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operation of the factory. That is due in part to the facilities which we have. · The plant was taken over by the government from the Danish West Indian Co. who went bankrupt.
A lot of the machinery has been replaced, but we still have what I would consider not a modern plant in any sense of the word.
The CHAIRMAN. You say that the growing worked out all right.
I am reading from the President's report for fiscal 1960. Would that be your report?
Mr. BARTLETT. That would be my report and, as Mr. Paiewonsky pointed out, in that particular year we had 31 inches of rainfall.
The CHAIRMAN. This says 33. I would not argue with you.
Mr. BARTLETT. It depends on which average you want to use, which place. But up or down, our production of sugarcane follows a very sharp line with the rainfall.
In 1960, that you are referring to, the 1960 crop, we had 31 inches of rainfall. We produced about 19.2 or 19.3 tons to the acre.
This year, on the same land, under the same conditions, and, incidentally, we produced a litle less than 6,000 tons of sugar, on the same land, under the same conditions, the same overhead, the same cultivation, this year we will produce some 15,000 tons of sugar simply due to the difference in rainfall, having had over 60 inches of rainfall.
The CHAIRMAN. Will that result in a profit?
Mr. BARTLETT. That will result in an operating profit, estimated at this time at $200,000 on the entire operation.
The CHAIRMAN. It says the production of sugarcane showed a loss of $208,472 in that one year.
You think this year it might be an offsetting profit? Mr. BARTLETT. It will be entirely reversed and will show a profit of at least $200,000.
The CHAIRMAN. The next part of the report says the low production of sugarcane was reflected in factory operations which showed a loss of $472,000.
Mr. BARTLETT. That has always been the area where the heavy losses are incurred.
As I pointed out, we have an old mill, a limited volume of sugarcane to put through that mill, and our overhead remains the same, our depreciation remains the same, the interest on the money remains the same, whether we make 5,000 tons of sugar or 15,000 tons of sugar.
The CHAIRMAN. How much depreciation is involved in this on the mill?
Mr. BARTLETT. It is in the area of—I do not have that figure. I will be glad to furnish it for the record. I believe it is in the GAO report, if you have a copy of it there.
The CHAIRMAN. Well, this is something we can take up with you at a later time. We need not burden this hearing with it. But I did not think the investment that might still be depreciated in that mill was very substantial.
Mr. BARTLETT. About $3 million, sir. $2,900,000-some-odd, as I remember the figure.
The CHAIRMAN. You think that is $200,000 a year depreciation ? Mr. BARTLETT. It may not run that much.
I wish I had that report with me. I had not anticipated your question.
The CHAIRMAN. What I am trying to get at is that this loss is somewhat of a paper loss.
Mr. BARTLETT. That is correct, a substantial part of it is a paper loss.
The CHAIRMAN. I guess I have no further questions.
Senator DWORSHAK. Who owned the powerplant prior to the VICORP ownership?
Mr. BARTLETT. It was under private ownership. The municipality owned it—this is before my time but I think I know the history. In St. Thomas it was owned by the municipality of St. Thomas. In St. Croix there were two private operators, one in Frederiksted and one in Christiansted and there was also the rural electrification area throughout the country.
Senator DWORSHAK. Why did VICORP take over the plant?
Mr. BARTLETT. My understanding is that at the time there were no funds available from the local government for investment that was necessary in equipment to meet the growing demand that had started.
Senator DWORSHAK. Is VICORP obligated to meet all of the requirements of an expanding economy in the islands?
Mr. BARTLETT. That has been pretty much the picture over the past few years, what has been expected of VICORP.
Senator DWORSHAK. Would it be better to call VICORP a white elephant, instead of VICORP, the Virgin Islands white elephant ?
Mr. BARTLETT. Well, it certainly could be termed that in some respects.
Senator DWORSHAK. In other words, Mr. Paiewonsky or other private investors pick off the lush businesses in the islands and when you have a difficulty, losing business, VICORP steps in and bales out the business?
Mr. BARTLETT. That has been part of the history. Of course, the Congress put the Corporation out of the rum business and forced us to sell the business when we were federally chartered in 1949.
The CHAIRMAN. Why? Mr. BARTLETT. I have not any idea. I was not with the Corporation.
The CHAIRMAN. Did you not ever get curious? Mr. BARTLETT. I have not gone into the record of the hearings in connection with the sale of the rum plants. But the language specifically prohibited rum production.
The CHAIRMAN. Was the Government making any money? Mr. BARTLETT. The Government was making money on the rum plant at the time, yes, sir, because it was during the war period.
Senator GRUENING. That is why the administration sold it. It was making money.
Senator DWORSHAK. Why did they not sell the mill along with the distillery?
Mr. BARTLETT. That is a very good question. I certainly do not have the answer.
· Senator DWORSHAK. Again, VICORP merely operates the defunct, losing business propositions in the islands?
Mr. BARTLETT. No; I would say the power operation definitely will show a profit again this year and should be a profitmaking operation. The sugar. I have serious doubts can ever be made.
Senator DWORSHAK. Do you recall the mechanics involved in the sale by the Government of the distilleries, why the mills were not tied in with the distilleries in a single operation? Do you recall that transaction?
Mr. BARTLETT. No, I do not recall any discussion of tying in the mill at that time, the distillery was definitely surplus and excess to the needs of the Corporation inasmuch we had been put out of the liquor business, so it was put up for sale, offered for sale.
Senator DWORSHAK. If Mr. Paiewonsky had purchased the mill at that time, he probably would have made a lot of money and bulwarked the economy of the islands, based on his business record.
Well, that is all.
Senator MILLER. Mr. Bartlett, the nominee testified last week that with respect to the dispute you had over the 1959 molasses, that your corporation loaded the cane from the field with bulldozers and pickup machinery into trucks which brought with it about 25 or maybe 30 percent of field dirt, mud and trash, to the sugar mill, and the sugan mill weighed this as a part of the cane and paid for it as cane, but it was mud and dirt.
Are you familiar with that situation?
Mr. BARTLETT. Yes, sir. We are forced, due to the shortage of labor, to load all of our sugarcane by mechanical means. We use a mechanical loader similar to those used in Hawaii, Louisiana, and Florida. This does pick up a certain amount of trash, as we speak of it, from cane, and it also will pick up a certain amount of mud or stone. We made constant checks on the quantity of this material coming in, in order to have an evaluation of it. To my knowledge, no sample has ever exceeded 10 percent, and it averages about 8 percent.
Senator MILLER. Then you dispute his statement of 25 to 30 percent?
Mr. BARTLETT. Yes, sir; I would have to correct that statement or dispute it.
Senator MILLER. You are down to an average of not more than 10 percent now, is that correct?
Mr. BARTLETT. That is correct. I would say it would average not more than 8 percent.
Senator MILLER. Is that a satisfactory average ?
Senator MILLER. Does it affect the quality of the molasses very much?
Mr. BARTLETT. There is always a possibility in that situation of some carryover of a certain amount of the dirt and silt into the molasses. That certainly can happen.
Senator MILLER. Is there any way of reducing that below 8 percent?
Mr. BARTLETT. It would be practically impossible unless we went back to hand loading of cane, for which we do not have the labor, and the cost would be prohibitive.
Senator MILLER. Do you know what percent they have out in the Hawaiian Islands?
Mr. BARTLETT. It would run out there, I would say, at least 12 to 15 percent, as my knowledge of it goes. Their harvesting methods are entirely different than ours. They use bulldozers and rack the cane up, tearing it down with rakes and so forth, and they get a good deal more trash coming into the factory. Of course, they have very extensive washing machinery to clean the cane before it goes into the mill also, which does help their problem somewhat.
But I had a man from the American Factors Ltd., the vice president, visiting with me last week, and our factory people who are always complaining about dirty cane, because they like to work with clean cane, they were mentioning the dirty cane which they were receiving. He sort of laughed and said, “Well, if you could see our cane in Hawaii, you would have no complaints about the type of case you are getting in the factory here."
Senator MILLER. With this 8 percent, are you paying with that included as if it were cane?
Mr. BARTLETT. The payment for the cane, the only cane which is loaded mechanically is that grown by the Corporation, but all the rest of the cane which comes into the factory is hand loaded by the private grower. So, in a sense, we would be paying or debiting ourselves in relation to any trash in our own cane.
Senator MILLER. The statement of the nominee was that the sugar mill weighed this as a part of the cane and paid for it as cane.
Mr. BARTLETT. The trash and dirt in private grower's cane, I would say would average less than 5 percent, probably in the area of 3 percent.
Senator MILLER. Yes; but this statement is not with respect to grower's cane. It was with respect to your Corporation's cane which I said was picked up with bulldozers and pickup machinery.
This contained about 25 percent or maybe 30 percent field dirt and the sugar mill weighed this as a part of the cane and paid for it as such.
Mr. BARTLETT. Well, we weighed it. It is all weighed across the scale; that is correct, but we would only be paying ourselves, as I say. Inasmuch as we operate both the mill and grow the cane, ourselves, it becomes merely a matter of mathematics whether you credit or debit it to your accounts.
Senator MILLER. When you credit, Do you credit on the basis of the full weight?
Mr. BARTLETT. We take it on the basis of the full weight as far as the factory operation is concerned.
Senator MILLER. Which would include the mud ? Mr. BARTLETT. That is correct. Senator MILLER. Do you think that that is good accounting? Mr. BARTLETT. It might be possible or it might be fairer to take an average of, say, 5 percent, and anything above that to credit it back against the field. But inasmuch as they are all one set of funds, the sugar operation is carried as a single operation, except for internal management. To determine losses in the field and losses in the factory, it would be a very small amount of money involved either way.
Senator MILLER. Thank you. I have no further questions.
The CHAIRMAN. There are no further questions. Thank you.
STATEMENT OF SIDNEY DICKSTEIN, WASHINGTON, D.C. Mr. DICKSTEIN. Mr. Chairman, I represent Mr. Brauer.
Mr. Brauer has been accused of making savage, sensational, and totally unjustified charges under oath before this committee. He would appreciate an opportunity to reply to these accusations, either by testifying here or by submitting a sworn affidavit to the committee.
The CHAIRMAN. Does the committee want the affidavit or to go into testimony?
I think we would prefer to have the affidavit.
(The following communication and affidavit were subsequently sub mitted :)
LAW OFFICES DICKSTEIN & SHAPIRO,
Washington, D.O., March 15, 1961, COMMITTEE ON INTERIOR AND INSULAR AFFAIRS, New Senate Office Building, Washington, D.C.
GENTLEMEN: We hereby lodge with the committee an affidavit by Amandus M. Brauer for inclusion in the record of the proceedings on the nomination of Raphael Paiewonsky as Governor of the Virgin Islands. Copies of this affidavit have been delivered to the members of the committee. Very truly yours,
SIDNEY DICKSTEIN. DISTRICT OF COLUMBIA, 88:
Amandus M. Brauer, being first duly sworn, deposes and says:
I submit this affidavit in amplification of my testimony before the U.S. Senate Committee on Interior and Insular Affairs and in refutation of the testimony of Raphael Paiewonsky, nominee for Governor of the Virgin Islands.
Mr. Paiewonsky testified that "every drop produced at [the A. H. Riise Distilleries] has been straight distilled rum, unrectified, and every drop from [his) distillery is checked by the insular gager.” The statement by Mr. Paiewonsky has been obviously calculated to deceive the committee. The insular gager, when he inspects distilled products, does nothing other than check the proof of the distillation. He does not conduct any tests or analyses which would indicate the composition of the rum he gages for accuracy of proof. Moreover, with respect to the statement by Mr. Paiewonsky that “every drop" of his rum is unrectified, Rudolph Sebastian, formerly employed as a chemist by the A. H. Riise Distilleries, has advised me that he customarily used 20 cubic centimeters of Fritzche rum ether to 50 gallons of his distillate in order to stabilize the flavor of all rum produced.
Mr. Paiewonsky has further testified that the 5,000 barrels of Cuban rum purchased by his distillery “was kept and used solely and exclusively for sale in the local nearby market [and] was not shipped to the United States." Five thousand barrels of rum will make up into 175,000 cases. It is patently impossible for this amount of rum to have been consumed locally. Moreover, Mr. Paiewonsky was not the only distiller of rum sold in the local market. Therefore, Mr. Paiewonsky's statement is incredible on its face. The only significant and truthful aspect is that he admits the purchase of this Cuban rum. Moreover, Rudolph Sebastian personally admitted to me that this rum was shipped to the United States.
Mr. Paiewonsky also testified under oath that he was personally unfamiliar in my high wine distillation operation. In fact he, in conjunction with Mr. Skeoch and Mr. Kessler, complained to Governor Merwin about my distillation process and he was identified as one of the complainants in the February 26, 1960 issue of the Virgin Islands Daily News, a copy of which is annexed hereto.