Mr. FLEET. Just let me get my figures. How many shares? Mr. FLEET. Yes; that is correct. Mr. TOLAND. And you received-what did you receive in the sale to the Vultee interests for your stock? Was it $8,647,000? Mr. FLEET. Wait until I add it. It is in two columns. $8,647,097.25? Mr. TOLAND. Right. Now you are employed by the company as a consultant, are you not, and you receive compensation? Mr. FLEET. $60,000 per year. Mr. TOLAND. What is your present holding in the company? Mr. TOLAND. No stock at all? Mr. FLEET. No stock. I want to invite your attention to one thing on the statement I just placed in the record. My average annual salary for the 18 years and 7 months was $18,622. The average bonus per annum was $123.72, including the Christmas bonus. The average director's fees for the 18 years and 7 months was $12. The average dividend on my investment was $98,685, and the average preferred dividend was $4,726.38. The total remuneration, therefore, including return on my investment, per annum, was $122,170.10, and the total amount of money I have ever received from Consolidated for everything, including return on my investment, outside of sales of stock, was $2,270,326.17, and the total income tax that I paid during that time, which includes the tax as I disposed of my stock, including the last sale, was $2,491.776. I want to read into the record the following statement, if I may. Mr. TOLAND. Right. Mr. FLEET (reading): The above includes the entire compensation paid to R. H. Fleet by Consolidated Aircraft Corporation and erstwhile subsidiaries since the company's inception. No commissions, shares of stock, bonds, warrants, promotion fees or organization compensation were ever given to him or to anyone for services rendered or for nothing. The company has never disposed of any stock for anything other than net cash without discount to anyone, or as consideration in acquiring the assets or corporate entities of 10 companies they are listed below which were purchased by it from time to time and which are merged in the company. Consolidated Aircraft Corporation was organized on May 29, 1923, by R. H. Fleet, who, at the company's organization, bought for cash at par 60 percent of its common stock and later for cash at declared value upon issuance 25 percent of its preferred stock. Major Fleet acted as chairman of its board, its president and manager from the company's organization until December 31, 1941. Mr. TOLAND. Did you bring with you a recapitulation of the business of the company for the past 18 years? Will you read that for the record? Mr. FLEET. Yes. The CHAIRMAN. Why not just put it in the record? Mr. TOLAND. I have it here, briefly. Mr. FLEET. It has been the practice of Consolidated Aircraft Corporation to publish in its annual report a recapitulation of all of its delivered business, from the day it first began, down to the end of the year for which the annual report is current. The total volume of business-I will read just the totals Mr. TOLAND. That's all. Mr. FLEET. Delivered is $160,000,000, in round figures, to include the first 11 months only, of 1941. There was a change in the fiscal year of the company to make it conform to the buyer's; namely, Vultee Aircraft's fiscal year, and therefore the report covers only 11 months of 1941. There was $20,000,000 worth of business delivered in December 1941, so that would make it $180,000,000 of business. But for this report I covered only that filed with the Treasury Department, $160,000,000, in round figures. The profit made by the company on that business, after taxes, the net profit, is $15,062,000. It is carried down to the cents here. Mr. TOLAND. I would like you to file it, Major. It shows the break-down? Mr. FLEET. That is right, and the profit is 9.42, and it is divided into Army and Navy and foreign business; $16,000,000 of it was for the Army. The profit on the Army business in the 18%1⁄2 years was $1,700,000, which is 10.5 percent. On the Navy business, the volume is $57,000,000, in round figures. The profit is $3,500,000 in the 18 years, and the percentage of profits to sales is 6.2. That was due, mostly, to the Vinson-Trammell Act profit limitation. Mr. TOLAND. That is after taxes, not before taxes? Mr. FLEET. After taxes. Mr. TOLAND. Yes. Mr. FLEET. Volume of business to foreigners and others was $87,000,000-and the profit is $9,800,000, which figures 11.3 percent. The Vinson Act too, if you remember-the old Vinson-Trammell Act-was based on price and not on cost, which was very important from your angle and from ours, because everyone would have been in an interminable dispute as to what constituted cost and what did not, so the law made the profit limitation on price. These figures are audited by Haskins and Sells, certified public auditors. (The recapitulation furnished by Major Fleet, entitled "1940 Annual Report to Stockholders of Consolidated Aircraft Corporation" was received in evidence, marked "Exhibit No. 173" and is filed with the committee.) The CHAIRMAN. So the effect of that law enabled the Navy, until it was applied to the Army, to get a better contract from Consolidated. The percentages were 9 percent for the Army and 6 percent for the Navy, and at the beginning of the law it applied only to the Navy and not to the Army. Mr. FLEET. That is right. The CHAIRMAN. But that is ancient history so far as the majority of this committee is concerned. Mr. FLEET. Whether it resulted in beneficial results for the Navy or not is a question because, you see, a contractor, knowing he was going to make less money from Navy business because of that profit limitation, if he was governed solely by desire for profit, would prefer to take more profitable business if he could get it. The CHAIRMAN. That is true. Mr. FLEET. And the Navy felt that perhaps they were being neglected, in a sense. Mr. TOLAND. Isn't it a fact that the profit on your Navy business is 6 percent and on your Army planes 18 percent? Mr. FLEET. Last year? You are very interested in last year because of the large volume. I should give you that. Last year, in the 11 months, we delivered to the Navy $21,000,000 and made $450,000 only, which is 2.2 percent profit. Mr. TOLAND. That is after taxes. Mr. FLEET. That is after taxes. Then we delivered the Army $3,000,000 and made $215,000, which is 6.8 percent profit. We delivered foreigners last year, in the first 11 months, $72,000,000, made $7,500,000 which is 10:4 percent profit. Mr. TOLAND. Let me interrupt you there. Mr. FLEET. The profit average was 8.5 percent. Mr. TOLAND. Let me interrupt you there, Major. While you were president of this 'company did you ever sell any planes or any parts to Japan? Mr. FLEET. We never did, excepting, with Government permission, one obsolete commercial flying boat to Mitsui. Mr. TOLAND. What foreign governments did you sell planes or parts to? Mr. FLEET. Well, I never sold any planes or technical information, or parts to any of our present enemy governments, Germany, Italy, Japan. Mr. TOLAND. Now, your profit formula is based, is it not, on the selling price and not on the cost of the contract? Mr. FLEET. It is always based on the selling price and it is always after taxes, and in that respect is the same as every corporation in America figures. All corporations report net profit. Mr. TOLAND. If we take a different position with you, you will understand if we think the profit should be determined on the cost of the contract? Mr. FLEET. That's right. Mr. TOLAND. Now, Major, speaking of the Vinson-Trammell Act, and to try to get through quickly, do you remember having a meeting with Mr. Bendix in 1938 to bring about the repeal or the suspension of the Vinson-Trammell Act? Mr. FLEET. No. Mr. TOLAND. Let me see if I can refresh your recollection, Major. This is a photostatic copy of a Mr. FLEET (interposing). To save your reading it, I can glance at it. Mr. TOLAND. I want to read it for the benefit of the committee. This is written by Vincent Bendix to Mr. Marcus, Mr. Lansing, Mr. Palmer, Mr. Thomas, and Mr. Breech. Mr. FLEET. I was not associated with any of those gentlemen. The CHAIRMAN. Who are these? Mr. TOLAND. Mr. Marcus is vice president of Bendix. Mr. TOLAND. Yes. Mr. Lansing and Mr. Palmer are also employees of Bendix; Mr. Breech was then an employee of General Motors, but is now president of Bendix. This is marked "Personal and confidential." Mr. TOLAND. December 12, 1938: PROPOSED BILL TO SUPERSEDE VINSON ACT Last Wednesday Mr. Reuben H. Fleet, of Consolidated Aircraft, telephoned me to join a conference at his hotel headquarters, among whom would be present Don Brown, president of United Aircraft; C. L. Egtvedt, president of Boeing Aircraft; Guy Vaughn, president of Curtiss-Wright, and myself. The.conference that afternoon included Reuben Fleet, I. M. Laddon, chief engineer of Consolidated Aircraft, and myself. Mr. Fleet stated that he had just come from Washington, and that there was a possibility of having a new bill introduced and passed that would supersede the Vinson Act. I am attaching hereto a photostat copy of the small eight-page brochure privately printed by Mr. Fleet, in which all the punctuation is identical to the original. Everyone who received the same, which was a very limited and private distribution, was urgently requested to keep this matter strictly confidential. It might fail completely if any publicity would leak out as to the source of the backing, although obviously it is for the good of all concerned, the Army, Navy, as well as the manufacturing industry, because it will insure greater efficiency, coordination, and assure the greatest possible service from a military standpoint. A copy of this proposed bill is being submitted to the attorneys and accounting departments of the companies represented in the above-mentioned conference, and I am herewith handing the same to you for the same purpose of analysis and suggestions. Those present seemed unanimous in favor of the proposed bill, as well as the suggestion to retain a certain undisclosed representative at the expense of $100,000 over a period of 3 years. The provisions regarding the proprietary articles, etc., seem to me to require careful scrutiny, as any relinquishment of our proprietary rights seems incomprehensible, although it may be of no importance to a plane manufacturer who is more interested in his designs than in his patents, etc. I request that any future suggestions regarding the above matter be taken up direct with Mr. Marcus upon his return from Europe. P. S. Please destroy this memorandum after taking notes of same. Are those your initials, Mr. Bendix? Mr. BENDIX. Yes, sir. V. B. (The memorandum was received in evidence and marked "Exhibit No. 174.") Mr. TOLAND. Mr. Bendix, who is the undisclosed individual? Mr. TOLAND. Have you any recollection as to the individual that you mention here, that everybody agreed be retained for a price of $100,000 for 3 years? Mr. BENDIX. Mr. Toland, when you were questioning me for information about the Vinson-Trammell Act, I didn't understand what there might be, so I 'phoned our offices to search our files, to see if I had any information about it, and I inquired of some individuals in our company, and they said "No." And only last night, coming out of the dining room of the Mayflower Hotel, I bumped into Major Fleet, and I said, "Major, can you recall having discussed with me anything about the Vinson-Trammell Act?" and he said, "No." I was trying to find out if I had ever written or done a certain thing, and now it is a coincidence that you should ask me that. Mr. TOLAND. Doesn't this refresh your recollection? Did you hire anybody and did you collect $100,000? Mr. BENDIX. No. The CHAIRMAN. Did you hire anybody, Major Fleet? Major FLEET. No. The CHAIRMAN. Did you collect $100,000? Major FLEET. No, sir. The CHAIRMAN. Were there any conferences held for the purpose of hiring anyone? Major FLEET. Yes; I remember now. I never held a conference resulting in the hiring of anyone. Mr. TOLAND. May I show you this, Major? It may refresh your recollection. Major FLEET. I might say to you, gentlemen, and this is very important because you are all working for the country the same as I, that I had felt for a long time that the act under which aircraft is being procured in the United States, adopted by the Congress in 1926 and written by Mr. John McSwain, then chairman of the Military Affairs Committee, was completely out of date and working a terrific hardship on the aircraft industry in America. The reason why that was so was because at the time the act was written, in 1926, airplanes cost five or six or eight or ten thousand dollars each. However, when you got up to modern days, namely, 1938, airplanes were costing, say, an experimental model, over a million dollars, and therefore, the act adopted in 1926 was crippling our Government very badly, and so I worked hard and wrote this bill, which is there, and which was introduced by a Congressman, Mr. Nichols. Had it been adopted at the time it was introduced, it would have helped the situation immensely in America and we wouldn't have been in the position we are now in. The CHAIRMAN. Wait one minute, Major. That bill wasn't passed, was it? Major FLEET. No; it was introduced. The CHAIRMAN. For the record, we are still operating under the McSwain procurement law which was written by Mr. McSwain and other members of the joint committee. Major FLEET. Yes. Mr. TOLAND. May I show a draft of the proposed bill to the witness for the purpose of having him identify it? Major FLEET. I identify it. (Draft of proposed bill was received in evidence, marked "Exhibit No. 175" and is printed in the appendix of this volume.) Mr. TOLAND. Major, do you have any recollection as to who it was you discussed at that meeting that you might hire or wanted to hire? Major FLEET. No; we didn't discuss any person. It was thought that if the country was to have modern legislation governing the modern subject, aviation, somebody would have to write it; somebody would have to father it and mother it and talk it and publicize it and everything. I had spent my life in aviation. This makes my twentysixth year continuously, and so I wrote it, having thought it over a great many years and having discussed it with many members of Congress, including Mr. John McSwain, who had insisted that his act should have 10 years of trial. The CHAIRMAN. But, Major, that is not the question. That is the Procurement Act for aviation of 1926. That is on the statute books today. All airplanes are procured under that statute. Now the question asked by counsel was with reference to the act relating to the limitation of profits known as the Vinson-Trammell Act. |