The CHAIRMAN. When was this building constructed?
Mr. PLUMLEY. In 1931, Mr. Chairman.

The CHAIRMAN. No, succinctly, what is the nature of the technicality which leads the Government to withhold this $19,000?

Mr. PLUMLEY. It is because of the failure of the National Surety Co., and the intervention of other parties in interest, and the involvement, perhaps, of other claims which the Government has. against the National Surety Co. It is holding this balance of $19,000, due on the Rutland contract, as a sort of "back log", to help straighten out some other situations which obtain between the Government and the National Surety Co.

The CHAIRMAN. There is a suit now pending, is there not, between the Government and the National Surety Co. upon some of the indemnifying instruments that were given by that company? Mr. PLUMLEY. I so understand.

The CHAIRMAN. Yes; I understand that several of these bills that we have this morning are in that same category; they did not grow out of litigation, but litigation grew out of these claims with reference to the National Surety Co.

Mr. PLUMLEY. Mr. Chairman, Mr. Robert Watson has very full information with respect to the situation.

The CHAIRMAN. Yes; we are going to come to that directly, because all of these claims are pretty much on all fours, are they not? Mr. PLUMLEY. Yes, sir.

The CHAIRMAN. Because nearly all of them have the National Surety Co. involved. But in any event the amount stated in this contract has not been paid, the building has been completed and has been accepted by the Government, but those who did the work have not been paid to the extent of $19,000 in this case?

Mr. PLUMLEY. That is correct, Mr. Chairman. And that is work-. ing not a mere theoretical but a very concrete hardship on some of these individuals, who tied up all they had in this contract.

The CHAIRMAN. May I ask this further question: Aside from the technical grounds, is there any controversy between the Treasury Department and these gentlemen who are due this money under their contract, as to whether or not, the technical question being laid aside, they will be entitled to their money?

Mr. PLUMLEY. I understand not.

The CHAIRMAN. Are there any further questions?

Mr. CROWE. That clears it up in my mind, but I thought that this was the way that, perhaps, some of the matters worked: That the general contractor, perhaps, had been paid in full by the Government, but he in turn had not paid his subcontractors; is that not so? Mr. PLUMLEY. No, sir; that is not so.

Mr. HOLMES. That is not this case?

Mr. PLUMLEY. No.

Mr. HOLMES. How many contractors are involved in this litigation as to the $19,000?

Mr. PLUMLEY. About 15.

Mr. HOLMES. About 15 small contractors?

Mr. PLUMLEY. Yes; 15 small contractors.

The CHAIRMAN. They have done the work, and they have not received their money?

Mr. STEFAN. I am at a loss to know just exactly what the Comptroller has to say. What is his objection to paying these people? The CHAIRMAN. I thought, Mr. Stefan, that since there are several of these bills, involving very much the same principles, before us this morning, we would give these gentlemen an opportunity to be heard, and then we would go over these reports in executive session and just save that much of the time of the committee; and then, if we desire to call any of these gentlemen to straighten out any of these matters, we can do so.

Mr. PLUMLEY. But may I suggest, Mr. Chairman, without attempting to influence the attitude of the committee on this bill, what has been the attitude of the Senate with reference to the technicalities by the Comptroller?

The CHAIRMAN. You may do so.

Mr. PLUMLEY. They raise the question of whether Congress is legislating and authorizing payment of these bills, or whether somebody else is doing it.

The CHAIRMAN. I see. Thank you very much, Mr. Plumley.

Mr. PLUMLEY. I will be glad to furnish any other information the committee desires; but Mr. Robert Watson, as I have said, is very familiar with this.

The CHAIRMAN. We are going to come to that a little later.

Mr. BLACKNEY. I am wondering why there should be any doubt as to payment in this case, because there might be a contention raised growing out of that assignment that the Government would be liable: What is the difficulty?

Mr. PLUMLEY. This money is just being held by the Government, as I understand the situation, on account of other claims pending between the Government and the National Surety Co., which is bankrupt; and it is a question whether

The CHAIRMAN (interposing). They are being withheld temporarily, are they not, pending the determination of that suit between the Government and the National Surety Co.?

Mr. PLUMLEY. That is correct.

Mr. HOUSTON. Was that on another project?
Mr. PLUMLEY. That was on another project.
Mr. HOUSTON. It has nothing to do with this?
Mr. PLUMLEY. Nothing at all.

And the surety company took this contract over and finished it?
Mr. PLUMLEY. That is correct.

Mr. FERGUSON. Did the National Surety Co. complete the contract, or did the Government have to step in?

Mr. PLUMLEY. The surety company

Mr. FERGUSON (interposing). Finished it?
Mr. PLUMLEY. Finished it; yes, sir.

Mr. FERGUSON. The Government did not have to go in and complete it?

Mr. PLUMLEY. No, sir.

Mr. HOLMES. And there was a balance of $19,000 in the fund?

Mr. PLUMLEY. Yes, sir.

Mr. FERGUSON. And they accepted it from the National Surety Co. as being completed according to the specifications?

Mr. PLUMLEY. Yes, sir; and they have occupied it and rented it, and derived an income therefrom.

Mr. HOUSTON. Well, I did not understand why, in that case, they do not pay them in full.

Mr. PLUMLEY. That is what we would like to know.

Mr. FERGUSON. But the other claims against the National Surety Co. ?

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Mr. CROWE. Did the general contractor 'go broke "? Is that what caused the difficulty in the first place?

The CHAIRMAN. I will say with reference to these details that there are some gentlemen here-and all of these bills are in the same category-who are very familiar with the details; and Mr. Plumley is

Mr. PLUMLEY. All I know about is the Rutland post-office situation. The job was completed satisfactorily; and these material men and subcontractors have not been paid; and the Government occupies the property.

The CHAIRMAN. Thank you very much, Mr. Plumley. When we get into executive session we will consider all of these bills.

We will now take up H. R. 3970, introduced by Representative Brunner, of New York, authorizing the Comptroller General of the United States to settle and adjust the claims of subcontractors and material men for material and labor furnished in the construction of a post-office building at Hempstead, N. Y.

Representative Brunner is present, and the committee will be glad to hear him now.

STATEMENT OF HON. WILLIAM F. BRUNNER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW YORK

Mr. BRUNNER. Mr. Chairman and gentlemen, I have very little to add to what the previous speaker has just told the committee with reference to another bill (H. R. 4019) along the same lines as this, relating to Rutland, Vt.

I might say that the conditions with respect to the Rutland post office are almost identical with those as to the Hempstead post office; and, while I am not an attorney and cannot discuss the legal technicalities involved, still I think this is just a question of ethics.

The Government made contract with a certain contractor to build this post office at a certain price. He got to a certain stage and could not continue. The National Surety Co. had given a bond and was forced to complete the building. The building was completed, and there was still an unpaid sum that the Government owes somebody-and the persons to whom it is owed are these subcontractors.

Now, the question brought up by the Comptroller General is as to the priority of the claim of somebody in this job. Now, as to the subcontractors, there is no dispute about the priority, insofar as these subcontractors are concerned. All they want is for the Government to pay the amount still due, and the subcontractors themselves, with the committee, will decide who is to get that money.

The CHAIRMAN. May I ask you this question: I see the amount named in your bill (H. R. 3970) is $13,685.72. Now, when the surety company took this over and completed the job, did these contractors and subcontractors go ahead and actually do the work, or did they

get other men to do the work, and is that the way the question of priority of claims can arise ?

Mr. PLUMLEY. Mr. Watson is more familiar with that than I am, Mr. Chairman; and I understand that you are going to hear him later.

Mr. HOLMES. Did they utilize the total appropriation?

Mr. PLUMLEY. No; there is a balance left of $13,000, as the chairman has stated.

The CHAIRMAN. No new appropriation is involved?

Mr. PLUMLEY. No; the Government still has that amount of money. The only dispute about the whole thing, as I understand it, is that the National Surety Co., which is now in liquidation, owes some money to the Government on other jobs, and what the Government is trying to do is to put all of these things into one pot and balance them up, and, as I understand it, that is where the dispute

comes up.

The CHAIRMAN. And the Government, pending that, is withholding this money for the settlement of these claims?

Mr. PLUMLEY. That is correct.

Mr. STEFAN. Is the Government occupying the building?
Mr. PLUMLEY. Yes; it is.

Mr. FERGUSON. If that is the case, in some of the cases involved the Government has had to go in and pay some of the subcontractors on account of the failure of the National Surety Co. to pay those subcontractors; and if they now have to pay these men, they would be paying twice.

Mr. HOLMES. When the money is spent, usually the subcontractor has to go without his money. I know of two or three cases where they have had to make a contribution.

The CHAIRMAN. Gentlemen, Mr. Willis, an attorney from Virginia, is here; and I suggest that we hear him now as he desires to return to his home.

This bill, H. R. 2116, was introduced by Representative Bland. Authorizing the Secretary of the Treasury to pay subcontractors for material and labor furnished in the construction of Government buildings at Fort Myer, Va.

Mr. Willis is an attorney and is somewhat familiar with the litigation that has been mentioned, and we will be glad to hear from Mr. Willis with reference to this particular case, and to have any further information that he can give that will throw light upon the situation with reference to the litigation.

STATEMENT OF J. M. H. WILLIS, ATTORNEY AT LAW

Mr. WILLIS. Mr. Chairman and gentlemen of the committee, this bill, H. R. 2116, has to do with a contract of the Brooklyn & Queens Screen Manufacturing Co., as general contractor, with the National Surety Co. as surety on its bond.

There is a letter which I suppose will be put in the record from Hon. George H. Dern, Secretary of War, reporting unfavorably on this bill.

In that letter is given all the information concerning the date of the contract, the date of completion, the date of final settlement, the contract number, etc.

The CHAIRMAN. That letter of the Secretary of War will be inserted in the record.

(The letter referred to is as follows:)

Hon. FRITZ G. LANHAM,

FEBRUARY 8, 1935.

Chairman Committee on Public Buildings and Grounds,

House of Representatives, Washington, D. C. DEAR MR. LANHAM: Your letter of January 28, 1935, enclosing a copy of H. R. 2116, a bill "Authorizing the Secretary of the Treasury to pay subcontractors for material and labor furnished in the construction of Government buildings at Fort Meyer, Va.", has been carefully considered. This proposed bill is intended to reimburse subcontractors, labor, and material men who furnished labor and materials to the Brooklyn and Queens Screen Manufacturing Co., Inc., and which were used in the performance of contract no. W 6141 qm-22, between the United States and the Brooklyn and Queens Screen Manufacturing Co., Inc. This contract, in the amount of $95,470, is dated June 25, 1931; additional work authorized during performance made the final contract price $100,243.11.

The records of this Department indicate that all work under this contract was satisfactorily completed by the Brooklyn and Queens Screen Manufacturing Co., Inc., on August 19, 1932, and final payment made thereon to the said contractor on August 26, 1932. The records also indicate that under an order entered in the Supreme Court of the State of New York, New York County, on April 29, 1933, the superintendent of insurance of the State of New York took over for rehabilitation the National Surety Co., the surety on the performance bond of contract W 6141 qm-22.

Since the records show that the full contract price was paid to the contractor for all work performed under contract W 6141 qm-22, it is the opinion of this Department that the obligation of the Government with reference to this contract has been fulfilled. If additional payments by the Government are authorized to labor and material men who had contracts with the Brooklyn and Queens Screen Manufacturing Co., Inc., and to which the Government was not a party, the result would be a duplicate payment for part of the work. It is the opinion of this Department that the proposed bill, H. R. 2116, should not be approved.

Sincerely yours,

(Signed) GEO. H. DERN, Secretary of War.

The CHAIRMAN. What is the amount in dispute in this matter, Mr. Willis?

Mr. WILLIS. The bill calls for $20,000. In this instance the general contractor did complete the job and it was paid. Final) settlement was made.

Six months after that time, gentlemen, a proceeding was brought in the United States District Court for the Eastern District of Virginia, at Alexandria, at the relation of Daniel Morris Co. against the general contractor and the surety, under the Hurd Act.

In this proceeding other laborers, material men, and subcontractors filed their petitions according to law. During the pendency of this proceeding the National Surety Co. went into the hands of a rehabilitator, and receivers are being appointed in the various States, the receiver being a party to this suit.

Judgments were rendered there in favor of these claimants in the majority of instances. In some cases judgment was not rendered; why, I do not know; whether they did not request judgment, or for what reason, I do not know.

The general contractor, as stated heretofore, is utterly insolvent. The National Surety Co., while it may have some assets in the hands of the rehabilitator and may eventually pay some dividends, does not show an indication of doing so at present.