from shipside, or movement from the warehouse in the port to another storage warehouse. I would like to point out there that we are talking about commodities where the United States is still responsible and the United States would bear the burden of loss. In many of the commercial import program situations the importer picks his materials up right at the port. Where he does, this is the end of the line so far as AID is concerned. In other cases, these are moved in order to clear unloading space. They may have moved into a secondary warehouse location. We think that AID must provide more protection for these movements. This would apply to other types of commodities that AID is bringing into Vietnam.

In some cases this would mean following the commodity for a substantial distance into a provincial capital, trucking it perhaps. AID has responsibility in relation to some of their commodities for getting them to distribution points throughout the country.

I should mention that within the past year our people working in this area, and in relation to refugees and also on the construction program, have worked in about 40 locations in Vietnam. About 30 of those are outside the metropolitan area of Saigon.

This goes to the point discussed earlier, that these locations where we were working outside of Saigon, we didn't go just to the books and records. We went to actual locations to see what is being done. Our people were not experts in any particular area, but so many of these things are matters that just normal judgment and close observation can disclose.

We are stressing this in our work in Vietnam.

The point I was just discussing goes to some extent to having guards to accompany the merchandise. We think that is one way. There must be more guards riding shotgun with the merchandise.

Mr. YATES. American or Vietnamese?

Mr. STOVALL. This is the problem.

Mr. LANGEN. It probably goes a little bit further than that. I am pleased to hear of this.

Mr. STOVALL. If I might make just one more point?

Mr. LANGEN. Go ahead.

Mr. STOVALL. The other point, and perhaps the most important one, is that with so many hands in the operation in Vietnam, we think that AID is in the position of needing to take the leadership in relation to an overall synchronized control system for materials moving in because AID and the U.S. military agencies and the various bureaus of the Vietnamese Government all have a hand in these things. We think that AID should drive as hard as it can toward taking leadership in some sort of synchronized accountability system.

As far as knowing what comes in, where it goes, generally what the losses are this is a very difficult thing to do.

Mr. LANGEN. I am pleased to hear of these recommendations for purposes of improving the many labels of corruption and misuse of supplies that have been prevalent in connection with Vietnam. I think the American public is entitled to some assurances that steps are being taken to correct the many things that they read about in the papers every day. Probably there is some real justification that these steps be taken and a vigil be established to look after these properties. Yesterday afternoon in another subcommittee I had occasion to

question at that time one of the associates of AID with regard to the very matter that you are talking about, fertilizers shipped in there and used in connection with the rice fields and new varieties of rice.

Upon raising the question with him, to what degree they have had success in getting distribution of the fertilizer and the varieties of rice and thusly improve the production of food for their benefit, and I suppose ours too.

So it occurs to me that there is substantial room for someone to bear down with regulations that do make sure there is not too much of these properties that move directly into the hands of the Vietcong. One of the surprising things to me is that in these explorations and with these articles in the paper and Congressional Record, and Government officials must read them, that they don't get a little excited about it and begin wondering what in the world does go on.

I think the American public is entitled to know to what extent these reports may be correct or not correct.

If there is evidence of this material moving into the hands of the enemy, somebody ought to be doing something about stopping it. The recommendations that you have made this morning, I hope will be helpful. I hope, too, somewhere along the way there is a revelation. of the extent to which we may have contributed to the enemy.

One more point and then I am through. Yesterday we talked some about the PX's and lack of authority in exploring them. To me, this is a rather pertinent area. A PX still becomes associated with our Government and it is a part of a Government activity. As we view the corruption of other governments, we need to set a pattern or example of how these things ought to be done. When a PX becomes a party to the movement of goods into black markets or other areas where it does not belong, it kind of behooves us to do something about it.

Where there are indications with regard to goods that may have been associated with the PX being misused, whom are you going to report it to? It is the Defense Department itself which carries the initial responsibility.

Has your Department made any official reports to the Defense Department with regard to any discrepancies that you have been exposed to in your regular course of exploration that would be helpful to them in making the corrections?

I know that you stated yesterday that you actually have had conversations with them or talked the matter over with them. I think it needs to be a little more specific than that. Point out to them that here is a specific area or a specific commodity or instance that somebody ought to look into. Has that been done?

Mr. STAATS. Mr. Stovall would have to answer. I think the answer to your question is, How formal have our representations been to the Defense Department?

Mr. LANGEN. Right.

Mr. STAATS. When we have information of this kind.

Mr. STOVALL. We have made no formal reports. We have had a number of discussions, including discussions at Saigon. A great deal of this problem, as you know, in Saigon was the extent of authority that had been granted to the local manager. He was almost a czar. That was later changed and some of that authority was

Mr. YATES. Local manager of what?

Mr. STOVALL. The PX.

It is my understanding-perhaps Mr. Bailey might have more understanding and general knowledge than I-there are certain restrictions now. At the time this black market situation was at its height, about a year ago, he had almost carte blanche, as I understand it, for what he ordered. That was one of the things that we had discussed with the Defense people.

They took action; partly the elementary proposition of just stopping orders or having his purchasing requests screened before he was permitted to make purchases.

Mr. WEITZEL. As I think we pointed out formerly, the purchases were made on the basis of demand, customers of the PX. When the Defense Department went into it, they found that these demands were far out of line with the actual needs of the military and other entitled personnel that were authorized to buy at this PX, so they simply revised the procedures to provide that orders were to be based upon the needs of the valid customers. This in itself was a salutary move. They did discuss with us the situation there. There was a team that went over from the Government Operations Committee, as you may remember, Mr. Langen, Representative Moss' subcommittee. We had some people with that team. When they came back there were conferences all around about the situation. The Defense Department did take action. But as we explained yesterday, we don't have the jurisdiction to audit nonappropriated funds of the Department of Defense.

Mr. LANGEN. This is the point that disturbs me. There seems to be an area here where it may be there ought to be some other authority or some other check. Let me cite an example in one area, just to bear out what I mean.

A short time ago I had a complaint called to my attention from a young man in the service stationed in West Germany. His complaint was he couldn't buy ice cream out of the PX that served this installation.

Not too much to get excited about, but it gave cause for an inquiry. In the first place, it seemed almost impossible to find out about the validity of his complaint. Eventually we did hear from the Defense Department. Strangely enough, the Agriculture Department didn't seem to know whether there was any ice cream sold there or not. We did discover that they had quit dispensing ice cream through that PX and in place substituted a product made from coconut oil. We received no explanation as to why the substitute was made or how it came about or anybody knowing where it originated. Maybe this information is still coming to us. because I am still making inquiry. But the point is that there seems to be no place to inquire about what takes place in the supplying of the stocks that they have. Anyhow, upon second inquiry I just now got a notice which says that beginning April 1 they will again be selling ice cream. But no explanation of how this all came about or who made the decision.

If this is an example of the knowledge and regulation that goes with the volume of products that they move then I can see where there is room for any number of things to happen.

As I believe you pointed out, their requests far exceeded the demand that prevailed at that particular station.

I am hoping one day to discover the facts with regard to this. Now

we are back to selling ice cream. It just happened to be a product that we have plenty of in the United States. Why a shift was made to coconut oil I don't know. Did somebody have some excess coconut oil they had to get rid of? Found this a convenient place?

It would seem to me that somewhere there ought to be a way and a means in which these kinds of matters could be explored. That is all.

Mr. KELLER, Mr. Langen, I understand that PX's do have a very large exchange service which operates the PX's all over the world. It was located in New York. I think they recently shifted it to Dallas, Texas.

I am surprised that they cannot give you better information. My understanding is that there is a centralized control of PX's and they do a lot of central buying for PX's all over the world.

Mr. LANGEN. Maybe after we wise up a bit and know who to correspond with or communicate with we may be able to handle it better. It is an indication that anybody inquiring about what they seem to think may be a discrepancy, I can attest to by experience, that they are going to have some difficulty in finding the information.

Mr. STAATS. I think, Congressman Langen, it is clear we don't have any direct legal authority to examine the operations of the post exchanges themselves. We would have some interest and I believe some responsibility with respect to looking at the question of whether the Defense Department itself is exercising proper supervision over the PX's. This would be about as far as under the present law we could do. Mr. WEITZEL. You may recall we made a report to Congress several years ago or to Senator Douglas at his request on the operation of commissaries in areas where from our observation we didn't think they were any longer needed for comfort, convenience, and economy of the servicemen. Congress in its wisdom didn't take any action on this.

Mr. STAATS. Was that overseas?

Mr. WEITZEL. Was this limited to domestic commissaries, Mr. Bailey?

Mr. BAILEY. Domestic.

Mr. WEITZEL. Domestic only.

Mr. LANGEN. It might be that we ought to provide some new authority somewhere.

Mr. YATES. Mr. Staats, you have given me an excerpt from the Congressional Record of March 8, 1968, relating to Corruption in "South Vietnam-IV." Apparently this is an insertion by Senator Gruening. This is the fourth of his insertions. It makes reference to the fact that a hard-hitting report on the widespread dishonesty among South Vietnamese officials has been made by experienced, responsible American officials.

Would you happen to know who made this report?

Mr. STAATS. I believe there is

Mr. YATES. There is no reference to it that I can find.

Mr. STAATS. It is my understanding that this is a report of the advisory team that was sent to Vietnam by AID concerned with customs operations.

Mr. YATES. Was it out of AID or customs?

Mr. STAATS. If I am not mistaken, by the AID, but headed up by customs officials.

Mr. STOVALL. It was organized by AID to accomplish their purposes. They needed expert customs people to make up the team. They drew them from customs.

Mr. YATES. Is it a confidential report?

Mr. WEITZEL. I could put on the record that one of the problems, Mr. Yates, that we have found in examining the commodity import program in South Vietnam is that AID still has the strong attitude that they are limited in the actions that they can take by the fact. that the Government of South Vietnam is a sovereign nation and the AID people that are there are there as advisers.

Mr. STOVALL. I might add one more thought to that. They have had customs experts working for AID for a long time, separate from this team. They have worked quite closely, as I understand it, with the Vietnamese customs bureau.

Mr. YATES. Does anybody in AID take issue with the report prepared that is the subject of this statement by Mr. Gruening?

Mr. STOVALL. We don't have any information on that.

Mr. YATES. I think that I would like to have this in the record at this point.

Without objection, it will go in the record.

(The information follows:)

CORRUPTION IN SOUTH VIETNAM, IV-MUST OUR BOYS CONTINUE TO DIE TO PROTECT IT?

Mr. GRUENING. Mr. President, a U.S. Government team, studying corruption in South Vietnam, has come up with a hard-hitting frank report on the widespread dishonesty among South Vietnamese officials:

"The diversion of such a great percentage of the total Government effort to lining individual pockets, the report finds, instead of the devotion of all energies to fighting the war and building the nation, is aggravating this war and is causing fighting men, American as well as Vietnamese, to suffer unnecessary death at the very time this is being written and read."

The report by these high level, experienced, responsible American officials is a constructive report and does not content itself merely in pointing out instances of corruption in South Vietnam but makes eight positive recommendations for steps which could be taken to remedy the situation.

Some of the steps recommended are:

"1. Stop treating corruption as a delicate unmentionable subject. Openly acknowledge that it exists * * *

2. Create an anticorruption office within the U.S. mission. Invite the GVN to create a counterpart organization * * *

3. Confront the GVN with examples as fast and as often as they develop. Demand corrective action and force it by actual exposure of the individuals involved. ***

"1. Abandon *** the fiction that corruption is the special field of lower and middle echelon government officials *** place the blame squarely where it

belongs-right at the top. * * *

"5. Eliminate the root of corruption by making it possible for GVN employees to secure a real living wage.

"6. * * * announce to everyone that "the party is over and the game will be played straight from now on."

7. The U.S. must take the initiative in this and * ** must continue with it. *

“8. * * * don't make this a classified subject and thereby bury it. * * *

I ask unanimous consent that the entire report, except for such portions as were deleted to protect the source of the report, be printed in the Record.

There being no objection, the report was ordered to be printed in the Record, as follows: