PROPOSED CHANGE IN LANGUAGE Mr. CANNON. We will insert in the record the first four pages of the justification explaining the proposed changes in language. (The matter referred to is as follows:) JUSTIFICATION OF LANGUAGE CHANGES FISCAL YEAR 1946 ESTIMATE In the justification of estimate for the fiscal year 1945 which appears on pages 58 through 63 in the hearings before the subcommittee of the Committee on Appropriations, House of Representatives, on the first supplemental appropriation bill for 1945, there was set forth a detailed statement of the historical background and methods by which the Office of Alien Property Custodian has defrayed expenses during prior fiscal years, as well as other information with respect to this Agency. The changes in the language of the proposed authorization for the fiscal year 1946 are summarized as follows: 1. The phrase "the objects as specified in section 201 of the National War Agency Appropriation Act, 1945," which is contained in Public Law 529, Seventyeighth Congress, approved December 22, 1944, has been omitted from the proposed authorization for the reason that this Office has been informed by the Bureau of the Budget that a section similar to section 201 will be submitted for approval in the National War Agency Appropriation Act for 1946 in which the estimate of this Agency will be included. 2. A provision has been added providing for the payment of the salaries of the Alien Property Custodian and one Deputy Alien Property Custodian at $10,000 per annum each. The salary of the Alien Property Custodian has been fixed at $10,000 per annum by the President, and the salary of the Deputy Alien Property Custodian has been fixed at the same amount by the Custodian. The power of the President to fix the salary of the Alien Property Custodian and the power of the Custodian, by delegation, to fix the salary of the Deputy Alien Property Custodian may be inferred from section 5 (b) of the Trading With the Enemy Act, as amended by title III of the First War Powers Act, 1941 (50 U. S. C. App. sec. 5 (b)). The Civil Service Commission has taken that position in a letter to the Custodian, dated June 27, 1944. However, in order to remove any doubt which may arise with respect to the implied powers contained in section 5 (b), as amended, express authorization for the payment of the salaries of the Custodian and the Deputy Custodian is requested through the insertion of the phrase "the salaries of the Alien Property Custodian and one Deputy Alien Property Custodian at $10,000 per annum each.' 3. A further provision has been included authorizing the expenditure, out of the sum made available for general administrative expenses of "not to exceed $70,000 for the temporary employment of persons or organizations by contract or otherwise for special services, without regard to the civil-service and classification laws." This provision has been occasioned by the fact that the Office of Alien Property Custodian from time to time requires special services, particularly audits and legal services, of persons and organizations not connected with the Federal Government. This provision has been duly submitted to the United States Civil Service Commission for approval and the Civil Service Commission has approved the authorization requested by letter dated February 26, 1945. 4. In Public Law 529 a proviso was included to the effect that "after June 30, 1945, the Office of Alien Property Custodian shall not incur any obligations for the expenses of said Office except pursuant to further annual authorization by the Congress specifically therefor." This proviso was included in the proposed authorization for the fiscal year 1946 as submitted to the Bureau of the Budget by this Office. The Bureau of the Budget, however, deleted this item contending that the proviso in Public Law 529, quoted above, constitutes continuing legislation and is effective for future years without having to be restated specifically. 5. In the second proviso of the proposed authorization, which requires this Office to submit a detailed report of expenditures to the Appropriations Committees of the Senate and House of Representatives, the date for the submission of such report has been changed from April 1, 1945 in the existing authorization to November 1, 1946. It is believed that this Office will be enabled to render a more thoroughly satisfactory and complete report with greater facility if the time for submission is changed to a date after the close of the fiscal year. 6. At the end of the proposed authorization a further proviso has been added to the effect "that nothing herein contained authorizing expenditures by the Alien Property Custodian during the fiscal year 1946 shall be construed as invalidating expenditures by the Custodian during prior fiscal years." This Office has proceeded upon the assumption that the powers conferred on the Alien Property Custodian pursuant to the Trading With the Enemy Act, including section 5 (b) thereof, as amended by title III of the First War Powers Act, 1941, are sufficient to authorize the expenditures which have heretofore been made by the Alien Property Custodian. However, in the proposed authorization it has been deemed desirable to include, for purposes of clarification, a number of specific objects for which the sums made available for general administrative expenses may be expended. In view of the fact that some of these permitted objects of expenditure were not specifically included in the authorization for the fiscal year 1945 and were not stated for prior fiscal years due to the absence of annual authorizations, some question might be raised as to whether the specific inclusion of these objects of expenditure in the proposed authorization carries the implication that expenditures for the same purposes in prior years were not authorized. While this Office has consistently maintained that there is no proper basis for such an implication, it has been deemed desirable to include a specific provision in the form quoted above which would clearly indicate that the provisions of the proposed authorization do not by implication invalidate expenditures for prior fiscal years which were lawful in all respects when made. The Bureau of the Budget has consented to the inclusion of this language upon the grounds set forth herein. AUDIT OF ACCOUNTS OF ALIEN PROPERTY CUSTODIAN Mr. CANNON. What audit is made of the transactions and accounts of your office? Mr. MCNAMARA. We employ an outside accounting firm. Mr. CANNON. Are those audits made periodically or continuously? Mr. MCNAMARA. Continuously, with reports periodically. Mr. CANNON. Are they included in this estimate? Is there an estimate of the expenditure of that amount? Mr. MCNAMARA. Yes, sir; that is included in the estimate. I may say that we did write to the Comptroller General asking him if he would examine our accounts in the usual manner, and at that time he declined to exercise jurisdiction, saying that we should go ahead with our outside accountants. Mr. CANNON. You employ a firm of established reputation? Mr. WIGGLESWORTH. May I ask if recent legislation does not change that picture? Mr. CANNON. I think there is legislation which authorizes an audit by the Comptroller General. Mr. MCNAMARA. If it does we will be glad to have him come in. Mr. CANNON. Have you any information as to whether you are included? Mr. CUTLER. After the passage of that legislation (Public Law 529, 78th Cong., containing the first express expense authorization for the agency) tentative accounts for the office of Alien Property Custodian were set up by the Treasury in conjunction with the General Accounting Office looking to the audit of the authorization for administrative espenses alone. Prior to that the Custodian, as Mr. McNamara, stated, had requested the Comptroller General to audit the entire agency, and he declined to do that on the ground that the Trading with the Enemy Act placed the agency outside of his jurisdiction. We have now again written the Comptroller General asking him for a ruling upon the present status, namely, whether he will audit all or only part or none of the accounts, because we felt that our original request and the congressional authorization should be coordinated. We have not yet received a reply to our letter. Mr. CANNON. There is no question whatever but that the Alien Property Custodian's Office comes within the purview of that law. That is one of the corporations that the Comptroller General is authorized to audit. Mr. CUTLER. Were you referring to the George bill? Mr. CANNON. Yes. Mr. CUTLER. I thought you were referring to the authorization which we received for the fiscal year 1945. As to the George bill, since we are not a corporation at all, there is no reason that we know of for the Comptroller General to audit us by reason of that legislation. Mr. CANNON. There is no legislation which would place you in that category? Mr. CUTLER. None that I know of. PROPERTIES UNDER FOREIGN FUNDS CONTROL Mr. LUDLOW. Would you tell the committee the line of demarcation between the Foreign Funds Control and the business you handle exclusively? Mr. MCNAMARA. Those properties which are dynamic and need someone to manage them come within the jurisdiction of the Alien Property Custodian. Those properties which are dormant, such as cash and property of that type, are blocked and frozen under the Treasury regulations. Mr. LUDLOW. Do you think it would be advisable to combine them under one overhead, or are they sufficiently delineated and separated, and should they be controlled separately? Mr. MCNAMARA. I think it has worked out very well up to the present time. VALUE OF PROPERTY CONTROLLED Mr. LUDLOW. You may have told the committee-I did not have the advantage of hearing your opening statement-but what is the total value of the property you own? Mr. MCNAMARA. I did state that as of December 30, 1944, it was approximately $223,000,000. Mr. MOORE. That is equity of the property vested, not property controlled. Mr. MCNAMARA. If you want the value of properties controlled- Mr. LUDLOW. How many business enterprises are embraced in that operation? Mr. MCNAMARA. Four hundred and seventy-two. Mr. LUDLOW. How many have been liquidated at the present time? Mr. MOORE. It is hard to answer that. We have liquidated most of the physical properties of the companies which it has been determined are to be liquidated and dissolved as corporations. Of the comparatively small number that are to be sold as going concerns we have sold 13. Mr. LUDLOW. How many countries are represented? You may put that figure in the record. (The information is as follows:) METHOD OF OPERATING PROPERTY TAKEN OVER Mr. LUDLOW. When you take over property, do you generally continue the operating personnel as is, or how do you manage it? When you take over a business establishment, what do you do? Do you continue the operating personnel? Mr. MCNAMARA. That depends upon the type of property which is taken over. If we vest the stock of a corporation and acquire control of the corporation we elect directors and select the corporation management. In other cases, we take the assets directly and become owners of the property itself, and we deal with it as the owner. Mr. LUDLOW. Where you receive the assets you have to take over individual management. Mr. MCNAMARA. We do that. Mr. LUDLOW. About how many cases are you actually managing? Mr. MCNAMARA. I cannot give you the exact figure. Mr. LUDLOW. How do you get your managerial personnel to manage these properties? Mr. MCNAMARA. In the case of corporations, we designate directors who are elected to the Board, and then they select the management under our supervision and direction. LEGAL OPERATIONS Mr. LUDLOW. Now, I notice on page 15 of your justifications what seems to me to be a very striking increase in the category of your legal operations. For your legal instruments, which you have to make, to be prepared in 1946, $6,500, or just about double that for 1945. All the way down the line you are asking for large increases in legal activities. I would have thought your operations were so shaken down at this time that you would not have much litigation. Mr. MOORE. The first column is for the first half of the current fiscal year, and the second column is estimated second half, so those two must be added together for the full fiscal year. It is roughly the same for 1945 and 1946. Mr. LUDLOW. Your legal operations are roughly the same? Mr. MOORE. Yes. Mr. LUDLOW. Is your work tapering off or increasing? Would you Say your load is growing less or heavier? Mr. MCNAMARA. It is growing less. We have reduced our personnel from 1,198 in March 1943, to 765 as of today. Mr. LUDLOW. As long as this emergency lasts, do you see a prospect of tapering off, or would you say what the future is likely to bring forth in the way of load? Mr. MCNAMARA. That depends upon future developments, such as the Philippines and our investigation and litigation which will involve these properties. But we do estimate for 1946, 745, which is another decrease in our personnel. Mr. LUDLOw. I think that is all. NUMBER AND TYPE OF PROPERTY OVER WHICH CONTROL HAS BEEN ASSUMED Mr. SNYDER. On page 8, halfway down the page, beginning with the words from March 1942 to December 31, 1944, the Custodian, vested or otherwise, assumed control of the following interests I wish you would place that portion in the record at this point. Mr. MCNAMARA. Yes, sir. (The statement is as follows:) From March 1942 to December 31, 1944, the Custodian, vested or otherwise, assumed control of the following interests: Number vested Type of property or interest: Business enterprises.. Parcels of real estate Lots of personal property Mortgages.. Patents, inventions, etc. Interests in patent contracts_ Trade-marks. Interests in estates. Interests in trusts Interests in guardianship estates. Copyrights (indeterminate, estimates range as high as 500,000) or controlled 472 611 220 165 46, 692 1, 019 411 1, 844 625 82 200, 000 Mr. SNYDER. The Alien Property Custodian-how many of those stand over a period of years-these properties? Or are they all new each year? Mr. MCNAMARA. We have new problems arising as time goes onproperties taken over already, management, and operation. Mr. SNYDER. Some of those properties have perhaps been hanging for 10 years? Mr. MCNAMARA. Oh, no; these properties are taken over only during the period of war. Mr. SNYDER. None before the war? Mr. MCNAMARA. We have some cash left over from the last war from the Office of Alien Property Custodian during the last war That cash is deposited in the Treasury. But we have no properties left over from the last war. Mr. SNYDER. None left over? Mr. MCNAMARA. NO. Mr. SNYDER. That is what I wanted to find out. That is all. TRANSITION FROM ACQUISITION TO OPERATION STAGE OF PROPERT HELD Mr. CUTLER. It might be useful to state that the reason there is n more striking prospective decrease in the work for the next year i that the nature and categories of the agency's work are undergoing transition from the stage where the problems were primarily thos connected with acquisition of property to those involving operatio |