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Mr. PAIEWONSKY. The President of the United States, sir, with the recommendation of the Secretary of the Interior.
Senator ALLOTT. Upon the recommendation of the Governor?
Mr. PAIEWONSKY. No, sir. The Governor has nothing to say in connection with the appointment of the Government Secretary. The Organic Act so provides.
Senator ALLOTT. Do you believe that a secretary would be appointed without consultation with the Governor? Mr. PAIEWONSKY. It has been done in the past, sir, several times.
Senator ALLOTT. The Government Secretary would be second in command in the government of the Islands?
Mr. PAIEWONSKY. He is the Acting Governor during the absence of the Governor.
Senator ALLOTT. He is in effect a lieutenant governor, is he not?
Mr. PAIEWONSKY. Section 12 of that act provides that the Government Secretary "shall have such executive powers and perform such other duties as may be assigned to him by the Governor.” Section 14 provides that in case of disability or temporary absence of the Governor, the Government Secretary shall have all the powers of the Governor.” Section 15 provides that in case of disability or temporary absence of both the Governor and the Government Secretary, the Secretary of the Interior may designate the head of an executive department of the government of the Virgin Islands to act as Governor.
Congress has thus made ample provision to take care of any problem of the Governor's self-disqualification on particular matters because of a conflict of interest problem. If necessary, I could even fly to Puerto Rico for the day, in order to enable the Government Secretary to proceed as Acting Governor.
Senator ALLOTT. Mr. Paiewonsky, may I interrupt there?
I detect here something that I question very greatly, and that is the reason I questioned you previously about this particular thing.
Do you believe that it would be consistent with your duties to adopt the subterfuge of flying to Puerto Rico in order to permit the Secretary General to act ?
Mr. PAIEWONSKY. No, sir. I think the question here is: If there is the remotest question that is raised, a question of a conflict of interest, whether it is in property or anything, which I do not foresee, and I do not see how there could be, in that case I would be willing, under the provisions which have been set up here, to absent myself and permit the Government Secretary, which is provided for here, to act in my absence.
Senator ALLOTT. Would it not be difficult for a Government Secretary in a situation in which you would find yourself to act in a direction which woulld be contrary to your known wishes ?
Mr. PAIEWONSKY. Well, sir, if there is any question on this particular matter, where I do not see the possibility of it arising, but should it be, he would have full right, and I would permit him. There would be no question about that, sir, about his having the right to act as he saw fit, without my bringing any pressure or any such thing
The CHAIRMAN. Proceed. Mr. PAIEWONSKY. In addition to the Virgin Islands holdings that I have listed, I should note that I own shares in A-1 nationally rated companies, and to an almost insignificant degree this could be considered a holding in the Virgin Islands.
For example, as a result of the exchange of my shares in Virgin Islands banks, I now own 1,100 shares of the stock of Chase Manhattan Bank, and 3,000 shares of the stock of First Pennsylvania Bank & Trust Co. Theoretically, this gives me an interest in the Virgin Islands branches; as a practical matter, that is insignificant. My shares represent an insignificant percentage of the total shares outstanding, and the Virgin Islands branches represent only a tiny percentage of the assets and business of the banks.
Again, as a result of the disposition of our shares in A. H. Riise Chemicals & Distillers, my brother and I will each receive shares amounting to less than one-half of 1 percent of the stock of a large national distiller. The Virgin Islands distillery will account for less than one-half of 1 percent of its total assets.
Senator BURDICK. Mr. Chairman, I would like to ask a question at that juncture.
When I questioned you earlier today, I asked you if the net worth of the Riise Chemicals was not in the amount of $451,000, and you said it was in excess of that. Mr. PAIEWONSKY. It was, sir. Senator BURDICK. How much in excess of that? Mr. PAIEWONSKY. I would say the total, including inventory—I mean, we would include all of the total assets—I would say the total asset value, including inventory, would amount to about $112 million.
Senator BURDICK. $11/2 million. Then you exchanged $112 million for stock in a distillery?
Mr. PAIEWONSKY. Well, but remember that the shareholders will not receive $112 million in shares. There are bank loans. There are mortgages. There are outstanding obligations against the company, which have to be assumed by the parent company that is taking it over.
Senator BURDICK. What was the value of the stock that you acquired in the distillery? I assume it is Schenley's? Mr. PAIEWONSKY. Yes, sir.
Senator BURDICK, What was the value of the stock that you acquired in Schenley's? Your personal interest, first.
Mr. PAIEWONSKY. My personal interest might amount to approximately about 12,000 shares, between 10 and 12 thousand shares.
Senator BURDICK. What is it worth, a share? Mr. PAIEWONSKY. It is an average of about $26 or $27 on the exchange today. It fluctuates between $26 and $27 a share.
Senator BURDICK. And your brother will receive stock?
Senator BURDICK. And does Schenley's do business in the Virgin Islands?
Mr. PAIEWONSKY. I think Schenley's sells its products, their whiskies and other products, and pharmaceuticals, I presume, in the islands. But I mean it is on the same basis that any other distillery
in the United States or in the world sell their products to the liquor stores or the drugstores and so forth.
Senator ALLOTT. Then, under the testimony you have just given, your interest in Schenley Distilleries would be over a quarter of a million dollars.
The CHAIRMAN. About $300,000. Mr. PAIEWONSKY. Yes, sir.
To avoid any questions, I shall place these shares in trust with an irrevocable instruction to the trustee to dispose of the shares as promptly as possible, and in any event within a year, and to either sell them, or exchange them for shares in one of the large mutual funds or investment companies, at such time and for such consideration as the trustee shall determine in its sole discretion.
The CHAIRMAN. Your statement there is that even though there might be temporarily a slight question of argument about conflict of interest, it would be terminated as soon as you got into a position where you could take capital gains on it and dispose of it, which would be not less than 6 months and not over a year?
Mr. PAIEWONSKY. Yes, sir.
On this delicate matter we must, I realize, consider both substance and appearances.
Personal confidence in Government officials is a necessary part of confidence in democratic government.
I can assure you that I am aware of this, that it is for that reason that I have made complete disclosure of my Virgin Islands holdings, and that if I am confirmed, I will be guided in my administration by a desire to be absolutely strict on this point. I am ready to bear any incidental sacrifice. It is a privilege to be asked to render service in high office, and I want to live up to the highest standards of the office.
I have a listing of the holdings.
HOLDINGS OF RAPHAEL PAIEWONSKY IN THE VIRGIN ISLANDS
HOLDINGS TO BE DISPOSED OF 1. A. H. Riise Chemical and Distillers Corp., Christiansted, St. Croix, V.I. This corporation is engaged in the manufacturing and marketing of Virgin Islands rum. I own 45 percent of its capital stock. The balance is also familyowned except for a very small fraction.
2. Consolidated Distillers, Ltd., St. Croix, V.I. Engaged in the sale of bulk rum. I own 24 percent of its capital stock. My brother also owns 24 percent. Another group owns 48 percent. The lawyers for each group own the balance.
3. I own 7 percent of West Indies Investment Corp., which owns a total of approximately 2,300 acres of undeveloped land in St. Thomas and St. Croix. My brother owns 2 to 3 percent. There are no other family holdings.
FAMILY MANAGED ENTERPRISES Retail
A. H. Riise, Inc., St. Thomas, V.I. This corporation operates three retail businesses: a liquor store, a stationery store, and a gift shop. It also owns a number of commercial buildings in St. Thomas, which are occupied either by the corporation or in some cases are rented to the firms that operate retail businesses. I own 8342 percent of its capital stock. My brother owns another one-third, and my parents own the remaining one-third.
(a) I own 25 percent of the stock of No. 1, Queens Quarter, Inc., St. Thomas, which owns a single building leased to Chase Manhattan Bank. My brother owns 25 percent, and my parents own the balance.
(b) I own an undivided half interest in approximately 120 acres of land in St. Thomas (Hassell Island).
(c) We own the property that is the site of our homes. Theater
(a) Centre Theatre, Inc., St. Thomas, V.I. Owns and operates a movie theater. I own 2212 percent of its capital stock. The rest of the stock is also family owned.
(b) Apollo Theatre, Inc., St. Thomas, V.I. Operates a movie theater. I own 16 percent of capital stock. The rest is also family owned except for a small outside interest.
FAMILY HOLDING AS MINORITY INTEREST Caribe Vintners, Inc., St. Thomas, V.I. Engaged in wholesale liquor business in Virgin Islands. I own 10 percent of capital stock. My brother owns 10 percent. The balance is owned by outsiders who control the corporation.
The CHAIRMAN. I would like to put Governor de Castro on the stand, because he wants to get back to the Virgin Islands this afternoon.
Senator ALLOTT. May I ask just one question, Mr. Chairman? The CHAIRMAN. Surely.
Senator ALLOTT. With respect to the holdings which you have discussed this morning, the list which you have attached, I want to ask you this general question: Is there any person, partnership, or corporation, holding for you, no matter how they hold it, any property, tangible or intangible, with an expressed or implied agreement or understanding that it will be reconveyed to you or resold to you at a later time? Mr. PAIEWONSKY. No, sir.
The CHAIRMAN. We will excuse you, then. You may stay right there, if you wish.
Thé CHAIRMAN. Governor de Castro, first of all, when were you Governor?
STATEMENT OF HON. MORRIS DE CASTRO, FORMER GOVERNOR OF
THE VIRGIN ISLANDS Mr. DE CASTRO. From 1950 to 1954. That is included in my statement. I have a very short statement.
I appreciate your hearing me now, sir.
I have a son in Boston in the Army, and I am trying to see him late this afternoon before returning to the Islands. May I go ahead, sir?
The CHAIRMAN. Yes. If you do not cover it in your statement, tell us a little bit about your position and what it is.
Mr. DE CASTRO. Mr. Chairman and members of the committee, my name is Morris F. de Castro. I am a native and a resident of the Virgin Islands.
I was the first Virgin Islander to be appointed Governor of the Islands. I served as Governor from 1950 to 1954.
All told, I have been in the Government service in the Virgin Islands for practically my entire lifetime, for 38 years, in various capacities. I served for 10 years as head of the Department of Finance of the Islands. That was from 1934 to 1944.
I served for 4 years as government secretary of the Islands, and for 4 years as Governor, from 1950 to 1954.
In 1954, I left the government of the Islands. I was the last Democratic Governor.
I then joined the West Indies Bank & Trust Co., as cashier, and ultimately became president of the West Indies Bank & Trust before it was sold to Chase Manhattan Bank
In 1959 I was invited to return to the government by Gov. John D. Merwin as his director of the budget and I am now serving as director of the budget of the Virgin Islands Government.
Mr. Chairman and gentlemen, my family and I, as did our forebears for a generation, are proud to call the Virgin Islands our home. It is to our interests, therefore, that the islands should continue to make substantial improvements physically, economically, and socially. It. is to our interests that the islands should become self-supporting. I may say that they are well on their way in achieving that goal. I am here, gentlemen, to support the President's nomination of Mr. Ralph Paiewonsky to be our Governor. The people of the Virgin Islands in general are proud and pleased that the President at this time of world stress and strain has seen fit to nominate another Virgin Islander to be our new Governor.
The United States is thus demonstrating to the world that the United States stands behind its policy by deeds as well as by words, the policy of self-determination for its territorial people...
Just as an aside, may I say that the Virgin Islands have been fortunate to have as their Governor during the past 212 years another Virgin Islander, Gov. John D. Merwin, who has proved to be a most effective administrator and able executive. I have known Mr. Paiewonsky all my life. I have lived all my life in the islands and in the government service. I need hardly say, because it has already been well covered, that Mr. Paiewonsky comes from a family prominent in the business as well as in the social life of the communities of the islands.
The Paiewonsky families over the years have made substantial contributions to the development of the economy of the islands. In making these contributions the Paiewonsky families have not forgotten the underprivileged classes in the community. Actually, I can say without fear of contradiction that they have friends in the Virgin Islands in all walks of life. Mr. Paiewonsky himself is an able and dynamic businessman and community leader. He was many years ago a member of the legislature for many years.
He has participated in the planning of many public improvements of a substantial nature. He commands the respect and the esteem, as well as the confidence, of a great majority of the island people. When Mr. Paiewonsky speaks on island matters, as he does frequently, he speaks with knowledge; he speaks with understanding and knowledge and an understanding born of long experience and of deep thought and study. He is thoroughly and completely acquainted by intimate day-to-day association with all the problems