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Mr. CHERNE. I remember the program vividly.
The CHAIRMAN. I think I have seen you perform on it; I may have performed with you on it.
Mr. CHERNE. You did perform or I did have the honor of participating with you on at least one occasion. I must say there was one occasion of a "Town Meeting of the Air" program in which I participated that has a small relationship to my request to have this opportunity to testify today.
In February of 1947, I debated a newly elected Senator from Wisconsin, Joseph McCarthy, on "Town Meeting of the Air.” It was his first national debate. I did so because it had been suggested to me by a Deputy Director of the FBI that the position that Joseph McCarthy had taken in that debate was an unwise one, and that the Federal Bureau of Investigation, in fact, opposed it, and that if, in fact, I genuinely agreed with the position which happened to be theirs, which I did
The CHAIRMAN. May I say that at that time Senator McCarthy was a member of this committee. He was a member of the Housing Subcommittee, and I will say this for him: He was a good housing member. He supported housing.
But let me ask you this question. You understand Mr. Casey is before us as an appointee to the Securities and Exchange Commission. It is presumed he will take the position of Chairman.
Now, do you have any familiarity with the operations of the Securities and Exchange Commission? Mr. CHERNE. So meager that it would be worthless to the committee.
The CHAIRMAN. The point you make though is that he is capable of doing this job; is that right?
Mr. CHERNE. Í have no more than modest knowledge of the functions of the SEC. If it were essential that I acquire that knowledge, given a reasonable interval of time, I think I would have no difficulty acquiring that knowledge.
Now, Bill Casey has that ability, all of us believe we have honed fairly well precisely that quality of mind in Bill Casey.
The CHAIRMAN. Any questions?
Senator PROXMIRE. I would like to say if I could, Mr. Chairman, Mr. Cherne came to my office and I admired him for many, many years; you are a great American and a wonderful person and certainly a great friend of Mr. Casey's. You are a fine character witness.
But you talk about how Mr. Casey has been a competitor of yours. I can't think of a better way of getting rid of a competitor than to see that he goes up to SEC. I say that facetiously, of course; I know you love this friend of yours and you are here to give him a good sendoff.
Mr. CHERNE. Let me say in response to that that if, in fact, you would not only elevate Bill Casey to the Securities and Exchange Commission but embark on the books he has written, then there is no doubt at all you would be rendering a decisive service to the Research Institute of America
The CHAIRMAN. Any further questions? Thank you very much, Mr. Cherne; we appreciate your opinion. Mr. CASEY. I think Professor Katz, of the Harvard Law School has a few words to say.
The CHAIRMAN. Very well.
STATEMENT OF MILTON KATZ, PROFESSOR, HARVARD LAW
SCHOOL, CAMBRIDGE, MASS.
Professor Katz. My name is Milton Katz. I am the Henry Ellis Gibson professor of law at the Harvard Law School. If it should be of any interest to the committee I have the “poop sheet” which the press office at Harvard University uses about me and I should be glad to leave it with the reporter. It includes some 15 years of Government service, Senator Sparkman, at home and abroad; and that includes 3 years of service with the Securities and Exchange Commission in its early formative years.
I have no knowledge of any of the matters we The CHAIRMAN. Did you say you had 3 years of experience ? Professor Katz. I served with the SEC for 3 years in its early, formative vears as executive assistant to the Chairman.
The CHAIRMAN. Who was the Chairman?
Professor Katz. James M. Landis and Joseph Kennedy before him. This was in the early formative days before it became the big operation that it is now.
The CHAIRMAN. That was in the days that it really had some work to do to get going, wasn't it?
Professor Katz. That was our impression at the time, yes, sir. My statement is very brief. I have known William J. Casey for 27 years. We first met during World War II as naval officers serving together in the Office of Strategic Services in the West European Theater. Since then, although we have remained in different cities, we remained in close touch with one another.
In early 1946, when the Marshall plan was launched in Europe I asked Bill Casey if he could work for us for a few months to help u get started. He shook himself loose from his responsibilities and became an employee of the Marshall plan in Europe. In those 3 months he helped us launch the enterprise.
I simply want to say about him on the basis of this long and varied experience, I am very happy to testify wholeheartedly to his complete integrity, his sense of citizenship, his devotion to the public welfare, warmth and generosity of spirit, and his intelligence and practicability.
That is the end of my statement.
The CHAIRMAN. You think he would perform well as Chairman of the Securities and Exchange Commission.
Professor Katz. I know he will if you appoint him.
BIOGRAPHICAL SKETCH OF MILTON KATZ
Program in Technology and Society, Harvard University, and a Fellow of Dunster House.
He received his A.B. from Harvard College in 1927. A year later, he entered Harvard Law School, receiving his LL.B. in 1931.
In the year between college and law school (1927–28), he crossed Central Africa on an anthropological expedition for the Peabody Museum of Harvard University
In 1931-32, he served as Law Clerk to U.S. Circuit Judge Julian W. Mack. From 1935 to 1938, he was Executive Assistant to the Chairman and Special Counsel of the Securities and Exchange Commission. The following year he was Special Assistant to the U.S. Attorney General.
From 1941 to 1943, Mr. Katz was Solicitor of the War Production Board, and during part of that time (1942-43), he was also U.S. Executive Officer of the Combined Production and Resources Board (U.S.A.-United Kingdom-Canada). In 1943, he was appointed to the Office of Strategic Services in Washington. Shortly thereafter, he was commissioned Lieutenant Commander in the Naval Reserve, assigned to the O.S.S., and he was on active duty in the European and Mediterranean theaters. For this service he was decorated with the Legion of Jerit and Commendation Ribbon.
Following World War II, Mr. Katz was appointed Byrne Professor of Administrative Law at Harvard University.
in 1950-51, he was the U.S. Special Representative in Europe, with the rank of Ambassador Extraordinary and Plenipotentiary. As such, he was chief of the Marshall Plan in Europe. He had served with the Marshall Plan in various posts from its inception in mid-1948.
In 1950-51, concurrently with his Marshall Plan duties, he served also as the Chairman and U.S. Member of the Financial and Economic Committee under YATO; and U.S. Representative to the United Nations Economic Commission for Europe.
From September 1951 to June 1954, Mr. Katz was Associate Director of the Ford Foundation. In 1954, he returned to Harvard to his present post.
He is the Chairman of the Board of Trustees of the Carnegie Endowment for International Peace (Executive Committee) ; and a trustee or director of Brandeis University; Case Western Reserve University; World Peace Foundation Executive Committee); Citizens' Research Foundation; International Legal Center; Interamerican University Foundation; Committee on Campaign Contributions and Expenditures (Executive Committee) and the International Friendship League. He is a member of the Visiting Committee for the Humanities of M.I.T.
He is Chairman of the Committee on Life Sciences and Social Policy of the National Academy of Sciences-National Research Council; a member of the SAS-NRC Panel on Technology Assessment; a Fellow of the American Academy of Arts and Sciences; and a member of the Corporation of the Boston Museum of Science.
He has been President, Cambridge Community Services (1959–61) ; Chairman of the Panel on Foreign Economic Policy of the Rockefeller Brothers Fund Special Project (1956–60); a member of the Herter Committee on Foreign Affairs Personnel (1961-63); Chairman, Committee on Manpower, White House Conference on International Cooperation (1965); and Consultant, Asst. Secy. for Education of HEW (1966).
Books by Mr. Katz include: The Relevance of International Adjudication (1968); The Things That Are Caesar's (1966); The Law of International Transactions and Relations: Cases and Materials (with Kingman Brewster, Jr.) (1960); Government Under Law and the Individual (Editor and Co-author) (1957); and Cases and Materials in Administrative Law (1947). He has also published a variety of articles on law, foreign policy, education and foundations.
Mr. Katz was born in New York City on November 29, 1907. He is married and has three sons. He has been a member of the New York Bar since 1932; the Supreme Court (U.S. Bar since 1936; and the Massachusetts Bar since 1959. He resides at 6 Berkeley Street, Cambridge, Massachusetts 02138.
The CHAIRMAN. Now, Mr. Casey, is there one other?
Mr. Casey. Senator, I would like you to call Harry McCall, who is general counsel at Kalvar, and he dealt specifically with the matters which Senator Stevenson is discussing, and maybe he can answer more specifically than I was able to because I wasn't involved in that part of the transaction.
The CHAIRMAN. Very well. Mr. McCall, we are very glad to have you.
STATEMENT OF HARRY MCCALL, JR., GENERAL COUNSEL, KALVAR
Mr. McCall. I am Harry McCall, Jr. I am an attorney and I practice in New Orleans, La. I am now, and have been from the inception, counsel for Kalvar. I am thoroughly familiar with the entire transaction effecting the acquisition of the stock of Standard Office Systems, Inc.
I understand some question has been raised as to the acquisition of the stock of the principal shareholders of Standard Office Systems, or SOS systems, as it is called—and in particular the fact that no proceedings were had before the California commissioner on corporations.
If the committee is interested, and Senator Stevenson, I understand, is particularly interested, would care to hear I can review that very briefly. What is the committee's pleasure ?
The CHAIRMAN. Would you like to ask questions, Senator? Senator STEVENSON. Maybe it would expedite the matters if Mr. Casey could take the stand, too. I am not as concerned with legal technicalities as I am with Mr. Casey's attitude toward what is right and wrong in corporate management.
The CHAIRMAN. All right, Mr. Casey.
Senator STEVENSON. All right. At the time of the transaction, the Kalvar stock, I am told, was bid at $82, $85 asked; which meant one share of Kalvar worth about $82 was to be swapped for less than three shares of SOS with a $1.48 per share book value.
Now, it is my further understanding that at this time, SOS had no record of profitability. In fact, it recorded a loss of almost $50,000 in 1964.
Now, I am not particularly interested, as I say, in getting into a long argument about legal niceties. I confess to some concern that the California law does not apply to the welfare of the minority stockholders of both SOS and Kalvar in California. I think that is what Mr. Casey suggested, at least he didn't have any concern as a lawyer or director and won't as the Chairman of the SEC so long as adult stockholders, in this case controlling the majority of the stock got together. He wasn't concerned about the removal of those stockholders from California to New Orleans for the apparent purpose of evading the California jurisdiction.
I would like at this point to pose a hypothetical question, Mr. Casey: Assume, if you will, a New York corporation with its principal place of business in New York proposing a public offering of stock to residents of, say, Connecticut, New York, Pensylvania—I don't know what the legalities would be—would you see anything wrong, Mr. Casey, with the officers and lawyers and directors of the offering corporation, this New York corporation in this case, bringing the offerees from those States to New York to transact or consummate their transactions there, and in so doing evading the jurisdiction and registration requirements of the Securities and Exchange Commission ?
Mr. Casey. I would see something wrong if they actively went out and transported out-of-State shareholders into the State for the purpose of evading the interstate commerce requirements under the jurisdiction of the SEC. Nothing like that happened here as I understand it. I don't think that would be effective in avoiding the jurisdiction of the SEC nor should it be.
On the other hand, when the Kalvar Corp., part of the agreement entered into contemplated the acquisition of this company and its employees and the chief executive officers and integrating those officers into their organization, and they confined that offer to the consummation of that transaction, in Louisiana.
As a lawyer advising his clients that this is entirely within their rights, I don't see any problem.
Senator STEVENSON. Well, that was the first part of the question; and as a lawyer who practiced a little blue-sky law, I think I can understand that attitude. But what I was getting at is your possible chairmanship of the SEC.
This goes way beyond what is technically legal or illegal. I am trying to find out if you in your opinion regard it as right or wrong. You indicated so long as it is technically legal, it is all right.
Mr. CASEY. No, I didn't indicate that at all, Senator. I think as Chairman of the SEC I would certainly have a broader public responsibility than that.
All I said is if a corporation decides to require—consummate a business transaction expeditiously and it wants to make an offer which is complying to acceptance in Louisiana, I don't see that the SEC would have any jurisdiction or concern with it. As far as the California Corporations Commission is concerned, they function for the protection of those California citizens who want that protection. The lawyers tell me they have found all kinds of cases that indicate it is entirely proper and legal for a California citizen to go elsewhere to transact business, even though that protection is available. The public authority charged with administering that protection should make it available to the citizens, but the citizens don't have to take it. He doesn't have to do anything else within the law as long as he feels he doesn't need that
That is what I said.
Senator STEVENSON. Well, I am concerned not only with the conparticular kind of protection. tracting parties but the noncontracting minority stockholders.
Mr. CASEY. Well, that is another issue. There was no such requirement here.
Senator STEVENSON. Do you know if in this case there were no minority Kalvar stockholders residing in California ?
Mr. Casey. I understand that what was at issue there was whether the California Corporations commissioner should have a hearing on the fairness of the offer to SOS. Insofar as the fairness of the Kalvar shareholders were concerned, the California Corporations commissioner expressed himself content if the offering circulars were made available to the Kalvar shareholders, so that when they ratified the transaction, acted on it, they would have proper knowledge. This was the information provided at the time. And on this business the lawyers advised the transaction could be handled that way.