a public auction? That would give you a doublebarreled gun to see that you got the highest possible price.

Mr. TOWNSEND. If you told the bidders you were going to do that, you wouldn't get any bids, I will tell you that; you wouldn't get any responsible bids.

All the bidders would start over again after they had put in their bids. After spending $150,000 or $200,000 to compute the bids, are

they going to throw them in the wastebasket and start all over again? You wouldn't get anybody to bid.

Mr. WOOD. You have had some difficulty in that line, have you not, in the administration of the Trading With the Enemy Act?

Mr. TOWNSEND. Well, I don't know that we have. I don't recall any case just now.

Mr. Wood. My attention has been called to the Karl Lieberknecht Co. in Laureldale, Pa.

Mr. TOWNSEND. Isn't that Reading, Pa.?

Mr. WOOD. Well, this report says Laureldale. But that is immaterial. You had 63.21 percent of the total outstanding stock.

Mr. TOWNSEND. Yes.

Mr. WOOD. And you put it on public sale by sealed bids on October 10, 1956. You were offered $3,005,100 for it. Two years, three months, and eleven days thereafter, you sold it for $2,655,000, where the Government lost, by successive bids, the sum of $239,100. Is that not a fact?

Mr. TOWNSEND. Your figures are accurate, but the reason for the rejection there was not a matter of inadequacy; that didn't come into it at all.

Since you mentioned the Lieberknecht case, I will mention this case, which is rather interesting. It is a very good illustration of the handicap that a business is under where the law requires it to be administered here.

Lieberknecht involved a patented machine for making ladies' stockings, and, as I remember, several years ago an expert that I knew came in and told me that he had a notion that the women were going to go for seamless hosiery, and that was a kind of calamity for this

company.

They had some money in hand and they came to me and asked if they could buy a little aluminum fabricating plant with it, as their hosiery machine business was going to pot. They didn't make a nickel out of it. So we sort of took a chance and said, "All right," and the aluminum plant was the only thing that saved them. The company would be in bankruptcy today but for that.

That is the kind of a thing that a business, running free, can do. Now, business handicapped by Government ownership, in that sense cannot do so well. That company is now doing very well, not in knitting machines, but in this aluminum fabrication, and did over $50 million worth of business this year.

That is a very good illustration. That is the kind of thing I want

to see.

Mr. WOOD. You sold it to the Haile Mines Co. of 500 Fifth Avenue, New York, for $2,250,276, which bid third at the sale; they bid $511,000 more for it than they did at the second sale.

Mr. TOWNSEND. They were the highest bidder, that I remember. Mr. Wood. You mentioned a moment ago that for other considerations you rejected the first high bid of $3,005,100.

Would you like to state for the record the major one of those other considerations?

Mr. TOWNSEND. No; the Attorney General rejected those bids, all of them.

Mr. Wood. You said, for other considerations they were rejected. Would you state for the record what those considerations were.

Mr. TOWNSEND. Well, I don't recall. They were rejected, all bids, and we started over.

Mr. WOOD. That isn't an answer to my question, Colonel. My question was, you said the bids were rejected for other considerations, this high bid of $3 million was rejected for other considerations.

Will you state for the record what those other considerations were. Mr. TOWNSEND. Well, I guess the highest bidder was not a qualified bidder. Something was wrong with the qualifications or eligibility to bid; it was something of that sort.

The property went up in value quite a lot through the years. It was sold for a great deal more than it was worth when vested.

Mr. WOOD. Will you furnish us, for the record, at this point, what those other considerations were?

I might say that your answer, so far, has been rather problematical and conjectural in nature.

Mr. TOWNSEND. I can look it up, and I know we rejected all bids. Senator JOHNSTON. Naturally, we would like to have that cleared up, as to why the Government lost so much money.

Mr. Wood. It was $239,100.

Mr. TOWNSEND. Well, the Government didn't lose, as far as that is concerned. We have all sorts of bids. We have a bidder, Senator, that is a deranged mental patient in a hospital up in Pennsylvania. He puts in bids up in the millions.

Now, we don't take them.

Senator JOHNSTON. Are you saying that this higher bid, in the first instance, was not a qualified bid?

Mr. TOWNSEND. I say that the Attorney General can reject any and all bids.

Senator JOHNSTON. He rejected it and lost that money, I know. I want to know why. Was it by a disqualified bidder?

Mr. TOWNSEND. I will have to look it up. I don't remember it now. Senator JOHNSTON. Did he appraise it?

Mr. TOWNSEND. I will have to look it up and send it to you. (The following letter was subsequently received by the chairman :)

DEPARTMENT OF JUSTICE,
OFFICE OF ALIEN PROPERTY,
Washington, D.C., July 20, 1959.

Hon. OLIN, D. JOHNSTON, Chairman, Subcommittee on the Trading With the Enemy Act, Committee on the Judiciary, U.S. Senate, Washington, D.C.

DEAR SENATOR JOHNSON: During the course of my testimony before your subcommittee on July 9, 1959, I stated, in effect, in reply to your question, that all bids on the first offering of the vested shares of Karl Leiberknecht, Inc., had been rejected by the Attorney General. You asked to be advised of the nature of the reasons for rejections.

The Department of Justice learned that one of the directors of the highest bidder was, at the time the bid was filed, an employee of one of the divisions of the Department, not, I may add, the Office of Alien Property. Investigation disclosed no conflict of interest and no connection between the employee and the submission of the bid. However, in view of the fact that this possibility of a conflict of interest might have been raised by one of the other bidders or by someone else, and with the thought that in subsequent bidding the Government would receive as much or more, Attorney General Brownell rejected all bids and thereafter called for new bids.

Sincerely yours,

DALLAS S. TOWNSEND, Assistant Attorney General, Director, Office of Alien Property.

Mr. Wood. You would not have let him submit an offer or you would disqualify him in advance. You would not let him submit a bid if he had not complied with your prospectus, is not that a fact? Mr. TOWNSEND. That doesn't necessarily follow.

Mr. Wood. There would have been no screening of it?

Mr. TOWNSEND. Because you might get a disqualifying circumstance on a bidding and it might not be revealed until later.

Mr. WOOD. Now, Colonel, I am going to ask these questions and I am sure that one of your associates can answer them, one or two questions the Senator desires that I clear up.

I refer now to table 2 of your last report of June 30, 1958, in the last classification at the bottom of the page. There we find that interest in trusts and estates aggregates $87,956,000 which represents the original vesting value plus the appreciation as of June 30, 1958. Do you have the items?

Mr. GROSS. I have the items.

Mr. WOOD. My question is: Are those estates of nationals of the United States in which either the Germans, Japanese, or Italians, Rumanians, Bulgarians, or others have an interest?

Mr. GROSS. Yes; for the most part I think they were. They could be the estates of persons other than American natonals who happened to have their property in the United States, but for the most part they were the estates of Americans.

Mr. WOOD. Now, referring to the preceding classification of personal property, would your records, or do you have any independent knowledge of what your records may indicate as to the items there which aggregate $110,420,000 with reference to whether or not they represented American-earned and owned property destined to go to the Alien Property Office?

Mr. GROSS. I would say probably not because of this factor. The owner of the property would be the guiding feature in connection with our vesting.

Now, take something like stocks. Take the second item, stocks, miscellaneous. I would say virtually all of those stocks were owned by people whom we consider to be enemies.

We don't know what the basic origin of this stock was, 50 or 40 years ago, but at the time we vested these stocks were owned by enemies.

The situation is not like the estates and trusts situation at all. Mr. WOOD. A very large percentage, however, of the $110,420,000 could have been American-owned and earned properties; could it not? Mr. GROSS. I don't see how.

Mr. WOOD. How can you see otherwise?

Mr. GROSS. Well, I don't understand your question. If John Smith in Germany owned stock that was in the United States and we vested it here, it would appear under this heading, "Personal Property Stocks." Now, who owned the stock before John Smith owned it? We don't know. I can't quite follow your reference to American origin in such a situation.