SALE OF GOVERNMENT-OWNED SURPLUS TANKER VESSELS MONDAY, MARCH 10, 1952 UNITED STATES SENATE, PERMANENT SUBCOMMITTEE ON INVESTIGATIONS OF Washington, D. C. 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, North Carolina; Senator Joseph R. McCarthy, Wisconsin; Senator Karl E. Mundt, South Dakota; Senator Richard M. Nixon, California. Also present: Francis D. Flanagan, chief counsel; Howell J. Hatcher, chief assistant counsel; Jerome S. Alderman, assistant counsel; William A. Leece, assistant counsel; Louis Sornson, consulting accountant; Ruth Young, chief clerk. Senator HOEY. The committee will come to order, please. Mr. Arthur G. Syran and Mr. Joseph S. Oppe will please come up to the stand. Will you each stand up and hold up your right hand? Do you solemnly swear that the testimony you give in this hearing shall be the truth, the whole truth, and nothing but the truth, so help you God? Mr. SYRAN. I do. Mr. OPPE. I do. Senator HOEY. Mr. Syran, would you please give your full name and address to the reporter? TESTIMONY OF ARTHUR G. SYRAN, DIRECTOR OF TRANSPORTA- Senator HOEY. And will you do the same, Mr. Oppe? Mr. OPPE. Joseph S. Oppe. I am Assistant Chief of the Office of Tanker Services, in the National Shipping Authority. Senator HOEY. Mr. Flanagan, you may proceed with the examination. Mr. FLANAGAN. Mr. Syran, how long have you been in your present position? Mr. SYRAN. I was Director of Transportation for ECA since late June 1948; and since January 1, 1952, I have been the Director of Transportation of Mutual Security Agency, which is the successor agency. Mr. FLANAGAN. Mr. Oppe, you are now with the Maritime Administration? Mr. OPPE. Yes; I am with National Shipping Authority, a branch of Maritime. Mr. FLANAGAN. How long have you been with the Administration, at this time? Mr. OPPE. At this time, I have been there 9 months. Mr. FLANAGAN. Prior to that, you were with the ECA? Mr. OPPE. No; prior to that I was with the National Federation of American Shipping for 1 year as Director of the Tanker Division, and prior to that I was with the Transportation Division of the Economic Cooperation Administration for 2 years, as Chief of the Tanker Branch. That would be from June 1948 to June 1950. Mr. FLANAGAN. And at that time you worked with Mr. Syran? Mr. FLANAGAN. What did you do prior to the time you were with ECA? Mr. OPPE. Prior to the time I was with ECA, I was for a year and a half with the chartering division of Sieling & Jarvis, brokers, New York. Mr. FLANAGAN. Mr. Syran, will you tell the committee when it first came to your attention that ships of the United Tanker group were allegedly chartered to carry oil to Chinese Communists? Mr. SYRAN. About mid-June 1949. Mr. FLANAGAN. And what did come to your attention at that time? Mr. SYRAN. Well, we found out at that time that the Kettleman Hills had engaged or was about to engage in a voyage from Constanza, Rumania, to northern China with a cargo of finished products. I don't remember whether it was kerosene, benzine, or what it was. Mr. FLANAGAN. At that time, in the summer of 1949, were other ships of the United Tanker fleet carrying ECA oil? Mr. SYRAN. Yes; I would say so. Mr. FLANAGAN. What was your reaction when you discovered that sister ships of the same fleet were chartered out to the Soviet Government to carry oil to Communist China? Mr. SYRAN. Well, we were very much concerned about it. Because from about December of 1948 up to the end of May 1949 the Communists had progressively gone down the mainland of China, and progressively ECA had to close out some of its missions. And we went right on down through Shanghai and finally to Canton. I believe that sometime in January or February we were extremely cautious in the shipments that we were dispatching to the mainland of China, to make sure that such commodities as actually arrived on the mainland were used by the Nationalists and there was not any excess that could fall into the hands of the Communists. And the last shipment that I recall that ECA financed to the mainland of China was about the 28th of May 1949; and that was to a place in south China called Amoy, A-m-o-y, which is about a hundred miles across the water from Formosa. And that was crude oil; and the purpose of that crude was to be refined on Formosa, and it could be ferried across from the mainland to Formosa. Senator HOEY. At these times, these shipments were being made from ECA to Nationalist China? Mr. SYRAN. That is right, sir. Senator HOEY. And your concern was that you did not want it to fall into the hands of the Communists? Mr. SYRAN. That is right, sir. Now, just as soon as we had concluded these last shipments-and we were extremely careful as to how they were arriving-we were really taken aback when we heard that the Kettleman Hills, owned by United Tankers, had been chartered or was about to be chartered for a voyage from Rumania, I think, to Dalny, which is Dalny in north China. Mr. FLANAGAN. What, if any, action did you take at that time to attempt to stop these shipments, these Communist shipments? Mr. SYRAN. Well, we tried to find out if we could find a legal objection, so that those shipments coud be stopped. And we made several inquiries. One was to the Coast Guard, to find out whether the crew situation aboard those vessels was such that something could be done. We had information that in the crew aboard there were no Americans, and we thought perhaps the movement of the vessel could be prohibited by reason of that. Well, we found that the most that could be done was to impose a very minor fine on the vessel if certain technical violations had taken place, upon its return to a U. S. port. Then we approached the Maritime Commission to determine what, if anything, could be done to stop the movement of those tankers, and we found out that there was no technical legal objection that they could interpose; because the charter was for less than 1 year, and although they had, I believe, General Order 59, which gave them the power to stop it if it was a charter in excess of a year, if it was less than a year it couldn't be done. I think we also notified the CIA if we could find something along the line that we could exercise some stopping power. And then we finally approached the Department of State, in the hope that perhaps, at that point, something might be done to prohibit the movement into China. Mr. FLANAGAN. I find here a memorandum dated July 29, 1949, addressed to Mr. Wood, Assistant Administrator for Operations, of your department, addressed to him by yourself. In this memorandum, which we will place in the record, you state that Several people in the State Department have been advised of the situation. * Senator HOEY. It will be exhibit No. 41. (The letter referred to was marked "Exhibit No. 41," and will be found in the appendix on p. 717.) Mr. FLANAGAN. Do you recall advising the State Department of this situation in July of 1949? Mr. SYRAN. Yes. Our dealings with the Department have always been only with one section, that is, the Shipping Section, which is headed, I believe, by Mr. Jesse Saugstad. I don't remember whether it was I who approached him or whether Mr. Oppe approached him at my direction, to find out what could be done or to ascertain if there was any directive or policy to prevent the Kettleman Hills from continuing. Mr. FLANAGAN. Now, at that time, did you express concern to the State Department over the fact that these shipments were being made to Communist China? Mr. SYRAN. Yes; that was the object of making the inquiry. Mr. FLANAGAN. And what was the result of your advice to the State Department? In other words, what did they tell you? Mr. SYRAN. Well, the information we got was at the very end of July 1949, and we were told that there wasn't any definite policy that could be invoked to prohibit vessels such as the Kettleman Hills from going into North China. Senator NIXON. Excuse me. When was that? Mr. SYRAN. That was July 28 or 29 of 1949. Senator NIXON. When you got your answer from the State Department? Mr. SYRAN. Yes, sir. Mr. FLANAGAN. Now, up to this time, July of 1949, had you contacted any of the representatives of the National Tankers on the situation? Mr. SYRAN. No, sir. Mr. FLANAGAN. You merely took it up with the State Department? Mr. SYRAN. That is right. That was the last of a series of inquiries that we had made. Mr. FLANAGAN. Now, as the record here shows, United Tanker continued to operate the Kettleman Hills and, in addition, the Saint Christopher was chartered to the Soviet Government in 1949 and continued to operate until the spring of 1950? Mr. SYRAN. That is right. Mr. FLANAGAN. During that period, were you and ECA cognizant of the fact that these two vessels were carrying Communist oil? Mr. SYRAN. Oh, yes. We were cognizant of it, because we watched those two vessels very carefully; not only those two, but we were on the look-out for any other tankers that might be going in that direction. For example, we knew, if my recollection serves me right, that in October 1949 there wasn't any action, because both of them were in the repair yards, undergoing repairs. Senator NIXON. At that time, did United have any vessels, during this same period, which were carrying ECA cargoes? Mr. SYRAN. Yes, sir. Senator NIXON. During this whole period? Mr. SYRAN. Yes, sir. Senator NIXON. In other words, during this whole period United was receiving ECA funds to carry ECA cargoes, at the time they were receiving funds from the Soviet oil agency for carrying the oil cargoes? Mr. SYRAN. That is right: except that those tankers which were moving ECA cargoes were in the Atlantic, or rather going to European countries, and not in the direction of China. Senator NIXON. Did it not seem to you somewhat inconsistent that that should be going on? Mr. SYRAN. That is what we were pretty much concerned about. Senator NIXON. If it seemed that way to you, I was wondering why it was that never during that period did you mention that inconsistency to the people who operated United. Mr. SYRAN. Because I had no legal authority, Senator. They were an American flag concern. They had the full umbrella of the protection of an American shipping concern, with American flag tankers. Senator NIXON. Let me say this. I assume from your testimony that you have indicated no official protest was made to United. May I ask you: Did you, to your knowledge, or did anyone connected with ECA, discuss informally with any officials of United what appeared to be a very gross inconsistency? Mr. SYRAN. In 1949, Senator? No, sir. Senator NIXON. When was it first discussed informally? Mr. SYRAN. Well, Mr. Wasson came down to see me in May. Senator NIXON. In May of 1950? Mr. SYRAN. But that was as a result of action that we had taken in March of 1950. Senator NIXON. In March? Mr. SYRAN. Yes, sir. Senator NIXON. Go ahead. Mr. FLANAGAN. What action did you take in March of 1950 that led to Mr. Wasson coming to see you? Mr. SYRAN. Well, there is a little more to it, Mr. Flanagan. I mentioned to you the inconsistencies that Senator Nixon mentioned, to which we were alert the minute they took place, in June or July 1949. In September 1949, I recall seeing Senator Knowland's statement that appeared in the press. In October 1949, we knew that both the Kettleman Hills and the Saint Christopher were in a repair yard. In November, sometime in November, I heard that the Defense Establishment had taken the matter up and were taking some action with respect to it. Now, during the winter months, tanker business is at its best. During the winter of '49-'50 there was not as heavy a tanker demand year as the same period of 2 years before that, and there was a good deal of bidding going on during that period. Now, sometime in the fall of 1949, again bringing the matter up that Senator Nixon brought up, about the legality of these tankers, we communicated unofficially with some of the participating countries and said to them very informally that this outfit operating the United Tankers was not, in our opinion, coperating with the general policy of the United States Government, and we asked if they would please be good enough, when making transcations, to prefer other tankers, of other American owners, or of countries that were friendly to us within the ECA orbit. We, in ECA, do not make any direct transactions. We finance transactions. And the way these charters would come to us would be after or immediately before a charter was made that they would dispatch; "they" referring either to the foreign mission or to the broker making the transaction-they would refer the charter to us for approval. The primary reason for the approval is to ascertain whether the rates, terms, and conditions are in fact competitive and in accordance with the going rate of the world market, so that we would not pay any excess amount of money. |