Senator MUNDT. What your firm was actually doing was taking these ships on a commission rate. Where you got the ship, you got a commission; and if you did not, you did not get a commission. I think you lawyers call it a contingency fee. We real-estate people call it a commission.

If the deal goes through, you get a commission; if not, you get nothing. Is that it?

Mr. DUDLEY. There are an awful lot of factors that go to determine what makes up the financial arrangement between attorney and client. And when a client is a corporation which has virtually no equity capital, it is impossible to make any sort of a firm financial arrangeanent which is other than contingent.

You have to make your financial arrangements, your fee arrangements, depending on the circumstances of each case. Most of these Maritime Commission ship purchases did involve things where there was no degree of certainty in them.

Senator MUNDT. Yes; I would understand that as to any business transaction. But I am to understand that your firm was operating as a commission agent. When you succeeded in getting a ship, you got a pretty good fee. If you did not succeed, you got no fee at all. It was up to you to go out and deliver the goods and bring back the ships.

Mr. DUDLEY. I don't know whether you would call it a case of a commission merchant or not, but certainly if we were unsuccessful there was no possibility of working out a fee, and, to that extent, it was substantially a contingent arrangement.

You might draw a parallel between that and real-estate transactions. Senator MUNDT. I just wanted to understand how the transaction worked.

Mr. FLANAGAN. Mr. Dudley, since January 1, 1947, have you made any gift or gratuity of any kind to any employee or official of the Maritime Commission?

Mr. DUDLEY. With the exception of some baskets of pears which I gave one Christmastime to, oh, maybe half a dozen employees of the Maritime Commission, I can't recall any gifts, gratuities, or anything that I have given to anybody down there.

Senator MCCARTHY. I did not hear you. You said a basket of pears?

Mr. DUDLEY. Yes. One Christmastime I had sent through the mail from one of these fruit places that send you ads, some baskets of pears that cost, I think, between $2.50 and $3 apiece. I sent those to some people down there.

Mr. FLANAGAN. To whom did you send them?

Mr. DUDLEY. I don't recall. I think they are people on the staff, or there may have been one or two Commissioners, but I don't recall who got them.

Mr. FLANAGAN. You don't recall now who got them?

Mr. DUDLEY. I don't recall now; no, sir.

Mr. FLANAGAN. Since January 1947, have you entertained any officials or employees of the Commission other than at a lunch? Mr. DUDLEY. No; I have not.

Mr. FLANAGAN. Have you paid for any hotel bills or arranged trips for them?

Mr. DUDLEY. No, sir.

Mr. FLANAGAN. Have you had any financial transactions or any loans, or any other kinds of financial transactions?

Mr. DUDLEY. No, sir.

Mr. FLANAGAN. With any member or official of the Maritime Commission, since January 1947?

Mr. DUDLEY. No, sir.

Mr. FLANAGAN. I will ask to have put in the record, at this time, Senator, this agreement we forgot to put in, the agreement dated April 15, 1949, between Mr. Dudley and his firm, regarding the distribution of the United States Petroleum stock.

Senator HOEY. That will be entered as exhibit 27.

(The agreement referred to was marked "Exhibit 27," and will be found in the appendix on page 697.)

Mr. FLANAGAN. I have no further questions.

Senator HOEY. Senator Mundt?

Senator MUNDT. Mr. Dudley, I am going to try to arrive at how the fee of $100,000 was determined. You have it in the record that it was worked out on a contingency basis.

I am trying to determine how much work was involved, as far as you were concerned, for your particular fee. About how long was it from the time you began work on this case before the deal was consummated and the ships were made available to your client? Mr. DUDLEY. I would say about 7 months, sir.

Senator MUNDT. Of that 7 months, about what percentage of your time did you spend on this particular transaction?

Mr. DUDLEY. Well, a rough estimate would be 50 percent.
Senator MUNDT. About half of your time?

Mr. DUDLEY. Yes, sir.

Senator MUNDT. So that you got $30,000 for what would be tantamount to about 312 months' work had you spent all your time on this. Mr. DUDLEY. Yes, sir.

Senator MUNDT. Now, how much time, do you know, did Mr. Casey spend on this transaction?

Mr. DUDLEY. I don't know, sir, how much time he spent on it. Senator MUNDT. It could not have been longer, I assume, because you started when the transaction began, and you ended when it terminated.

Mr. DUDLEY. Yes, sir. I think I spent more time than he did.

Senator MUNDT. And Mr. Rosenbaum, the other member of the firm, who got the other $33,000, did very little except perhaps with some paper work.

You were associated with him in the firm, but the actual leg work, the contact work, and so forth, was done either by you or by Mr. Casey? Mr. DUDLEY. Yes, sir.

Senator MUNDT. That is a pretty good fee for lawyers.

Any fee you charge your clients is all right, but I am just trying to determine what kind of service it is when someone has to pay $150,000 for what could not have been over 7 months' work by one man; 312 months' work for two; and none for the other, rather.

Mr. DUDLEY. Yes, Senator, those are generous fees, generous amounts of money; no question about it.

But here you have ships which cost between a million and a million. and a half dollars. That was their statutory sales price. They originally cost the Government substantially more than that, and with postwar building costs up, the ships were worth a lot of money. So while you can consider $33,000 and say that, sure, it is a lot of money for somebody just getting out of the Navy and starting to practice law-I consider myself very fortunate. But in terms of the percentage of that as compared with the total amounts of money involved in the transactions, it is not unusual.

For example, I understand that ships' brokers' fees-and a ships' broker would do normally a lot less work than I did in connection with the transaction-would be, I think, anywhere from 2 to 5 percent of the value of the vessel. I may not be doing justice by ships' brokers, but I think that is right. And if you take 5 percent of a million and a half or 2 million dollars, I think that is more than what I got. I haven't calculated it out, but I think that that would be. For the mere brokerage fee, you would get more than we would get for legal fees, which included everything from the processing of the application all the way down through to taking title of the ship and going into class allowances and a lot of other questions which are highly technical and complicated, which you have to solve at the time of purchasing the vessels.

Senator MUNDT. You are a maritime lawyer, and I am not. How does the Maritime Commission operate? Is it impossible for somebody to go in there and get a ship directly by offering to pay the regular legitimate price there by saving this fee, or is it necessary for him to employ contact people of that type.

Mr. DUDLEY. With respect to the present, I don't think there is any longer statutory authority to sell war surplus vessels.

Senator MUNDT. I am talking about this period.

Mr. DUDLEY. With respect to this period, a correct answer to your question is that it was perfectly possible for an applicant to go in and file his own application and get awarded a ship. However, with the difficulty in getting action on your applications during this rather hectic period in '47, I think it would have been of considerable help to get somebody here who was on the scene who could dog the thing through. We were not the only people doing it. There were a great many other lawyers, and people from New York, whom we would see around the Commission doing precisely the same thing we were doing, sitting outside people's offices, waiting their turn to get in to invite attention to a matter in which you were interested.

Senaor MUNDT. Since we are not doing that at the moment and we may be doing it again some time, I wonder if you could give any counsel to the committee, whether you agree with me that it sets up a rather unwholesome governmental situation, where you have a lot of eager attorneys dogging through these applications, each realizing that if he dogs it through he gets a fee of $33,000 or $100,000, and if he does not dog it through he gets nothing? Is it not likely to create a situation where some lawyers who are not stout-hearted in their virtue might go a little bit beyond something as insignificant as giving a couple of baskets of pears to a fellow, and that somebody might go a little fur

ther than that somewhere along the line to try to induce favorable decision?

It seems to me to set up a governmental situation in which the temptation for doing something which is wrong is pretty great. Mr. DUDLEY. I think in connection with the ship-sales program, and with particular reference to tankers, since they are the vessels primarily in question here, you had a situation which was very temporary in nature, caused by the backwash of the war, caused by a tremendous expansion in the petroleum industry, caused by perhaps miscalculation of tanker-transportation needs on the part of the principal oil companies, caused by a shortage of storage facilities in all transportation, plus a cold winter in 1947-48.

It gave rise to a set of circumstances which permitted certain groups of people to apply for tankers and to finance their purchase through pledging a charter on a ship with an oil company.

It was a situation which, I think, may not ever occur again. With the benefit of hindsight, I think that I could have made a lot more money if the situation were to occur again, now that I am reasonably familiar with the economics of the oil-transportation industry. I sort of had to learn by the Braille system as I went along. I did quite well, but on the basis of hindsight, I could do much better. I don't think that, in spite of the confusion of the Maritime Commission, there were people who were trying to mislead Government officials, trying to offer them greater inducements than a basket of fruit. I think everybody was down there working as hard as he could to try to focus particular attention on the particular project he was working on, but as far as I know, nobody was trying to do it in an unethical way.

Senator MUNDT. I am simply talking about the temptation.

You describe a situation of a lot of hurried little bureaucrats all behind in their work, tremendously busy, so that you had to contact them in the halls sometimes, all working at very modest salaries, being approached by hundred-thousand-dollars-a-year salesmen who would meet them in their offices or in the halls.

It seems to me it would put a terrible strain on their sales resistance. Mr. DUDLEY. Well, I don't share that view. I think there are probably always temptations in government for people who are in positions of trust and public responsibility. But I think in spite of everything, people in Government positions have done pretty well. You wouldn't believe it by reading the press, but I have been practicing law before Government agencies here for quite a while, and my opinion of the average Government employee is pretty good. I think he is a pretty good average honest American.

Senator MUNDT. I think that is right. But I think Congress and the Executive have some responsibility not to submit them to too great a temptation. That is why I am trying to find out from you whether you think that the set-up that prevailed at the time you were getting these fees adequately protected the Government interest, if we were to get into that condition again.

Mr. DUDLEY. I don't see any additional precautions that could have been set up. The best thing you can do in Government to assure honesty is to get the best people you can for the jobs, and in order to do that you have to pay them enough, select them carefully, and treat them right after they get there.

Senator MUNDT. What do you think about competitive sales to the highest bidder, as a way to protect the Government's interest?

Mr. DUDLEY. As I understand the ship-sales legislation, the Ship Sales Act of 1946, it was a very thoroughly considered piece of legislation. I think it was a well-done piece of legislation. And I think the Government interest was better protected by setting a statutory sales price than it was after the First World War, when I understand they did use a system of competitive bidding to dispose of surplus vessels.

Senator MUNDT. It is very difficult for me to see how the taxpayer has anything to lose by selling to the highest bidder.

Mr. DUDLEY. The trouble with that is that you get into a situation where, in the winter of '47 or '48, you might have received a great deal more for the tankers that were sold at the time, but a year later you would have received much less. Now, of course, you aren't selling them. You have a Korean situation, which no one could anticipate prior to the outbreak of the Korean war.

Senator HOEY. Any further questions?

Senator NIXON. Yes. Just one point to recapitulate.

As to the total number of corporations involved in the obtaining of surplus ships, which we have now listed as 10, as I understand it, this investigation deals primarily with AOTC. The corporations you have named today, together with those named by Mr. Rosenbaum when he appeared, total to 10.

The staff also considered the total number of ships which these corporations obtained. The number is 33, of which 8 were dry cargo ships as distinguished from tankers.

And on the matter of the fees, there was a recapitulation which was made as of a previous day, covering the AOTC and the companies that have been named up to that time.

The totals at this time are as follows: And this has also been compiled by the staff. Mr. Casey received on all of these deals a total of fees of $68,500, and in stock $528,700. Mr. Dudley received in all of these deals $79,500 in fees, and in stock $107,000. And the part that Mr. Dudley received is exclusive of the firm. This has been broken down so that this is what the firm received, $327,500, and in stock $156,000. The gross totals in fees on all 10 deals to $475,500 and in stock to $791,700.

Senator HOEY. In compiling that, did you show the amount paid in, or the amount which was to be paid in?

I just wanted to get that clear in the record.

I understand the amount of fees indicated is actually paid, but the amount of stock is what is to be paid provided it is collected.

Senator NIXON. That is right. These are the amounts they will receive if and when the stock is fully paid for.

Senator HOEY. I just wanted to get that clear.

Senator NIXON. Now, the other question I have relates to this. Did you in any way conduct the negotiations for the sale of the three tankers to the Chinese interests, do you recall?

Mr. DUDLEY. I don't think so. I dimly recall having met Mr. Wasson in New York to talk about some phase of that, but I don't know whether it was prior to or after the sale.

Senator NIXON. Did you ever meet Mrs. Konow?