Mr. JAY. You asked me why I thought they would make them. I said I don't know that they made them. I really sincerely don't. Mr. BROOKS. In view of the fact that the Henges Co. wanted to drop their bid about $13,500 after the deadline for bids, and the allegations that they were willing to pay another about $5,000, then drop it a little more than that, doesn't it seem to you that they must have been expecting not a lot of competition on this original contract? Mr. JAY. I don't think there is any question. I don't think there is any question. I think they thought they had it locked up on the specs. Mr. BROOKS. It doesn't help the taxpayers much when we have a situation where one contractor thinks he has a lock on Mr. JAY. It is a deplorable situation. Mr. BROOKS (Continuing). A part of the deal? Mr. JAY. That is why I fully approved of Mr. Warren's actions in broadening the areas. It certainly is not a good practice, and it is not one in which our office condones or wants. We want our specs just as liberal as can possibly be to meet the situations. Mr. BROOKS. When they do this, and go around and influence or try to influence other contractors and represent that they have connections which you say they don't have, what is the GSA policy in regard to doing business with firms who have used what apparently are questionable ethics, and unfounded from your testimony, that they don't have these connections to stop other competitors? Mr. JAY. What is the GSA policy? The first policy would be to determine accurately whether or not this is true. This would be done by use of one of our security compliance officers. Mr. BROOKS. And you have a compliance officer here? Mr. JAY. I certainly do. Mr. BROOKS. A representative from Washington? Mr. BROOKS. Do you get along with him pretty well? Mr. JAY. I certainly do. Mr. BROOKS. If you found that they had spread a rumor that they had influence in the GSA regional office, and were going to get everything set up for them, what would you do about it? Mr. JAY. I would turn the case over to the security and compliance officer to run it down and find the substance of this rumor. Mr. BROOKS. If that proved to be the case what would be done? Mr. JAY. I would take it to Mr. Horn Bostel and see what means could be done to bar them from future business with the Government. Mr. BROOKS. Have you ever done this in the past? Mr. JAY. I never have. Mr. BROOKS. In view of the statement of Mr. Benoist, don't you think that maybe the compliance division ought to give some information to Mr. Floete on this matter? Mr. Benoist was pretty definite in his sworn statement. Mr. JAY. That they offered to drop the price, as I understood. Mr. BROOKS. That is right, and give him an additional $5,000, and that we can give you a copy of that. Mr. JAY. I was never clear, sir, as to whether they offered to give him $5,000 or whether they offered to drop the price $5,000. Mr. BROOKS. Both. Mr. JAY. If I have something I could look at, I would certainly, if it called for measures like that, ask to have it looked into. I would feel Mr. BROOKS. I think if you sent your people down to talk to him he would tell you very clearly. Mr. JAY. All right, sir, I will do it. Mr. BROOKS. The reason they were doing this is not because obviously they liked to lower their prices, and cut their prices down, and cut out their profit, or cut into their profit. They must have thought that there was a real basis for keeping that business. Mr. JAY. I can't say what they thought, sir. All I can know is the way that we try to keep our relationships with contractors. Mr. BROOKS. Would you tell us, Mr. Jay, why it is you took from July until November to answer those letters of complaint from the Henges Co., and to refute their claims? When they wrote you that letter it took you a good while Mr. JAY. Yes; it did. Mr. BROOKS. To apparently get them laid to rest. Mr. JAY. There were a number of reasons. One reason was that the partitions were not yet finished or completed. Mr. Lund and I decided that we should go to St. Louis to look at the partitions. I handled these letters as I would handle any other. I passed them on to the Public Buildings Service for answer, because I don't know all of the details of these things. And the answer would be prepared over my signature from my staff. One other big time lag in there was occasioned by the fact that I was in the hospital for 2 weeks and away from the office for another week in that time, sir. Mr. BROOKS. Do you consider Mr. Burns a personal friend? Mr. JAY. The first time I ever met Mr. Burns has been in the last year. Personal friend is a hard way to describe things. Mr. BROOKS. A business acquaintance? Mr. JAY. A business acquaintance; I have never been out with Mr. Burns socially. I have never done anything with him away from the office. I talk to him, and I get along well with him. Fine. Yes. Mr. BROOKS. You are Mr. JAY. I think he is a good salesman and a very aggressive one. Mr. BROOKS. You are both members of the Optimist Club? Mr. JAY. No, sir. Mr. BROOKS. You are not a member? Mr. JAY. I am a member. I am not aware that he is a member. Mr. BROOKS. Have you talked with Mr. Burns since we announced this hearing? Mr. JAY. I beg your pardon? Mr. BROOKS. Have you talked with Mr. Burns since we announced this hearing? Mr. JAY. No, sir. Mr. BROOKS. When Mr. Burns hand-delivered his complaint to you on Mr. Warren's supposed verbal abuse, you wrote him the following day, September 23, but sent it to his home rather than his office. Mr. JAY. I wrote to who? Mr. BROOKS. Mr. Burns hand-delivered a complaint to you about his verbal abuse from Mr. Warren, and you wrote him on the follow ing day, dated September 23, and you sent it to his home address rather than his office address. I wondered why that was. It was apparently a business matter. Mr. JAY. I don't even know where his home is. It makes sense to me—I imagine that is what happened-the answer was probably sent back to the return address he had on the envelope he sent. I presume. I don't know. But I presume that would be the reason it would go to his home. Mr. BROOKS. Two days after writing Mr. Burns that you couldn't look into it personally because you apparently had an operation, or illness, you referred it to Mr. Lund and asked him to get the facts, and then report to you on corrective steps taken. Did you assume then that there were corrective step necessary? Mr. JAY. No; if I had added the words "if necessary" it would have been nicer. Mr. BROOKS. It looked sort of like Mr. JAY. I didn't mean it that way, though. I didn't mean it that way. The intent of that letter to Mr. Lund was not only to look into this incident, but to take whatever corrective steps were necessary, to retell, to reinstruct the employees of the necessity of their being proper to people that call on us. There was a completely open mind as to the right or wrong of what had happened. I didn't know. Mr. BROOKS. Just don't let it happen any more and get it straightened out, is what you meant? Mr. JAY. That is exactly what I meant. Mr. BROOKS. Had you told Mr. Lund to write it up and put it in his personal file? Mr. JAY. No, sir; I did not. Mr. BROOKS. Is it your understanding that there is a policy in GSA that no disciplinary action will be taken on higher grade employees without the approval of the Commissioner? Mr. JAY. The Commissioner? Mr. BROOKS. You. In this instance your own approval. Mr. JAY. Yes. I don't think there is a written policy. I think that is a policy that we more or less adhere to there. Mr. BROOKS. I think that is true in the central office. Mr. JAY. I think it is a policy. Mr. BROOKS. I wonder if it is your practice here for discipline or a serious discussion, as to their efficiency and operation, to be taken up by yourself? Mr. JAY. Not taken up by me, but brought to my attention. Mr. BROOKS. Brought to your attention and you approve them or disapprove them before final action is taken? Mr. JAY. I will say I approve or disapprove action of the staff member who brings it to me. Mr. WALLHAUSER. Mr. Chairman. Mr. BROOKS. Mr. Wallhauser. Mr. WALLHAUSER. Have there been other examples of that grade or higher? Mr. JAY. No. We don't have too many 14's, Mr. Wallhauser. We have maybe a dozen. This is the first case. Mr. BROOKS. This is the first case? Mr. JAY. That is right, sir. Mr. BROOKS. So that there has not really been any established practice? Mr. JAY. No; as I say I don't know of any written policy or practice. I think my people would bring anything to my attention of this nature. I am sure they would. Mr. BROOKS. It seems like you really could have taken about 15 minutes to talk with Mr. Warren before you checked out. It seems to me if he is one of your few grade 14's that you have. Mr. JAY. That perhaps is right, sir. Mr. BROOKS. I would like to ask you about the Third Recon matter. I wonder if you could tell us how many similar leases Mr. Ray or Mr. Rice have with the Government? Mr. JAY. From memory, sir, and there may be more, I know of two. One is the district Veterans' Administration office on Linwood Boulevard. One is the district VA office in Lincoln, Nebr. And this is the third. To my knowledge that is all. There may be more. Mr. BROOKS. Would you have your staff check and give us an idea if there are any others? Mr. JAY. I certainly will. May I jot that down? Mr. BROOKS. Of course. Mr. Lund ought to have that done for you by the time you get back to the office. On those leases, were the buildings converted after Mr. Ray and Mr. Rice were assured of the lease, or were they converted first and then offered to the GSA? Mr. JAY. They were converted after the lease was signed with the GSA. (The information requested was furnished in the following letter:) GENERAL SERVICES ADMINISTRATION, Hon. JACK BROOKS, DEAR MR. CHAIRMAN: When you were in Kansas City on March 25 and 26, 1960, you requested we furnish you a listing of all properties which we lease that William D. Ray and Ralph W. Rice, Jr., either singly or together, have an interest in. These leases are as follows: 1. 2420 Broadway, Kansas City, Mo.: Lessor, Recon Corp. III; interest, William D. Ray and Ralph W. Rice, Jr. (both have an interest); area, 50,200 square feet of office and storage space; occupant, Armed Forces; effective date, January 1, 1960; lease term, 3-year firm initial term. 2. 17th and N Streets, Lincoln, Nebr.: Lessor, Recon Corp. of Nebraska; interest, William D. Ray only has an interest; area, 25,910 square feet of office and storage space; occupant, Veterans' Administration regional office; effective date, January 1, 1960; lease term, 5-year firm initial term. 3. Professional Building, Sixth and Center Streets, Hannibal, Mo.: Lessor, Recon Corp. II; interest, William D. Ray only has an interest; area, 2,400 square feet of office space; occupant, Social Security Administration, old-age and survivors insurance; effective date, July 1, 1959; lease term, 5-year firm initial term. 4. 911 Linwood Boulevard, Kansas City, Mo.: Lessor, Recon Corp.; interest, William D. Ray and Ralph W. Rice, Jr. (both have an interest); area, 67,962 square feet of office, clinic, and storage space; occupant, Veterans' Administration regional office; effective date, July 1, 1958; lease term, 5-year firm initial term with a right to cancel a part of the space after 3 years. Others, in addition to William D. Ray, have an interest in the leases at Lincoln, Nebr., and Hannibal, Mo., but Ralph W. Rice, Jr., is not one of such persons. Sincerely, THOMAS G. JAY, Regional Commissioner. Mr. BROOKS. Have you known Mr. Ray and Mr. Rice for a number of years? Mr. JAY. I had never met Ralph Rice before-to my knowledge. I had met Bill Ray casually sometime during the past. But very casually. Mr. BROOKS. Where did you know him? Do you all belong to the same organizations? Mr. JAY. This I don't even know, sir. Mr. BROOKS. Country club? Mr. JAY. I don't know where I would have met him. ProbablyMr. BROOKS. To what extent would you have entered into negotiations on this lease? Mr. JAY. I didn't enter into any of the negotiations on the lease. I interested myself in the lease in regard to the fitness of the location, the desires of the agencies that were going to be in it, the savings which they claimed they would make. They bring the highlights to me and discuss them with me, not the details. Mr. BROOKS. The reason I was asking is that the article in the Kansas City Star, which Mr. Lund did not think was accurate, dated January 17, 1960, in describing the building, said: Leasing arrangements were handled through the General Services Administration, specifically Thomas G. Jay, GSA commissioner here, and Earl Lund, an associate. That is why I wondered if you actively participated or Mr. JAY. This is untrue, sir. It is done under our supervision but not directly. I talked to the agency heads that were going in. I looked at the complex in the neighborhood, study the costs, and that is my area. Mr. BROOKS. Did the reporter talk with you? Or did they just pick up the story from your office and otherwise? Mr. JAY. No, the reporter did not talk to me. Mr. BROOKS. Did not? Mr. JAY. Absolutely not, sir. If you are referring to the first press release that came out on the Recon building. Mr. BROOKS. I am referring to this story that came out in the Kansas City Star-show him the story, in case there is any doubt. (The document was handed to the witness.) Mr. BROOKS. It may have been based on a press release. I don't know. Mr. JAY. On this press release, sir, I talked to nobody with the newspaper. It surprised me as much as it did anybody else when it hit the paper. Mr. BROOKS. I notice it said that Third Recon had purchased the building when they had a lease on it. You apparently didn't talk to them and have no idea where they go that impression? Mr. JAY. I have no idea. Mr. BROOKS. Did you know prior to Mr. Lund's letter of acceptance of the offer on August 14 that the Third Recon wanted to change the option terms to two 3-year periods? Mr. JAY. No, sir. Mr. BROOKS. Do you think that Third Recon had any difficulty financing the cost of remodeling with the Government lease as security? 58364-60 -14 |