DISCUSSION OF PURCHASE OF VESSELS FROM AMERICAN PRESIDENT LINES

Mr. CASE. With respect to this compensation for delay in payment, the April 8, 1935, issue of a publication on maritime activity indicated that the War Shipping Administrotion had paid the American President Lines something over $500,000 as compensation for delays in payment on nine vessels purchased from the American President Lines. Admiral LAND. That is correct. That is all in this document referred to yesterday.

Mr. CASE. All of those ships, with the exception of the President Coolidge, were more than 20 years old, were they not?

Admiral LAND. I think so.

Mr. CASE. Do you contend that the prices paid to the American President Lines for those ships were in line with the formula laid down by the President's advisory board?

Admiral LAND. Yes, sir.

Mr. CASE. That was considerably in excess of the formula suggested by the Comptroller General in his letter of November 28, 1942, was it not?

Admiral LAND. No; it is very close in line with it. As a matter of fact, the formula we had long before we had the advisory board, and which I still have in my desk, is so close to what they arrived at that it is surprising, even though it is unusual.

Mr. CASE. How can the War Shipping Administration justify paying such a sum as $14,814,000 for these vessels, in view of section 902 of the Merchant Marine Act, and the Maritime Commission general order fixing the value of vessels for the determination of earnings and profits?

Admiral LAND. On the basis of the rules laid down by the advisory board we are not only legally but morally and justifiably required to allow that much. It was entirely unsatisfactory to the American President Lines, but they finally accepted it after months of struggle. Mr. CASE. Is the Maritime Commission the owner of the American President Lines?

Admiral LAND. It is the owner of about 80 percent of the common stock.

PARTICIPATION OF MARITIME COMMISSION IN DETERMINATION OF PRICES

Mr. CASE. Did the Maritime Commission as such participate in the determination of the prices paid for those vessels?

Admiral LAND. In general, yes. I do not think this particular thing was put up to the Maritime Commission, because it was not their function. It was the function of the War Shipping Administration, and they were very glad to get it off their hands.

Mr. CASE. It would be interesting to know whether or not the Maritime Commission participated in fixing the prices of the ships it was selling, would it not?

Admiral LAND. They fixed the value of some of them, the Coolidge for example. Of course we have a joint staff, Mr. Case, and there are a lot of us that do not pretend to know all the details, and we work with the staff on both sides of the hall. But it was thoroughly discussed by all of the staff on both sides of the hall. That has been going on for something over a year. In fact, we have been under fire

since 1937 on this A. P. L., so that we are pretty cautious and pretty careful to get all the advice we can from both sides of the hall.

Mr. CASE. Was any formal action taken by the Maritime Commission in the way of notes or minutes in the determination of the price that would be allowed by the War Shipping Administration?

Admiral LAND. I think at the early stage of the game, before W. S. A. was set up, there were a number of activities on the part of the Maritime Commission which were started but never implemented or executed. So there may be some such notes. I do not know offhand whether there are notes in accordance with your question or not. I can easily trace it up and put it into the record.

Mr. CASE. I would like to know if there were. (The information follows:)

Examination of the files of the secretary's office does not reveal any Commission action dealing specifically with these settlements. The reports themselves (20-E and 20-H) explain action taken by the Commission during earlier years in fixing insurance or other values for these vessels at rates equal to or higher than those provided for in the settlement.

Mr. CASE. With reference to the $500,000 that was paid in this instance, was that figured on seven-eighths of 1 percent?

Admiral LAND. Yes, sir; except as to the Coolidge and one other ship covered by contract commitments for 3%1⁄2 percent.

Mr. CASE. That is all.

Admiral LAND. May I add one thing for Mr. Case's benefit? I would like to insert right here a quotation from the testimony before this committee of Mr. Yates, Assistant Comptroller General, on January 18, 1945, where he said "The book value, I think, Mr. Wigglesworth, would not govern.

It is clear from this that the Comptroller General recognizes that book value is not controling in determining just compensation.

Mr. CASE. When the payment was made to the American President Lines was it required that that payment be deposited in the company's reserve fund?

Admiral LAND. I think one of the conditions was that they had to pay what they owed us, first, and then the balance of the principal would go to capital reserve.

SIZE OF CAPITAL RESERVE FUND

Mr. CASE. As of October 31, 1944, do you know whether or not the American President Lines' total capital reserve fund was $5,582,305?

Admiral LAND. I would not know that from memory. I have not the slightest idea what it is. I know I have it on my desk, as we have their annual report.

Mr. CASE. In the hearings on the independent offices bill for 1943 the testimony was that as of December 31, 1940, there was only $3,886,203 deposited in this capital reserve fund, and other testimony along that line at various times has indicated that up until the time of this purchase by the War Shipping Administration of these boats from the Maritime Commission the capital reserve fund was not in very good shape, but that on February 21, 1945, or thereabouts, they were able to declare a quarterly dividend of $1.25 a share on their preferred stock, which presumably was an outgrowth of this profit able sale.

Admiral LAND. I think a complete report of all these transactions is in the paper that I mentioned yesterday as having been submitted to the House Merchant Marine and Fisheries Committee. If it is

not, I shall be very glad to append any additional information. (The statement is as follows:)

Statement of net worth—per looks, American President Lines, Ltd., as of Dec. 31, 1944

Mr. CASE. Who owns that 20 percent of the stock not owned by the Maritime Commission?

Admiral LAND. Various stockholders.

Mr. CASE. Private stockholders?

Admiral LAND. Yes. I think one or two banks have some of it. Stanley Dollar still has some. It is fairly widely distributed amongst San Francisco institutions and citizens including former creditors. There is a complete record of that, of course, that has been submitted up here many times.

Mr. CASE. In any event, the net result of the transaction was pretty much to bail out a company that was in rather bad straits, was it not? Admiral LAND. I do not think so; not at all. That might have been true in 1937 and 1938; but the company bailed itself out by sucressful operating and not only paid back the R. F. C. but the Maritime Commission loans.

Mr. CASE. Were private stockholders represented in making this sale or determining the price they would receive?

Admiral LAND. The directors had it put up to them. The private stockholders had representation on the board of directors. We strugled with them for months and months to get them to accept this.

They turned it down three or four times. It has been a long process of negotiation. But the various stockholders had their representatives on the board of directors. The company put it up to the board of directors, and, as indicated, it was finally settled.

Mr. CASE. That is all.

Mr. TABER. We have not covered the revenue item, which is supposed to be a little over a billion dollars.

The CHAIRMAN. We had that up when we had the first general statement.

Admiral LAND. I thought I had covered that fairly completely in the general statement. I tried to.

CIVILIAN FREIGHT SERVICE

Mr. WIGGLESWORTH. I would like to ask, Mr. Chairman, just a couple of questions.

I notice you say that your civilian freight service hereafter is going to be at standard commercial rates.

Admiral LAND. That is right.

Mr. WIGGLESWORTH. Does that apply to lend-lease shipments also? Admiral LAND. Yes.

Mr. WIGGLESWORTH. How do those rates compare with the rates that have been charged?

Admiral LAND. Some of the lend-lease rates were figured on cost, but it takes such a long time to do it that we changed over to the standard commercial rates charged to other shipments.

Mr. WIGGLESWORTH. Will the standard commercial rates in general be higher or lower than the charges that you have been making? Admiral LAND. Standard commercial rates are a little higher. Mr. SCHELL. We have been charging standard commercial rates back from the beginning. It is not a question of having stepped up the lower rates; we are going right back to the beginning.

Mr. WIGGLESWORTH. The decision will be retroactive?

Mr. SCHELL. The decision will be retroactive.

Mr. WIGGLESWORTH. On civilian and lend-lease traffic both?
Mr. SCHELL. Yes, sir.

Mr. WIGGLESWORTH. It has always been commercial for the civilian traffic?

Mr. SCHELL. Yes, sir.

Mr. WIGGLESWORTH. Do you get any reimbursement from the Army and Navy for stores and supplies?

Admiral LAND. No, sir. We carry military for nothing.

Mr. WIGGLESWORTH. Do you get anything from people you carry under Government transportation requests?

Admiral LAND. It depends on how they are carried. We probably carry some military for nothing, but we carry commercial at commercial rates.

Mr. WIGGLESWORTH. Military for any United Nation is carriesi free?

Admiral LAND. I am not sure of that. In many cases we collect from Lend-Lease, so it is not free. Our own military is free, but anything else we would charge for.

Mr. WIGGLESWORTH. For instance, if you carry troops for the British Government or some other government you recoup something from them?

Admiral LAND. That is handled on a lend-lease and reverse lendlease basis.

Mr. WIGGLESWORTH. But, as a matter of fact, you do get something for the service rendered?

Admiral LAND. I am not competent to discuss troop carrying, because that does not come under our bailiwick. It comes more under the Army and Navy. I know it is handled by lend-lease and reverse lend-lease, but the details I am not familiar with.

Mr. WIGGLESWORTH. I was trying to get a general picture of what we do gratis and what we get paid for. Don't you think we are entitled to get something back from the Army and Navy for stores and supplies?

Admiral LAND. On a business basis, yes; on a governmental basis, no, because it all comes out of the Treasury anyhow, and it merely complicates bookkeeping.

The decision was just reached, according to the press, yesterday, that refugees would come back for nothing. The Navy made them give them I O U's. The Army will take them for nothing. The decision will undoubtedly affect us, and refugees will come back for nothing. The IO U's have been torn up.

Mr. TABER. Whom do you mean by refugees?

Admiral LAND. People coming back from prison camps, and so forth.

Mr. TABER. You mean, coming back to this country?

Admiral LAND. They are American citizens.

Mr. WIGGLESWORTH. Whose decision is that?

Admiral LAND. State, War, and Navy.

Mr. CASE. Where will they get the money to make refunds to those who have paid?

Admiral LAND. I am not going to attempt to answer that, sir.

If you will look, gentlemen, at page 96 of the justification I think it will be clarifying of the general questions. It gives a completebreak-down of our interdepartmental fiscal relations and covers not only what we are discussing here as far as the bill is concerned, but gives you a general picture of the interdepartmental set-up.

COMPARISON OF REVENUES FROM LEND-LEASE

Mr. CASE. Admiral Land, I think yesterday you indicated a comparison between the revenue you expected in fiscal 1944 as compared with fiscal 1945 from lend-lease. Would you repeat that, just for convenience for the record?

Admiral LAND. The estimated total expense is $3,096,400,000. The break-down is given on chart 16. The operating revenues amount to $1,153,800,000.

Mr. JOHNSON. The figures are given on the chart on page 11.

Mr. CASE. That is compared with $1,077,000,000. That would indicate an increase of $351,000,000 in revenues anticipated in 1946? Mr. JOHNSON. That is correct.

Mr. CASE. Does that indicate that you anticipate a higher revenue from lend-lease in fiscal 1946 than in 1945?

Mr. JOHNSON. That is correct.

Mr. CASE. How do you explain the anticipation of a greater flow of lend-lease materials in 1946 over 1945, with the state of the war such as it is?