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may resort to such procedure, or if required by the Director, must resort to such procedure, before taking an appeal or going to court. It provides that if he does not initiate his appeal within 90 days, the findings shall become final and conclusive. It provides that the appeal board shall treat the findings of the contracting agency as prima facie correct, and the burden is on the contractor to establish his right to any greater amount. The appeal board may increase or decrease the amount. The appeal board shall be appointed by the Director and shall sit in panels of one when the claim is less than $25,000, or three or more when in excess of that amount. It provides for arbitration of claims.

Section 14 provides procedure to be followed when suit is brought in the Court of Claims.

Section 15 relieves the Government's contracting or certifying officer from personal liability in the absence of fraud.

Section 16 provides that the General Accounting Office's function shall be confined to determining after final settlement whether payment was made in accordance with the settlement, and whether from the records transmitted to it there is a reasonable belief that the settlement was induced by fraud. In case of fraud, the Comptroller General shall report such facts to the Director, the Department of Justice, and the contracting agency. He cannot withhold or suspend payments. However, the contracting agency may, and upon order of the Director shall, take action to recover or withhold payments. The Comptroller General may review settlements to determine whether methods used were expeditious, fair and efficient, and protect the interests of the Government, and provides that he shall make suggestions and recommendations to the agency for improvement in the methods and procedures, and to Congress for any additional legislation needed. It provides that he shall submit his criticisms to the agency and accompany his report to Congress with any comments from that agency.

Section provides for the curing of, and payment of claims under, defective informal and quasi contracts.

Section 18 provides that the Director shall establish policies for supervision and review within the contracting agencies to prevent and detect fraud and to assure uniformity and expedition. It provides that the contracting agency shall keep such records as the Director deems necessary, and that such records shall be transmitted to the General Accounting Office. It shall seek to reduce the amount of such record keeping, however, to the minimum necessary to protect the public interest. The Director has the right to make such investigations as he deems necessary.

Section 19 provides that the contractors shall preserve records, provides penalties for their destruction, and also provides very stiff penalties for false statements by the contractor, providing forfeiture and refund of any profits obtained through such false statement. An additional fine of $2,000 for each such act and double damages are also provided.

Section 20 contains general provisions which do not need to be detailed. Section 21 provides other functions of the Director, such as training of personnel to handle termination, coordination of the war agencies, etc.

Section 22 provides for the use of appropriations in making termination settlements.

Section 23 provides that the Director may delegate his authority to the head of any Government agency, who may in turn redelegate. Provision for a crossdelegation among agencies is made in this section.

Section 24 provides that the act shall become effective 20 days after its enactment.

Section 25 provides that the act need not be applicable to contracts and inventories outside the continental limits.

Section 26 provides for separability of the provisions.

Section 27 gives title of act as the Contract Settlement Act of 1944.

Generally speaking, the Senate bill is not too unlike H. R. 4469. However, it differs in certain material respects: (1) It has no provisions for disposition of property or (2) for reconversion allowances; (3) it does not permit the Comptroller General to be present as an observer at the termination proceedings; his function is confined to post-audit or review, after the settlement has become final; (4) it provides no standards to be followed in making settlements; (5) it provides for a Director rather than an interdepartmental committee, to provide coordination and uniformity.

STATEMENTS OF JOHN M. HANCOCK, ACTING CHAIRMAN, JOINT CONTRACT TERMINATION BOARD, AND LT. COL. H. C. ROSE, SECRETARY, JOINT CONTRACT TERMINATION BOARD

Mr. WALTER. Mr. Hancock, will you proceed with your statement, please?

Mr. HANCOCK. I shall just talk from notes. I shall be glad to answer any questions as best I know how. I covered part of my preamble here. We faced this problem last December very frankly. We knew that there had to be legislation, in our opinion at least. The legislation had to cover these points. Mr. Vinson has covered some of them. It had to cover a plan for interim financing, because I was afraid, as all others were afraid, that there could not be a complete, quick settlement, and there must be enough money provided on the whole by the banks, with adequate Government guarantees back of them, so that men could get the money the Government owed them, so that they in turn could start pay rolls for civilian work or buy equipment for civilian work. We now have on the statutes a plan under which the Government may make loans or create loans for war production. But obviously when war production ceases

Mr. WALTER. That is the V loan?

Mr. HANCOCK. That is right. (Continuing:) there is no power to make a loan. So we are planning on a very simple operation, a twopage kind of loan that every bank in America will understand the provisions of; a simple operation, fully decentralized, so that men will get their money quickly. That was the first apparent need, and there was no authority in statute for it.

Next was the matter that Mr. Vinson referred to, the liability of contracting officers. I assume there is no concern over that.

Next was the possibility of delay in settlement, and in fairness, at least in a plan of settlement, it would be perfectly proper to allow a modest interest charge as of the day of termination or 30 days thereafter, assuming the Government would not pay within 30 days, because interest might technically be due on the amount owed as of the date of termination.

A very important thing in legislation was to get uniformity of procedure; otherwise you would have grievous unfairness among agencies toward contractors, and you could never justify one course of action by Navy, another by Army, and down the list. So far as I know, those needs were not controversial. There has been no controversy I have heard about anyone of them.

There was one point involving controversy, and that was in regard to the Comptroller General's position. The Comptroller General's position would afford him increased power, and uncertainty was created in my own mind as to handling termination. I think it important to have that issue settled. That is the only controversial thing I have urged Congress to settle quickly.

Mr. WALTER. Under this bill no power, as I understand it, that the Comptroller General already has can be taken from him.

Mr. HANCOCK. I understand that that is substantially correct. In fact, it adds to certain of his powers. Then, we have suggested modification. Mr. Baruch and I saw the Comptroller General and His assistant, Mr. Yates, and talked this matter out as far as we could. It seems to us that we are down to this simple procedure. The

Comptroller General had a right to say to the Congress, "I have a right to be told how far I must go. If I am to be looked upon as the watchdog of the Treasury, I cannot act without having powers." I have seen all of us here labor with the problem of about how far he should be in.

Mr. KEFAUVER. May I ask if you have considered section 16 of H. R. 4789, the bill we have here? That provision affects the Comptroller General.

Mr. HANCOCK. In the first place, I am told that the Comptroller General opposes the idea of being put on the Policy Board. We thought in our report that the wise course of action was to put the Comptroller General there. He has wanted to have either sole responsibility-entire responsibility or none. I thought on that issue he was entitled to a decision. On that issue I thought the only answer was to say that he shall have no power. I could not conceive of giving him full powers. So in our report-Mr. Baruch's and minewe proposed that he come in on the policy level, where he would not be charged with actual operations, but would be a guiding, helpful hand in setting up policies. He declined the appointment. Now he has declined it again. I think his argument ran beyond the first proposition, which was to know whether he was fully in or fully out. He did consent in his letter, written to the Murray committee, which I think is in the record of their committee, that if he was to be out, he should be put out in no uncertain terms. That was the way the Murray bill was written. Our concern is that if he comes into settlement by way of preaudit, we will have an impossible situation. I do not assume you men want any further argument on that point.

Mr. FOLSOм. That would so delay the thing that it would be utterly impossible.

Mr. HANCOCK. I think so.

Mr. WALTER. He said to the Post-war Planning Subcommittee that he did not want to be in on only questions of fraud, which, of course, obviously means that he would be in on questions of discretion, and then we would get right up to the argument between the Comptroller General and the contracting agency wholly on the question of proper exercise of discretion.

Mr. KEFAUVER. As I understand section 16 of your bill, page 37, (a) is just about like it is in S. 1718, and the new part is to be that where the Comptroller General finds fraud he can stop settlement until it is cleared up?

Mr. WALTER. Yes. This is purely a compromise, and it came as a result of five or six meetings. We finally concluded that the Comptroller General would be given such power under this that he could do that which he says he wants to do without participating in the question of settlement.

Mr. FOLSOM. In the Senate bill it was negative.

Mr. WALTER. Yes; and this defines his duties positively.

Mr. KEFAUVER. On the proposition of being all in or all out?

Mr. WALTER. He thinks that it is all right.

Mr. FOLSOм. He is present only in the case of fraud.

Mr. KEFAUVER. If the Comptroller General believes there is. fraud. What would prevent him from believing there is fraud in 50 percent of the cases and thus stopping settlement?

Mr. WALTER. I could not imagine any official arbitrarily taking that action.

Mr. KEFAUVER, How is he going to know unless he is in there doing the auditing?

Mr. WALTER. Just as he is in there now doing auditing. Somebody talks too much. Evidence comes to his attention. Then, when that suspicion does arise, if it is sufficient, it goes to the Department of Justice, the proper agency. Then the investigative agency that Congress has provided makes the investigation of those facts that caused him to reach the conclusion that there was fraud. Mr. KEFAUVER. In the meantime payments are held up. I know that Mr. Warren is a reasonable, capable, level-headed man and certainly would not do anything he did not think was right. But necessarily he cannot have detailed personal direction of all those things. Suppose the case of a big contract. Say the X company had a billion-dollar contract, and he felt that in some little part of it there was some fraud. Undoubtedly in every big contract there are some things that do not go on right. Then he might hold up termination of the whole contract, might he not?

Mr. HANCOCK. The statute provides for the amount involved in the fraud.

Mr. WALTER. The amount involved is what we thought we were saying; the portion thereof.

Mr. KEFAUVER. Do you think, Mr. Hancock that this is calculated to hold up the quickness of any settlement?

Mr. HANCOCK. I accepted it as the best compromise that can be got. My only reliance is on the word "believe." It is a pretty strong word. I think if a man goes out and makes charges or allegations of fraud without a fundamental belief in them, he is in a very dangerous position.

Mr. BRYSON. He is going to be hesitant to make such a charge. Mr. HANCOCK. I hope so.

Mr. WALTER. If he capriciously says there is fraud in this settlement, he does not believe there is fraud.

Mr. BRYSON. Of course, threat of fraud is just as bad as fraud prosecution.

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Mr. KEFAUVER. Would it not be better if he has reasonable grounds to believe?

Mr. WALTER. I think that is what that means.

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Mr. HANCOCK. We have relied on it being a pretty good word. am thoroughly in favor of having it there for the sake of getting legislation through.

Mr. KEFAUVER. I believe if we write standards in-and I have a letter here from Mr. Warren which at some time I want to put in the record-indicating he favors cost standards being written into the bill.

Mr. HANCOCK. Our difficulty with Mr. Warren is-I do not say this in a critical way-that we tried to get Mr. Warren to join us when we are building principles, and he did not want to come in. I have no power to bring him in. If Mr. Warren will take the principles we have already announced and will tell us where they are wrong, we will welcome his criticism.

Mr. WALTER. I probably did not impress upon the committee this morning that we were greatly concerned over the possibility of fraud. We spent days, literally, in considering just that, and this was one of the

steps that we took in order to prevent fraud, if it is humanly possible, and, consequently, to make it very unprofitable to either defraud or attempt to defraud the Government in these settlements. This was one of the safeguards that we though we had provided.

Colonel ROSE. My understanding yesterday was, in the light of the provision in 16 (a), that the General Accounting Office would come in only to determine after final settlement; that the expectation was that under section (b) they would not be holding up payments under a particular settlement by reason of a fraud charge under that settlement; that they would be able, however, to earmark an equivalent amount, if the contracting agency were having subsequent dealings with the contractor, and require that that be withheld.

Mr. WALTER. So that that section we subsequently wrote with respect to the penal sum could be made relative.

Colonel Ros. Yes; but it would not be the means of having the General Accounting Office go in and pre-audit a particular settlement. It was simply intended, as I understand it, to state what the Department would normally do anyhow if the General Accounting Office were to make a charge of fraud, namely, withhold an equivalent amount, if it had sums owing to a contractor.

Mr. HANCOCK. If you appoint a man to supervise somebody else, I think he has got to make a critical report. If you get a lot of critical reports, you are going to slow up settlements, even if they are not wellfounded, until they can be proved to be unfounded. There was a vice president of a trust company in New York who stole some money in the last few days. But nobody has made the charge that all bankers are crooks. But if one Army or one Navy officer pulls a crooked deal, the tendency in the post-war period will be to condemn them all. That is maybe a magnified fear. I know in the last war I did not have to appear before any congressional committee, but I saw a lot of men suffer from unjust charges, and the tendency was to blame everybody, and not just one man.

Colonel Ros. We have a practical demonstration of what happened in the disposition of property. I think the charges which were made, in connection with certain cases, have tended to freeze the entire situation, good and bad.

Mr. LEWIS. There is a feeling among some of the members here in the House that they want the Comptroller General to be in this picture. I talked with one Congressman who said that he is not going to support any measure that does not have the Comptroller General in it. I suggested to him the slowness of the settlements if all claims have to be audited. He said the Government must not be defrauded and that it is our job to see to it that it is not, even if it slows up settlements. That was his view. Of course, it is just one man's view. But he is a member of the Military Affairs Committee, and he is very strong for the May bill. He wanted to argue with me that the May bill is much better than the Walter bill. The report came out of committee by a vote of 13 to 12.

Mr. WALTER. We had ample evidence to show that if the Comptroller General is in this thing, it will take 6 months to settle claims-in all probability, lots longer. One of the witnesses said it would not take 6 months; it would take 20 years and 6 months.

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