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. 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? Mr. DUDLEY. No, I have never met her. Mr. DUDLEY. I have never met Mr. Morris. Senator NIXON. Do you recall what the extent of your conversations were with Mr. Wasson on the situation? Mr. DUDLEY. It is kind of dim. I remember talking some thing about national tankers. Senator NIXON. Who handles those negotiations primarily? Mr. DUDLEY. I think they are handled by Mr. Casey. I had so little to do with the transaction that I really couldn't tell you who was the primary force there. Senator NIXON. Did Mr. Rosenbaum have anything to do with those transactions? Mr. DUDLEY. Not that I know of, no. Senator NIXON. That was primarily a deal between Casey and Wasson? Mr. DUDLEY. As far as I knew, we had virtually nothing to do with the transaction other than forming the corporation, which is a thing we did through the Corporation Trust Company. Senator NIXON. The total, incidentally, in stock and fees was $267, 200. Senator HOEY. Thank you, Mr. Dudley. I believe we will not be able to proceed with the investigation further this afternoon. It is nearly adjournment time now. The committee will recess until 11 o'clock in the morning. (Whereupon, at 4:22 p. m., Tuesday, March 4, 1952, the hearing was recessed to reconvene at 11 a. m., Wednesday, March 5, 1952.) SALE OF GOVERNMENT-OWNED SURPLUS TANKER VESSELS WEDNESDAY, MARCH 5, 1952 UNITED STATES SENATE, PERMANENT SUBCOMMITTEE ON INVESTIGATIONS OF THE The subcommittee met at 11 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 Hubert H. Humphrey, Democrat, Minnesota; Senator Joseph R. McCarthy, Republican, Wisconsin; Senator Karl E. Mundt, Republican, South Dakota; Senator Richard M. Nixon, Republican, California. Also present: Francis D. Flanagan, chief counsel; Howell J. Hatcher, chief assistant counsel; Jerome S. Adlerman, assistant counsel; William A. Leece, assistant counsel; Louis Sornson, accountant; Ruth Young, chief clerk. Senator HOEY. The hearing will please come to order. Mrs. Olga Konow will please come to the stand. Mrs. Konow, will you please stand up and hold up your right hand? Do you solemnly testify that the evidence which you give in this case shall be the truth, the whole truth, and nothing but the truth, so help you God? Mrs. KoNow. I do. Senator HOEY. Have a seat. Will you please give your name, address, and occupation to the reporter? TESTIMONY OF OLGA KONOW, PRESIDENT, AMERICAN VIKING I am also having lately a nickname. I am called "Oil Boat Olga." Senator HOEY. Will you give your name and address also? Mr. KELLY. I am Roy B. Kelly, attorney, Transportation Building, Washington, D. C. Senator HOEY. Mr. Flanagan, you may proceed with the examination of Mrs. Konow. Mr. FLANAGAN. Mrs. Konow, by way of background in connection with the questioning we will do of you, I want to state for the record here that our testimony to date indicates that in January of 1948, you acted as a broker between the United Tanker group and the Casey group in the purchase of three tanker ships which eventually were turned over to the United group; and our questioning will, for the most part, have to do with your activities as a broker in connection with that specific transaction. Now, could you tell the committee who first contacted you in the United Tanker group for the purpose of having you attempt to get them ships? Mrs. KoNow. You mean to say who very first contacted me? Or you want to know how did I become a broker for United Tanker in this very deal? Mr. FLANAGAN. Yes. Mrs. KoNow. I was very fortunate, because in the tanker business it is usually good to have the buyer. Tankers you always have. So the United Tanker people gave me the privilege to act for them as a broker, either for chartering or for purchasing vessels. Mr. FLANAGAN. Which representative of the United Tanker group contacted you and asked you to be their broker in seeking charters or ships? Mrs. KoNow. It was never actually an individual, because this United group is usually three or four gentlemen who are getting together, and then they ask you to either go and look for shipsHow would I explain that? Would you want to know one specific person? Mr. FLANAGAN. Yes; or the three or four persons. Mrs. KoNow. Well, most of them was Mr. Wei, who I had most close contact with Mr. FLANAGAN. That is Chung-ching Wei? Mrs. KoNow. C. C. Wei. Mr. FLANAGAN. W-e-i, I think he spells it. Mrs. KoNow. Yes, W-e-i. Mr. FLANAGAN. Did Mr. Wasson contact you at that time? Mrs. KoNow. Mr. Wasson was always with our group together, like Mr. Lenfest or Mr. Sieling or Mr. Wei, but most of my dealings were specifically with Mr. Wei. Mr. FLANAGAN. Now, at the time that Mr. Wei first contacted you with regard to getting tankers for them, did he indicate what commission or what brokerage fee you might get if you were successful in obtaining tankers? Mrs. KoNow. It is not actually the buyer of the vessel who indicates the commission. It is actually the broker, who is very hopeful to get 5 percent on a brokerage, on a ship. Mr. FLANAGAN. Did you indicate to Mr. Wei or to others in the group that you would want 5 percent of the purchase price? Mrs. KoNow. Yes; I imagine I have said so. Mr. FLANAGAN. Now, how did you happen to first get in contact with the Casey group? Mrs. KoNow. Well, you know, everybody knew the Casey group. In old times we used to call them the Stettinius group. And in New |