Mr. BEGGY. Mr. Hobson is the coinventor of the lung apparatus, the inventors being Lieutenant Momsen and C. L. Tibbals, now deceased, and Hobson. The CHAIRMAN. And you manufactured their article? Mr. BEGGY. On an exclusive license but free to the Government. The CHAIRMAN. Why hasn't he a right to pay him a royalty? Mr. TOLAND. I'am not questioning whether he had a right. I am asking if, where they had contracts with the Navy, they are paying royalties to any employee of the Navy Department. Mr. BEGGY. We are not paying royalties on devices to the Navy where the Navy has an exclusive right in that there are some employees of the Government that receive royalties on commercial items. Mr. TOLAND. How many of them are at the Navy Department? Mr. BGGGY. One as an agent. Mr..TOLAND. Who is he agent for? Mr. BEGGY. F. M. Hobson is that agent. Mr. TOLAND. But whom does he act as the agent for? Mr. BEGGY. He is the agent for Momsen and Tibbals executrix, Mrs. Tibbals. Mr. TOLAND. Were they both also employees of the Navy Department? Mr. BEGGY. Yes, sir. Mr. TOLAND. Civilian employees? Mr. BEGGY. No; they were officers. Mr. TOLAND. What is your recollection as to the amount of money you paid in '41 to Hobson? Mr. DREWRY. What was that paid for? Mr. TOLAND. Royalties on patents that they have. Mr. BEGGY. I would have to see the records. Pardon me, I would like to get the record I sent you. Mr. TOLAND. I am asking you, do you have any recollection? Mr. TOLAND. Do you have any recollection of the total amount of money you paid to Hobson? Mr. BEGGY. I would have to see the files. I don't think we paid him anything. The CHAIRMAN. I think, Mr. Toland, it looks like to me-I know a little law. If a naval officer invented something, as a matter of fact, sometimes we take care of it here. We appropriate as high as $15,000 to pay him. What is this line of inquiry to show? We don't want to place an officer Mr. TOLAND (interposing). This is a civilian employee that I am inquiring about. Mr. COLE. What does he do at the Navy Department? Mr. TOLAND. Do you know what Mr. Hobson does at the Navy Department? Mr. BEGGY. No; I don't. Mr. TOLAND. Have you ever talked to him? Mr. BEGGY. I have talked to him at various times. Mr. TOLAND. Do you know the nature of his work? Mr. BEGGY. No, sir. Mr. Izac. Does he have anything to do with the award of contracts? Mr. BEGGY. You would have to ask him about that. I do not know. Mr. COLE. In negotiations with the Navy Department for the products you sell the Navy Department, on which Mr. Hobson has a royalty, have you ever discussed the matter with him? Mr. BEGGY. No, sir. Mr. COLE. Has he ever entered into negotiations on anything with you? Mr. BEGGY. No, sir. Mr. TOLAND. Doesn't Hobson go to your plant and inspect your plant, or hasn't he? Mr. BEGGY. Mr. Hobson has made trips to our plant occasionally. Mr. TOLAND. Doesn't he inspect equipment at your plant? Mr. BEGGY. Not to my knowledge. Mr. TOLAND. Hasn't he ever been to your plant and inspected the equipment there? Mr. BEGGY. He has been to our plant, but what he has done I do not know. Mr. MAAS. Was he there as an official representative of the Navy Department or as an interested party in the patent? Mr. BEGGY. As a representative of the United States Navy. Mr. BATES. Has he ever written to you with respect to the progress of the negotiations for contracts between your organization and the Navy Department? Mr. BEGGY. I wouldn't know that, sir. I don't believe so. Mr. BATES. Did he at any time act as your agent with the Navy Department? Mr. BEGGY. No, sir. Mr. BATES. The only connection he has is royalties? Mr. BEGGY. Yes, sir. Mr. COLE. It is definite that Mr. Hobson received no royalties on any business you did with the Navy Department on his patent? Mr. BEGGY. That is correct, on the lung apparatus. Mr. TOLAND. But on other patents he did? Mr. BEGGY. There was an agreement back some years on the crash apparatus, and a copy of that report was sent to you showing the royalties that were paid on that, some $127.75. Mr. HESS. That was sold to the Navy, though. Mr. BEGGY. That is right. Mr. MAAS. How much payment, $127? Mr. BEGGY. That is right. That was a specific apparatus that was being developed for aviators at that time. Mr. TOLAND. Isn't he in close contact with your local office here in this city, Mr. Hobson? Mr. BEGGY. I can't answer that. Mr. TOLAND. You have no knowledge of that? Mr. BEGGY. I know he is in contact with us, as a good many members of the United States Navy are. We service and supply a tremendous number of devices to the Navy and a lot of men contact us. Mr. TOLAND. He is a civilian. He is not an officer. Don't you get reports from your Washington office with regard to Mr. Hobson's activities with the representatives you have there? Mr. BEGGY. We get reports from our representatives on all the people we deal with. The CHAIRMAN. I suggest, Mr. Toland, that we have Mr. Hobson come up here some time in executive session and we will talk to him. Any further questions of the witness here? Mr. TOLAND. Wait a minute. The witness referred to this report, and it shows that in 1940 there were about three thousand-odd dollars paid to Mr. Hobson as agent, that the grand total that he received from 1929 to 1940 was $8,800. I would like to offer that in evidence. (The report on royalties was received in evidence, marked "Exhibit No. 407," and is printed in the appendix of this volume.) Mr. BEGGY. That is on sales of the lung apparatus other than to the United States Navy. The CHAIRMAN What has that got to do, if it is not to the United States Navy, with the royalties to Mr. Hobson? Mr. TOLAND. They were royalties paid to him, other royalties, on other items that were sold to the United States Government. Weren't there royalties paid to Hobson on other items you sold to the United States Navy? Mr. BEGGY. Not to my knowledge. We gave you the report on the royalties paid to Mr. Hobson as agent. Those are all the royalties that were paid to him. Mr. TOLAND. Now, as to other civilian employees, did you pay any other civilian employees of the Navy any royalties? Mr. BEGGY. Not on Navy business. Mr. TOLAND. But on other commercial business you did pay them royalties? Mr. BEGGY. I am not certain that they were employees of the Navy. There were some members of the armed forces that have developed things which we are selling. Mr. TOLAND. That is all right. The CHAIRMAN. What is the use of encumbering the record, Mr. Toland, with the royalties he paid on other than Navy business? Mr. TOLAND. I just asked that question as to the amount of record. The CHAIRMAN. Let that not go into the record. Have you any information that you can give the committee as to your cost price and your selling price, or shall we get that from somebody else? Mr. BEGGY. Yes, sir; we will have that prepared for you, sir. Mr. Curran will have the factory cost only. He will not have the selling cost or anything beyond the selling cost. The CHAIRMAN. Who has the selling cost? Mr. TOLAND. We have it. The CHAIRMAN. Has the witness got it? Mr. BEGGY. No, sir; he does not have it. He has the cost price and possibly the selling price. The CHAIRMAN. Let that witness come around here. Thank you very much. Do you solemnly swear the evidence you shall give the Naval Affairs Committee shall be the truth, the whole truth, and nothing but the truth, so help you God? Mr. CURRAN. I do. TESTIMONY OF JAMES P. CURRAN, COST ACCOUNTANT, MINE SAFETY APPLIANCES CO., PITTSBURGH, PA. Mr. TOLAND. What is your full name? Mr. CURRAN. James P. Curran. Hr. TOLAND. What is your position with the Mine Safety Appliances Co.? Mr. CURRAN. Compiling costs and cost estimates, factory costs and cost estimates. Mr. TOLAND. Are you familiar with the salaries and bonuses of the officers of this company? Mr. CURRAN. No, sir. Mr. TOLAND. You have no knowledge of that? Mr. CURRAN. No, sir. Mr. TOLAND. Are you familiar with the costs of contracts with the United States Navy? Mr. CURRAN. Manufacturing costs; yes, sir. Mr. TOLAND. Can you tell the committee what the manufacturing cost was on contract 75776, of August 7, 1940 ? Mr. CURRAN. I am not familiar with the date. The CHAIRMAN. You have the number of the contract. Mr. CURRAN. That is right. Mr. TOLAND. No. 75776. Mr. CURRAN. These are the figures that were submitted to the auditors when they were there; 75776, the total cost, factory cost, $1,054,649.20. Mr. TOLAND. What were the total costs, excluding general overhead? Mr. CURRAN. I don't quite get your question, Mr. Toland. Mr. TOLAND. What was the figure you gave-one million, fifty-four thousand Mr. CURRAN (interposing). Six hundred forty-nine dollars and twenty cents. Mr. TOLAND. The amount of the selling price of that contract was $2,034,000? Mr. CURRAN. That I wouldn't know. Mr. TOLAND. Well, don't you have the amount that you billed the Navy for that contract? Mr. CURRAN. No, sir. That is out of my province. I don't see the billing. I don't have anything to do with the billing. Mr. TOLAND. Mr. Glisson, will you take the stand? The CHAIRMAN. Wait one minute. Mr. Toland, let's not interrupt that way. Mr. TOLAND. I can put him on. The CHAIRMAN. Have you the selling price now of this contract? Mr. CURRAN. No, sir. The CHAIRMAN. Have you any selling prices there? Mr. CURRAN. No, sir. The CHAIRMAN. All you have is the manufacturer's price? Mr. CURRAN. That is right. The CHAIRMAN. Who has the selling price of this contract? Do you have the unit cost? Mr. CURRAN. The unit cost? Yes, sir. Mr. TOLAND. How did you arrive at the unit cost of this particular contract? Mr. CURRAN. Divide the total by the total units on the contract. Mr. TOLAND. Is this your handwriting [showing witness a document]? Mr. CURRAN. No, sir. Mr. TOLAND. Do you know whose handwriting that is? Are those your figures? Mr. CURRAN. No, sir. The CHAIRMAN. Mr. Toland, if you can't get anything from this witness except the manufacturer's cost Mr. TOLAND. Mr. Beggy, will you come back and see if you can identify the handwriting on this exhibit? Mr. BEGGY. I think that is Mr. Sanders' handwriting. Mr. TOLAND. The only thing you have, then, is the manufacturing cost on the items? Mr. CURRAN. That is correct. (Document containing handwritten cost estimates was received in evidence, marked "Exhibit No. 408," and is printed in the appendix of this volume.) Mr. TOLAND. On contract 70462 do you have the manufacturing cost? Mr. CURRAN. The manufacturing cost? Mr. TOLAND. On 70462. Is that $416,869.47? Mr. CURRAN. No, sir. Mr. TOLAND. What amount is it? Mr. CURRAN. The figure I submitted was $417,229.92. Mr. TOLAND. And the total billing for that contract-do you have that? Mr. CURRAN. No, sir; I don't. Mr. TOLAND. The total billing was $899,731, and the percentage of gross profit on cost was 115.83. The percentage of profit to the selling price was 53.67. Do you have contract 77200? Supposing you give us the total manufacturing costs on all these contracts, to make it fast-70462-do you have that? Mr. CURRAN. That is the one I just gave you. Mr. TOLAND. 75776. Mr. CURRAN. $1,054,649.20, and to that there is an additional cost there for mould. Mr. TOLAND. How much was that? Mr. CURRAN. $13,865.12. Mr. TOLAND. Do you have the total cost for 77200? Mr. CURRAN. $316,127.54. Mr. TOLAND. Now do you have the total cost for 80477? Is that $136,607.26? Mr. CURRAN. $136,607.26. Mr. TOLAND. The next is 156-S-18817, and 19106-$3,047.70? Mr. TOLAND. And for 84802 the manufacturing cost is $16,357.69? Mr. TOLAND. And for 91596 the manufacturing cost was $493.58? The CHAIRMAN. Mr. Toland, let me ask you this: Haven't your auditors gone over all these and got the manufacturing cost from their books and the selling price? on. Mr. TOLAND. Yes; we have. The CHAIRMAN. I suppose we can expedite it by putting the auditor Mr. TOLAND. I would like to get them-we have difficulty getting any information out of them. They only have it piecemeal. |