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Mr. TABER. That is the Comptroller's Division. What about the
Mr. McNAMARA. The Comptroller's Division is on page 16. Investigation and Research is from page 17 to page 23.
The Patents Division also has a staff in Washington, and the Property Division.
Mr. TABER. How many licenses or permits have you given on these forty thousand-odd patents? I imagine about two-thirds or three-quarters of them are just dead anyhow.
Mr. McNAMARA. You will find on page 29 a statement under item No. 5, licenses granted from July 1 to December 31, 1944, 371. I shall be glad to get the total number of licenses issued since we commenced our licensing program, for the record.
Mr. Ludlow. What is that number?
Mr. McNAMARA. I do not have it here, but I shall get it for the record and insert it, if I may.
(The total number of licenses issued March 1942 to December 31, 1944, was 1,338 covering 8,469 patents.)
Mr. TABER. These people who are shown in the Budget as field employees: What do they do and where are they?
Mr. McNAMARA. They are in the Chicago, San Francisco, and Hawaii offices.
Mr. TABER. You have how many in Hawaii now?
Mr. MOORE. At present we have 22; it may vary 1 or 2 from week to week.
Mr. TABER. You have something like 20 in Hawaii?
Mr. TABER. You are planning next year to have how many altogether?
Mr. McNAMARA. Altogether, 745 employees.
Mr. TABER. Seven hundred and forty-five employees. This thing says man-years. How many positions does that mean?
Mr. Moore. That is 789 positions. Mr. TABER. Seven hundred and eighty-nine positions? Mr. MOORE. As a maximum. Mr. Taber. Well, now, from that, you are planning to have a gradual reduction throughout the year 1946?
Mr. MOORE. Yes. Mr. TABER. What are you going to cut it to at the end of the year? Mr. MOORE. That is a long time away. I should estimate 725. That depends, of course, on these programs that we mentioned a few minutes ago, that are very preliminary and not worked out.
Mr. TABER. You could get along just as well with half the help you have in Washington?
Mr. McNamara. I would not say so; in fact I know we could not. We have pared this down pretty close to the line as far as we can do it, as far as it is humanly possible. I do not know of any place in which we can make any change other than what we have done so far in reducing our personnel.
Mr. TABER. You are going to increase your lawyers?
Mr. CUTLER. Not substantially. Only an increase of 4 persons is provided for in the estimate, and that is for the entire General Cound sel's office including both professional and secretarial personnel. As explained on pages 14 and 15, and as I mentioned a moment ago however, the legal problems have increased rather than decreased as the general work has changed from acquisition and investigation of property to liquidation, sale, and administration; and the volume of litigation—as well as that of claims filed and prosecuted—is also inevitably on the increase as the war draws to a close.
In addition, we have the very large segment of property involved in the enemy banks and insurance companies, which have been under liquidation by the State superintendents. The Custodian has vested the residue remaining after the local superintendents have completed their work. They are now in a position or at a point where they are ready to turn that over to us, and it involves some of the largest amounts and most complicated legal problems that that field has seen.
Further, we have a group of some 800 enemy interests in patent contracts, each one of which involves determination as to its relationship to the antitrust laws. Many of those were cartel contracts or were violative of antitrust laws in various respects. They have just reached the point where they can be effectively examined in that connection. The Attorney General has indicated that he wishes initial analysis from our agency
Those are examples of why, specifically, legal problems are somewhat on the increase; nevertheless the Budget calls for a very moderate increase in that field, in which we are in fact definitely understaffed.
Mr. MOORE. As bearing upon Mr. Taber's question, it has been the policy of our office to get along with as few people during the war period as we could. That was one of the ways in which we were able to account for this decrease from about 1,200. We have done that by concentrating on doing the things first that seemed to be most necessary during the war—that is, the sale of physical, usable properties. The book work in respect to them, the problem of liquidating intangibles, which could make no contribution to the war effort, we have postponed where possible. Instead of dealing with this lump of work with twice as many people during the war period, we have, partly because of the recruiting difficulties, but principally because of a feeling on our part that we wanted to use the minimum number of people during the stringent period, postponed certain of these items.
Mr. CUTLER. If I may add one more example in the legal field, the Custodian's authority to pay debt claims has been in doubt, and general legislation to clarify that is before Congress. The same is true with regard to his authority to return property to friendly foreign nationals. Without a clear directive from Congress, the Custodian does not feel that he is entitled to return it.
When those two points are cleared up, the backlog of claims in those two fields, which numbers some 3,300, will be moved, substantially, we trust, in the next fiscal year. That, in addition to the other salient examples I mentioned, helps to account for the expanding legal problems we will have in the immediate future.
Mr. CANNON. Mr. Case.
LANGUAGE PREVENTING INVALIDATION OF EXPENDITURES OF CUSTODIAN
IN PRIOR FISCAL YEARS
Mr. Case. I should like to ask you about the last proviso which reads:
Provided further, That nothing herein contained authorizing expenditures by the Alien Property Custodian during the fiscal year 1946, shall be construed as izvalidating expenditures by the Custodian during prior fiscal years.
That is very unusual language. I think that is the first time I have ever seen that posed in an appropriation bill. Why should the agency fear that anything contained in the language making appropriations for 1946 would be construed or might be construed as invalidating expenditures in prior years?
Mr. CUTLER. I do not believe that would be a justifiable construction, but there is a possibility, as some of the court decisions of the First World War showed, that by implication some such argument might effectively be made. We felt it important that the Congress have the problem presented and that they be asked to set the matter at rest. The argument, if made, would be this: That because we now came before Congress and Congress authorized specifically the expenditure of funds for administrative and other expenses, and included certain specific categories in addition, that for those years in which there has not been any such specific authorization, but in which we expended funds under a general authorization, the use of specific language in the one year might be deemed to imply lack of authority to make a particular use in the earlier years. That type of implication has been made to prevail in the courts.
Mr. Case. It occurs to me that the language is—I do not know what the lawyers' term is, but I have heard some reference to special pleading, and that would seem to me to be some sort of special pleading, because if the expenditure in the first place was illegal, it was illegal on the authority that you then had.
Mr. CUTLER. This would leave that as it is. This is not an attempt or could not be used to justify anything that was illegal. It is merely to set at rest any possibility that by the use of specific language in this year's appropriation Congress intended to state that for prior years those expenditures were in fact invalid. They would stand or fall on their own feet.
Mr. CASE. The fact that we place limitations on appropriations in a given year does not necessarily mean of itself that expenditures in prior years, when that limitation did not exist, is illegal.
Mr. CUTLER. If that is the view of Congress, I suppose it is fair to say that we would be entirely satisfied if this is omitted with that thought in mind.
Mr. Case. I do not care to belabor the point, but it seems to me that an expenditure of any given year would be legal or illegal according to the statutes and provisos existing at that time.
Mr. CUTLER. I believe that is a correct view, sir. This is merely to set at rest any doubt to the contrary.
Mr. McNAMARA. I may add this. As I explained in my opening remarks, from 1923 on, the Trading with the Enemy Act authorized payment of the expenses of operation out of property which was seized by the Alien Property Custodian, and the question of payment of expenses became an issue in at least three cases that went to the Supreme Court of the United States. Up until the Russell amendment, under which we came before this committee last year, the Alien Property Custodian always paid his expenses under that broad authorization in the Trading with the Enemy Act rather than to come before the Congress every year for an authorization to expend a certain amount each year.
Upon the appointment of the Alien Property Custodian in the present war, the question arose as to the payment of expenses, and the President by Executive order authorized deductions, to be subject to the approval of the Director of the Bureau of the Budget. We submitted our budget to the Bureau of the Budget, and they approved it as to our expenditures until the Russell aimendment, when we came here last year.
It was felt that because of the general authorization of the Trading with the Enemy Act to pay all expenses arising out of the property held, if specific language were used in the present act under the appropriation method of drafting legislation, including salaries in the District of Columbia and items of that kind, it might be arguable when some litigation arises out of deduction of expenses during the years prior to the authorization by Congress specifically for each year, that those earlier deductions were unauthorized.
If, as a matter of law, that is incorrect—that position—then there is no necessity for having the language. It is only a safeguard that we are not going to be faced with a contrary construction by the courts with respect to this language, enumerating the purposes for which the money can be spent under the authorization-we wish to be certain that that position will not cause us any difficulty.
Mr. CASE. Congress does pass certain legislation validating certain expenditures, but I have never heard of legislation invalidating them. I should think that would be considered ex post facto.
Mr. McNAMARA. If Congress would construe the effect of this language in this present authorization as not throwing any doubt upon the prior authority to expend money under the general authorization in the Trading with the Enemy Act, there would be adequate protection. Mr. WOODRUM. We can meet that by a statement in the report.
Mr. McNAMARA. If it is taken care of in the report, then there is no need of the language.
Mr. WIGGLESWORTH. Why is it necessary to postpone the report on all administrative expenses, which was due April 1, 1945?
Mr. CUTLER. The first report was filed April 1, 1945. For the next year it was thought that a report after the fiscal year, so that you could have the entire fiscal year's story, would be more useful to you. This year's has been filed for the partial year, in compliance with the present act. :
It may be helpful to mention that what the agency construes as "general administrative expenses" are those not practicably allocable to specific properties. As requested, we included both administrative and nonadministrative expenses in the report filed April 1.
LEGAL STATUS OF PROPERTY UNDER CONTROL OF ALIEN PROPERTY
Mr. LUDLOW. The theory of the Alien Property Custodian Act, as I understand it, is that it is an act essentially for the interests of the United States; therefore, there is no charge imposed, nor is there any rharge contemplated to be imposed, for the management of those properties, as against foreign owners; is not that true?
Mr. McNAMARA. We charge against the property itself for our expenses of operation.
Dr. LUDLOW. You deduct the managerial charge. Is that different from the Foreign Funds Control?
Mr. McNAMARA. Yes; Foreign Funds Control operates under appropriated money. We ask for no appropriations but ask for authorization to pay out of the properties themselves. Mr. LUDLOW. Out
of the assets you take over? Mr. McNAMARA. That is correct.
Mr. CUTLER. Which has become the property of the United States, as is not the case with the Foreign Funds Control property.
Mr. Ludlow. Well, it becomes the property of the United States by virtue of the strong arm of Federal acquisition; is not that so?
Mr. McNAMARA. We take title to the properties; Foreign Funds Control does not. Foreign Funds Control operates against the person. We vest the property and take title.
Mr. Ludlow. You could take title by virtue of eminent domain,
Mr. McNAMARA. Under the war powers in the Constitution we get the power to make captures on land and water.
Mr. Ludlow. I suppose that on some property you make considerable money?
Mr. McNAMARA. We have increased the value of some properties.
Mr. Ludlow. Suppose you have wise management. Are you going to turn the profit over to the foreign owners?
Mr. McNAMARA. Every property vested is carried in a specific account under the name of the former owner of the property, but the former owner is divested of any interest in the property. Congress decides whether they are going to confiscate it, and it becomes forever the property of the United States, or whether they are going to return it, as they did theoretically, in the last war.
After the last war, in 1923, Congress gave back $10,000 in principal and $10,000 in income in any one year to the former enemy owner. In 1928, they authorized a return of 80 percent plus that $10,000; 20 percent was to be retained with the consent of the claimant and put in a special deposit account to pay American claims.
Mr. CUTLER. But subject to deduction of expenses since 1923, as is now the case.
Mr. McNAMARA. So we are not dealing with this property in the manner the Treasury is dealing with the property under its control.
Mr. Ludlow. I am familiar with the Foreign Funds Control, because it comes under the bill which the subcommittee of which I am chairman has the duty of preparing.
Mr. CUTLER. Enemy property to which title vests in the United States bears the cost of its operation rather than the costs being borne by the taxpayers.
Mr. Ludlow. Suppose a concern under your management should lose money by reason of something you cannot help. Are you under any obligation to continue the life of that enterprise, or can you close it out?
Mr. McNAMARA. We are liquidating, we are dissolving some corporations where they cannot operate as going concerns.
Mr. Ludlow. Do you have a moral right to dissolve when the time comes?
Mr. McNAMARA. Well, there is no legal or moral right involved. Whatever property is returned is returned by the grace of Congress.
Mr. MOORE. There has in fact been a net increase in the vested equity in these properties from vesting date to June 30, 1944, in the amount of $16,000,000.