If it were possible to do these things, then again it is just plain common sense to have these boards supervise the letting of contracts and all current operations to detect waste and inefficiency. Why lock the barn door after the horse is stolen? Why hold post mortems on the taxpayers' money after it is gone?

Manufacturers whose peacetime products are purchased by the War Department are particularly embittered over the fact that if they bid low, and receive the award, they may have to give up their domestic and foreign peacetime business to competitors who refuse to take war work knowing the advantage to be gained by taking over the other contractor's business. This preying on war contractors' peacetime business is going on right now. Why, then, should the patriotic low bidder have this additional penalty of renegotiation which cuts his profits while his competitors are taking over his business without any threat of negotiation?

If the act were just and honest, it should be possible to pass it without plots or unjust accusations. It was called an un-American act by its first administrator, and that was before the true purpose of holding a club over contractors was disclosed.

I have a letter here which I want to submit, which shows the rise of a new form of percenter. This letter comes from a fellow who said he was on the Renegotiation Board. He now offers his services to any and all who are threatened with renegotiation. Would you like to have me read it, or will I just submit it?

The CHAIRMAN. Either way.

Colonel ROCKWELL. He says:

DEAR MR. ROCKWELL

this is, apparently, a circular letter

Under the impression that your company's defense contracts are rapidly expanding, and that improving continuity and general coordination is resulting in 'satisfactory" profits accruing-I would expect the subject of renegotiations to be of growing importance to your company as well as to the Government.

You will note he has quotations around "satisfactory" for reasons that I do not know.

You may know, following my resignation as Air Force renegotiator-I had also been asked to join the Ordnance Board-I had the pleasure of serving manufacturers in the capacity indicated by this letterhead

and the letterhead is, "Renegotiation Consultant”—

during the latter years of the recent war. Incredible as it may seem, every case in which I participated-including those that had been previously impassed-was settled with a satisfactory bilateral agreement. With the approval of the Renegotiation Board and the United States Securities and Exchange Commission-with whom I am registered as an investment consultant-I have resumed my service. I feel certain that anyone with wartime experience in renegotiations appreciates how serious those "determinations" can be. Yes, a few hundred thousand dollars or more-one way or the other-frequently results from overlooking factors that renegotiators would view favorably-or, as in many cases, subjects that appear at least debatable to the businessman and/or preparation attorney (who have not "sat in the renegotiator's chair") are argued to the point of bitter feelings and— unsatisfactory-"bilateral" (virtually "unilateral") agreement or an impasse

results.

It has occurred to me that you and/or one of your associates may be in this city discussing financial affairs in the near future. In that case, perhaps you could conveniently arrange to join me for an informal luncheon conference at the Bankers Club.

78955-51

Senator BYRD. Did he say what he was going to charge?

Colonel ROCKWELL. No, sir. That would depend on the great savings he could make. He seems to have connections.

Senator CONNALLY. You would not renegotiate his contract?
Colonel ROCKWELL. I hope you will.

When I appeared to testify before the House Ways and Means Committee, and later the Senate committee, in 1943, I was asked about threats which had been made against my interests; and several Congressmen told of threats that were made to their constituents. There were two threats which I thought too silly to report, although you will find that I made reference to one, as reported on page 1020 of the Senate Finance Committee hearings on H. R. 3687.

The one not reported was a telephone conversation with a man who refused to give his name. He said I might have a bad accident if I testified again. When I asked him what kind of accident, he said, "You might fall out of a Washington hotel window," and then hung up.

In the other case, I was given a friendly warning by members of the Renegotiation Committee of the Maritime Commission, before I testified, that a plan had been prepared under which any individual whose testimony adversely affected the passing of the act would be blasted by a high Government official who would appear at the last open committee hearing, of this Senate Finance Committee, thus making sure that his victim could not appear face-to-face to answer unjust or false accusations.

I did not consider it probable that a high official would resort to such unfair tactics and take such undue advantage of a private citizen. I did not think a high official would resort to slander, merely because he had immunity from slander suits; but if he did, I felt certain that Congress would give the victim an opportunity to be heard and to be examined. I had no idea then of the method used by bureaucrats, under which they give out special and sometimes secret reports to sensation-seeking newspapers or the smear reports, in exchange for which these smear artists praise the work of the cooperating bureaucrats and blast anyone who opposes the bureaucrats.

Senator CONNALLY. Did he carry out this terrible threat?

Colonel ROCKWELL. I will prove that to you. Senators of both parties know what I am talking about, as Senator George and I were both blasted in a smear column of December 21, 1943. I am sure he knows. I happened to be in his office when he was telling the people over in the Army that they had done him wrong, but they did much better on me.

When I testified before this committee on December 2, 1943, Senator George, who is acknowledged generally to be the greatest expert on taxes, said to me (p. 409):

Well, Colonel, the truth is that on the economic front the one single congressional act which conveys absolute and arbitrary power to anybody is the Renegotiation Act. There are no standards in it. There is no remedy under it. Those who contract with the Government are simply bound hand and foot. They must do what they are told or else.

He also said:

** * without standards or without real restriction or restraint, they inevitably would make mistakes and create discriminatory favors on one side, and harsh discriminations on the other side.

And, later:

I agree with you fully on this Renegotiation Act. If I had it in my power, I

would throw it out entirely and rely absolutely on the taxing laws.

Senator Vandenberg (p. 408) said:

It seems to me on the face of the statement as you make it, the position of the Government is totally indefensible.

With such recognition of my testimony, the high official appeared on December 6, as threatened, at the last open hearing. He made virtually no attempt to answer the objections of myself or Senator George. He proceeded to give you a series of baseless statements and then asked his aide to add more smears. He not only made the statements, but he carefully refrained from telling the truth about a conversation in which I said my company was willing to make a contract the one he discussed-without any profit, if we were relieved from the liability for subcontractors' errors, which we might not be able to detect before delivery.

We were also subject to renegotiation; and the contract he was talking about had a redetermination clause in it, so they could redetermine the price when it was partially completed.

Where I had pointed out that the excess profits tax left some incentive for savings, while the Renegotiation Act permitted a higher profit for any undetected waste, due to ignorance or intent, the high official said (p. 1004):

* * * the higher you raise the figure on the excess profits taxes, the more wasteful contractors are going to be.

And went on to claim contractors would double everybody's salary, "because the Government is going to get it, anyway.'

As I said before, under the excess profits tax, the obvious truth is that the highest rate of 85.5 percent left the contractor 14.5 cents out of every dollar he could save from salaries or any other expense; while, under the Renegotiation Act, if any allowable cost was not raised to that limit, the contractor lost 3 percent to 20 percent when the flat rate of profit was announced and before taxes were decided. It is typical of the bureaucrats that they ignored the experienced and expert advice of Senator George and many leading industrialists, and the act was passed on the basis, in part, of unfounded charges by a high official who had demonstrated that he could not read a financial statement or work out simple financial problems, and was backing the act merely to increase his own dictatorial power and set up a situation under which no contractor could oppose his ruthless tactics without becoming a victim of his power to punish. It is not surprising that the Garsson case developed under this scheme.

The high official charged, on December 6, 1943, that terms demanded by the Timken-Detroit Axle Co. were "utterly unreasonable and that the Government should never yield to them"; but, 5 days later, on December 11, 1943, orders were issued from his office to proceed with the contract without the change of a single word. Your committee may want to ask that high official if this was admission that his testimony to you was false or that he was so cowardly as to accede to "utterly unreasonable demands."

The correct answer is that there were no unreasonable demands, and that the most competent procurement officers in the Army had completed the contract negotiations and approved them many months

before. The high official was so ruthless and vengeful as to forget that, in his attempt to smear the Timken-Detroit Axle Co., he was smearing honest Army officers. There was never a moment of delay on Timken's part because of the high official's sordid and savage attacks, but later this official proceeded to send out false reports that Timken management was on strike against the war effort and, therefore, the contract would be canceled.

These false statements, which were sent out on radio programs and War Department press releases, obviously made it difficult for us to interest subcontractors and, of course, really hurt the war effort.

He had told you that this contract had to be filled and we were the only ones to fill it, which was not exactly so. After that, he deliberately set out to sabotage our efforts.

In 1943, after 6 months' study of the Timken-Detroit Axle Co.'s figures, and numerous conferences, the false statement was issued, as to Timken's dividends and salaries.

He said we had raised our dividends-we had actually lowered them and that we had increased the officers' and executives' salaries 500 percent. And that letter is in the record. He was only 475 percent wrong about the officers' and executives' salaries. The 25percent increase was due to the great increase in business and a contract with the officers which had been approved by the stockholders several years before. Incidentally, the Treasury Department just asked us to drop, the contract with our executives, which we did, and they received no extra compensation during the war, although they were entitled to it under the stockholders' agreement. That statement could have been merely a mistake, but it is very obvious that he was wrong one way or the other.

Senator CONNALLY. I do not see the profit of devoting this whole meeting here to this high Government official. We do not know who he was, or anything of the kind, It seems to me that the witness ought to go to the question of the law, the bill, the theory of this thing, instead of spending all of this time on this.

Colonel ROCKWELL. If you will pardon me, the theory of the thing is that you will not have many people coming in here testifying, when they are afraid of this kind of retaliation.

Senator CONNALLY. I do not know who this terrible man is, but ever since I have been in here, you have been talking about this high official all of the time.

Colonel ROCKWELL. I have given you a lot of reasons here.

Senator CONNALLY. It is just a bitter attack, and that is all there is to it. You had a row with him, and you want to vent your spleen on him. We do not want to hear it; that is, I do not.

Go to the question involved in this legislation. That is what we want to know.

Colonel ROCKWELL. I will go to the question. I say that Senator George said that the thing is absolutely unnecessary and that it would ruin the men who had it, because it gave too much power to them. I am trying to prove that is the case.

Do you want to hear any more?

The CHAIRMAN. Yes.

Senator BUTLER. Yes.

Senator MARTIN. Certainly.

Colonel ROCKWELL. I received, right after I testified, all kinds of blasts in the public press. One of them was a Washington paper which came out with a front-page article giving a completely untruthful story.

Senator MARTIN. I would like, if the witness would permit, to make this comment: I think this committee ought to appreciate the presence of a witness like this. This might deteriorate his istuation to a great extent. I think it is information we ought to have. I think the witness is very courageous to come here and testify as he is now testifying. I think it is information that this committee ought to have. This is information that the Congress ought to have. It is information that the people of the United States ought to possess.

The CHAIRMAN. Yes; all right, Senator.

Colonel ROCKWELL. As I say, one of these Washington papers published an utterly false story.

Senator CONNALLY. Is this higher official still in the Government? Colonel ROCKWELL. No; he is not. He is doing very well outside. Senator CONNALLY. He will not have anything to do with this bill then?

Colonel ROCKWELL. I have no hesitancy in naming him.

Senator CONNALLY. I did not ask you to name him. I say, if he is out of the Government, he will not administer this bill that is before us?

Colonel ROCKWELL. I think, Senator, that Senator George's criti-cism still stands. There is too much power to give any man.

Senator CONNALLY. Is this the same bill he was operating? Colonel ROCKWELL. This, apparently, will be the same kind of a bill.

Senator CONNALLY. All right.

Colonel ROCKWELL. I say, one of the Washington papers published this false statement. I filed a suit for a million dollars against them, and in a few days they came out with a front-page heavy-type article telling the truth. Then my attorneys told me that all I could hope, in view of their retraction, was a nominal statement. But there is a paper in New York, PM of which I am sure you have heard, and they published a blast against me and called Timken Co. a company which had gone on strike against the war effort. The reporter who wrote that called me up sometime later and said that he would like to know if I had any answer. I told him one thing I would like to have him say is that when he said he could not get in touch with me before he published it, that that was a downright lie. Then I also pointed out that he had repeated this statement about Timken dividends being raised, the salaries being raised, and asked him where he got the information. He said he got it out of the Under Secretary of War's office.

The Under Secretary of War's office told me they talked to him. His name was Nathan Robertson. He wrote the article.

I got the chance to answer that. I gave them a two-page answer which was published in PM after a little pressure, but these reports kept coming out-that we were going to have this contract canceled. So I went to Senator Ferguson, our plant being in Detroit, and I told him we were having real trouble to get subcontractors on this job because of these false reports. The Senator said, "If you can find out where they are issued, you get me one, and I will use it."