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4 S 'A&$aP M 'V ti. - '.S, \ iln ' f : VST r JUL \ -- .;;.v:,:v. .1 v ; St v: v. ' V 1 W . i Standard Steel car Company J. M. HANSEN, President. Hon. William J. Graham, M. C. v General Offices: 'Frick Building, Pittsburgh, Pa. New York Office, 170 Broadway. Chicago Office, Fisher Building. Works: Butler, Pa.; New Castle, Pa.; Hammond, Ind. 642 Munsey Building,\ Washington, D. October 81, 1919.' c: Chairman, Subcommittee No. 5, on Expenditures in War (Ordnance) Department, ' v . w House of Representatives, Washington, D. C. . ' , Sir: ' The Chicago Tribute of October 23, 1919, contains the following statements: \Criminal prosecution of at least a dozen army officers and civilians will be asked y the congressionaVsubcommittee which last night com- - pleted its inquiry into the $27,000,000 munition contract scandal involving the Standard Steel Car Company of Hammond. ' \The announcement was made at the close of the final hearing in the assembly room3 of, the Illinois Trust and Savings Bank by Congress- - - man William J. Graham, chairman of the subcommi f;ee. if in \In making his statement Congressman Graham declared credit for the expose belonged to the Government accountants, mainly L.H.Blakey, stationed at the car plant in Hammond, Ind.; the military intelligence department and the Tribune. ' \CHARGES.GIGANTIC FRAUD.\ . ( \ 'The subcommittee is satisfied that the Government is the victim of a gigantic fraud on this contract,' he said. 'We shalTmake our report to that' effect on Monday or Tuesday, and we shall see that it is read before the house. ' - VThe report will ask that several probably a dozen or more army officers, members and aids of the Chicago district claims board,, and officials of the Standard Steel Car Company be prosecuted under the Federal criminal code for abetting a fraud against the Government in -- war time.' . j \Perusal of the testimony heard and evidence 'submitted in private by the intelligence department shows that there was a preconcerted, scheme yto put this graft across. \MULCTED OF $13,000,000.\ - - \It cost the Government in excess of $25,000,000. The gun carriages were supposed to cost $40,000 apiece. Only 200 were finished $8;000,000 worth. Allowing for the cost of preparation, the Government still is mulcted pf between $13,000,000 and $15,000,000, as I figure An Associated Pres3 dispatch appearing in the evening papers of October 23d and the morning papers of October 24th quotes the same authority, more briefly to the same effect. v V v This communication assumes that you are correctly quoted. If we are in error in this respect, we shall be glad toTbe corrected and to make such changes as the correction may require. 1 These statements were made after the testimony of several witnesses had been taken jupon the subject, but before the explanation of the Acting' President of the War Department Claims Board. No officer of this Company was called to testify. Your printed interview states that they \Remained out of town and out of reach of the summonses issued for them\ but Mr. W. G. Cory, Assistant to President, who had been immediately in charge of the settlement of this claim, was present in Chicago on October 22d. In the examination of witness, Frank Owen May, on that date, you state that, \Mr. Cory has just been in here and spoken to me Mr. Cory of the Standard Steel Car Company.\ Mr. , Cory at that time offered to furnish you, any records or information required. Mr. Cory offered to testify and told you that Mr. P. G. Jenjcs, who had been in direct charge of the work under this contract and had taken an active part in the preparation of the claim, was then on vacation but that he and any .other officers of this Company were available if you desired their testimony. All the officers of the Government who were concerned in the settlement of the claim were available. Some of these were called, but the Committee failed to call those representatives of the Government who 'were most closely connected with it and best knew all its details. , Your Subcommittee thus closed its ears absolutely to the testimony of witnesses who knew most about this settlement and opened them wide to rumor and unsupported suspicion. The principal witnesses relied upon by your Subcommittee were subordinate accountants and clerks, unfamiliar with the details of the settlement, and a few of the superior officers of the department who supervised the settl6ment, but whose knowledge did not extend intimately to the details upon which it was based. No notice was given to the Standard Steel Car Company of the hearings either in Washington or Chicago. No opportunity was given for them to cross-exami- ne the adverse witnesses. This would have disclosed the lack of personal knowledge of the witnesses whCwere examined, but who through your ques- tioning were made to appear as manufacturing; engineering and artillery experts. Their testimony is largely opinion and guess. The hearing was thus ex parte and one-side-d. Upon such hearing, so conducted, positive findings have been made, as stated in the above newspaper quotations, that .the Government is the victiir of aigsntic iitrd ar.d that it was irulcted of between $13,000,000 and $15,000,000, and judgment has been rendered that t least a dozen army officers and civilians are guilty of crimes demanding prosecution and punishment. An investigation so conducted is a travesty upon justice. As a method of eliciting truth it is farcical. A judgment so concluded and announced is iniquitous. The natural conclusion is that the object is political capital, rather than the discovery of truth and the furtherance of just'ee. With judgment already pronounced after such an inquiry, it would be absurd for the officers of this Company now torequest that they and the United States officers most familiar with the facts should be called to testify. They could not expect a fair consideration of their testimony. They could look forward to nothing but an effort to distort the most candid accounts of a perfectly straightforward transaction, in an effort to sustain a judgment already hastily pronounced against them. - ' All these witnesses are still available to your Subcommittee, if it desires to ascertain the truth. This Company, will do everything possible to secura prompt attendance of its officers upon the issuance of subpoenas by your Subcommittee, and to produce any records which may be desired, besides the ' voluminous papers already in the possession of your Subcommittee. But if such further necessary inquiry is to be made, the adverse judgment already pro- nounced should be withdrawn with the same publicity as was given the charge, and such procedure adopted by your Subcommittee as will be designed to elicit the truth and not to sustain a prejudiced judgment already pronounced. . Intelligent study of the facts relative to this contract and claim discloses the eminent services of this Company to the Government, its absolute good faith, its entire devotion to the prosecution of the war, and its fairness in the negotiations for the settlement recently concluded. This was the largest ordnance artillery contract during the war. The work was once offered to this Company and refused because of the great diffi- culties involved in transforming a car building plant into an arsenal. It was finally accepted on the representation of the War Department that this Company's facilities and organization were better than were otherwise available and that ' the manufapture sof these gun carriages was essential to the successful prosecution of the' war. The difficulties involved are apparent when it is made known that the contract was for 9G4 of such gun carriages, and that the French government during the entire perjod of the war had made only 125 of them. Each one involves nearly 15,000 different pieces. They have the mechanical nicety of a watch. i The difficulties apparent before the contract was undertaken were tremendously multiplied later. The French plans had to be entirely revised for American practice and for quantity production. The work required the original invention by this Company of entirely novel machinery and its construction, as\ preliminary to production. Revision and approval of plans by the War Department in the crowded exigencies of the war were greatlv delayed. The Government was unable to furnish promptly the parts reserved for manufacture by it or by independent contractors. The Government admitted these delays by written extensions of time. - . Had these difficulties not occurred the gun carriages could have been produced practically within the time contemplated in the contract. At the time of the armistice quantity production was well under way andrhad the war continued until the spring of 1919, as was expected, the full quantity of gun carriages contemplated by the contract would probably have been in use on the battlefield. At the termination of the war the Company wa3 left with an enormous quantity of costly war material on hand, useless for purposes of peace except ,as scrap. At the time of the settlement now complained of the Company had never received a cent of its guaranteed profit. It had not been reim- bursed for all of its expenditures. It had yast obligations to its subcontractors, a large share of which has not yet been discharged by the Government. The entire peace business of this plant was disorganized by the changes required under this contract. The plant was encumbered witn war machinery which could not be disposed of except with the approval of the Government. Negotiations for settlement of the contract began as early as March, 1919, and dragged through complicated administrative processes until Sep- tember. The machinery of the 'War Department, which had successfully settled minor contracts, operated with difficulty in the presence of the com- plications of so great a piece of business as this. The settlement demanded and received the most careful consideration of the Chicago Claim's Board, the Ordnance Bureau Claims Board and the War Department Claims Board. It was only by the joint cooperation of these Boards that a final settle- ment could be reached. Repeated conferences were held at Chicago and Washington with representatives of these Boards. The minutes of these con- ferences were carefully preserved and are available, if not already in the hands of your subcommittee, showing the extreme care and the frank publicity of the action of the governmental authorities. As a fruition of all such consideration personal investigation was made on theground by representatives of these three Boards and other branches of the War Department. The settlement was reached only after most careful conferences and consultation between them. The officers of the Company rendered every possible aid. The records both of the Government and the Company were carefully scruti-- . nized. The items of the claim involved not merely the details of accounting for expenditures, but the exercise of judgnlent and discretion in determining a proper compensation to the Company for its losses of other business, caused by undertaking this great enterprise, for the'value of the continued occupation of its works for an unexpectedly long period and for the sudden cessation of work due to the termination of the order. That the Company exercised its stewardship economically is shown by the fact that out of a total\ appropriation of .\$42 for this work but $18000,000 was expended by the Company. This reduction was in large part due to the originality of the methods adopted by the Company in manufacture, improving both in time und quantity upon methods used by the French, British and American Governments. The Government has paid on this contract approximately $18,000,000 All payments have been approved by Government officers and accountants present at the works. Tho interview quoted charges that the government \Still is mulcted of between $13 ,000,000 and $15,000,000. as 1 figure it.\ Is it intended in sober truth to sijiy that this Company spent only $3,000,000 to $5,000,000 on account of tills contract, and that all the balance was fraudulently paid by \collusion of Government officers? Or is this a striking instance of sensational statement for political effect Has the sentiment of justice wholly departed from legislative halls?- - The principal witness relied upon by your subcommittee to sustain the charges is a subordinate accountant of the Government office at Chicago. In- telligent cross-examinati- on of 'this witness would have disclosed the fact that in July, 1919, he applied to the Standard Steel Ca Company for employment, that this application was then declined, that it was renewed on September 17th, at the very time when this settlement was under consideration, and that the witness was then informed that it was not considered ethical by the Company to take into its employ persons stationed by the Government at its works in such capacity as his. The interview with this accountant which appeared in the Chicago Tribune during the period between July and September could not have been more complimentary to the Company had it been dictated by the officers of the Company, yet in a very few days after the final rejection of his application for a position, his denunciation of the claim settlement was printed in the Chicago Tribune of October 1, 1919. It is thii denunciation , which was used as a basis'for your subcommittee's investigation. This Company's arduous labors on this and o her war contracts were highly appreciated by the War \Department and other branches o the Govern- ment \This appreciation has been expressed in written commendations in the possession of, the Company. It is grossly unjust that the Company should now be held up to public scorn upon an incomplete hearing ofirresponsible witnesses making charges beyond their knowledge, without effort to secure the truth from officials of the Government and of the Company thoroughly familiar with all the facts. The apparent disposition'of your subcommittee to set. before the public statements, and to make accusations, not based on fact or on the evidence and without the least opportunity for the accused to be heard, must De condemned in the strongest possible terms. It is propaganda, nothing more, and the continuation and spread of such propaganda must in time tear down the ideals and safeguards of our American nation. The bolshevists can find no material better suited for their purposes than that which is thus supplied. Respectfully, STANDARD STEEL CAR COMPANY. ' , ' (Signed) J. M. HANSEN, President. J 'w , ' \f ... ''4 i : J
