HOUSE OF REPRESENTATIVES. TUESDAY, January 29, 1924. The House met at 12 o'clock noon. The Chaplain, Rev. James Shera Montgomery, D. D., offered the following prayer: Incline Thy ear unto us and hear us, O Lord. Do Thou ever teach and persuade us that the tidal wave of a clean, pure life is sufficient to lift us and the Nation to the highest plane of usefulness. May Thy holy precepts be enthroned in all our breasts. Within the confines of our country may truth and honor and justice prevail. Do Thou ever give us great encouragement to press toward the goal of high and holy endeavor. Enable us always to prove ourselves to be just and patriotic citizens in the pursuit of all good work. Bless and succor all institutions that contribute to the Nation's Christian character. Through Christ. Amen. The Journal of the proceedings of yesterday was read and approved. TREASURY AND POST OFFICE APPROPRIATIONS. Mr. MADDEN, from the Committee on Appropriations, by direction of that committee, reported the bill (H. R. 6349) making appropriations for the Treasury and Post Office Departments for the fiscal year ending June 30, 1925, and for other purposes, which was read a first and second time, and, with the accompanying report, referred to the Committee of the Whole House on the state of the Union. Mr. BYRNS of Tennessee. Mr. Speaker, I reserve all points of order. LEAVE OF ABSENCE. Mr. FITZGERALD. Mr. Speaker, I ask unanimous consent to be absent until February 4 because of important matters in my district. The SPEAKER. The gentleman from Ohlo asks unanimous consent to be absent until February 4 on account of important matters in his district. Is there objection? There was no objection. AIR SERVICE CONDITIONS. The SPEAKER. By special order, the gentleman from Wisconsin is recognized for 40 minutes. Mr. NELSON of Wisconsin. Mr. Speaker, the Members of the Congress and the people of the country are familiar with the details of the aircraft scandal during the war, which resulted, after several investigations, in the disclosures that with more than $1,000,000,000 available not a fighting plane or bomber was delivered to the front, and but 196 airplanes of American manufacture of any character whatsoever were delivered to the front in France up to the time of the armistice. Despite an investigation by the now Secretary of State, the Hon. Charles E. Hughes, whose report will be found in the CONGRESSIONAL RECORD of December 30, 1918, pages 883-914, inclusive, and the recommendations made therein, nothing to date has been done to punish the guilty. Despite the investigations of the Senate committee, headed by Senator C. S. Thomas, which reported on August 22, 1918, nothing has been done. Despite the accusations made by the distinguished gentleman from Michigan, Mr. ROY O. WOODRUFF, on April 11, 1922, nothing has been done. While it is not my purpose to rattle any war skeletons, nor to recall the circumstances surrounding the scandals which forever will be a blot upon the pages of American history, I am impelled to again call to the attention of this Congress the conditions in the Air Service which, I am informed, now imperil America's defense in the air, at this very moment when newspapers and magazines are being filled with statements by officials of the Air Services, which can be shown to be plain and deliberate misrepresentations. A condition I am informed at present exists in our Air Service which is a continuation of the same methods by the same individuals and corporations who have been bitterly condemned by unprejudiced investigators and investigating committees in the past as having been responsible for the shameful failure which developed during the war. I have had brought to my office files containing more than 7,000 documents which I am told will show clearly and incontrovertibly that the same conditions which existed during the darkest days of that black scandal in the Air Services of this country now exist in those services; that the same firms who participated in the loot of more than $500,000,000 of the people's money and who contributed indirectly to the death of LXV-103 many of our brave aviators-according to the investigation of the Senate committee; of Gutzon Borglum, the sculptor; of the Frear committee of the House; of H. L. Scaife, the Department of Justice investigator who succeeded Mr. Hughes; and of the various other investigations which have been attempted from time to time-are still getting the contracts under the same conditions and provisions they got those previous contracts. According to the findings of the Senate Thomas committee (S. Rept. No. 555, p. 13, Aug. 22, 1918), the concerns which at the outbreak of the war were prepared by experience and the possession of adequate factories and engineering staffs to launch into the promptest possible quantity production of efficient battleplanes were denied contracts, while automobile concerns and individuals who were without either experience, factories, or engineering staffs for designing and building aircraft were permitted, after we entered the war, to form companies for the manufacture of aircraft; were financed by the United States Treasury; were given practically all of the contracts; were paid without stint until more than $700,000,000 had been consumed and numerous aviators had been killedand never delivered a fighting plane at the battle front. I was loath to believe it possible in the United States of America, in the light of the disclosures made by these various investigators, that the conditions of which they then complained could obtain to-day. I undertook with my office force to go into this evidence which had been brought to my office. I consulted with the various investigators, who assured me that the conditions, with the exception that we are not now in war, are as bad in the Air Services to-day as they were in those days. I looked personally into some of this evidence and discovered that it is of such magnitude that I have neither the time. money, nor organization to go into it systematically, but I am convinced by my personal inspection of the evidence that it is of such a nature and of such grave importance that I dare not refuse to present to this House the facts I am now giving you. This evidence is indicative, so far as I have been able to go into it. of such a serious condition that I consider it the duty of this House to see to it that these more than 7.000 documents are classified and scanned by competent attorneys under the direction of a committee in order that this House may be informed as to the proof or falsity of the charges that are openly made that the Air Service procedure to-day is corrupt and that our defense in the air is in peril because of these conditions. I am preferring no charges against anybody, and I have no political object in mind, but I simply wish to end this unspeakable condition in the Air Service or set at rest for all time these charges if they are found untrue. Men of integrity have brought the evidence of these charges to my office. They tell me the evidence is complete and incontrovertible. I bring it to this House because my inspection of the evidence convinces me that it is probable that these charges are true. I think a committee of this House should sit to determine whether or not the documentary evidence in this case is conclusive. Who were the firms who during the war got the contracts for aircraft that cost us $700,000,000 and more and were never delivered? Were funds wasted during the war in our Air Service? Maj. Gen. Mason M. Patrick, present Chief of the Army Air Service, says in an address which is reproduced on pages 30 and 31 of the Aeronautical Digest of January, 1924, that The money we wasted would provide for our aviation program for 400 years. According to the records, companies were hastily organized after it was discovered the United States would have hundreds of millions to spend on aircraft. Those firms were organized to take advantage of the war, of the peril of the United States. They formed themselves into what was known as the Manufacturers' Aircraft Association (Inc.). According to the records, the following firms were members of that association. Mr. Speaker, because of my voice I will not attempt to read all the names of these firms, but will ask unanimous consent to insert them in the RECORD. The SPEAKER. The gentleman from Wisconsin asks unanimous consent to insert the names of certain firms in the RECORD. Mr. BLANTON. Mr. Speaker, reserving the right to object, may I ask the gentleman whether he would not like to have an audience? Mr. NELSON of Wisconsin. Not at all, and I beg the gentleman not to take the time in having a call of the House. Mr. BLANTON. I will not bother the gentleman. I quote: The committee has not heard a word in approval of it. It is condemned by every airplane manufacturer outside of the immediate beneficiaries. Those executing the license agreements have done so under protest because the Aircraft Board recommended or required it. Criticisms of it are numerous, the most serious of them being that it subjects manufacturers to onerous requirements by its beneficiaries, such as assessments for the use of plans and specifications, the purchase of the material and accessories from favored houses, the The SPEAKER. Is there objection to the request made by assignment and surrender of valuable patents and patentable devices the gentleman from Wisconsin? There was no objection. (The names referred to follow:) Aeromarine Plane & Motor Co., Keyport, N. J., Times Building, New York City; Boeing Airplane Co., Georgetown Station, Seattle, Wash.; Burgess Co., Garden City (L. I.), N. Y.; Curtiss Aeroplane & MotorCorp., Garden City (L. I.), N. Y.; Curtiss Engineering Corp., Garden City (L. I.), N. Y.; Dayton Wright Co., Dayton, Ohio; Gallaudet Aircraft Corp., East Greenwich, R. I. (522 Fifth Avenue, N. Y.); Fisher Body Corp., Detroit, Mich.; Glenn L. Martin Co., Cleveland, Ohio; L. W. F. Engineering Co., College Point (L. I.), N. Y.; Packard Motor Car Co., Detroit, Mich.; Sturtevant Aeroplane Co., Hyde Park District, Boston, Mass.; Thomas Morse Aircraft Corp., Ithaca, N. Y.; West Virginia Aircraft Co., Wheeling, W. Va.; Wright Aeronautical Corp., 238 Lewis Street, Paterson, N. J.; G. Elias & Bros. (Inc.), Buffalo, N. Y.; and a few others. Mr. NELSON of Wisconsin. These firms participated in the contracts in which more than $700,000,000 was spent, and not a fighting plane developed during the war. Now, how did these firms proceed to take control of the situation? First, their friends and former officials were placed on a so-called advisory board, which instead of advising took control of the situation until it saw that its course was to be disclosed, whereupon it promptly endeavored by resolution to divest itself of its usurped power and again call itself an advisory board in an effort to escape just condemnation for its conduct. Next, and most importantly, these firms got up what was then called and what is now designated as "the cross-license agreement." What was the cross-license agreement? Briefly, it was an agreement entered into by and between the members of the Manufacturers' Aircraft Association (Inc.) under which the patents owned or controlled by them were cross licensed to each member of the trust by the other members; in effect, the patents were pooled. Each member company was to pay into the trust treasury a royalty of $200 for each airplane built by it. Out of the first deposits thus made the Wright-Martin Aircraft Corporation was to receive $175 of each $200 thus deposited, until it had received the sum of $2,000,000. Following this the Curtiss Aeroplane Co. was to receive $175 of each $200 until it in turn had received $2,000,000. The balance of the funds deposited was to remain in the treasury of the trust. As a matter of fact, I am informed that the collection of the entire amount of royalty from the Government by the air trust was based upon a fraud which was perpetrated in this way, namely: The air trust asserted that it controlled certain adjudicated patents as to special forms of lateral airplane control which would be infringed in the manufacture of the Government airplanes, whereas the airplanes manufactured by the air trust for the Government utilized a form of lateral control which had not been involved in the adjudications; in other words, if my information is correct, there was no legal basis upon which to predicate the payments made, and a thorough investigation of this cross-license fraud may recover for the Government the millions paid out on this account. Now, what does the Senate Thomas committee report as having found out about this cross-license agreement? I am going to quote from that report of August 22, 1918, page 15, but before I begin the quotation let me state that the Subject of the cross-license agreement was investigated by a subcommittee of the Senate Thomas committee, and for some reason, never explained to the Congress, the testimony was not included in the hearings of the committee as published, and has never been published, so far as I am able to learn, nor is the evidence available apparently. I am told that if the facts brought out in this testimony had been made public they would have shown just what I have stated; namely, that the whole scheme for collecting royalties from the Government on these airplanes was based on fraud and would not have been tolerated by the country. to the Aircraft Association upon terms prescribed by itself, the discouragement of invention, and the inevitable control of the aircraft industry by that association or by some other interest through its agency. Your committee sympathizes with many of these sentiments, and notwithstanding the Aircraft Production Board as now officered no longer requires or recommends the execution of the agreements by contractors we believe the arrangement should be abrogated. We regard it as vicious and as designed to reap large profits by taking advantage of the necessities of the Government. The basic patentees should, of course, if the patents are valid. be compensated, but this should be done by the Government directly whenever the courts finally determine who the owners are, and the patents should then be made free to all manufacturers. New patents of meritorious character should be similarly acquired by the Government as they appear. Such a course would stimulate invention and promote the development of an art which is still in its cradle. In my opinion the Manufacturers' Aircraft Association (Inc.) and its method of operation were in absolute violation of the Sherman antitrust law, and I am convinced that an investigation will show this, not only as being a fact then but its being a fact to-day. Let me further observe that although the Senate committee believed that the Air Service was going to no longer require the execution of the cross-license agreement, the contracts we have here now show that the committee was deceived, because the cross-license agreement is covered in paragraphs of the contracts which I now have and which were executed in 1922 and 1923. We have now seen who composed this Aircraft Trust in those disgraceful days and their method of insuring their throttling grasp upon the throat of the Nation's air defense. I might observe in passing that it was this Air Trust, the Manufacturers' Aircraft Association, which charged this Government $2,000,000 for the use of the Wright patents, which the Wrights in 1914 had sold to Great Britain for $75,000. Now, who composed the Manufacturers' Aircraft Association in 1923? I quote from the Aircraft Yearbook of 1923, published by the Aeronautical Chamber of Commerce of America (Inc.), page 274, which shows the membership to be as follows: Aeromarine Plane & Motor Co., Keyport, N. J.; Boeing Airplane Co., Seattle, Wash.; Curtiss Aeroplane & Motor Corporation, Garden City, Long Island, N. Y.; Curtiss Engineering Corporation, Garden City, Long Island, N. Y.; Dayton Wright Co., Dayton, Ohio; G. Elias & Bros. (Inc.), Buffalo, N. Y.; Fisher Body Corporation, Detroit, Mich.; Gallaudet Aircraft Corporation, East Greenwich, R. I.; L. W. F. Engineering Co., College Point, N. Y.; Glenn L. Martin Co., Cleveland, Ohio; Packard Motor Car Co., Detroit, Mich.; Sturtevant Aeroplane Co., Framingham, Mass.; Thomas-Morse Aircraft Corporation. Ithaca, N. Y.; Chance Vought Corporation, Long Island City, N. Y.; West Virginia Aircraft Co., Wheeling, W. Va.; Wright Aeronautical Cor poration, Paterson, N. J. It will thus be seen that the membership of the Manufac turers' Aircraft Association to-day is practically identical with the membership of the Manufacturers' Aircraft Association of those days of our national disgrace. I now present to this House a list of contracts issued by the Air Services for new airplanes and airplane parts during the years 1922-23, which list I shall not take the time of the House to read, but ask unanimous consent to include in my remarks in the RECORD, and I desire to call the attention of the Members of this House to this list of contracts. D. C. Emmons. Aeromarine Plane & Motor Co.. 1 3 201 3*.. 1922 Do.. 1 3 201 39.. 1 3 204 76.. 1922 Do 1 4 204 110. 1922 Aeronautical Engineering Corporation. 1 4 201 30. 1922 1 4 4 59.... 1922 1923 1923 1923 8 9 681 703. 9 994. 8 9 975. 1923 1923 1923 1923 Mr. NELSON of Wisconsin. By this list it will be seen that in 1922-23 the Aeromarine Piane & Motor Co. received from the Air Service 46 centracts. The Boeing Airplane Co. received 36 The Consolidated Aircraft Corporation, which is a contracts. 1923 combination of the old Dayton-Wright Co. and the old Gallaudet Aircraft Corporation, received 2 contracts, the Curtiss Aeroplane & Motor Corporation 95 contracts. The Dayton-Wright Co., which was accused by the Department of Justice in 1922 in the action of the United States of America, plaintiff, against the Dayton Aeroplane Co., of fraud against the Government in excess of $2,000,000, and which 1923 1923 1923 9 2023. 1923 152.. 1923 34... 1923 1923 2 8 20 2 9 4 66.. company became defunct in July, 1923, was receiving up to the day it went out of business contracts from the United States Air Service, having received in 1922 and 1923. at the time it was under charges by the Department of Justice, 30 contracts. This was the organization of which Col. E. A. Deeds was an incorporator. Deeds, you know, was condemned by Mr. Hughes in his investigation, and court-martial was recommended. The L. W. F. Engineering Co. received eight contracts. The Packard Motor Car Co., which, according to War Department audits as reported in the American Legion Weekly of April 27, 1923, page 6. overcollected on its contracts from the Air Service $6.580,521, received contracts in 1922-23 numbering 49. The Wright Aeronautical Corporation, formerly the WrightMartin Aircraft Corporation, was accused on the floor of this House by the distinguished gentleman from Michigan [Mr. WOODRUFF] of having overcollected from the Government $5.267,476,75. Action was promised at that time against this company, but nothing more has since been heard of the case, except that the Wright Aeronautical Corporation in 1922-23 received 82 contracts from the United States Air Services. After this case was in the hands of the United States district attorney of New York, with instructions to proceed with action, certain events began to transpire which may be to some degree an explanation of these singular circumstances surrounding the letting of aircraft contracts by the Air Service in 1922-23 to these companies. A magazine published at Greenville. S. C., called the Libertarian, in its issue of December, 1923, publishes the following in an article: Under date of June 16, 1921, Mr. Charles Hayden, an official of the Wright-Martin Aircraft Corporation, in a letter to Hon. John W. Weeks, Secretary of War, with the salutation of "My Dear John," stated: "These officers who now have claim in charge appear to be entirely incompetent to handle it, or else they can not handle it fairly "Ordinarily I would hate to bring these matters to your personal attention, but the way the general situation has been developing in the last six months, it seems to me that everything that can be done by cooperation between bankers and the Government to inspire confidence in a legitimate way should be done, and that is why I feel a perfectly clear conscience in giving you this little additional bother." Under date of June 22, 1921, Hon. John W. Weeks, Secretary of War, in a letter to Mr. Charles Hayden, with the salutation "My Dear Hayden," stated: "In view of the steps that have already been taken, I am convinced that the proper procedure is for the company to come in before the Air Service section and make their showing. "Whatever decision may be reached by the Air Service section, you should understand, is not conclusive. Not only is the approval of a higher officer required, and even if that approval is obtained, there is a further appeal to myself. " On November 21, 1921, Assistant Secretary of War, Mr. Wainwright, returned to the Secretary of War a letter from Mr. Charles Hayden, together with a memorandum informing the Secretary of War that there had been full hearings given the contractor, who was represented by counsel, and that in view of the extensive hearings, covering a period of two years, nothing further could be gained by administrative action and that "only a court which possessed full powers to render a final decision and enforce it could cope with such a situation." The memorandum further stated: "On October 26, 1921, the file of the case of the Wright-Martin Aircraft Corporation was forwarded to the Department of Justice, requesting that litigation be instituted to protect the interests of the United States. The Attorney General advises me that the papers have been referred to the United States attorney, New York City, for action. Officials of the Air Service will probably proceed to New York City in a few days to advise the United States attorney in this matter. "It will be noted that the case is now in the hands of the Department of Justice, which is engaged in the necessary investigation to determine the course of litigation. In view of this state of affairs, the case has passed beyond the control and jurisdiction of the War Department. "I feel very strongly that the viewpoint of the contractor having been presented to the Air Service Section by its principal officials and by its counsel at a number of meetings and in many papers, that the contractor's viewpoint is thoroughly understood by the depart ment." On November 23, 1921, two days after this memorandum of the Assistant Secretary of War was written, in a letter to Mr. Charles Hayden, the Secretary of War stated: "I have not thought of the ase in which you are interested since I wrote you last June, assuming that it was proceeding satisfactorily. I will see Mr. Hoyt" (Hoyt was president of the Wright-Martin Aircraft Corporation) "some day next week if he will call my secretary and make an appointment. In the meantime I have requested that no further immediate action be taken by the Department of Justice until I have had a talk with Mr. Hoyt." The case was withdrawn from the hands of the United States attorney in New York City and a hearing was given these people in the Department of Justice, at which were present officers and counsel of the corporation, the Assistant Secretary of War, the Judge Advocate General of the Army, representatives of the Department of Justice, and members of the legal staff and auditors of the War Department. On January 21, 1922, Col. Guy D. Goff, assistant to the Attorney General, wrote the following letter to Mr. William Wallace, jr., of the firm of Chadbourne, Babbitt & Wallace, attorneys for the Wright-Martin Aircraft Corporation: "Referring to your letter of December 9, 1921, in which you very kindly inclose a memorandum presenting in consequential order your views on the chief points orally argued at the hearings before me on December 7, 1921, concerning the final adjustment under Wright-Martin cost-plus contracts of the 2250 series, I wish to say that your oral argument and also the points and authorities stated in your memorandum have had very careful attention. "After thorough consideration I have to inform you that in the opinion of the Attorney General the case is one in which it is necessary to institute litigation to protect the interest of the Government." On May 7, 1922, about a month after the conduct of this case had been criticized on the floors of Congress, Col. Guy D. Goff, Assistant to the Attorney General, in a letter to Mr. Leland B. Duer, stated: "There are reasons why the department desires you to handle the case." The reasons were not explained in the letter, but the fact remains that promises made in behalf of the Attorney General during the impeachment proceedings on December 18, 1922, that action would be brought in this case within a few weeks, have not been kept. Bear in mind, this company is receiving contracts now involving millious: The sage who said, "Do right and fear no man; do not write and fear no woman," might well have amended his advice to include, "Do not write and fear no man or woman." The "Dear John " letters may become historical. Mr. WAINWRIGHT. Will the gentleman yield? Mr. WAINWRIGHT. Is not the gentleman aware that that action is now proceeding against the Wright Aeronautical Corporation and is pending? Mr. NELSON of Wisconsin. I have heard they are proceeding, but two years have gone by since we had that specifie promise and still we hear it is proceeding indefinitely. Now, we want to look and see exactly what the status is. Mr. WAINWRIGHT. But the inference to be drawn from the gentleman's remarks is that no action had been brought against this company. Mr. NELSON of Wisconsin. Nothing that I know of, but the gentleman from Michigan [Mr. WooDRUFF] is here and 1 will ask him to state to the House whether he has heard anything about the case. Mr. WOODRUFF. Mr. Speaker, I will say that the only thing I have heard relative to action in the Wright-Martin case is that the Department of Justice is still negotiating a settlement with the Wright-Martin Co., and I understand those negotiations have been going on for something more than a year. Mr. NELSON of Wisconsin. I will say further, gentlemen, that I have consulted gentlemen who know all about this case and the other cases. They tell me that all the indications are that nothing is intended to be done, and if Congress does not act the whole thing will end in a farce. That is what they tell me. Mr. STEVENSON. Will the gentleman yield? Mr. NELSON of Wisconsin. Yes; I shall be glad to yield. Mr. STEVENSON. There has been one other interesting development in the last few months, namely, the scandal in the Veterans' Bureau. Is anything being done about Mr. Forbes and his performances, as well as Doctor Sawyer and the others? Mr. NELSON of Wisconsin. That is why I am reluctant to begin an investigation in this Congress. We investigate and we do not see whether these things are attended to. But in view of the things which have come to pass recently, the Congress itself is derelict if it does not get after these things, and we ought to know how we are spending the people's money. Another singular thing develops. In spite of all of the inVestigations and the reports thereof indicating fraud; in spite of the action of the Department of Justice and the charges of fraud made by it; and in spite of the speeches of the distinguished gentleman from Michigan on the floor of this House, |