"Mr. Jackson," Smith testified, "acknowledged that he had destroyed the working papers after a call from an unnamed person in the Estes organization, and that he had not made an adequate audit of Mr. Estes' financial records prior to submitting his report."

REVIEW REQUESTED

Smith noted that Secretary of Agriculture Orville L. Freeman had asked the American Institute of Certified Public Accountants, the Texas State Board of Public Accountancy and the Texas Society of Certified Public Accountants to "review Mr. Jackson's performance.'

On February 20, 1961, Jackson furnished the Agriculture Department with a financial statement showing Estes had a net worth of $13.7 million.

Jackson said that his examination "was made in accordance with generally accepted auditing standards" but that "by reason of the limitation of the scope of our examination as to inventories, no opinion may be expressed as to the fairness of presentation in the accompanying balance sheet."

În accepting the audit the Agriculture Department disallowed the $942,701 listed as "inventories-merchandise for resale" and also discounted the claimed value of assets on which there was no insurance.

Even so, Smith added, Estes still appeared to have a net worth of nearly $7 million while Department regulations required a net worth of only $2.2 million on the 29 million bushels of grain storage capacity that he had in early 1961.

Miller, who was then in charge of setting grain storage bonds, left the Estes bond at $700,000 rather than raising it to $981,000, as had been suggested by Agriculture Department officials in Wichita, Kans., who had investigated Estes' operations.

FIRST MET IN 1961

Miller said that he first met Estes in January 1961, when Estes came to his office in Washington to discuss his bond problems. In December the Agriculture Department had requested an audited financial statement from Estes.

*

'You

Estes spent a considerable amount of time, Miller recalled, telling of "his humble beginnings" and "a great deal about his philosophy of life win by losing, you multiply by dividing, you increase by diminishing.' Estes was, Miller added, "the most unusual person I had ever met." The Estes dinner that Miller attended last May was at the Watergate Inn and, Miller said, included about 25 persons, most of whom were business associates of Estes, their wives and children. Miller said that he talked with Estes only about a minute at the dinner.

INVITED TO FUND DINNER

Miller also said that Estes had invited him to be his guest at a Democratic fundraising dinner last year in Washington, but that he had declined the invitation. On another occasion last year Miller said that he met Wayne L. Cooper, the manager of the Estes grain warehouses, at his room in the Sheraton-Park Hotel where Cooper asked him about a proposed expansion by Estes into the grain storage business in Kansas.

Miller denied that he had ever granted Estes any favors or had received any gifts from him.

McCoy, an Agriculture Department examiner stationed in Wichita, Kans., was sent to Plainview and Pecos, Tex., in February 1959, to check up on Estes when he first sought to have his warehouses certified for Government grain storage.

McCoy said that Cooper chartered a plane so he could save time in getting from Plainview to Pecos, a distance of about 250 miles. McCoy reported to his superiors at the time that Cooper had furnished him with transportation.

McCoy also said that he used Estes' car while in Pecos and that Estes picked up some luncheon and dinner checks, too.

The subcommittee is expected to resume its hearings next week.

Two AIDS OUT, ONE PROBED BY AGRICULTURE

A Department of Agriculture spokesman said yesterday that the head of the South Dakota Agricultural Stabilization and Conservation office and a member of the ASC committee had resigned under pressure brought by the Department. Alfred E. Johnson, executive director of the ASC office at Huron, resigned May 16. He was a full-time employee.

George Crouch, a member of the State ASC committee, also resigned. He was paid only for the days that he worked.

The Department spokesman said that William D. Duba, chairman of the State ASC committee, was under investigation by the Department.

The spokesman said Secretary of Agriculture Orville L. Freeman was responsible for the appointment of all three men to their posts.

The forced resignations stemmed from an incident last fall.

All three men, the official said, accepted rides from South Dakota to Minneapolis from Northrup-King, a Minneapolis seed firm, to attend a football game between Minnesota and Michigan. They stayed at a hotel that night and attended the game, all at the expense of Northrup-King, he said.

Johnson said from his home in Huron, "I had time coming for working and that is all I charged for. We worked all day at the Minneapolis plant of NorthrupKing. We explained the ASC program and the company was demonstrating its seed-cleaning operations."

In Huron, Duba said he was not aware that he was being investigated personally. Duba said he had talked to Hans Jensen, area ASC director, and that Jensen had said there would be some kind of investigation of the matter. Duba added that nothing had been said to him about resigning. Crouch could not be reached immediately for comment. At Minneapolis, Northrup-King President D. K. Christensen had received any preferential treatment from the three officials. any preferential treatment to them, he added.

denied the firm Nor did it give

Mr. BROOKS. I would like to say it didn't look like a very reasonable way for them to operate to have a man and his wife to go and check on the food. That was the gist of my inquiry and they haven't given you an answer yet. I think maybe you ought to have a chat with them about it.

Secretary UDALL. As a result of the information you have given us I signed a letter this morning giving the answer and Secretary Carver is prepared to discuss it.

The administration has a set of regulations with regard to ethics and what you do and you don't do with regard to people the Government does business with.

Mr. BROOKS. And it is a sensitive area.

Secretary UDALL. It raised a very serious question.

I would rather have Secretary Carver present it to you. Since this new code of ethics was put into effect we have had to review the whole thing. It presents some rather nice questions in regard to policy but we are prepared to answer your letter. I normally like to answer the letters of committees and Members of Congress much quicker than this, but if your hearing has done nothing else, Mr. Chairman, you have produced a reply.

Mr. BROOKS. We will look forward to reading the reply. I will just say they are not going to say that it is all right for them to take all their friends and their wives and their girl friends in and eat dinner free on the concessionaires and thereby drive their cost of operating up.

Secretary UDALL. No; we have never allowed that, I don't think, and we are trying to draw a line now which we think makes sense. Because, of course, you have the problem on the one hand since in some of these areas which are isolated-Yellowstone Park is a good example if we assign a man to go there on a mission and the only place that he can stay is in these facilities we regulate and if Congress only allows so much as a per diem and the charges exceed that-we are either going to have to ask on the one hand for extra appropriations or on the other hand we are going to have to ask this concessionnaire who is operating as a public utility to make some allowances for our people.

Now the real problem is another problem but I mean this total problem of people of this Department who go to some of these places, the only place they can stay is in the facilities operated by the concessionaires. This, as you can see, gets to be a rather tricky thing.

Mr. BROOKS. I just thought of an answer that might be helpful: They might put a little card out for people who eat there, who are not professionals, just paying tourists, something on their evaluation of the price structure and the quality of the food and the lodging that is provided in some of these areas. They may already be doing thisI don't know-but that might result in a cross section of maybe nonprofessional suggestion.

We appreciate very much your reply. I have not had a chance to read it carefully. Apparently the letter authorizes $14 a day for cost and limits it to $30. Without objection we will include the reply in the record at this point.

(Exhibit 4A follows:)

EXHIBIT 4A-LETTER FROM HON. STEWART J. UDALL, SECRETARY OF THE INTERIOR, TO HON. JACK BROOKS, AUGUST 15, 1962

DEPARTMENT OF THE INTERIOR,

OFFICE OF THE SECRETARY, Washington, D.C., August 15, 1962.

Hon. JACK BROOKS,

Chairman, Government Activities Subcommittee,
Committee on Government Operations,

House of Representatives, Washington, D.C.

DEAR MR. BROOKS: I appreciate very much the interest you have taken on the question of National Park concessionaires providing accommodations and meals to personnel of this Department. Responsive to your letters of May 21 and 31, I have looked into the matter and have discussed its implications with our Solicitor and the Assistant Secretaries who are primarily concerned.

As a result of this interest, the National Park Service Handbook on Concessions Management was amended on June 7, 1962, in a manner which I consider to eliminate the most objectionable features of past practices. Specifically, the provisions of that handbook requiring that free services be provided certain departmental officials has been rescinded. Similarly, the so-called reduced rates chargeable to all employees visiting a park on official business have been revised upward so that they relate reasonably to the maximum per diem allowance permitted under Federal travel statutes.

I am informed that the first of these changes does not, in fact, represent actual departure from recent practice since the arrangement requiring free services only applies where so provided in the concession contract and such provisions gradually disappeared as new or revised contracts were issued. I have not investigated the origin or the reasons for this practice, but I can conceive of no possible justification for it at this time, and agree with you that it would open the door to highly questionable relationships and possible conflicts of interest.

The matter of reduced rates to employees traveling to the parks on official business presents quite a different issue. As you may know, the isolated location and seasonal nature of certain park operations result in abnormally high costs for some concessionaires. As a consequence, rates for accommodations, meals, and other services must be higher than those prevailing in most areas, frequently exceeding the per diem allowance authorized for Government travel. We believe it would be unreasonable to expect an employee to absorb this expense if that result can be avoided. For this reason, the Department has traditionally required that its concessionaires, as one of the conditions of doing business, agree to provide facilities at a cost which is within the official allowance, leaving a small margin for incidental expenses. The new instructions referred to above provide that

meals and lodging shall be furnished at rates which will not exceed four-fifths of the authorized per diem allowance on an American plan basis. It is the practice of the National Park Service to authorize per diem of $14 to its employees when traveling on official business in park areas where accommodations and other services are provided by concessionaires.

The evil sought to be eliminated by conflict-of-interest policies stems, it seems to me, from circumstances where a Government official is placed under obligation to one doing business with the Government. This can only arise where the private party offers some advantage in value or comfort to the recipient, either voluntarily or under some form of private duress. Where a specified service to an employee is required by Government contract or regulation, no such obligation is created. So long as the rates charged are reasonably related to the travel allowance, the employee gains no advantage and the arrangement facilitates performance of the public's business. I hope you will agree, therefore, that our recent revision of the concession handbook has eliminated the objectionable features of earlier versions.

Generally, the same principles apply to the matter of free meals to park superintendents while inspecting establishments in the areas under their supervision. These arrangements, being of long standing and required by the Department as a means of checking on the quality of service, do not appear to create any obligation on the part of the superintendent toward the concessionaire. Thus conflict of interest is not evident unless abuse arises through frequency of use. I am not fully informed on the controls exercised over this aspect of the question, but have asked that it be reviewed to assure that use of the provision is reasonable and necessary to the objective being sought.

You will be informed promptly of any further developments on this subject. Sincerely yours,

STEWART L. UDALL,
Secretary of the Interior.
Carver could explain

Secretary UDALL. I think maybe Secretary this quickly to the members of the committee and tell you the decision we have arrived at on this specific question.

Mr. BROOKS. Very well.

Mr. CARVER. The part of our letter which deals with the point you have just made has to do with our instructions which were issued on June 7, 1962, as a result of, among other things, the interest of this committee, which provides that meals and lodgings shall be furnished at rates which will not exceed four-fifths of the authorized per diem allowance on the American plan basis. It is the practice of the National Park Service to authorize per diem of $14 for its employees when traveling on official business in the park areas where accommodations and other services are provided by concessionaires.

Now, if I understand the chairman's question, it has to do with whether or not, assuming that this is a reasonable approach, we shouldn't take advantage of that provision of the travel regulations which allow us to charge a maximum $30 where that is the actual charge. And we will readily concede that that is an alternative, but we think this is also an alternative which is entirely fair in this kind of a situation and more appropriate for the normal administering of the Park Service business.

Mr. BROOKS. We will look it over. We appreciate your effort in explaining it.

(Subsequently, Chairman Brooks wrote to Secretary Udall on August 17, 1962, and the Department replied on November 6, 1962, as follows:)

EXHIBIT 4B-LETTER FROM HON. JACK BROOKS, TO HON. STEWART L. UDALL, AUGUST 17, 1962, WITH ATTACHMENTS

HOUSE OF REPRESENTATIVES,

GOVERNMENT ACTIVITIES SUBCOMMITTEE OF THE
COMMITTEE ON GOVERNMENT OPERATIONS,
Washington, D.C., August 17, 1962.

Hon. STEWART L. UDALL,
Secretary of the Interior,

Washington, D.C.

DEAR MR. UDALL: During the hearings before the Government Activities Subcommittee on August 15, you handed us your letter of August 15, replying to my letters of May 21 and May 31, concerning the National Park Service practice and regulations permitting Federal employees to request and receive free meals and other reduced-rate accommodations from concessionaires regulated by the Park Service.

I

The second paragraph of your letter states that on June 7, 1962, the provisions of the "National Park Service Handbook" "requiring that free services be provided certain departmental officials has been rescinded." The third paragraph of your letter states that the requirement of free services applied only where so provided in the concession contracts, and that such provisions are not present in the newer contracts. In the same paragraph you also state that you "can conceive of no possible justification for it at this time," and that you "agree *** that it would open the door to highly questionable relationships and possible conflicts of interest."

The subcommittee would appreciated your sending us two copies of—

(a) The "National Park Service Handbook" provisions concerning this matter, in their form immediately prior to June 7, 1962.

(b) The handbook provisions as now revised.

(c) The information requested on the attached appendix I.

We are puzzled by the next to the last paragraph of your letter. That paragraph seems to say that there is no possible conflict of interest with respect to "the matter of free meals to park superintendents while inspecting establishments in the areas under their supervision *** unless abuse arises through frequency of use," because such arrangements are "of long standing and required by the Department as a means of checking on the quality of service.' The subcommittee would appreciate your informing us—

(a) Does the next to the last paragraph in your letter mean that, notwithstanding the revision of the Park Service Handbook mentioned in the second paragraph of your letter, park superintendents may continue to request and receive, and concessionaires will be required to furnish, free meals to such superintendents when they inspect establishments under their jurisdiction?

(b) Is it essential for a superintendent or other person to receive free meals from a concessionaire in order to inspect the quality of service furnished by the concessionaire?

(c) Is it possible and feasible to inspect the quality of the concessionaire's service without receiving from the concessionaire a regular meal at no charge? (d) Is it feasible for the Park Service to minimize the possibility of conflict of interest, which arises from the sense of personal obligation that often flows from the receipt of such a personal benefit, by having food inspections made by various persons (preferably with training in dietetics) and only infrequently by the superintendent?

(e) As set forth on page 3 of Chairman Dawson's letter to you of August 9, 1961, the Comptroller General has suggested that the furnishing of free meals to, and acceptance thereof by, Interior Department officials in connection with the performance of their official duties, conceivably could violate the criminal provisions of 18 U.S.C. 1914, which penalizes the giving to, and the receipt by, Government officials, of "any contribution" to a Government employee for services performed by him for the Government. Has the Solicitor of the Department rendered an opinion to you concerning this matter? If so, please furnish the subcommittee two copies thereof.

(f) Your letter states you have ordered a review as to the controls exercised to prevent abuse "through frequency of use" of the free meals arrange