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degree in 1962. I practiced law in Minneapolis and joined the Department 2 years ago. I am employed in the branch of Fish and Wildlife of the Division of Territories, Wildlife, and Parks, of the Solicitor's Office.

CONTRACT NEGOTIATIONS

Senator GRUENING. The first phase of this investigation will be largely limited to seeking and obtaining facts concerning the contract (exhibit 6) awarded to the Pierre Laclede Co. of St. Louis, Mo., and its relationship to the awarding of the contract (exhibit 5) to the Fouke Fur Co. of Greenville, S.C., and to the contract (exhibit 3) with Supara awarded by the Department of the Interior, called into question by the General Accounting Office, and subsequently canceled. Mr. McKernan, of the three contracts which I mentioned, which did you negotiate and in which did you participate in the negotiation, and to what extent?

Mr. McKERNAN. Mr. Chairman, I negotiated the contract with Fouke Fur Co. and with Pierre Laclede Fur Co., and I had a hand in the negotiation of the Supara contract. The Supara contract was consummated that is, finally consummated, more directly by the Assistant Secretary for Administration of the Department of the Interior, but it was done in consultation with myself and our Bureau throughout the negotiations.

Senator GRUENING. So you had a participation in all three? Mr. McKERNAN. Yes, Mr. Chairman, and events leading up to the consummation of these contracts in each case.

Senator GRUENING. You signed the contracts, did you not?

Mr. McKERNAN. I signed the Fouke contract and the Pierre Laclede contract and the secretarial officer signed the Supara contract.

Just a moment. I will consult with Mr. Layton. I believe our Assistant Secretary for Administration finally signed the Supara con

tract.

Senator GRUENING. What is his name?

Mr. McKERNAN. Assistant Secretary Otis Beasley.

Senator GRUENING. Otis Beasley?

Mr. McKERNAN. Yes. D. Otis Beasley.

Senator GRUENING. D. Otis Beasley. He signed the Supara contract and you signed the contract with the Fouke Fur Co. and Laclede Fur Co.

Mr. McKERNAN. Yes. That is to the best of my recollection. I am quite certain that Secretary Beasley signed the Supara contract.

PIERRE LACLEDE FUR CO. AWARDED R. AND R. CONTRACT

Senator GRUENING. Will you tell the subcommittee how the contract with the Pierre Laclede Co. came about, chronologically, from the time the decision was first made to set aside the contract with Fouke for research or before that time of development, and give the subcommittee a complete picture?

Mr. McKERNAN. Mr. Chairman, the Department for a number of years has thought that it would be in the Government's interest to develop competition in the processing of fur seals. The Government realized that, if I can use the term somewhat loosely, the monopoly

that had existed in this processing by one company for a large number of years might, by its peculiar circumstances, lead to some detrimental effects to the Government and to the broad public interest. It was with this in mind that the Government was interested in broadening the base of competition, and when we originally canceled the contract in, I believe, 1961 with the Fouke Fur Co. and invited proposals for a new contract, it soon became apparent that there wasn't sufficient skill available in other fur processors in the United States to provide for the kind of competition that the Department felt to be in the best interests of the Government.

After a good deal of consideration, and following an award to Supara which subsequently was declared invalid by the General Accounting Office, we invited proposals again and we got three somewhat deficient responses. The Department felt it was in the broad national interest to encourage the development of further processing skills beyond the one company.

With that in mind, when we made the award in March of this year to the Fouke Fur Co., we quite clearly stated in the public announcement at that time, copies of which were supplied the Alaskan delegation, and which was very broadly circulated, that we were going to withhold a number of skins from the new Fouke contract, from the kill each year, and we were going to encourage the development of new processes and the skills of new companies in order that when the contract again came up for bid in 1968, we would hope that there would be a better basis for competition.

This one company, Fouke, had held the contract for some 40 years and there was no real-there were no real skills by other fur processing companies that were completely adequate. For that reason since the awarding of the Fouke contract in the spring, we have encouraged some other companies to become interested, and we have found some interest by several. That interest was then consummated in a research and development contract with the Pierre Laclede Fur Co.

The Pierre Laclede Fur Co. from the very beginning appeared to us to have certain desirable characteristics. It had available a large number of expert people in the fur processing business who had previously had experience in processing sealskins. They were located in St. Louis, quite a traditional fur processing area from the very early settlement of this country, particularly beaver processing in the early years. This company produced skins from the very beginning which we found to be very good. They compared quite favorably with the Fouke skins. So we felt that there were some special possibilities with this company and did encourage them to submit a research proposal, and we have signed a contract with them to further develop this skill with the hope that we can get competition for the next round of bids for this contract.

OTHER BIDS RECEIVED

Senator GRUENING. What were the other companies that submitted bids?

Mr. McKERNAN. Superior Seal Co., I think that is-is that the correct name?

Senator GRUENING. Superior?

Mr. HODGES. Superior Seal, Inc.

Mr. McKERNAN. Superior Seal, Inc. of Chicago. And the C. W. Martin & Sons indicated an interest in the matter; Pierre Laclede, as we have already recognized.

Senator GRUENING. Where is the Martin Co. located?

Mr. McKERNAN. In London. C. W. Martin & Sons, Ltd., is an old and established fur processing company. It is a very, very large one, and from the very beginning they have indicated an interest in processing fur seals. They did compete in our previous solicitations but they were unsuccessful. In fact, their processed furs were judged not to be of the same quality as either of these three domestic companies, the Fouke Fur Co., Pierre Laclede Fur Co., or the Superior Seal, Inc. Globe Fur Dyeing Corp. of New York also indicated an interest. Senator GRUENING. What company is that?

Mr. MCKERNAN. Globe Fur Dyeing Corp., and Van Daal & Meijer indicated some interest in this. This was a company that was called to our attention by the chairman some time ago. Since that timeSenator GRUENING. Where is Van Daal & Meijer located? Mr. McKERNAN. They are in Gröningen in the Netherlands. And then since that time, another company has come to our attention, Fur Seal Processing Corp. of New York. They have asked us for some skins for experimental processing, and they show an interest. So there is developing or has developed over the past several years since our cancellation of the Fouke contract considerable interest, and we are very hopeful that this will lead to some expertise by other companies and provide for better competition and that the Government interests will be served by this means.

OFFICERS AND BOARD MEMBERS OF PIERRE LACLEDE FUR CO.

Senator GRUENING. Who are the officers and members of the board of directors of Laclede? Would you give us their backgrounds and the background of the corporation? How long has it been established and what has been its experience in processing furs?

Mr. McKERNAN. I wonder if I could supply that for the record, or would you like me to take the time to look

Senator GRUENING. No. I wish you would supply it now.
Mr. McKERNAN. All right. I will do my very best.

Mr. Sylvester G. Lipic is the president of Pierre Laclede.

Mr. Chairman, I am not certain we have that information with us. Mr. Lipic-it is my knowledge that he is a businessman of St. Louis who has been in a number of businesses, and there are a number of other prominent people in St. Louis who are associated with this company. I apologize for not having the detail of the composition of the board of directors or officers of this company with me, but I can certainly supply it for the record.

Senator GRUENING. Are you familiar with Mr. Aloys P. Kaufman, the vice president?

Mr. McKERNAN. Yes. I am generally familiar with him. not specifically familiar with him.

I am

Senator GRUENING. Has he any experience in the fur business? Mr. McKERNAN. Not that I know of, Mr. Chairman.

Senator GRUENING. Are you familiar with Mr. Mark R. Holloran, the treasurer?

Mr. McKERNAN. Yes.

Senator GRUENING. Tell us about him.

Mr. McKERNAN. He is a businessman in the St. Louis area also and has been rather prominent in our discussions with the company from time to time. That is about the only information I can give you. Senator GRUENING. Do you know whether he has any activities outside of his business activities?

Mr. McKERNAN. I don't know any of these men on a personal basis, Mr. Chairman, and I really couldn't say about that.

Senator GRUENING. Do you happen to know whether he is now and has been for some time the Democratic national committeeman for the State of Missouri?

Mr. McKERNAN. No. I have no knowledge of his political activities, Mr. Chairman.

Senator GRUENING. Do you know Miss Adele Struckhoff, the secretary?

Mr. McKERNAN. Mr. Chairman, I didn't hear your question, but I now find a list of the officers of this company as of March 31, 1964. Would you care to have me

Senator GRUENING. Yes. Would you please give them for the record.

Mr. McKERNAN. Yes. Mr. Sylvester Lipic is-I mentioned before the president; Mr. Aloys P. Kaufmann, vice president; Mr. F. W. Trampe, vice president in charge of plant operations; and Miss Adele L. Struckhoff, secretary-treasurer. The board of directors consists of Mr. Lipic, Mr. Kaufmann, Mr. Trampe, Miss Struckhoff, and Mr. Russell L. Dearmont.

Senator GRUENING. Do you know whether Mr. Lipic has had any experience in the fur business?

Mr. McKERNAN. I don't believe before the organization of this company in about 1961 or 1962 that he had had any experience himself. Senator GRUENING. Do you know whether Mr. Aloys P. Kaufmann had any previous experience in the fur business?

Mr. McKERNAN. I don't know that. The superintendent, in a sense the director of their operations, is a man named Richard Trampe who has had 30 or so years of experience in the fur seal processing business, and he has been the specialist in furs with whom we have dealt from time to time.

Senator GRUENING. Mr. Mark Holloran-do you know whether he has had any previous experience in the fur business?

Mr. McKERNAN. I doubt it, Mr. Chairman. I don't believe he has. I am not certain of this but, from my conversation, I think these people are businessmen who have formed the company and have brought together these experts who resided in St. Louis.

FORMATION OF LACLEDE CO.

Senator GRUENING. Was this company formed especially to get this fur contract?

Mr. McKERNAN. I couldn't say whether it was formed especially or not. I am afraid you would have to ask them. But it was formed at that particular time, Mr. Chairman; yes. It was formed, to the best of my knowledge, after the cancellation of the contract with the Fouke Fur Co. It is my general understanding that what they did was form this company which would bring together 100 or more

former employees of the Fouke Fur Co. who were in the St. Louis area. Mr. Trampe was one of the superintendents or supervisors, one of the leaders of the highly specialized and highly trained group who work under these officers that we have mentioned.

So that, to my knowledge, and I have looked at their prospectus, they have a great deal of expertise among the people who are handling their furs and, in fact, have produced some very excellent products.

Senator GRUENING. The company itself was formed, then, after the contract with the Fouke Co. had been canceled, or was about to be canceled, for the specific purpose of trying to secure the processing of the Pribilof seals; is that correct?

Mr. McKERNAN. Well, I know they were formed about that time, Mr. Chairman. I am not sure what their purpose was and background. I am afraid that is something that is beyond my knowledge.

FORMATION OF SUPARA AND OTHER COMPANIES

Senator GRUENING. Well, in the case of the Supara Co., whose contract was canceled after the adverse opinion of the Comptroller General, was that also formed specifically at the time of the cancellation of the Fouke Co. ?

Mr. McKERNAN. That was, Mr. Chairman. That was formed from two existing fur processing and dyeing corporations, one New York and one Chicago corporation, and it was my understanding that they came together to form the Supara Co., and got financial backing as the Supara Co. and then competed for the fur seal contract.

Senator GRUENING. Now, you sent out how many invitations to other potential fur processors?

Mr. McKERNAN. Quite a large number, Mr. Chairman. Just a moment and I will provide you with that information.

Senator GRUENING. Will you furnish a list of those? Mr. McKERNAN. Yes. We will furnish a list. than 20.

Senator GRUENING. More than 20?

Mr. McKERNAN. More than 20 notices all together; yes.

It was more

Senator GRUENING. Were any of these also formed specifically at the time for the purpose of securing the contracting of the Pribilof seals or had they had experience?

Mr. McKERNAN. Were any of these companies?

Senator GRUENING. Yes.

Mr. McKERNAN. No. To the best of my knowledge there were none formed at that time. Now, since that time, as I mentioned, a new corporation in New York has become interested, the Fur Seal Processing Corp., and to my knowledge that corporation has only very recently been formed from three companies.

Oh, yes, Mr. Chairman. I do have copies of the invitation that was

sent out.

LIST OF COMPANIES RECEIVING MARCH 31, 1965, INVITATION Senator GRUENING. Would you read the names of those companies that you invited

Mr. McKERNAN. This was the March 31, 1965 invitation. Yes. Jonas Brothers of Seattle, to my knowledge an old, established company. Herman Basch & Co., Inc., in New Jersey.

Senator METCALF. Would you yield just a moment?

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