Mr. GRISWOLD. I will tell you one thing now. We have several men who get 10-percent commission and some who get 20-percent commission on certain kinds of work on a straight-commission basis.

Mr. TOLAND. Mr. Chairman, I am going to call a witness now who refused to fall for it.

Mr. Underwood.

The CHAIRMAN. Hold up your right hand, Mr. Underwood. Do you solemnly swear the evidence you shall give to the Naval Affairs Committee shall be the truth, the whole truth, and nothing but the truth, so help you God?

Mr. UNDERWOOD. Yes, sir.

TESTIMONY OF JOHN A. UNDERWOOD, JOHNSON & JOHNSON, NEW BRUNSWICK, N. J.

Mr. TOLAND. Mr. Underwood, will you give the reporter your full name?

Mr. UNDERWOOD. John A. Underwood.

Mr. TOLAND. Where do you reside?

Mr. UNDERWOOD. I am in the midst of transferring from Connecticut to New Jersey. I formerly lived at 45 Dover Road, New Britain, Conn.

Mr. TOLAND. At that time you were connected with Manning, Bowman & Co. of Meriden?

Mr. UNDERWOOD. I was president of that company.

Mr. TOLAND. You are now connected with Johnson & Johnson?

Mr. UNDERWOOD. In New Brunswick, N. J.

Mr. TOLAND. What position do you have?

Mr. UNDERWOOD. I am assistant to Mr. Johnson and Mr. Smith, the president and executive vice president.

Mr. TOLAND. Do you know Mr. Stone who is sitting on your left? Mr. UNDERWOOD. Yes, sir.

Mr. TOLAND. You heretofore met Mr. Stone, did you not?

Mr. UNDERWOOD. Yes, sir.

Mr. TOLAND. Will you tell the committee briefly in your own way just exactly how you happened to meet him; what he said to you and what transpired?

Mr. UNDERWOOD. Mr. Stone originally contacted our vice president in charge of our New York office, Mr. Mirrielees.

Mr. STONE. Which Stone?

Mr. UNDERWOOD. I think Mr. Mirrielees informed me it was you originally. But in any case, Mr. Mirrielees called me up-this was early in December 1941 and we had been working to obtain defense production-and said that he would like me to meet Mr. Stone, and Mr. Stone was anxious to have me come to New York and talk with him about obtaining war production.

I did not go down, but as a result, a little later Mr. Mirrielees called our factory superintendent and said that Mr. Stone's brother and another gentleman, whose name I don't remember, would like to come up and survey our plant. They did that early on December 7-the day of Pearl Harbor. Our superintendent and our secretarytreasurer, Mr. Hartnett, took Mr. Stone and the other gentlemen through our plant, and the next day when I came to the office, they

told me of the visit and said that Mr. Stone and his friend had stated that undoubtedly production could be obtained with our equipment in Washington.

As a result of that, I made an appointment and met Mr. Stone in New York, at our New York office, a little before Christmas, 1941, and we had a discussion at that time. I told him that I felt, number one, that adding 5 percent commission to the cost of war production was a little too much, and that I believed the Government frowned upon it, that I would be very hesitant about committing our company to such a course. He told me that he felt that I had the wrong interpretation, that a fully accredited representative to a company would be recognized by the Government as having the right to represent any manufacturer. He said that if I would come to Washington, he would take me to the Judge Advocate General's office, and he felt that I would be satisfied by what I was told there, that there was nothing irregular about employing him to represent us.

I asked him to send us in writing the form of contract that he wanted, and told him that I would talk it over with my directors when I went back up to Meriden, which I did. Well, we were unanimous there that we didn't think it was the right thing for our company to do, and I so wrote Mr. Stone, I think early in January. Mr. TOLAND. Wasn't that late December?

Mr. UNDERWOOD. It may have been, Mr. Toland. I have the letter here.

Mr. TOLAND. It was December 29 that you decided not to take any further action?

Mr. UNDERWOOD. That is right. You are correct, sir. December 29 I wrote Mr. Stone and told him we had decided.

Mr. TOLAND. Then will you tell the committee what, if anything, happened after that date?

Mr. UNDERWOOD. Well, I received a reply from Mr. Stone on January 1, in which he said that-I will read this if you want me to.

The CHAIRMAN. Read it out.

Mr. UNDERWOOD. "Thank you for your letter of December 29. Your brochure will be sent to your New York office by the end of this week." That referred to a presentation book we had gotten up of our plant and departments, which we left at the various Government procurement offices so that they would be more familiar with what Manning, Bowman had to make. Mr. Mirrielees gave a copy of it to Mr. Stone.

I want you to know that I appreciate your attitude, as well as that of the directors, in seeking clarification of the Government's ruling in regard to representation. As stated when I saw you, I would suggest that you communicate with Mr. Francis Reed, in the office of Charles Evans Hughes, Jr., and if you come to Washington I shall be glad to accompany you to the Judge Advocate's office. It is advisable for our mutual interests that both these suggestions be followed, if possible, as I am almost positive I can use the facilities of your company. Should you decide to come to Washington, will you please notify me a few days in advance?

With kindest personal regards and best wishes for a happy new year, I am, Sincerely yours,

A. H. STONE.

Mr. TOLAND. Then, thereafter did you consult with a representative of the Navy Department?

Mr. Underwood. Yes. I talked with Mr. Frank M. Folsom in the Navy Department.

Mr. TOLAND. He is in charge of procurement, under Admiral Robinson, is he not?

Mr. UNDERWOOD. I think that is true. He is a member of the War Production Board.

Mr. TOLAND. As a result of your conference with him, what, if anything, happened with regard to Mr. Stone?

Mr. UNDERWOOD. Mr. Folsom asked me to contact Mr. Stone, and said he thought that I should find out whether or not he was correct in stating that the Judge Advocate's office would recommend his form of agreement and whether or not he would be a desirable representative for us. I called Mr. Stone and met him at his apartment, and he and

his brother

Mr. TOLAND (interposing). That was on the 29th day of January? Mr. UNDERWOOD. That was about the 29th. It was the latter part of January. I have forgotten the exact date.

Mr. TOLAND. Go ahead. Tell us what Mr. Stone said to you on that date.

Mr. UNDERWOOD. Well, Mr. Stone had several blueprints of Navy war material there that he had recently obtained, and he stated that he had made a contract with the Griswold Manufacturing Co., of Erie, that he had obtained approximately $7,000,000 worth of business for the Lionel Corporation and, I believe, referred to the Lee Tire & Rubber Co., of Conshohocken, Pa. I asked him if he would, as he promised, take me to the Judge Advocate General's office, so we drove to the Navy Department and went into the Judge Advocate's office and talked with Lieutenant Commander Perry. The lieutenant commander was noncommittal on the matter. He did not make any statement that was either favorable or unfavorable, and said that in any case, his opinion couldn't bind the Judge Advocate General's office as to the correctness or incorrectness of Mr. Stone's agreement. So we left there and called on Captain Lee, but he was out. Then we called on Commander Hubbard, and he was cordial. I explained to him our desire to obtain war work, and that was about all the conversation there. Then we left.

Mr. Stone explained that he could introduce me to other naval officers, but he thought I had probably seen enough to convince me that he knew his business and was in position to get war production. So I told him I would have another discussion with my directors in Meriden and would let him know later—and I did. But our attitude there was still the same, that if we got war production work we ought to get it under our own power and with our own men, and I am glad to say we have.

Mr. TOLAND. Then you reported the complete incident to the Navy Department, did you not?

Mr. UNDERWOOD. Yes, sir; I did.

Mr. TOLAND. I would like to state for the record, Mr. Chairman, that as a result of the report of Mr. Underwood to the Navy Department, the matter was referred by the Navy Department to me for investigation as to the activities of the witness. I would like to offer in evidence, not to be printed, the report, letters, and communications. (Letter from Mr. Underwood to Mr. Frank M. Folsom, dated February 2, 1942, with attached correspondence relating to Mr. Stone, was received in evidence, marked "Exhibit No. 478," and is filed with the committee.)

Mr. TOLAND. I would also like to introduce in evidence at this time, the report of the Inspector General of the War Department, to which I have heretofore referred, signed by Virgil L. Peterson, major general, the Inspector General, dated April 3, 1942, which relates to Mr. Reagan, whom we read about before.

(The report of the Inspector General, dated April 3, 1942, was received in evidence, marked "Exhibit No. 479," and is printed in the appendix of this volume.)

Mr. TOLAND. I would like in this connection to refer to two letters of the witness that I have heretofore offered in evidence, exhibits Nos. 470 and 473.

Mr. ALEXANDER HARRIS,

Art Metal Works, Inc., Aronson Square, Newark, N. J.

DEAR ALEX: Pursuant to our conversation of January 20, 1942, the following is an outline of the procedure adopted for your company as well as other companies for which I obtain business in the Navy Department.

My emphasis is placed on restricted schedules and negotiated contracts. Restricted schedules are those which the word implies. These schedules are restricted to those companies that have been approved for confidential work and whose facilities are adapted or might be adapted for the material required. It is perhaps needless to say that only a few companies in proportion to the 178,000 manufacturers receive invitations to bid on these schedules. Some time ago I arranged for inspection of your plant, particularly for the purpose of approval for restricted and confidential work. This inspection was made and your company obtained a most favorable rating. Since then various schedules, both restricted and unrestricted, have been sent to you. This was effected by constant visitations by me to the officers in charge of various items of procurement.

I am located in Washington where I have lived for the past 7 years. I maintain an office and have established myself with the Navy Department as a bona fide representative. I call on numerous procurement officers in the Navy Department every day. In addition to inspecting bids and determining what the Navy's immediate future requirements will be, in which I believe you will be interested, I follow through on your awards, preference rating certificates, contracts, priorities on material and machinery, tools, and many other details too numerous to mention. It can best be summed up by my saying it is your duty to manufacture and it is my obligation to take care of all matters pertaining to your items of manufacture, from their very inception in the form of a schedule or negotiation, to completion and payment by the Government.

I represent the Lionel Corporation, Lee Tire & Rubber Co., Unique Art Manufacturing Co., and the Griswold Manufacturing Co., all of whom are receiving a very substantial amount of business solely through my efforts.

You might be interested in knowing what constitutes a "bona fide representative." If you will refer to article 11 of any Navy contract, you will note that a bona fide representative is one who has a selling agency maintained by the contractor; therefore, the necessity for a drawing account as defined in my contract. Before signing my contract with the Lionel Corporation, Mr. Francis Reed, of the law firm of Charles Evans Hughes, Jr., 1 Wall Street, New York City, made a thorough investigation for the Lionel Corporation to determine the Navy Department's acceptability of my services with Lionel from a legal viewpoint. This was thoroughly acceptable to the Navy. Since then Mr. Snell of the Griswold Manufacturing Co. visited the Judge Advocate's office in behalf of his own company and learned that not only did the hiring of my services meet with their approval but was encouraged by them.

It is not my intention to request you to enter into a formal contract hastily. However, time is absolutely of the essence and I have various items to bring to your attention in which I believe you will be interested. Will you, therefore, let me know as soon as possible when we can enter into a formal contract? Cordially yours,

Mr. TOLAND. Now, Mr. Underwood

A. H. STONE.

Mr. BRADLEY (interposing). Did that say "encouraged by them," Mr. Toland?

Mr. TOLAND. That is the next question.

Did Commander Perry say anything or indicate anything to you that he was encouraging you to sign a contract with this man?

Mr. UNDERWOOD. No, sir.

Mr. STONE. Mr. Underwood's name is not mentioned in that letter. That was Griswold. That was another conversation.

Mr. TOLAND. That is another one, but I am using it as a comparative basis when he was seeking another contract.

Mr. STONE. I want to explain that, Mr. Toland. That is very unfair to me.

The CHAIRMAN. One minute. Go ahead, Mr. Toland.

Mr. TOLAND. He said that

Mr. Snell, of the Griswold Manufacturing Co., visited the Judge Advocate's office in behalf of his own company and learned that not only did the hiring of my services meet with their approval but was encouraged by them.

The CHAIRMAN. Was there any indication by manner, gesture, or words by any officer of the Navy Department to encourage you to do business through Mr. Stone, Mr. Underwood?

Mr. UNDERWOOD. Why, Commander Hubbard was cordial to him, as I suppose he would be to any salesman calling on him. I would have to answer you in the negative, I believe, Mr. Chairman.

The CHAIRMAN. Let me ask you this: After your interview, as you just related it, you reported it to the Navy Department?

Mr. UNDERWOOD. That is right.

The CHAIRMAN. Whom did you report it to in the Navy Department?

Mr. UNDERWOOD. Mr. Frank M. Folsom.

The CHAIRMAN. Mr. Folsom. And as a result of that, Mr. Toland, the Navy Department has requested this investigation.

Mr. TOLAND. That is right.

The CHAIRMAN. I want personally to thank you, Mr. Underwood, for having reported it to Mr. Folsom, and if other manufacturers had the courage to do that very thing we would break up here in Washington City this practice that goes on that you have got to have some special agents to do business with your Government.

Mr. UNDERWOOD. Thank you.

The CHAIRMAN. You are to be commended, and I hope other manufacturers have the same courage, and then this hue and cry that goes out over the country that you can't get business in Washington City with your own Government unless you have a certain pull or an inroad to some confidential matters that are going on would be stopped. It burns me up.

Mr. BRADLEY. Mr. Underwood, did you find that your negotiations with the Government afterward, with the Navy Department with respect to contracts, were all right; that you got cooperation in every respect?

Mr. UNDERWOOD. We always got cooperation, sir. As I said before, we have succeeded in getting some war production in our Meriden plant, chiefly from the Air Corps.

The CHAIRMAN. Let me ask you this: What do you manufacture? Mr. UNDERWOOD. Well, we manufactured electrical appliances and gift wares.