under the auspices of the Office of Production Management, about which the committee has heard so much, provides for the payment of double time on Sundays and designated holidays.

Bearing in mind then that the common consensus is that excessive and unconscionable profits should not be realized, that hours of labor should be extended to the point necessary for maximum production without disturbing the wage structure and without creating turmoil and dissension, that the preservation of a status quo with respect to the closed-shop or union-shop controversy should be preserved as a means of stabilizing industrial relations, and that all these objectives looking toward the greatest possible utilization of our production effort should be achieved without penalizing industry or wiping out the social gains of labor, but at the same time recognizing that the sacrifices and hardships of war should fall equally upon all members and classes of our society when the security of our country demands it, I have prepared a draft of a bill which in great measure seems to meet the objectives while avoiding unfortunate and harmful effects.

There is one objection, however, which this proposal cannot meet. The bill calls for legislative action, since it seems that further delay would be unwarranted. First of all, the bill would eliminate the apparently undesirable feature of a definite percentage limitation on profits on all contracts. The procurement officers of the Navy Department and the other officials of the Department are men of judgment, ability, and integrity. The same can be said for those officers performing similar services and functions for the War Department.

This bill provides that rather than fix a definite percntage of profite the problem of excess profits be attacked by utilization of the method of renegotiation which has proven successful in very many instances up to now within the Department. In each contract entered into by the Department, the contractor shall be required to stipulate that he will report to the Secretary of the Navy whenever and in such manner as the Secretary shall prescribe, the cost of the performance of the contract. His records are to be open for inspection and he agrees in the initial contract that he will renegotiate the contract if the Secretary of the Navy shall have found an excessive profit or any other inequality in the terms of the contract. This method is addressed to the discretion and judgment of the Navy Department, and gives them the necessary authority to recapture excessive profits and force their repayment to the Government.

Other practices which have been found to exist, which have the effect of increasing the cost to the Government, are separately provided against. Salaries and dividends shall be frozen as of the 1st of July 1940. Distribution of excessive bonuses have evoked widespread criticism. On the other hand, some witnesses, particularly Mr. Nelson, have testified as to the advisability of providing in some form for incentive bonuses to employees as a spur to production. The bill therefore allows bonuses, but only up to 10 percent of the normal salary of the individual.

The bill provides the method of determining the cost of performance of the contract. Treasury Decision 5000 is to be applied, but necessary flexibility, so essential in cost determination, is provided for by empowering the Secretary of the Treasury and the Secretary of the Navy to issue such rules, regulations and changes under this decision as they may from time to time see fit. To safeguard contractors and

meet the objection that a flat percentage profit limitation does not make allowance for return on invested capital or the financial structure of the contractors, interest on indebtedness is to be considered. properly as an appropriate item of cost. So too are expenditures for research, educational and developmental purposes, where they bear a relation to the contract.

The 40-hour week law is amended but to avoid disturbance and the reshifting of the wage structure the bill makes it mandatory upon the contractor to provide a bonus to his employees equivalent to the compensation which they would have received under the old 40-hour week. Work in excess of 48 hours a week is to be compensated for at the rate of time and a half. As an alternative to such provision and to meet the problem presented by Mr. Bates a provision might be substituted for this and I present this for serious consideration of the committee by virtue of which any employee or group of employees desiring voluntarily to relinquish time and a half compensation for overtime in excess of 40 hours could do so. Such a provision might well be adopted as an amendment to the 40-hour law and thus give to the thousands of loyal American workmen an opportunity to demonstrate their willingness to make some measure of sacrifice in the war effort.

To return to the proposed bill, the bill provides for the stabilization of industrial relations by freezing the closed shop and union security question without, however, abrogating existing agreements and without prohibiting the renewal of such agreements. In addition, to avoid confusion and possible complications, Government departments, bureaus, and agencies are prohibited from issuing any decision or order compelling any employee not a union member to join a labor organization. I might say that such a bill as I have outlined would achieve the objectives which we all desire and it appears to me would meet most of the objections urged against the passage of H. R. 6790.

There is still another provision which according to the testimony would seem desirable which finds no counterpart in the old bill. In this draft I have inserted a clause providing a method or furnishing a "cushion" to absorb the shock of the post-war letdown. The bill requires that the contractor after he has met necessary expenses of taxation and after dividends have been distributed shall buy nonnegotiable, nonredeemable Government securities with 50 percent of all profits on naval contracts remaining to him in excess of $100,000 during the year in which these profits have accrued. Such securities shall be noninterest bearing for the duration of the war but after the war shall bear interest at the normal rate and be redeemable. This method of enforced saving it would seem is consistent with the other features of the bill and will prove to have had a salutary effect upon business and the economic structure of the country after the close of the war, with the added advantage that the Government during the course of the war is given the use of funds which it so badly needs and which it might otherwise not obtain.

May I say that my own personal view is that I am opposed to any lifting of the 40-hour provision if it is going to affect the wages that the employees are now receiving, based upon the economies of the workers. There are two alternatives that the committee might consider.

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Mr. BRADLEY. Right there may I say this. I welcome any suggestion or contribution of Mr. Toland, because I know that he has spent a lot of time with various things in connection with the investigation work of the committee, but I cannot agree with his interpretation and analysis and summarization in toto of the testimony presented to this committee, and I think it should be understood that Mr. Toland's summarization and analysis is only personal and does not reflect the analysis and interpretation and summarization of this committee. Mr. TOLAND. No; not at all.

The CHAIRMAN. Mr. Toland is speaking for no one but Mr. Toland. Mr. TOLAND. I meant, Mr. Bradley, with respect to the profit limitation.

The CHAIRMAN. Very well, Mr. Toland. Thank you very much. Mr. TOLAND. I would like to file also with the record the report of the Board of Governors of the Federal Reserve System, which has just been issued, on the quarterly earnings and dividends of large corporations.

The CHAIRMAN. That may go into the record.

(The report was received in evidence, marked "Exhibit No. 102" and is filed with the committee.)

Mr. TOLAND. Now, Mr. Chairman, I would like to bring to the attention of the committee the suggestion of the amendment of section 1044 of the revised statutes. In the last war section 1044 provides that in conspiracies or attempts to defraud the United States, indictment must be returned within 3 years thereafter.

The CHAIRMAN. Will you prepare a bill covering that?

Mr. TOLAND. I have an amendment already prepared, because I think that in view of the evidence we have heard, and the cases that were presented, it may be there will be a determination that some of these acts constitute a fraud on the United States, and there are many cases where it will not be discovered, I do think that the statute of limitations in war frauds should be extended to a period of 6 years. The CHAIRMAN. Instead of 3 years?

Mr. MAAS. Why not make it 3 years after the conclusion of the war? Because the war might last 3 years.

Mr. TOLAND. Well, it will be 6 years from the time that the actit provides that-now you must return the indictment within 3 years.

Mr. MAAS. During the war we are not going to be in a position to discover these things as easily as we may when the war is over, so I think that whatever limitation is agreed to it should be for a period after the conclusion of the war.

The CHAIRMAN. Then you would have to say "after the peace proclamation," to get some date to run from, or else you would be bogged down because of-for instance, the last war actually stopped on the 18th day of November, but as a matter of fact we were not at peace until about 2 years later, officially. You have a good point there.

Mr. TOLAND. Could I read this for you, Mr. Maas?

Mr. MAAS. Yes; I will be glad to hear it.

Mr. TOLAND. The proviso that was attached during the World War, or after the World War, was as follows:

Provided, That in offenses involving the defrauding or attempt to defraud the United States or any agency thereof, whether by conspiracy or not, and in any

manner, and now indictable under any existing statute, the period of limitation shall be 6 years. This Act shall apply to acts, offenses, or transactions where the existing statute of limitation has not yet fully run, but this proviso shall not apply to acts and offenses or transactions which are already barred by the provisions of existing law.

If we enacted it today and extended it, we could return indictments within the next 6 years, and they would continue on for 6 years from the time the acts happened. So it will cover the present war period and extend beyond.

Mr. MAAS. I still think you should put a further proviso that it will be either 6 years from date of enactment or 3 years after the conclusion of the war, whichever may be the longer period.

Mr. TOLAND. I will be glad to add that proviso. May I offer these in the record?

The CHAIRMAN. You don't need to put that in the record. goes before the Judiciary Committee, and we will handle that.

That

Now, members of the committee, that finishes all that Mr. Toland has to submit to us, and we have now reached down to the point of consideration of the proposed substitute that I am offering. I suppose everybody has a copy of this substitute.

Mr. TOLAND. Mr. Chairman, may I submit my proposed substitute bill?

The CHAIRMAN. We will have that printed, Mr. Toland.

Mr. TOLAND. I do not say it is an entire cure, and I have no pride of authorship in it. However, there are some provisions in it that may be helpful and some that may not.

The CHAIRMAN. Now, members of the committee, it is 12 o'clock, and it might be a good idea for us to start off fresh in the morning and consider the substitute, as we have finished all the evidence we desire to put into the record. If that is agreeable we will take a recess now until 10 o'clock tomorrow morning, when we will proceed to read the proposed substitute and begin to act on the bill as originally introduced and the substitute.

Mr. BRADLEY. Might I ask, is it the intention to have a session tomorrow afternoon?

The CHAIRMAN. I am very anxious to have the committee reach a decision at as early a date as possible.

Mr. BRADLEY. I have some engagements tomorrow afternoon, and I think it will be impossible for me to be here. I would appreciate it if we could have a session tomorrow morning.

The CHAIRMAN. I think we can get along with it tomorrow morning. We will take a recess now until 10 o'clock in the morning, when we will take up the bill for consideration.

(Whereupon, at 12:05 p. m., the committee adjourned until 10 a. m., Friday, April 17, 1942.)