Now, at what stage of this transaction did the permission required by the law take place permitting your corporation to transfer these ships to foreign ownership? Mr. CASEY. Which transaction are you referring to, Senator? Senator MUNDT. The one that put the ships in the hands of these Chinese. Mr. CASEY. I don't understand that. That remained under American flag and is American flag so far as I know up until now. There was no transfer foreign there. We had a warranty to that effect and and opinion from Mr. Goertner, the counsel for the Commission, that that was American. Senator MUNDT. It seems to me, if I understand this transaction, that the ships ultimately wound up either in the hands of a Greek citizen, through a myriad of corporate structures, or into the hands of a Chinese group controlling it. Am I wrong in my understanding of what happened? Mr. CASEY. I think there is some confusion there. If you are talking about National Tankers and United Tankers-is that what you are talking about?-there was never a change of flags with respect to those ships. They were sold to an American corporation, according to a warranty from that corporation, and according to the counsel's opinion. There never was any change in flag, so that would not apply to that instant. Senator MUNDT. Also one of these corporations, or two of them, I believe, are owned by this Greek citizen whose name escapes me at the moment. He is the owner in fact of two corporations having control of two of those ships. Is that not correct? Niarchos? Mr. CASEY. Now, if you are talking about American Overseas and Greenwich-is that right? Mr. FLANAGAN. Yes, that is what he is talking about. Mr. CASEY. Those had gotten permission from the Maritime Commission for foreign flag for Panamanian registry. So that section would not apply to them. Senator MUNDT. But it says it is unlawful without permission. Mr. CASEY. No, it applies only to American Flag. These were not American Flag, these were Panamanian Flag, with permission of the Commission, from the beginning. Senator MUNDT. There is another statement of Cochrane's here, but I am advised by counsel that this whole case is in the hand of the Justice Department. They probably will decided it by the legal process and it is not for me to try to decide it here today. No further ques tions. Mr. FLANAGAN. Mr. Casey, since January 1, 1947, have you personally made any gift or gratuity of any kind to any employee or official of the Maritime Commission? Mr. CASEY. No. Mr. FLANAGAN. Since January 1, 1947, to your knowledge, has anyone who is in any way associated with you in these tanker transactions made any gift or gratuity of any kind to an official or employee of the Maritime Commission? Mr. CASEY. No. Mr. FLANAGAN. Since January 1, 1947, have you had any financial transactions at any time with any official or employee of the Maritime Commission? Mr. CASEY, No. Mr. FLANAGAN. Since January 1, 1947, to your knowledge, have any of the people who associated with you in these transactions in any way had any financial transactions with members or officials of the Maritime Commission? Mr. CASEY. No. Mr. FLANAGAN. I have no further questions. Senator HOEY. Mr. Casey, thank you for your attendance. I recall that you wrote me a letter soon after this matter was referred to my committee and expressed your willingness to appear at any time. We had not called you earlier because we were not ready to go into investigation. Thank you for your appearance. A number of members of the committee have engagements, which will make it necessary that the hearing be postponed until Wednesday of next week at 10 o'clock. You are excused as witnesses. (Whereupon, at 4: 15 p. m., the hearing was recessed until 10 a. m. Wednesday, February 27, 1952.) SALE OF GOVERNMENT-OWNED SURPLUS TANKER VESSELS WEDNESDAY, FEBRUARY 27, 1952 UNITED STATES SENATE, PERMANENT SUBCOMMITTEE The subcommittee met at 10 a. m., pursuant to Senate Resolution No. 251, Eighty-second Congress, second session, agreed to January 24, 1952, in room 357 of the Senate Office Building, Senator Clyde R. Hoey (chairman of the subcommittee), presiding. Present: Senator Clyde R. Hoey, Democrat, North Carolina; Senator John L. McClellan, Democrat, Arkansas; Senator Thomas R. Underwood, Democrat, Kentucky; Senator Richard M. Nixon, Republican, California. Also present: Francis D. Flanagan, chief counsel; William A. Leece, assistant counsel, Louis Sornson, accountant, Ruth Young, chief clerk. Senator HOEY. The committee will please come to order. Mr. E. Stanley Klein will come to the stand. Mr. Klein, will you hold up your right hand? Do you solemnly swear that the testimony you give in this case shall be the truth, the whole truth, and nothing but the truth, so help you God? Mr. KLEIN. I do. Senator HOEY. Mr. Klein, give your name, address, and connection to the reporter. TESTIMONY OF E. STANLEY KLEIN, BRONXVILLE, N. Y. Mr. KLEIN. E. Stanley Klein, 370 Fourth Avenue, my business address; my home address, 20 Hereford Road, Bronxville. Senator HOEY. And give your position. Mr. KLEIN. Vice president, John P. Maguire & Co. Senator HOEY. Mr. Flanagan will conduct the questioning, Mr. Klein. Mr. FLANAGAN. Mr. Klein, will you tell the committee how you first happened to become associated with Casey and the others in connection with the purchase of these Government-owned tankers? Mr. KLEIN. I was introduced to Mr. Casey and General Holmes by Mr. Stettinius. They had outlined this proposal to him and had done some work on it. And he acquainted me with the facts and wanted my opinion of it as a business proposition. Mr. FLANAGAN. And what was your general opinion at that time as to the outlook of this whole matter as a business proposition? Mr. KLEIN. If all of the things could be accomplished, that is, the charters obtained and the ships allocated and the financing arranged, it looked to me like it was an attractive business proposal. Mr. FLANAGAN. Did you meet with Mr. Casey and Mr. Holmes prior to the incorporation of AOTC on August 26, 1947? Mr. KLEIN. Yes. Mr. FLANAGAN. At that time did you advise him in any way as to how this plan should be worked out? Mr. KLEIN. No. Mr. FLANAGAN. Or did Mr. Casey himself have some plan? Mr. KLEIN. No; I think there was considerable work that had to be done before we could come to any final conclusions as to how it would be worked out. Mr. FLANAGAN. What was Mr. Casey's plan about which he told you and your associates of at the time of this first meeting or the first meetings? Mr. KLEIN. He merely acquainted us with the Ship Sales Act and its obligation to sell ships to American citizens at the close of the war, and if we could find employment for the ships after receiving an allocation, financing was possible, he thought. No details of the plan were discussed at that time. Mr. FLANAGAN. In other words, he merely told you that if they could get ships allocated and find charters and financing, they might be able to work out some kind of an arrangement; is that true? Mr. KLEIN. Yes. Mr. FLANAGAN. At the time of these first meetings, which would probably be in August 1947, were you conferring with Mr. Robert Dudley or Mr. Joseph Rosenbaum in connection with this matter? Mr. KLEIN. No. Mr. FLANAGAN. Did Mr. Casey tell you that they had any part in this whole matter? Mr. KLEIN. He had told Mr. Stettinius that they had undertaken to do this thing themselves. Mr. FLANAGAN. That who had undertaken to do it themselves? Mr. KLEIN. He and some associates in Washington. I think it was Mr. Dudley and Mr. Rosenbaum. Mr. FLANAGAN. And what did he say was the outcome of their efforts? Mr. KLEIN. They hadn't been successful. Mr. FLANAGAN. That is why I supposed they called on Mr. Stettinius and you. Mr. KLEIN. No, I think they then called on General Holmes, and he in turn introduced them to Mr. Stettinius. And I think that he made inquiry before he talked to me. Mr. FLANAGAN, At that time, in August 1947, had you discussed possible chartering with any oil company? Mr. KLEIN. Had I personally? Mr. FLANAGAN. Yes. Mr. KLEIN. I think I had. Mr. FLANAGAN. With what oil company, and what representative, did you discuss it? Mr. KLEIN. I think it was with Mr. Winterbottom of either the Panama Transport or the Standard Oil of New Jersey. I don't know what his connection is, particularly. Mr. FLANAGAN. And briefly what was the extent of your discussion at that time? Mr. KLEIN. Briefly, the extent of the discussion was that at that particular moment they were not considering any further charters. Mr. FLANAGAN. Did they indicate that they might be considering charters at some later date? Mr. KLEIN. Yes. They always indicate that. They can never tell which way the market will go, as I understood it. Mr. FLANAGAN. Well, why did you decide to get into this venture, if, after you had talked to the Standard Oil people, they indicated they didn't want charters? Mr. KLEIN. It was quite a little time after that, that we did go into it, some week, I should say. Mr. FLANAGAN. Was it in September, or in October, can you recollect? Mr. KLEIN. No, I cannot. But it was some weeks after the original conversation. Mr. FLANAGAN. In any event, a few weeks after the original conversation, you again contacted Standard Oil? Mr. KLEIN. I didn't, no. Mr. FLANAGAN. Who did at that time? Mr. KLEIN. Mr. Bergen of Marine Transport Lines. Mr. FLANAGAN. We will take that up when Mr. Bergen is here. Did you have anything to do with arranging the loan which AOTC eventually received from Metropolitan Life? Mr. KLEIN. Yes. Mr. FLANAGAN. When did you first, to your best recollection, confer with the representatives of Metropolitan Life? Mr. KLEIN. I would say from memory that it was a few days before we made the down payment on the ships, just a few days before. Mr. FLANAGAN. Before you made your first down payment? Mr. KLEIN. Yes. Overtures had been made to banks before that, and the plan contemplated bank financing, but conditions arose which made it seem important to seek another source for the loan, and it was at that time that I approached the Metropolitan. Mr. FLANAGAN. Will you explain to the committee who is M. Daniel Frantz? Mr. KLEIN. M. Daniel Frantz was an accounting and legal consultant in this venture. Mr. FLANAGAN. When did you acquire the services of Mr. Frantz? Mr. KLEIN. I can't say exactly, but I think it was some time after we had arranged to have the Marine Transport group identified with us. We had invited them to participate in this venture, as practical people in the shipping business. Mr. FLANAGAN. For what purpose did you hire Frantz? Mr. KLEIN. Well, some one had to follow through on the legal and accounting details, and I would say that it was in that capacity that we considered Mr. Frantz of considerable importance and value. Mr. FLANAGAN. Mr. Frantz is also a tax expert, is he not? Mr. KLEIN. I think so. Mr. FLANAGAN. He is primarily a tax expert, is he not? |