Mr. SCHLEGEL. I only know they were put out on new routes in the same type of program that the Department was carrying on in Ohio, with one in Flint, Mich., and several in the State of Kentucky across the river from Cincinnati.

Mr. MOLLOHAN. You mentioned a minute ago, Mr. Schlegel, that the primary determining factor in acquiring these 32 vehicles by lease with a recapture clause in it was because you were at the end of the year and you were short of funds?

Mr. SCHLEGEL. No, sir, I didn't say it was the primary-I think I said that was given consideration.

Mr. MOLLOHAN. You said “almost.”

Mr. SCHLEGEL. Yes; it was my determination because I am responsible for my money.

Mr. MOLLOHAN. That is fine. I appreciate that. And I commend you for it. But you said "almost." What were the other factors? Mr. SCHLEGEL. I couldn't say, sir. We-just let me give you the order of events.

I gave my people your people my complete file. I had requirements that were established by an operating agency.

We are a service bureau, right, sir?

Mr. MOLLOHAN. We accept that.

Mr. SCHLEGEL. I operate a service bureau. I have a firm valid requirement put on me to furnish vehicles. I don't have the vehicles. We were late in getting delivery of the vehicles that had been scheduled. And they had this requirement set up in the Atlanta area where they had done some testing similar to what I mentioned in Ohio. I transmitted that to the procurement officer. I don't have the vehicles, so I transmitted it to him for a ruling.

Can we do this? Could we buy these vehicles? I asked him that question. After all, it is up to me to get the vehicles. Isn't that right? To try and get them, to fill this requirement.

And I get an answer back; no, you can't buy the vehicles. I still have the requirement. Further correspondence goes on which is in that file from a certain postmaster, saying he needs the vehicles.

The only way I can get them, is go into the area and rent vehicles to fill that requirement. Now, that is exactly, sir, what happened.

Mr. MOLLOHAN. Well, we are not quite consistent here. A moment ago you said the reason you didn't buy them was because of a shortage of funds. Now, you are saying Mr. Kallio says you cannot do it.

Now, there is something here that has to be consistent. One moment you say it is because you don't have the money and the next moment you say it is because Mr. Kallio says you can't do it.

Mr. SCHLEGEL. I said I didn't have the funds left in my budget to buy anyway. That is the statement I made to Mr. Christensen. I would have to go and get money from the Department in the event they were purchased to add to my budget. I merely made that statement as a matter of information.

Mr. MOLLOHAN. You made it as a statement of fact. You said the reason you didn't purchase the vehicles instead of renting them was because you didn't have the money. That is what you said a minute ago.

And, now, you say

Mr. SCHLEGEL. No, you are not quoting me right.

I said I couldn't have bought the vehicles anyway because I didn't have the money available.

Mr. MOLLOHAN. You mean to tell me that you didn't say to me a minute ago that the reason you didn't buy the vehicles was because you were at the end of the year and you were out of funds and didn't have the money to do it and that was almost the entire reason for your not buying them?

Mr. SCHLEGEL. No, sir. I meant to imply, Mr. Chairman, that the money was not available in my budget to purchase these vehicles. Now, that is all I meant to imply.

If you understood me that way, I wish to withdraw that if I can. The money was not available in my Department to buy these vehicles. At that time that we got this request.

Mr. MOLLOHAN. Then you sent a request over to the Purchasing Department or to Mr. Kallio to buy them, didn't you? Mr. SCHLEGEL. That is right, sir.

Mr. MOLLOHAN. If you didn't have the money how could you ask the purchasing authority to buy them?

Mr. SCHLEGEL. If I didn't have the money, the budget officer would try to supply it if they had it available. Would have transferred to our account.

Mr. MOLLOHAN. Mr. Schlegel, aren't you getting yourself wound up here in a little ball of wax?

Mr. SCHLEGEL. It looks like I am, frankly.

Mr. KALLIO. I might be able to explain that. I think the request actuallly came to me as a request to negotiate. And, of course, the only time we negotiate for vehicles of that purpose is if there was a management. And, of course, we couldn't see the manager for a negotiation.

Therefore, my office had to turn it down because

Mr. MOLLOHAN. All right. The next question I want to ask is who was the first person that came up with this lease suggestion?

At whose suggestion did we enter into this lease? Now somebody suggested it. There wasn't any half a dozen people who came up with it all at the same time?

Mr. SCHLEGEL. There is a normal procedure, sir. When we need. vehicles

Mr. MOLLOHAN. I appreciate the normal procedure, Mr. Schlegel. But I am interested only in 32 vehicles.

And that is a specific proposition. In this decision that was made here as to lease of these vehicles, who made the recommendation that they be leased?

Mr. SCHLEGEL. The recommendation was made in a conference between Mr. Kieb and Mr. Abrams that the need for the vehicles in Atlanta still existed.

Mr. Abrams stated that he wanted to get them if he possibly could. And I took the matter up with Mr. Kieb, which I think is a matter of record in Mr. Christensen's papers.

Mr. MOLLOHAN. Did you recommend to Mr. Kieb that you lease them?

Mr. SCHLEGEL. Yes.

Mr. MOLLOHAN. It was your recommendation first?

Mr. SCHLEGEL. Yes.

Mr. MOLLOHAN. It was not Mr. Kieb's or Mr. Abrams'?

Mr. SCHLEGEL. It was Mr. Abrams' request that we fill the order if we possibly could. It was my recommendation that we advertise for vehicles in Atlanta in the region to fill this requirement.

That comes under the purview of my office in all cases; all rental contracts come under my office for all vehicles. Of course, the authority to lease them now is distributed to the 15 regions.

Mr. MOLLOHAN. Did you at the time you made this recommendation feel secure in your own mind that they would be needed in the permanent program of the Department and that you would exercise the recapture clause at the end of the 2-year period?

Mr. SCHLEGEL. I had hoped that they would do it, sir. I could not say I could feel secure in my mind.

Naturally, if you have a mail requirement, it does not just disappear overnight, although there is no guaranty of it because the Bureau of Operations sometimes changes the whole medium of operation and may go back to foot routes if they find it is more economical to do it that way.

Mr. MOLLOHAN. Let's go back to our original discussion a moment

ago.

If you had had the funds available, would you have recommended outright purchase?

Mr. SCHLEGEL. I would have, sir, at the price it was offered to us in view of the requirements.

Mr. MOLLOHAN. Explain to me just a little bit more the step wherein you asked Mr. Kallio to purchase them or to acquire them. Explain that a little bit more for the committee.

Mr. SCHLEGEL. I think, sir, that is a matter of record.

Mr. MOLLOHAN. I don't care about the record. I just want you to explain it.

Mr. SCHLEGEL. Naturally any type of requirement like that, we have a requirement-let me explain one thing to you. Our whole vehicle procurement or replacement program is planned on a large scale.

For example, we are already planning for the fiscal year 1958. This was a particular requirement as has been established by the conversations and testimony given. It is my normal routine that if I do not have vehicles available and there is a determination made to purchase, like a special case, like this special requirement, I would send it to Mr. Kallio for action. And that is exactly what I did, sir.

Mr. MOLLOHAN. Was that made you sent it to him for action even though you did not have the funds and knew you did not have the funds to encumber to him for the purchase purpose?

Mr. SCHLEGEL. I did know the funds were short at that time, sir; just how much I couldn't tell you.

Mr. MOLLOHAN. Are you saying to me now that you did not know that there were not sufficient funds in your budget to purchase it?

Mr. SCHLEGEL. There was not sufficient money in my budget to buy them, sir. I would have had to ask Mr. Kieb to ask Mr. Brinkmyer to see if he could transfer money. In the event the purchase was made, it would have to be transferred back to account 234 which is my purchase account.

Mr. MOLLOHAN. Do you as an ordinary practice requisition Mr. Kallio to purchase for your Department when you know that you do

not have sufficient amounts of funds in that budget to cover the cost of purchase or the estimated cost of purchase?

Mr. SCHLEGEL. Not ordinarily; no.

Mr. MOLLOHAN. Ordinarily you know how much money is in your respective budgets?

Mr. SCHLEGEL. Yes.

Mr. MOLLOHAN. You know whether or not you have sufficient amounts of money to validate or to cover the estimated purchase price of the article you are requesting; is that not true.

Mr. SCHLEGEL. That is right.

Mr. MOLLOHAN. In this instance why should we not know in this case?

Mr. SCHLEGEL. The Bureau of Facilities, like all the other-I can't just give you a detailed information as to the financial structure of it; but within the Bureau of Facilities-and I think Mr. Kallio can explain that better than I can there is a method of transferring money. And that is allowed by the Bureau of the Budget where you are short in one account and you have it available in another account to transfer it to take care of an obligation.

Mr. MOLLOHAN. Don't you ordinarily ascertain whether such a transfer can be made before you initiate the purchase request?

I have been in Government. That is the reason I ask you these questions. I spent 10 or 12 years in the executive branch of the Government.

Mr. SCHLEGEL. Yes, sir; I do.

Mr. MOLLOHAN. Didn't you do it in this case?

Mr. SCHLEGEL. I cannot remember.

Mr. MOLLOHAN. Wasn't there somewhere along the line some discussion on this which said in effect we cannot purchase these vehicles because of certain reasons and conditions, but we can get the same result by a lease agreement with a recapture clause?

Now, wasn't there such a thing as that entered into this thing at some point?

Mr. SCHLEGEL. No, sir; not to my knowledge. It was never discussed with me, sir. That was never discussed at my level at all. Mr. MOLLOHAN. Do you have any questions?

Mr. YOUNGER. None whatsoever.

Mr. MOLLOHAN. That is all.

(Discussion off the record.)

Mr. GOFF. There was some statement made here of some lack of cooperation on the part of the Solicitor of the Post Office Department personally in this investigation. I want to say that the tenor of this investigation was set by the committee, not by the Solicitor of the Post Office Department.

The first thing to my knowledge we knew about this was: As I remember there were some investigators who showed up. The only inference that could be drawn from that was that the expectation was, or the inference was, that there was something crooked and under the table down in the Post Office Department, or if there wasn't something crooked, then there was to be an investigation in which the judgment of some of these investigators was to be substituted for that of the responsible officials of the Department who were selected for their ability to operate the Department in its various agencies and in con

nection with its operation and those delegated to make purchases and to meet the needs of the Department.

Now, in one other instance the chairman approached me about a matter. I asked him what he wanted to find out. And he got it very quickly. But in this instance, the only inference could be that the responsible officials, meaning the Postmaster General and myself, were covering up something that was crooked.

And with that connection, since they had set it on an arm's-length basis, the only matter left open-the only procedure left for us was to conduct ourselves on an arm's-length basis. I did not ask for this job in the Department. I was practicing law out in Idaho. I was asked to take this position. My first reaction and first word to them was that I was not interested. I had a substantial law practice. Later I said I might be interested if I knew what it was all about. Because I knew nothing about the Post Office other than simply mailing letters and buying a few stamps.

The ultimate result was that they asked me to come back to Washington and discuss it with Mr. Summerfield. I came back and discussed it with him. I had never had the privilege of meeting him personally, but I was impressed by his sincerity of purpose in trying to do something and modernize a very fine department. He sold me on his objective. And I finally decided that I had some obligation as a citizen to play some part in it since he offered me the position.

I want to say that in the two and a half years I have been here, every action of the Postmaster General has confirmed in me the favorable impression of his integrity and his desire to really save the Government money, to modernize a fine old department and bring business methods to it.

Now, it seems to me that if there is anything wrong about the Department or its procurement, if somebody is getting money under the table, no one is quite as concerned about knowing about that as is the Solicitor of the Post Office Department. And certainly if I found there was anything wrong, I would consider it my duty to at once. go to the Postmaster General and tell him about it, and we would take the necessary action, disciplinary if necessary; or if there was anything criminal involved, it would immediately be turned over to the Department of Justice.

I know in one instance where such charges were received in my office about some post-office officials in Texas and the first thing I did was to get right over to the Department of Justice and have an investigation made.

Now, as I say, the whole tenor of this investigation has been one that we were concealing-perhaps concealing-some fraud or something of that kind. I do not know what other purpose or else that we are inefficient in our operation. But there has never been given to me any statement about what they were looking for.

When this matter came up, my first directions were to go into the thing thoroughly and see if there was anything illegal; if there was any fraud; if there was any money under the table; if there was any unlawful preference given to any manufacturer. As far as I could find in the reports I received, there was nothing of that kind that took place.

Now, I have been unable to see in this investigation, and certainly I would be the very first one if there was anything improper, that