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NOMINATION FOR GOVERNOR OF THE VIRGIN

ISLANDS

Fong Umat Makewonsky to popularly

FRIDAY, MARCH 10, 1961

U.S. SENATE,
COMMITTEE ON INTERIOR AND INSULAR AFFAIRS,

Washington, D.C. The committee met, pursuant to call, at 10 a.m., in room 3110, New Senate Office Building, Hon. Clinton P. Anderson (chairman) presiding.

Present: Senators Clinton P. Anderson (New Mexico); Henry M. Jackson (Washington); John A. Carroll (Colorado); Ernest Gruening (Alaska); Frank E. Moss (Utah); Oren E. Long (Hawaii); Quentin N. Burdick (North Dakota); J. J. Hickey (Wyoming); Henry Dworshak (Idaho); Gordon Allott (Colorado); Firam L. Fong (Hawaii); and Jack Miller (Iowa)... . The CHAIRMAN. This is an open public hearing on the nomination of Raphael M. Paiewonsky to be Governor of the Virgin Islands. Mr. Paiewonsky's first name is popularly abbreviated to "Ralph."

If confirmed, Mr. Paiewonsky will succeed Hon. John Merwin, who was appointed by President Eisenhower in 1958 as Governor of the Virgin Islands. I am happy to see that Mr. Paiewonsky, like Mr. Merwin, is a native of the islands. ?

The Department of the Interior, as is customary in cases such as these, has submitted a biographical sketch of Mr. Paiewonsky. This biographical material is before each member of the committee, but so that it may be a part of the permanent record, I will direct that its text be inserted in the hearing record at this point. (The biographical sketch referred to follows:)

BIOGRAPHICAL SKETCH OF RALPH PAIEWONSKY
Birthplace: St. Thomas, U.S. Virgin Islands.
Date of birth: November 9, 1907.
Religion: Hebrew.
Marital status : Married.
Children: Two.
Education :

Attended Catholic School, St. Thomas, V.I., 1913–20 (school closed).
Worked at Navy Supply Office, St. Thomas, V.I., 1920–23.
Graduated Alexander Hamilton High School, Brooklyn, N.Y., 1927.

Graduated New York University, B.S. degree in science chemistry, 1930. Business career :

1930: Entered family business in St. Thomas. Principal duties: manager of St. Thomas Apothecary Hall (drugstore).

1932: Engaged in extensive research with sea water fermentation from which rum distillation process developed, which is present foundation of the rum industry in the Virgin Islands.

1933: Appointed manager of A. H. Riise Distilling Co. Elected president 1949 and continued in that capacity to date.

1948: Elected president Appollo Theater, Inc., and Center Theater, Inc., builders, owners, and operators of St. Thomas' largest theater. Serving in that capacity to date.

1949: Elected president of A. H. Riise, Inc., a family-owned corporation whose activities include A. H. Riise Liquor Store, A. H. Riise Gift Shop, stationery store, drugstore, restaurant, bakery, and extensive real estate. All located in St. Thomas.

1954: Together with other Virgin Island residents, organized West Indies Bank & Trust Co., which opened for business on December 1, 1954, in St. Thomas and expanded into four branches in all three Virgin Islands. Served as member of board of directors and chairman of executive committee. Also served as vice president until bank was acquired by Chase Manhattan Bank in 1959.

1954: Organized with others West Indies Insurance Co. Member of its board of directors and president from 1954 to 1958. Sold to a Florida concern.

1954: Organized with others West Indies Investment Corp. Served as its president 1954 to 1958. Member of board of directors 1954 to 1960.

Important real estate development in St. Croix and St. Thomas, V.I. Political:

1936 : Became active in local politics, member of People's Party on local level and elected to the Municipal Council of St. Thomas and St. John, V.I. Also organized Democratic Club for participation in national politics.

1936 to 1946: Served five terms as a member of the St. Thomas and St. John Municipal Council, an elected office equivalent to Virgin Islands Legislature. Meinber of municipal committee and later its chairman. Chairman of municipal council and chairman of Legislative Assembly of the Virgin Islands.

1940, 1944, 1948, 1952, 1956, and 1960: Attended Democratic National Convention as a delegate from the Virgin Islands.

1940 to 1960: Served as Democratic national committeeman for the Virgin Islands.

1939: Elected as a member of a delegation to present needs of the Virgin Islands to Congress. Also member of several subsequent delegations to Congress. Testified before many congressional committees on behalf of Virgin Islands.

1959 to 1960: Member of special tax committee for chamber of commerce and Virgin Islands Legislature to present Virgin Islands case re tax legislation before Congress.

1952 to 1960: Member of Virgin Islands' Senate's Organic Act Advisory Committee. Also member of Citizens' Advisory Committee for Home Rule.

1958 to 1960: Appointed adviser to legislature to Caribbean Commission by Governor.

1960: Appointed to Governor's Advisory Committee on Tourism and Trade. Was elected by its members as general chairman.

1960: Elected president of Virgin Islands Board of Trade.

1958 and 1960: Chairman of Jackson-Jefferson Day dinners for fund raising for Virgin Islands.

1960: Honorary member inaugural rule committee. Memberships: St. Thomas Democratic Club; Democratic Capital Club (charter member), Washington D.C. ; Order of Free and Accepted Masons (32d degree) ; Order of the Shriners; and 750 Club.

The CHAIRMAN. As will be seen from his biography, Mr. Paiewonsky has held high elective positions. He served in the St. Thomas Legislative Council for several years. He has also been a leader in civic affairs, and is a successful businessman in the islands.

The committee has received a large number of communications regarding Mr. Paiewonsky's nomination as Governor, including several petitions signed by many Virgin Islanders. These petitions and the great proportion of the communications are overwhelmingly in support of confirmation. Among the endorsements are those of the legislature, the chambers of commerce, and various citizens' groups. How

ever, the committee has also received some communications opposing confirmation, and one Virgin Islands businessman has come here to appear personally in opposition.

I will direct that these communications, both for and against confirmation, be incorporated by reference in these hearings. They are a part of the official record. I will also direct that various editorials appearing in Virgin Islands newspapers be held in the committee files and made a part of these hearings by reference,

We have a number of witnesses to hear, including a representative of the Secretary of the Interior, the Honorable John Carver, Assistant Secretary of the Interior, the president of the Virgin Islands Legislature, Hon. Walter Hodge, and a former Governor of the Virgin Islands, Hon. Morris de Castro. Our first witness will be Mr. Carver. Mr. Secretary, we are happy to have you with us again.

I may say now, before we start, that it may be, during the course of this hearing, that members of the committee will desire to have an executive session with Mr. Paiewonsky because of material that has been circulated and printed about him. If so, that will be done. Such procedure is not usual, but it may be done in this instance. Go ahead, Mr. Carver.

Senator DWORSHAK. Mr. Chairman, are you not going to have Mr. Paiewonsky appear?

The CHAIRMAN. Oh, yes. He is here and is swinging his bat ready to go to the plate. STATEMENT OF HON. JOHN A. CARVER, ASSISTANT SECRETARY

OF THE INTERIOR Mr. CARVER. Mr. Chairinan, members of the committee, on behalf of the Secretary of the Interior, and as the Assistant Secretary who has supervision over the Office of Territories, it is my pleasure this morning to present to the committee the Honorable Raphael Paiewonsky of the Virgin Islands, who has been nominated by President Kennedy to be Governor of the Virgin Islands.

The biographical sketch which is before each member of the committee details his long association in the Virgin Islands and his important public service there.

Without any further ado, it is my great pleasure to introduce to the committee the Honorable Ralph Paiewonsky.

The CHAIRMAN. Mr. Paiewonsky, I am happy to have you here as President Kennedy's nominee, and have you appear and answer questions by members of the committee.

I assume you have some sort of a statement you would like to make. But at the very outset, I would want to say that there have been people who have suggested that there is a conflict of interest in your ownership of some rum businesses and other enterprises and properties in the Virgin Islands, and I think the first thing you might do, if you desire, is to straighten out the conflict-of-interest question, if you wish to do so.

If you desire to go ahead and make a general statement prior to doing that, you may do so. You may take your choice. But I think this is a crucial question, and one that we would like to have you answer as quickly as you can.

STATEMENT OF RAPHAEL M. PAIEWONSKY Mr. PAIEWONSKY. Thank you very much, Mr. Chairman.

I anticipated this question, since the issue of conflict of interest has arisen. I know there have been several newspaper articles and communications to your committee. I have prepared a statement which, with your indulgence, I would like to read, now, which covers this point and maybe several of the other points.

The CHAIRMAN. I hope the members of the committee, if they have questions, will feel perfectly free to interrupt at any point and ask questions, because it is probably easier to do it as he reads it than it is to go back to it at a later time.

Mr. PAIEWONSKY. Having in mind the interest of your committee in possible conflict-of-interest problems, I have prepared a list of my business holdings in the Virgin Islands.

To avoid any possible misunderstanding, let me make it clear that this also shows the holdings of my family in the Virgin Islands—my parents and my brother.

This list shows two corporations that do business with the Virgin Islands Corporation—VICORP. VICORP operates under an act of Congress passed in 1949, which was extended in 1959 for another 10-year period (48 U.S.C. 1407).

The A. H. Riise Chemical & Distillers Corp. buys molasses from VICORP.

These purchases are governed by a long-term contract for the duration of VICORP (1969), with fixed quantities and a definite formula for determining price.

But this situation will not present any conflict-of-interest problem for the reason that my family and I are disposing of all our stock in this corporation to an outside interest.

The CHAIRMAN. Is that an outright sale, or is it some trustee agreement ?

Mr. PAIEWONSKY. It is an outright sale in exchange for stock of this large corporation, and the arrangement is covered in my statement.

My portion of the stock will be placed into a trust agreement, either for sale within a year, or for exchange for mutual shares in a very large investment trust.

The CHAIRMAN. But as far as the transaction on your stockownership in the distilling company is concerned, your shares will be sold completely? Mr. PAIEWONSKY. Yes, sir.

We will also dispose of all of our stock in Consolidated Distillers, Ltd., either by sale to the purchaser buying the stock in Riise Chemical & Distillers or by sale to the other stockholders in Consolidated, or by liquidation.

* The West Indies Investment Corp. is not a family company. I own 7 percent of the stock and my brother owns about 2 or 3 percent of the stock. We are neither officers nor directors, although I formerly acted as an officer, without salary, primarily as a means of signing checks in the absence of the active officer.

Senator BURDICK. Mr. Chairman, may I ask a question at this point?

at

The CHAIRMAN. Senator Burdick.

Senator BURDICK. The West Indies Investment Corp. has an authorized capital of $1 million?

Mr. PAIEWONSKY. Approximately, yes.

Senator BURDICK. And in 1958 it had a tangible net worth of $896,000. And your interest in it is 7 percent?

Mr. PAIEWONSKY. Seven percent.
Senator BURDICK. Have you disposed of that stock?
Mr. PAIEWONSKY. I have made arrangements for doing so.
Senator BURDICK. To a third person?
Mr. PAIEWONSKY. To an outsider.

Senator BURDICK. You will have no further interest in the West
Indies Investment Corp.?
Mr. PAIEWONSKY. That is correct, sir.
Senator BURDICK. Thank you.

Senator MILLER. Could I go back to the paragraph immediately preceding No.3?

As I understand, you are selling this stock by an outside interest to a large corporation ?

Mr. PAIEWONSKY. Yes, the distillery; to one of the large distilleries. And the percentage of shares that I will receive in return may be 2 percent or 3 percent or a half of 1 percent of the large company.

The CHAIRMAN. You say it will be 2 percent, 3 percent, or a half of 1 percent. That is too much. Will it be 1 percent, or less than 1?

Mr. PAIEWONSKY. I am coming to the part here; on page 5 : Again, as a result of the disposition of our shares in A. H. Riise Chemicals & Distillers, my brother and I each will receive shares amounting to less than one-half of 1 percent of the stock of a large national distiller.

Senator ALLOTT. Who is the large national distiller ?
Mr. PAIEWONSKY. The Schenley Corp.

Senator MILLER. When you refer to “his corporation,” then, you are referring to Riise Chemical!

Mr. PAIEWONSKY. Riise Chemical & Distillers Corp.
Senator MILLER. Do you have any interest in VICORP?

Mr. PAIEWONSKY. It is a U.S. Government corporation, sir. As a citizen, and one doing some business with it, I am interested in it, in its operation.

The CHAIRMAN. It is wholly owned by the Government?
Mr. PAIEWONSKY. It is wholly owned by the Government.

The CHAIRMAN. It is a corporation originally established for the purpose of reviving the economy down there, sort of an RFC arrangement that was set up to operate in the islands under Federal charter.

Senator MILLER. Who are the officers of VICORP? Mr. PAIEWONSKY. It is provided by law that a Board of Directors consisting of the Secretary of the Interior, the Secretary of Agriculture, the Small Business Administrator, the Governor of the Virgin Islands, and three directors selected or appointed for a period of 5 years at alternate periods.

Senator MILLER. You say the Governor of the Virgin Islands is also a member?

Mr. PAIEWONSKY. He is one of seven members of the Board. This is provided by law, under congressional enactment.

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