Mr. CULKIN. Yes.

Mr. GARNER. Some of our vessels were chartered by the British Ministry of War Transport at the request, and I might say at the instruction, of the Maritime Commission, and with the approval of the Maritime Commission.

Mr. CULKIN. And those were paid lend-lease, do you know?

Mr. GARNER. The charter hire was paid to us by the Maritime Commission, and I don't know who finally paid it along the line. Mr. CULKIN. That would be for an individual trip, or was it for a series of trips?

Mr. GARNER. No, sir; they were chartering them, and that practice began about May 1941.

Mr. CULKIN. For individual trips?

Mr. GARNER. Yes, sir.

Mr. CULKIN. That would be one return trip to the Red Sea? Mr. GARNER. They would charter them and tell you to make the ship available in New York, for example. We kept the crew on. We operated, in a way, but we were not permitted to be the so-called agent on the ship, because the Commission required us to turn those ships over to somebody else that supposedly had had trade out to the Red Sea.

(The following statement was subsequently furnished for the record by the Maritime Commission.)

Voyages began May to October 1941. Voyages ended December to June 1942. 107,736÷$3,342, 669 $31. 02 dead-weight ton earnings..

Mr. CULKIN. The gentleman on my left says I am getting too lengthy and I am a little bit afraid of him.

The CHAIRMAN. Any other questions? (None.)

All right, Mr. Garner. Stand aside.

Mr. GARNER. Thank you.

I want to express appreciation for the courtesy of appearing here and presenting the testimony which represents the views of the Waterman Steamship Corporation.

The CHAIRMAN. Mr. Garner, you are always welcome.

(The following statement was subsequently filed for the record :)

WATERMAN STEAMSHIP CORPORATION,
Mobile, Ala., December 24, 1942.

Hon. S. O. BLAND,

Chairman, Committee on the Merchant Marine and Fisheries,

House of Representatives, Washington, D. C.

DEAR JUDGE BLAND: At the public hearing which began December 15, 1942, before your committee in connection with House Document No. 840, Seventyseventh Congress, second session, reproducing a report which was transmitted by the Comptroller General of the United States regarding the purchase of five old laid-up vessels by the Waterman Steamship Corporation from the Maritime Commission during June 1940 and the sale by Waterman to the Commission of a similar number of other "spot condition" vessels during the latter part of 1941 and the early part of 1942, it developed that the witnesses from the General Accounting Office placed a great deal of stress on the profit realized by our company in connection with the sale of the said five vessels to the Commission.

The vessels which we sold to the Commission during the latter part of 1941 and the early part of 1942 were in "spot operating condition" and were named as follows: Raphael Semmes, Iberville, City of Alma, Ipswich, Jean Lafitte.

The testimony at the said hearing will reveal that the Commission paid us the sum of $75 per dead-weight ton, or a total of $3,374,700 for those five vessels. We had owned these ships a considerable length of time and they had been depreciated to the extent that our total book value thereof, as of the time they were sold to the Commission, was only $357,136.79, therefore, this reflects that we made a profit of $3,017,563.21 covering the sale of these ships to the Commission.

The profits from this sale were impounded in joint account with the Commission under the provisions of section 511 of the Merchant Marine Act, 1936, as amended, however, by virtue of changed conditions, we have since decided to withdraw this money from the impounded account and to pay the capital gains tax on the said profit.

The capital gains tax on this gross profit of $3.017.563 21 will amount to not less than 25 percent thereof or approximately $754.390.80, therefore, the amount of this last-named figure will be paid into the Federal Treasury in the form of capital gains tax.

In addition to this capital gains tax which will accrue to the Federal Treasury, it is necessary for us to pay income tax to the State of Alabama covering this gain and, of course, that item is substantial; however, I shall not mention it specifically at this time because it has no bearing on the position of our National Government.

By deducting the capital gains tax of $754,390.80 from the total gain of $3,017,563.21, it leaves us with a net profit of only $2,263,172.41 in connection with the said sale of the five vessels to the Commission.

I now wish to refer to that part of my testimony wherein I stated that at the time we obligated ourselves to the Commission under the sales agreement dated June 8, 1940, to construct four new vessels, entirely without the aid of any subsidy, we estimated under good cause that each of these new vessels would cost us $1,800,000, or a total of $7,200,000, and I further testified that by virtue of the tremendous increase which has subsequently occurred in new ship construction, these four new vessels have actually cost us a total of not less than $12,000,000, which correctly reflects a total increased cost of $4,800,000. In other word, our obligation to contruct the four new vessels has cost us $4,800,000 more than we contemplated under good cause at the time we executed the said sales agreement with the Commission, therefore, it seems to us that we are entitled to the benefit of the enhancement which occurred in the value of our old ships during the period from June 1940 to the latter part of 1941 and the early part of 1942.

By deducting the net gain of $2,263,172.41 which we realized from the said sale of the five vessels from the increased cost of $4,800,000 which we had to pay for the new vessels, over and above the figure which we originally contemplated, the result reveals immediately that our entire profit on the sale of the five vessels is wiped out and we are still $2,536,827.59 worse off financially than anyone could have contemplated under the combination of these two transactions.

We believe that the facts as explained herein should be taken into consideration by your committee in connection with your study of the testimony presented at the hearing.

History proves that whenever the cost of new ship construction increases, the values of serviceable old "spot condition" vessels simultaneously increases.

We are sending a copy of this communication to Hon. Lindsey Warren, Comptroller General of the United States, and to Admiral E. S. Land, Administrator of the War Shipping Administration, because it is our desire to acquaint both of those gentlemen with the net increase in our financial burden resulting from these transactions.

We sincerely hope that your committee will give careful consideration to the contents of this letter.

With best personal wishes,
Yours sincerely,

WATERMAN STEAMSHIP CORPORATION,
W. B. GARNER, Vice President.

STATEMENT OF BON GEASLIN, COUNSEL, WATERMAN STEAMSHIP CORPORATION, WASHINGTON, D. C.

Mr. GEASLIN. My name is Bon Geaslin, of Washington, D. C. I am engaged in the general practice of law in this city with offices at 520 Investment Building. I represent the Waterman Steamship Corporation, of Mobile, Ala., and its several subsidiaries. I have been a member of the bar in the State of Missouri since 1924 and a member of the bar in the District of Columbia since 1931, and am a member of the bar of the Supreme Court of the United States.

I would like to say that my statement here is not quite as long as Mr. Garner's, but it is probably too long to start reading at this time of the day, and in general it covers a good many of the matters which have been covered by Mr. Garner.

The CHAIRMAN. Then, Mr. Geaslin, do you believe you would be amply protected by making it part of the record, and then letting you touch on the high places?

Mr. GEASLIN. I have no objection to doing that at all, sir, except for one portion of it upon which I would like to make some comments. The CHAIRMAN. That will be entirely as you wish, on account of the personal nature of your interest, and that will be done without objection on the part of any member of the committee.

Mr. GEASLIN. My memorandum points out, as has been done in a great many respects by Mr. Garner, many of the inaccuracies in the record contained in the report of the representatives of the General Accounting Office, as they are designated by the Comptroller General.

The CHAIRMAN. I may ask one thing, Mr. Geaslin, before we begin. One thing that struck me with considerable force in the Comptroller's report was the statement that it was reported that you had been General Counsel for the Maritime Commission. I thought everybody in Washington knew it. I was surprised at the statement that it was "reported" that you had been, and our records here would have shown that you had appeared many times for the Maritime Commission, and I don't think you would have denied it.

Mr. CANFIELD. Do you plan to have the investigators of the General Accounting Office appear before the committee?

The CHAIRMAN. As they wish. They are here, and they will appear as they or the committee wish. In the case of the Tampa they did

appear.

Mr. GEASLIN. Under date of August 21, 1942, the Comptroller General of the United States transmitted to the Congress a report of an

investigation by representatives of that office of the contracts and other records of the United States Maritime Commission relating to—

(a) The sale by the United States Maritime Commission (hereafter referred to as "the Commission") to the Waterman Steamship Corporation (hereafter referred to as "Waterman") of certain vessels from its laid-up fleet under a sales agreement dated June 8, 1940;

(b) The sale by the corporation to the Commission of certain vessels late in 1941 and early in 1942; and

(c) The connection of the Commission's former General Counsel with such transactions.

Section 312 of the Budget and Accounting Act (42 Stat. 25, sec. 53, title 31, U. S. C. A.) provides that the Comptroller General shall investigate all matters relating to the receipt, disbursement, and application of public funds and submit to Congress in writing a report of the work of the General Accounting Office containing recommendations concerning legislation he may deem to be necessary to facilitate prompt and accurate rendition and settlement of accounts, and such other matters relating to the receipt, disbursement, and application of public funds as he may think advisable.

Subparagraph (c) of that section provides:

The Comptroller General shall specially report to Congress every expenditure or contract made by any department or establishment in any year in violation of law.

The Merchant Marine Act, 1936, as amended, provides, in section 207 thereof, that

The Comptroller General shall report annually or oftener to Congress any departure by the Commission from the provisions of this act.

The reports contemplated by these provisions serve the excellent purpose of informing the Congress of the use of public funds. Of course, I recognize and agree with what the chairman said at the opening of this hearing, that these reports are submitted as a duty imposed by the Congress. But that same duty imposes an abligation on the staff of the General Accounting Office to correctly inform the Comptroller General of the facts, so that he may transmit the facts to you. No one more strongly believes than I that the Congress, and particularly the committees with which each Government agency deals, is entitled to be and should be kept fully informed as to the facts with respect to, and the reasons for, any action taken by any such agency. The members of this committee may remember that this policy was scrupulously followed by me while I was General Counsel of the Commission.

No citizen dealing in good faith with the Government, and in my view, no Government agency, can offer any tenable objection to such procedure. But every citizen whose transactions with any agency of the Government are reported upon has a right to expect that any such report shall not only reflect a meticulous regard for the facts, but shall contain, as well, all the facts pertinent to the subject, in order that the Congress may justifiably rely upon it as a basis for any legislative action which might be deemed appropriate.

Therefore, we are glad to have the opportunity, which has been afforded to us, of submitting in the only forum available, the facts relating to the transactions involved, and of point out to you some of

the more glaring inaccuracies in the report which is the subject of this inquiry.

The criticism contained in the report is leveled at a decision of the Commission reached in the exercise of its administrative discretion in carrying out the functions which had been delegated to it by the Congress. Specifically, the "apparent irregulatrities" complained of are that

(a) The Commission failed to exercise an option it is alleged to have possessed to purchase five vessels at a price which would have resulted in an alleged saving to the Government of approximately $2,000,000, with a corresponding gain of the same amount to the corporation; and

(b) Waterman attempted by improper means to avoid or defer the payment of income tax on the profit arising out of the transaction. Nowhere in the document is there a direct assertion that either of the transactions complained of was "in violation of law" or that either of them constituted "any departure by the Commission from the provisions of this (Merchant Marine) Act." By implication, and only by implication, the report has it appear that Waterman has been guilty of wrongdoing, and that the Commission has been guilty of gross incompetency or worse.

The issue here, actually, is very simple. It consists merely of the question as to whether it was in the public interest, under all the facts and circumstances, for the Commission to have purchased the five vessels which it bought from Waterman, or whether that agency should have acquired five other vessels from Waterman, about which there had previously been some contractual relations between the two.

If the report concerning this simple issue consisted of an accurate recitation of the facts, we might well restrict ourselves to an insistence that the true facts speak for themselves, and that those facts indisputably establish the legality and the propriety of the transactions brought into question; but, unfortunately, that is not the case. The authors of the report, perhaps in the zealous pursuit of their public duty, fell into the error of omitting to cite certain applicable provisions of the law; of ignoring the records of the Commission when it served their purpose to do so, thus withholding from the Congress certain pertinent facts; of adopting a manner of expression throughout the report tending to color and distort the facts; of reciting as facts matters which are directly contrary to the actual records of the Commission; and then tying the whole thing together with the persistent assertion of a nonexistent fact.

Therefore, in order that the committee may weigh the statements. contained in the report as against what we have shown to be the facts, it unhappily becomes necessary to point out to you the inaccuracies which form the basis of the whole complaint. To do otherwise would be to ignore the effect of it, as written, upon this committee and the other Members of Congress, who have a right to expect that a public document of this character, in which are alleged serious irregularities in transactions with the Government, will contain a fair and unbiased statement of the facts and that the setting in which the material facts are placed will not be designed to give rise to erroneous and dangerous conclusions not in accord with the facts. You should expect no more than that; we can expect no less.