Mr. TOLAND. In fact, didn't you recommend him for a position with the Cramp Shipbuilding Co.?

Commander WEYERBACHER. Certainly.

Mr. TOLAND. Did you discuss

Commander WEYERBACHER (interposing). I would like to make one remark about this audit. I question whether or not this audit is from the Merchant-Sterling

Mr. TOLAND. Beg pardon?

Commander WEYERBACHER. Was made from the Merchant-Sterling

book.

Mr. TOLAND. That was furnished to us by Mr. FitzGerald.

Mr. VINCENT A. BURNS (staff, Naval Affairs Investigating Committee). Mr. FitzGerald gave us that.

Commander WEYERBACHER. I have a letter in my files at Philadelphia where he entered this balance here; I wrote a check for approximately that amount to Merchant-Sterling Corporation. My records will so show it.

Mr. TOLAND. There is no inference as to the balance in the statement or any statement that I made that you retained it.

The ACTING CHAIRMAN. For the record, Commander, you wish it to show that you did send the check for that balance? Commander WEYERBACHER. Absolutely.

Mr. MAAS. When?

Commander WEYERBACHER. Around about the middle of May 1941 when I closed out the account.

Mr. TOLAND. 1941?

Commander WEYERBACHER. No, no.

Mr. MAAS. That check would be available, wouldn't it?

Commander WEYERBACHER. In May of 1940 in the office of Mr. FitzGerald in New York.

Mr. MAAS. You would have the canceled check now, wouldn't you?

Commander WEYERBACHER. I have it in my files, or they have it in their own files, because my canceled checks were sent to the MerchantSterling with my bills as evidence of payment and they have all the canceled checks.

Mr. MAAS. What is the date

Commander WEYERBACHER (interposing). What they found in my files were stubs, and there were two checks not entered in my stubs because I made them out in New York.

Mr. MAAS. What is the date of this audit furnished you by the Merchant-Sterling?

Mr. TOLAND. That was furnished within the last 60 days.

Commander WEYERBACHER. I question this entirely. That is a summary of the checks of my stubs that they got here.

The ACTING CHAIRMAN. What does the balance amount to, Mr. Toland?

Mr. TOLAND. The balance?

The ACTING CHAIRMAN. The unexpended balance.

Mr. TOLAND. They have here $2,000.

The ACTING CHAIRMAN. And that balance you returned to them? Commander WEYERBACHER. Absolutely.

Mr. TOLAND. The statement doesn't say that you didn't and I haven't said that you didn't.

Commander WEYERBACHER. You made the inference.

Mr. TOLAND. Well, now, wait a minute, Commander. You and I are going to get along fine except you omit your remarks about inferences. I said there was no inference.

Commander WEYERBACHER. I withdraw my remark, Mr. Toland.

Mr. TOLAND. Getting back to your friend Work, what was the date you retired?

Commander WEYERBACHER. What date? In May 1937.

Mr. TOLAND. I show you what purports to be a letter in your handwriting addressed: "Dear Jim," and signed "Tommy." Is Tommy your nickname?

Commander WEYERBACHER. Yes, sir.

Mr. TOLAND. Did you write that letter to Mr. Work?

Commander WEYERBACHER (examining paper). Yes; I wrote this. Mr. TOLAND. Will you read it?

Commander WEYERBACHER (reading):

DEAR JIM:

It is undated

Received your typed letter and note the position you have taken. I am sorry, for I never before got the impression that the door was closed relative to consulting. I was under the impression that in time some arrangement could be made and I did not intend to press the matter. It was in your hands.

As to the personal matter, it was discussed, but not in full detail, and just before I left for the west coast we stated we would discuss it upon my return. I asked for an appointment for I wanted to tell you some interesting experiences I recently had and which would be of value to you and also about the personal details. I am leaving here Friday and will be in Pittsburgh next Monday and Tuesday; returning here on Wednesday next.

Well, Jim, we are two old friends, and don't worry, I will not do anything to affect that. Why can't we have a good old chat? I will let you select the time and place. You name it and have word waiting me at the club on Wednesday next.

'Remember me to the family.

TOMMY.
Ꭲ.

Mr. TOLAND. That was a response, was it not, Commander, to a letter you had received from Mr. Work on the 17th day of August? Isn't the date thereon "8-17"?

Commander WEYERBACHER. It has "8-17."

Mr. MAAS. What year?

Mr. TOLAND. 1937.

Is this a copy of the letter that you had received that day from Mr. Work to which you had replied?

Commander WEYERBACHER. Yes, sir.

Mr. TOLAND. I offer that in evidence.

The ACTING CHAIRMAN. You didn't offer the other in evidence. Mr. TOLAND. I will offer both of them.

(The two letters were received in evidence and marked "Exhibits No. 259 and 260.")

Mr. SUTPHIN. Read the last one to the committee, Mr. Toland. Mr. TOLAND. I will, Mr. Sutphin.

Do you have any relation by the name of K. H. Weyerbacher? Commander WEYERBACHER. He is my brother.

Mr. TOLAND. This is committee exhibit 260, dated 17 August 1937. [Reading:]

Commander R. D. WEYERBACHER,

Columbia University Club, New York.

DEAR TOMMY: I received your message from Miss Colby that you wanted to see me for 1 or 2 hours of uninterrupted conversation on Thursday or Friday. I have given very serious thought to our talks in recent months, and cannot help but feel that any further conversations on the question of your becoming a consultant for Brewster are a waste of time and are becoming very painful to me due to the position in which I am placed. As I have told you in the past, Tommy, this question has been taken up in detail with all of the directors and all of the officers of the company as well as with the bankers. Due to the circumstances, which certainly should be very apparent, the unanimous opinion of these men is that it would not be in the best interests of Brewster for such a contact to be made. Frankly, this is also my opinion, as I have expressed it to you on numerous occasions, and I see no hope of this attitude changing. As far as our personal relations are concerned, we went over this question in detail the last time you were down at the farm, and I believe we understand each other in this matter. I certainly hope that the facts set forth above will not in any way influence our long-standing friendship. I have felt that I must put this situation down in black and white in order that a definite conclusion might be reached, although all that I have said here has been said time and time again. I am afraid that in the event of any further conversation on this matter, your insistence on serving this company as a consultant may affect this friendship, and this I do not want

to see.

We expect to go to the shore Thursday for a short vacation, and upon our return I will get in touch with you.

Commander WEYERBACHER. After my retirement, I took up with Work the question of having him retain me as consultant, and that is the refusal.

Mr. TOLAND. How long have you known the Mirandas?

Commander WEYERBACHER. I met the younger Miranda once or twice in Detroit in '28 and '29.

Mr. TOLAND. Wasn't he connected with the Detroit Aircraft, too? Commander WEYERBACHER. I don't remember.

Mr. TOLAND. Wasn't he associated with Mr. Work at that time? Commander WEYERBACHER. Not to my knowledge. I think the connection in which I met him, he was working through a subsidiary for Mr. Evans.

Mr. TOLAND. Of the Detroit Aircraft at that time?

Commander WEYERBACHER. I do not have first-hand knowledge on that; no, sir.

Mr. TOLAND. Well, at the time that you met him, was Mr. Work connected with the Detroit Aircraft or the Brewster Aircraft?

Commander WEYERBACHER. He was connected with the Detroit Aircraft.

Mr. TOLAND. Who is Mr. Miranda; do you know?

Commander WEYERBACHER. The only thing I knew at the time, he was in a sales capacity.

Mr. TOLAND. Of what kind?

Commander WEYERBACHER. He was in foreign sales at that time. Mr. TOLAND. A foreign salesman? I show you what purports to be a memorandum of a telephone conversation between a member of the Securities and Exchange Commission staff and yourself on the 6th day of May 1942, and ask you if that correctly sets forth the conversation that you had with Mr. Brookhart?

(Witness examining the paper.)

Commander WEYERBACHER. Yes; that is in substance correct. Will you please read it?

Mr. TOLAND. Yes. I offer it in evidence.

(The memorandum was received in evidence and marked "Exhibit No. 261.")

Mr. SUTPHIN. Will you read it for the benefit of the committee? Mr. TOLAND. I am going to read it.

The ACTING CHAIRMAN. Who is Mr. Brookhart. Mr. Toland? Mr. TOLAND. He is the son of the late Senator. He is an employee of the Securities and Exchange Commission. [Reading:]

MEMORANDUM OF TELEPHONE CONVERSATION WITH LIEUTENANT COMMANDER WEYERBACHER, UNITED STATES NAVY, RETIRED, RE: BREWSTER AERONAUTICAL CORPORA

TION

Commander Weyerbacher is now employed by Cramp Shipyards, Richmond and Norris Streets, Philadelphia, Pa.

Commander Weyerbacher has known James Work since the last war, at which time Weyerbacher was employed in the Philadelphia Navy Yard and Work was under his supervision as a draftsman. Work was very able and was promoted rapidly. He soon had about 40 or 50 men under him.

In August 1919, Weyerbacher was ordered to Lakehurst to build the lighterthan-air ship, ZR-1, later named the Shenandoah. He took Work with him as his design manager. Work became acting chief engineer of Lakehurst. Later Weyerbacher was transferred to the naval aircraft factory and was followed a few months after that by Work, who became assistant manager of the naval aircraft factory.

Work left the employ of the Navy in 1928 to go with the Detroit Aircraft Corporation. Weyerbacher has seen him off and on ever since, but has had no business dealings with him and has known nothing about Work's interest in the various companies with which he has been connected.

Weyerbacher met I. J. Miranda in 1928 or 1929, during the period that Detroit Aircraft Corporation was active. He met A. J. Miranda, Jr., once some years later. He has never had business dealings with them. Commander Weyerbacher said that if Work had any interest in any of the Miranda organizations he knew nothing about it, and he never discussed the subject with Work or anyone else.

Weyerbacher is available at Cramp Shipyards at any time and will be glad to talk with any representative of the Commission. He suggests that a call be made first (Regent 5400) to arrange for a representative to be admitted.

MAY 6, 1942.

SMITH W. BROOKHART, Jr., Attorney.

The ACTING CHAIRMAN. What is the date?

Mr. TOLAND. Dated May 6, 1942.

Now, going back to that loan of $1,500, is it a fact that any part of the $1,500 or all of it was used to purchase stock in the bank of which your brother is the president?

Commander WEYERBACHER. Not to my knowledge.

Mr. TOLAND. Not to your knowledge? You don't know whether the books of the Brewster Aircraft Corporation reflect a transaction involving 50 shares of stock, certificate No. 20, purchased for $715, given to R. D. Weyerbacher, March 26, 1940. It is covered by the cash loan of $1,500 to R. D. Weyerbacher. Do you know anything about that? Commander WEYERBACHER. No, sir.

Mr. TOLAND. Now getting back to the Merchant-Sterling, I show you what purports to be a copy of a letter, dated March 20, 1939, addressed to the Merchant-Sterling Corporation, bearing your typewritten name, and ask you if you forwarded the original of that to the Merchant-Sterling Corporation.

(Witness examining paper.)

Commander WEYERBACHER. Yes, sir.

Mr. TOLAND. I offer it in evidence.

(The letter was received in evidence and marked "Exhibit No. 262.")

Mr. TOLAND. Commander, who are Mr. Sinclair and Mr. Miller? Commander WEYERBACHER. Mr. Miller has since died.

Mr. TOLAND. Who was he prior to the time? Where did he work? Commander WEYERBACHER. He was a very prominent, outstanding structural engineer.

Mr. TOLAND. Where did he work?

Commander WEYERBACHER. He worked in the Bureau of Yards and Docks up until the time of his retirement. He retired some years ago. Mr. TOLAND. Who is the other gentleman?

Commander WEYERBACHER. Mr. Sinclair is the project manager in the Bureau of Yards and Docks.

Mr. TOLAND. Now an employee of the Navy Department?
Commander WEYERBACHER. Yes, sir.

Mr. TOLAND. The exhibit of the committee, No. 262, as identified by the witness, reads as follows:

MERCHANT STERLING CORPORATION,

New York, N. Y.

GENTLEMEN: Attached hereto is a report on rehabilitation of William Cramp & Sons Ship & Engine Building Co., of which the following is a brief outline: Plan.-To rehabilitate and refinance the Cramps Shipyard, putting it in a position to resume operations under a competent management group and so to participate in the present ship-building programs.

Rehabilitation.-A conservative, detailed study shows that for an outlay of about $2,200,000 the existing Cramps Shipyard can be made over, in 6 to 8 months' time, into a thoroughly up-to-date plant adequately equipped to build ships economically according to modern practices. Rehabilitation will add a definite increment of value to property now idle and can be accomplished in much less time and at much less cost than to create new shipbuilding facilities. Organization.-A competent group representing experience in all phases of ship work is available to manage and operate the plant. Cramps is located in favorable labor and material markets. Unemployment will be relieved and the community will benefit generally from restoration of Cramps to an active status. Capacity.-An initial capacity of at least 50,000 dead-weight tons of standard merchant vessels is estimated. In due course two additional shipways could be recommissioned and plant capacity more than doubled.

Market possibilities.-The country's existing shipbuilding facilities are inadequate to handle the large merchant and naval shipbuilding programs which now face the country. National policy demands an increase in these facilities, a demand which will only partially be met by the addition of the Cramps facilities. It appears there will be little difficulty in securing an ample volume of profitable ship work over a long period of years. The present maritime law gives the American ship operator in foreign trade costs which are comparable to his foreign competitors. I therefore conclude that the American operator through his ability and ingenuity will get his fair share of this business, that the American merchant marine will expand, and that I know of no other American business whose profit is also dependent upon foreign trade in a more unique position than the American shipbuilder.

Profit expectation.-A maximum of 10 percent profit is legally allowable on Government work and it appears this profit can be readily attained under the conditions which will prevail in the restored Cramps yard. At current prices of $240 per ton, this should yield a net profit after taxes, etc., of at least $500,000 per year based on reasonable capacity.

Refinancing requirements:

Rehabilitation .

Working capital__.

Adjustment of taxes--

$2, 000, 000 1, 200, 000 800, 000

Total ---

4, 000, 000

A tentative revision of the whole financial structure has been worked out which is acceptable in principle to the present owners of the property. The refinancing plan involves certain adjustments and revisions of back taxes, liens, mortgage notes, all of which are considered reasonable and practicable.