(The information referred to, furnished at a later date, is as follows:)

Records of the Department show that during the 1st session of the 83d Congress at least three bills were introduced in the House of Representatives (H.R. 3407, H.R. 5670, and H.R. 6426) relating to accelerated amortization of the cost of farm and commercial storage facilities. H.R. 3407 and H.R. 5670 would have amended section 124 of the Internal Revenue Code to permit the amortization of the cost of farm storage facilities over a 60-month period. H.R. 6426, which is the bill referred to by Senator Symington from the Congressional Record, proposed to amend section 169 of the Internal Revenue Code to permit accelerated amortization of the cost of both farm and commercial grain storage facilities. In reporting on H.R. 3407 and H.R. 5670 (June 1953) the Department did not take a firm position either for or against their enactment, but expressed its belief that accelerated amortization of the cost of farm and permanent type storage facilities would provide an incentive for the construction of new facilities. Furthermore, the report stated that the Department would welcome the opportunity to have representatives of the Department discuss these bills with the chairman or other members of the committee whom he might suggest. We have no record in the Department which indicates that these bills were subsequently discussed with a member of the committee or the authors of the bills. In regard to H.R. 6426 the Department has no record which would indicate that it was requested to report on the bill and that no hearings were held in connection with the bill insofar as the Department was concerned.

Mr. SCHMIDT. Mr. Hanson, do you think this study that you are making will give you a good basis for the renegotiation of the grain contract?

Mr. HANSON. I certainly hope so. I personally feel we have exhausted every bit of the talent in the Department in this area and I think it will be as reliable as any study made under the circumstances could possibly be. I am perfectly well satisfied in my own mind professionally, I would say, that we will not be doing any injustice by using the results of the survey.

Mr. SCHMIDT. You feel it will accurately reflect the situation as it exists currently and will give you as representatives of the Department an adequate basis for negotiations with industry?

Mr. HANSON. I think it will reflect the situation as it existed during the survey period.

I want to point out that we had to take a complete fiscal year and because of the fact that this survey related itself to the operating expense part of cost of storing grain and it will reflect a period during the period of survey, I think it will provide us with adequate basis for renegotiations within the margin of error that is inherent in the sampling technique used.

I say that because we used a sampling technique that I was told initially the size of that sample, 537 houses, would come up with results which would provide a margin of error of approximately 1 cent one way or the other and to that extent I think it will accurately reflect the situation.

Mr. SCHMIDT. Mr. Hanson, in your cost analysis technique, do you recognize this accelerated depreciation as a basis for cost?

Mr. HANSON. We used the books of the companies as they existed at the time that the survey was made. If they had depreciated the facility out completely we gave them no depreciation. If they had a normal depreciation over a 20- or 40-year period we gave them that, and if they had rapid depreciation we used rapid depreciation. Now I would like to point out in some instances, in many instances you

have both types of depreciation, both rapid and normal. We used whatever the books of the company showed, unless the company expressed a preference for us of normal rather than rapid tax writeoff. Mr. SCHMIDT. Mr. Pollock

Mr. POLLOCK. Yes, sir.

Mr. SCHMIDT. Do you concur with Mr. Hanson that this cost study survey will give you a basis for good negotiations?

Mr. POLLOCK. I am sure it will; yes, sir.

Mr. SCHMIDT. And you are convinced of the worthiness of this cost study?

Mr. POLLOCK. Yes, sir.

Mr. SCHMIDT. What is the approximate cost of this study to the Department? Have you analyzed that?

Mr. HANSON. Yes, sir.

Mr. SCHMIDT. What is it?

Mr. HANSON. We have set up a system of reporting on these costs when we first started and the last figure I had was $256,000. That is just about it.

Mr. SCHMIDT. This cost of $256,000 in relation to the information which you gained and the amount of money you are dealing with in storage is a relatively small amount.

Mr. HANSON. I think it is a good investment?

Mr. SCHMIDT. You think it is a good investment?

Mr. HANSON. Yes, sir.

Mr. SCHMIDT. You recommend then that that type of study be made?

Mr. HANSON. I recommend that it be made; yes, sir.

Mr. SCHMIDT. Mr. Pollock, you concur with that?

Mr. POLLOCK. Yes, sir.

Mr. SCHMIDT. Are you making the same type of survey for the Uniform Rice Agreement, Uniform Bean Agreement?

Mr. POLLOCK. We haven't yet.

Mr. SCHMIDT. Do you plan to?

Mr. HANSON. I don't.

Mr. POLLOCK. It isn't in our plans, sir.

Mr. SCHMIDT. Why not, Mr. Pollock?

Senator ELLENDER. I can't see the necessity of going into cotton, for instance, because it hasn't gone up any since 1951. In that connection, I would like to state that all of the grains, that is, barley, corn, flaxseed, grain sorghum, oats, rye, and soybeans, and not overlooking wheat, Senator Young, percentagewise since 1951, rates have increased from a minimum of 32 percent in the case of oats to 42 percent in the case of corn. Now that is the range.

In regard to cotton, the only increase was in 1958 from 4.20 to 4.55, and that is an increase of 8 percent, and it has only been, according to this statement, for that year.

In the case of cottonseed oil, the increase has been zero.

So I would like, Mr. Chairman, to get the cotton people up here and find out why it is, and I will probably pat them on the back for keeping the rates down, that they saw no reason to increase them-why it is that these people have been able to get an increase in rates beginning in 1951-52 to, as I said, ranging from 32 percent to as high as 42 percent.

Senator SYMINGTON. That will be done, Mr. Chairman.

Mr. SCHMIDT. Mr. Pollock.

Mr. POLLOCK. Yes, sir.

Mr. SCHMIDT. I have here before me a report dated November 24, 1956, from the Internal Audit Division of the Commodity Stabilization Service and it contains a summary of findings which read as follows.

Rate paid by Commodity Credit Corporation under the Uniform Rice Storage Agreements for rough rice storage greatly in excess of the commercial rates covered in tariffs filed by the California Public Utilities Commission. For example, the total storage related to costs incurred by Commodity Credit on the California 1956 rice crop were more than $1 million higher than the cost would have been at commercial rates. While it must be recognized that the higher Uniform Rice Storage Agreement rates entitle Commodity Credit to certain additional services it was questionable whether the value of these services warranted the substantial difference in rates.

Now have you undertaken a cost study of rice storage in California to determine the correctness of this charge made by the Internal Audit that more than a million dollars was spent than needed?

Mr. POLLOCK. Not that I know of.

Mr. SCHMIDT. Do you plan to?

Senator SYMINGTON. Do you know of this case?

Mr. POLLOCK. No, I don't know of that.

Senator SYMINGTON. This is new to you?

Mr. POLLOCK. Yes, sir.

Mr. HANSON. May I make a comment on that, Mr. Schmidt?
Mr. SCHMIDT. Yes, sir.

Mr. HANSON. I think there is probably in the record a reply to that report.

Mr. SCHMIDT. There certainly is. There is a reply in here from Mr. Pollock dated December 1958, objecting to the findings of the Internal Audit Division, and then I have here two photostatic copies of letters dated March 10, 1959, from the Internal Audit Division, disagreeing with Mr. Pollock's objections on December 24, 1958. Nothing further appears in the record.

Mr. HANSON. Is there any comment with respect to the manner in which the California Tariff Commission applies their rates?

Mr. SCHMIDT. Yes, there is, and Mr. Pollock in his letter stated that the commercial rates were based on a two-crop year, and the Internal Audit Division checked back and said even if the commercial rates were based on a two-crop year that the Commodity Credit rate was still double what would be paid under the California

rate.

Senator SYMINGTON. You said you didn't know about this. Was that because somebody on your staff did it without your knowledge? Mr. POLLOCK. No, sir. I suspect that my memory has failed me just a little, sir.

Senator SYMINGTON. This is a million dollars involved here? Mr. POLLOCK. Yes, sir.

Mr. SCHMIDT. Well, do you plan to look into it further, Mr. Pollock?

Mr. POLLOCK. Yes, sir. I certainly will.

Mr. SCHMIDT. I realize that a million dollars in comparison to the figures we have been talking about here today is a relatively small

amount, but it would be worthy of further consideration, don't you agree?

Mr. POLLOCK. Certainly do.

Senator SYMINGTON. The Internal Audit says you paid over a million dollars excess, in California, in rice storage. Has there been any decision to do anything about it?

Mr. POLLOCK. We have those things constantly under review, Mr. Chairman, and we will do whatever we can about it, sir.

Senator SYMINGTON. Thank you.

Mr. SCHMIDT. Mr. Chairman, I have no further questions of Mr. Pollock at this time.

Senator SYMINGTON. Senator Ellender, have you any questions? Senator ELLENDER. NO.

Senator SYMINGTON. Senator Young?

Senator YoUNG of North Dakota. No.

Senator SYMINGTON. Mr. Pollock, in executive session, we discussed your previous relationship with the grain elevators and the story came out in the paper about it yesterday. Would you care, briefly, so the record is clear, to tell what your past relationship is and what your present relationship is, and refer to the loan with your son; and also the question of the insurance? My request is completely without prejudice and in your interest.

Mr. POLLOCK. Yes, sir. I would be very happy to.

The question was raised as to whether I was still interested in the business in which I was engaged at Walford and Norway, Iowa, for about 14 years before I came with the Department in March 1957, and I simply told the committee in executive session yesterday that I had sold out my two-thirds interest in those two country elevators to my son. I hold some notes on him. Do you want me to give the amounts of those, sir?

Senator SYMINGTON. I think that would be pertinent.

Mr. POLLOCK. I hold some notes on him in the amount of some $65,000 representing my two-thirds share on which he pays me 31⁄2 percent interest. Aside from that, I have had and still have no more control over those two country elevators than you do.

I have every reason to believe

Senator SYMINGTON. You don't want to give me those notes, do you?

Mr. POLLOCK. If you need them, I will be glad to make you a loan of them, yes, sir.

Senator SYMINGTON. I need them.

Excuse me.

Senator ELLENDER. Off the record.

(Discussion off the record.)

Mr. POLLOCK. There was also a question raised as to

Senator ELLENDER. Before you go into that, I wonder what prompted you to negotiate with your son? When did you decide to do that? Was it before you were appointed to the position you now hold or after or just exactly when did you decide to do that?

Mr. POLLOCK. I decided to do that when I decided to come down here.

Senator ELLENDER. Why? Because the law required you to, the rules and regulations, or just what?

Mr. POLLOCK. I thought you meant why did I come down here and I was just about to say that if my foresight had been as good as my hindsight

Senator ELLENDER. You are sorry you came, in other words?
Mr. POLLOCK. No, I didn't say that.

Senator ELLENDER. No, but you were about to say it.

Mr. POLLOCK. No, no. If you would let me finish, I would say that if my foresight had been as good as my hindsight and those of others, including my wife, I probably would have reflected on it further and might not have come.

Senator ELLENDER. How long have you been with the Department?
Mr. POLLOCK. Since March 25, 1957, I believe is the date.
Senator ELLENDER. How much has the note been reduced?

Mr. POLLOCK. It hasn't been reduced at all.

Senator ELLENDER. Have you been paid any interest?
Mr. POLLOCK. Yes.

Senator ELLENDER. Is any time fixed at which the note is to be paid?

Mr. POLLOCK. No, it is a demand note. He has offered to pay me some principal payments from time to time, but I happen to know that he has to also borrow money from his banker out there from time to time and I don't believe he can borrow it from his banker at 32 percent.

Senator ELLENDER. All right.

Mr. SCHMIDT. Do you have anything further to add, Mr. Pollock? Mr. POLLOCK. Not unless you want me to.

Senator SYMINGTON. Will you explain a little bit about that insurance policy?

Mr. POLLOCK. Oh, yes. I was about to say that.

There was some question raised as to an insurance policy, which I am not sure yet, Mr. Chairman, whether that was put on that financial statement from the Evanston Commodity Credit office as an asset. But I believe there was a space at the bottom of this financial statement for listing the life insurance policies. And he did list one, and I guess his date on there was 1958, which listed an insurance policy which he carries on my life for $15,000. And when you asked me the question about an insurance policy in 1958, I really thought I had lost my memory completely, because I have not taken an insurance examination for several years.

It finally came to me that the reason for it was that my son happens to have a rheumatic heart; it is a heart murmur. He was not able to buy insurance on his own, on his own life, when he came with me in business after finishing at Iowa State University in 1953. And being a prudent father, I suggested that he ought to have some life insurance and, on application, he was turned down by two or three companies; and an enterprising insurance man thought it would be a good idea for him to have some anyway. So, since I could still pass an examination-and I still can he bought a $15,000 policy on me in February 1954.

Now, if that had anything to do with my plans to come down here, I must have been planning this for a long time, because I did not know at that time I was going to do this.