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January, 1921 A $92 watch was also presented to him at Christmas, while $50 and $25 were paid respectively to the resident auditor and checkers. Hanes asserted that under an old agreement, ship repairmen were al- lowed 80 cents an hour. for mechan- ics, whereas the government now is paying at the rate of $1.37% an hour. This rate applied to practically all re- pair yards in the port of New York. As to general repairs, the witness said it was the prevailing system on the Atlantic coast for shipyards to sub- mit to the board their rates for both labor and materials. The yards which complied with this rule, according to 'some cases, the witness said he knew of none. In he said, the chandleries had made refunds on overcharges. He named W. P. Wilkins & Co., Nor- folk, Va., who returned $5000 on an $11,000 order for meat. Robert R. Laggren, director of the supply and sales division of the ship- ping board for the eastern district, tes- tified that H. H. Weaver, formerly general manager of the Cambria Steel Co., was retained in an advisory ca- pacity to the construction and claims department of the shipping board after he became connected with Bardee & Co., Philadelphia, dealers in scrap ma- terials, who bid $4,000,000 on scrap THE MARINE REVIEW 7 signed. This document told of an agreement under which a commission of $40,000 to be paid by Wallace Downey was to be "divided among us in the following manner: Twenty-five thousand dollars to be paid in one lot, and equally divided in the sum of $6250 for each of the four of us--. Sisler, Bolling, Cranor and myself." Sands testified that the statements con- tained in the affidavit were true, and explained that he had not signed the document on the advice of his attor- ney. This document was not read into the records, 'but extracts were read to the witness. Sands' testimony was sunilar' to that of <B. (FL (Pullen 4 AMVUIVUAUUV A.C Ucn Shipbuilder Saves U. S. $25,000,000 on New Contract N ILLUSTRATION of how proper cost plus Aseaa work out is shown in the case of the American Shipbuilding Co., Cleveland owned by the Rockefeller interests. In other words, } have been informed, it is owned principally by John D. Rockefeller and his associates. That was stated to me in Washington by tle men who are interested. Upon the request of the owners of. that institution, a resolution was passed by their board to the effect that their corporation would not be permitted to make over 10 per cent profit on war work. On Oct. 1, 1919, when I arrived in Washington, Judge Payne turned over to me that case for settlement. Under the cost plus contracts which it had, the American Shipbuild- ing Co. was entitled te $157,000,000. The company re- quested that its contracts be changed to lump sum and it offered to return to the government approximately: $7,000,000 for all excess railway charges, $8,000,000 for excess wage increases paid under the Macy award; $7,000,000 for amortization of plants; and $3,000,000 for depreciation---all of which they were entitled to under the contract made by them with the United States government---a total of $25,000,000. (The difference in the amounts is due to my not having the records before me.) It was the most unusual position taken by any contractor with a legal binding contract on the government. A new contract for a lump sum, retroactive in dts nature, was entered into with the company after it had made a deduction of $25,000,000. It will be noted in this settlement that the company did not ask for any profit on wage increases, way transportation, and in addition to this, they gave up all of the increased wages that they had paid, and all ot the increased railway transportation, together with amortization and depreciation. "In my judgment, had proper cost plus contracts been drafted, many of the other large contracts would have been materially cut, and this applies not only to the shipping board, but to the other departments of the government as well. The percentage of saving would have decreased as the contracts decreased amount."--Testimony of Martin Gillen. nor on rail-, AMAHUNLLCUAA Etna him, were placed on a _ preferential list. It was the custom for ships ap- proaching port to furnish a list of re- pairs needed, on which were based requisitions enabling the ships' masters to have the work done while in port. While the supervisory force is adequate and willing to inspect this repair work, Hanes said, it could not do so intelli- gently, because in half the cases the requisition papers did not reach them until the ships had sailed. Hanes testified of the custom of ship's officers accepting money and gifts from supply concerns. He alleged that the port steward at Sparrows Point, Md., was set up by a shipping concern in an office and, according to Hanes, bought supplies billed to him at an increase of 50 per cent over what they would have cost in the Open market. Asked about refunds. steel and later raised that bid to $10,- 000,000. : E. Wilmer Bolling, brother-in-law of President Wilson, and treasurer of the shipping board; Lester Sisler, ex- secretary of the shipping board, and John Cranor, a representative of the Downey' Shipbuilding Corp., were named as recipients of part of a $40,- 000 gratuity alleged to have been paid by Wallace Downey for their influ- ence in aiding the corporation to pro- cure contracts from the shipping board. The names of Bolling, Sisler and Cranor were introduced through the testimony of Tuker K. Sands, former cashier of the Commercial National bank, Washington, D. C. When Sands was called to the stand he was asked to identify a photostat copy of an affidavit prepared for his signature, but which he had _ never food salesman, who said that he was a witness to some of the personal ne- gotiations between Bolling and Sands. John T. Meehan, deputy chief of the division of investigation of the ship- ping board, was called to the stand to explain why he never made a thor- ough investigation into the charges against Bolling. Meehan said he thought the charges were an attempt at blackmail and, therefore, deserving of no further attention. Wallace Downey thereupon issued to the press a statement explaining why he had given Sands notes for $40,000 and had actually paid him $25,000 on account. He said this fee was intended. for Mr. Sands in con- nection with making a financial report on the Providence Engineering Corp., in which Mr. Downey was interested, (Concluded on Page 12) -- } J