Senator McKELLAR. It has not been disclosed? Mr. CROWLEY. It has not been disclosed, and it could not be because of the service performed or even the financial condition of the companies. Senator MCKELLAR. I was going to ask you about the financial condition of the companies. For instance, let us consider the financial condition of the United Airlines. Senator TRUMAN. Senator McKellar, I think that representatives of the United Airlines and the American Airlines are here, and we can have them answer such questions, if you like. Senator MCKELLAR. I should rather go on with my questions of Mr. Crowley. Senator TRUMAN. Very well. Senator MCKELLAR. And then if they wish to discuss those matters, they may do so. Senator TRUMAN. I thought the best evidence would be the financial statements. Senator MCKELLAR. Are they in the record? Senator TRUMAN. No. Senator McKELLAR. I want to ask him about these rates. The purpose of the subsidy, as I understand it, and as you understand it, is to aid in promoting and making successful and in bettering the condition of these pioneer companies, is it not? Mr. CROWLEY. That is the reason that has been given. Senator MCKELLAR. That is the reason that has been given? Senator MCKELLAR. We pay more than the Service earns? Is that not true? Mr. CROWLEY. Yes. Senator MCKELLAR. Do you have the figures about that, by the way? What is the entire cost for the Service? Could you fix it for 1936, or have you that figure available? Mr. CROWLEY. I shall supply all these: The respective amounts for TWA, American, and United, and the mileage, and then the exact total of costs. Senator MCKELLAR. Yes, sir. Senator TRUMAN. Let us have that information for all the air-mail lines, please. Mr. CROWLEY. Yes; for all of them. Senator MCKELLAR. I am perfectly willing to have that go in, but I should like it to go in separately, if you please, because I am addressing myself to what I believe is the manifest inequity of these rates as applied to these three great transcontinental companies. Senator TRUMAN. I understand that, but I should like the Interstate Commerce Commission to tell us what the rates are. Mr. CROWLEY. I have the table here showing the rates fixed for the three lines. Senator MCKELLAR. I should like to see that, if you please. Mr. CROWLEY. The American line is divided into two routes, one from Washington to Fort Worth, and one from Fort Worth on. Senator MCKELLAR. But the rate is the same? Mr. CROWLEY. Yes. And now I have the figures on mileage; this information has just been phoned from the office: The mileage on the American Airlines, transcontinental, is 2,977 miles. Senator MCKELLAR. Yes, sir. Mr. CROWLEY. The American Airlines has two round trips a day from New York to Los Angeles. Its total yearly compensation is $951,069.23, for the last fiscal year. The United Airlines has three transcontinental trips and four trips from New York to Chicago; that is, four schedules only as between New York and Chicago. Senator MCKELLAR. Yes, sir. Mr. CROWLEY. The mileage is 2,773 miles, and their yearly compensation during the last fiscal year was $2,334,556.59. The TWA has three round trips per day. The mileage is 2,616 miles. The compensation to the TWA is $1,665,754.82. Senator TRUMAN. That compensation is fixed on the number of trips? Mr. CROWLEY. That compensation is fixed on the number of trips. Now, the American has only two trips; the United and TWA each has three. The United has the fourth trip between Chicago and New York. The American has only two. The Department is naturally held down, because of the appropriation, as to putting on increased frequencies. Senator MCKELLAR. According to those figures, and by simple calculation, the United is given rates that produce almost as much compensation as both of the other transcontinental lines put together; is that not true? Mr. CROWLEY. Yes; that is so. Senator MCKELLAR. Do you know of any reason why the Interstate Commerce Commission, if it has knowledge of the subject, would thus favor so tremendously one of the transcontinental lines over the other two? Mr. CROWLEY. As I stated before, I do not know. I do not have any idea what the formula was, if they had one, or what their basis of fixing these rates is. I do not know. Senator MCCARRAN. May I ask a question? Senator MCKELLAR. Yes; I should be glad to have you. Senator MCCARRAN. Mr. Crowley, in fixing these rates, they are discussed in open hearings, are they not? Mr. CROWLEY. Yes, sir. Senator MCCARRAN. And in these hearings the right of crossexamination rests with the Department as well as with the applicant? Mr. CROWLEY. That is right. Senator MCCARRAN. And briefs are filed with the Commission? Mr. CROWLEY. That is correct. Senator MCCARRAN. And the reasons are given, in writing, for the fixing of the rates? Mr. CROWLEY. No, sir; no reasons are given. The rates are fixed. Senator MCCARRAN. Will you answer this question "No": That no reasons are given by the Interstate Commerce Commission for the fixing of the rates, in the decisions rendered? Is your answer to that "No"? Mr. CROWLEY. No adequate reason; no. Senator MCCARRAN. But they do give a reason? The question of adequacy is your judgment; is that true? Senator MCKELLAR. The testimony as to that has been repeatedly stated. Senator MCCARRAN. Just a minute, please. They do give a reason, do they not? Mr. CROWLEY. They simply say they consider the fair and reasonable rates to be established on these routes to be so-and-so. Senator MCCARRAN. And that is based on the hearings and the evidence produced, is it not? Mr. CROWLEY. It is based on the hearings and the evidence produced. Senator MCCARRAN. And you have a right to appear before the Interstate Commerce Commission, and you and your Department do appear and do protest those rates? Mr. CROWLEY. That is right. And I should like to give an explanation of that, if I may. Senator MCKELLAR. Go right ahead, please. Mr. CROWLEY. I should like to state that the Department is not properly informed as to any investigations or any audits made by the Commission, at a time prior to the date of the hearings. We have no reasonable opportunity to cross-examine the auditors of the Interstate Commerce Commission; we are faced with the evidence at the instant of the trial, and we naturally cannot adequately defend the Post Office Department with the present system. We have asked that the law be changed a little, and a bill has been introduced to provide that before a rate can be changed the Commission must make certain audits and the results of those audits shall be submitted to the Post Office Department; that we shall be given a reasonable opportunity to examine those audits; and, if necessary, on the filing of an application, have a slight continuance in order to make a little further independent investigation ourselves. We are constantly making these independent investigations, because we have not been able to know the position of the companies from any matter furnished us by the Interstate Commerce Commission. I am not criticizing the Commission; they have been fixing rates for a long time; perhaps they think that is the best thing to do. And I do not want to be understood as attacking the Commission at all. I am merely trying to state to you that about the first time we hear of the alleged position of a company is practically at the instant when I am faced with the matter, to go over it as a litigant. Senator MCCARRAN. And you have a right to cross-examine and to call for all of the audits? Mr. CROWLEY. They have not produced any auditors for our crossexamination. Senator MCCARRAN. Have you ever requested that to be done? Mr. CROWLEY. They have refused to do it; yes, sir. Senator MCCARRAN. The Interstate Commerce Commission has refused to do that? Mr. CROWLEY. Absolutely. Senator MCCARRAN. Will you give me an instance in which the Interstate Commerce Commission refused you an audit? Mr. CROWLEY. Refused to produce their witnesses on the stand, as to why they said certain things in their reports. Senator McCARRAN. The Interstate Commerce Commission has refused? Mr. CROWLEY. That is correct. Senator MCCARRAN. The Interstate Commerce Commission has refused to call witnesses to the stand to give testimony regarding their position? Mr. CROWLEY. That is correct. Senator MCCARRAN. Give me the name of the case, please. Mr. CROWLEY. The last instance was the Delta Airlines, that runs from Dallas, Tex., to South Carolina. Senator MCCARRAN, And in that case the Interstate Commerce Commission refused to put the witnesses on the stand, to explain that? Mr. CROWLEY. That is correct. That is the information given me by the attorney. Senator MCCARRAN. Well, do you know personally? Mr. CROWLEY. Mr. O'Brien is the attorney, and he is now in the room here. He may be able to answer that question. Mr. WILLIAM C. O'BRIEN. I should like to have the question read. I was in the back of the room and could not hear it distinctly. Senator MCCARRAN. I shall put it to you again: Is it true that the Interstate Commerce Commission in the Delta case refused to allow witnesses to go on the stand to be examined by you? Mr. O'BRIEN. I did not try the Delta case; Mr. Page tried that case. STATEMENT OF PAUL D. PAGE, JR., ASSISTANT SOLICITOR, POST OFFICE DEPARTMENT Mr. PAGE. I tried the Delta case, Senator. It is still pending. Senator MCCARRAN. May I have an answer to my question, please? Mr. PAGE. Yes, sir; I am attempting to answer it. It is my recollection that when the audit was produced before the examiner, I first objected to its introduction upon the ground that it was not verified, that it was not signed, and that we had no opportunity to cross-examine the auditors. Over my objection that audit was received and placed in the record. It is my recollection, though I cannot be definite, that I specifically requested that the auditors be produced. It is my further recollection, though I cannot be definite on this, that there was present at the hearing room and taking notes of this matter a representative of the auditing office of the Interstate Commerce Commission. That is all I can say in the matter. Senator MCCARRAN. Well, did they deny you the right to have the auditor take the stand? Mr. PAGE. They introduced the report into the recordSenator MCCARRAN. Cannot you answer that question? Mr. PAGE. That is my recollection. I cannot be definite. Senator MCCARRAN. Did they deny you the right to do that? Mr. PAGE. That is my recollection. The record will speak for that. Senator MCCARRAN. How long ago was that? Mr. PAGE. Within the last 3 or 4 months. The record will speak for that, Senator. Senator MCCARRAN. Yes; but I am asking you. You were the attorney. Mr. PAGE. Yes, sir. Senator MCCARRAN. That is your best recollection? Mr. PAGE. Yes, sir. Mr. CROWLEY. I understand the American Airlines had the same result. Mr. O'Brien is here, who handled that case. Senator MCKELLAR. We should like to hear Mr. O'Brien regarding that case; let us have the facts properly presented before the committee. STATEMENT OF WILLIAM C. O'BRIEN, ASSISTANT ATTORNEY TO THE SOLICITOR, POST OFFICE DEPARTMENT-Resumed Mr. O'BRIEN. If the Senators please, in the American Airlines case when an audit was introduced the day before the hearing, Mr. Crowley and myself requested that the audit be withdrawn. That memorandum to the Interstate Commerce Commission covers some 20 or 30 pages. Incidentally, the audit covers a period a year short of that period covered by the rate fixing hearing. We asked that the audit be withdrawn and that the auditors be ordered to make a complete audit of the records, books, and accounts, in accordance with section 6 of the present act, I believe. That request was denied by the Commission. We also requested that the hearing date be set aside for the purpose of allowing us to make an audit under the act, which we are authorized to do. However, they said, "No; we shall go ahead with the hearing, and after it you can do that." And they did give us 60 days, as I recall. Then the audit was offered by Mr. Grealis, of the American Airlines, as I recall. I that it was improper evidence and on the grounds set forth in the 20-page memorandum of Mr. Crowley. And the examiner overruled my objection. Two or three days later, upon similar grounds, I moved to strike. That motion was also overruled. Now, I should like to say this to the committee: In preparing the exceptions to a proposed raise in rates in the American Airlines case only a few days ago, it is my recollection that I moved to strike the so-called audit. It was no audit; it was only a résumé of figures submitted on form 2780 of the Post Office Department and represented in no sense an audit of the books of the company, or none that we could discover, with the assistance of the chief auditor of the Post Office Department. It is my recollection that I demanded the production of the auditor, and that that was refused. But in justice to the Commission I must say that in scanning through the five volumes of testimony and of counsel's objections, and so on, I have not been able to put my finger on that point. I have in my files, however, a memorandum wherein I called Mr. Haley, of the Commission, and asked if it would be proper to call for the production of the auditors; and he demurred, but he said I, of course, could make the request. That is all I know about it. |