STATEMENT OF GEORGE L. PRATT, VICE PRESIDENT AND TREASURER, CHESTATEE PYRITES & CHEMICAL CORPORATION, ATLANTA, GA.

Mr. PRATT. Mr. Chairman and gentlemen of the committee, when the Government entered the war in 1917, one of the first things that became apparent was the absolute necessity of securing a supply of minerals needed for the manufacture of munitions, for the hardening of steel, and so forth.

Accordingly, the Secretary of the Interior, in which Department were the Geological Survey and the Bureau of Mines-the Bureau of Mines has since been transferred to the Department of Commercebecame intensely active in his search around the country for deposits of these minerals, the supply of which had up to that time been practically all secured by importations.

On the 17th day of May 1917-and I might say I an referring to the general war-mineral situation, although, of course, my own Chestatee Co. will be mentioned prominently in connection with itin May 1917, the late Mr. Fuller Callaway, who was a prominent man in our community, a cotton-mill owner, and identified also with mining, called on me at the mines and presented a letter from the Secretary of the Interior, and late Mr. Franklin K. Lane, in which letter he requested Mr. Callaway to use his influence with the Chestatee Corporation to enlarge its operations.

This letter is printed in the printed hearings held on House Joint Resolution 170, Sixty-sixth Congress, second session, at page 20.

On June 18, 1917, I made full written report to the Secretary of the Interior through Mr. Callaway as to then operations of the property which I was there conducting in a small way.

I tendered the property for the use of the Government and declined to enlarge the operations to result in larger output to supply the needs of the Nation unless the Government would-and I am now quoting from that report, which is also spread out in full in the same document I referred to-unless the Government would "underwrite in some way the hazard or mining risk' which would attach to the enlarged enterprise "not justified under sound, conservative business principles in normal times.' That is to be found on page 27 of the same document I just referred to.

Being called to Washington by Secretary Lane, I reiterated my position, and I further showed to the Secretary that the corporation was unable to finance the larger operations required by the Govern

ment.

Whereupon Secretary Lane appealed to the Ashcraft-Wilkinson Co., through Mr. Lee Ashcraft in Atlanta, and Mr. Mell Wilkinson, who was then in Washington, Mr. Wilkinson then acting as assistant to the Secretary of Agriculture in Washington in the distribution of munitions material.

The Secretary of the Interior appealed to them to use their influence with the Chestatee Corporation to enlarge their operations and to assist in financing the enterprise.

Complying with this request, Ashcraft-Wilkinson Co. did use their influence and did lend the necessary money, financing the enterprise in the amount of $695,000.

Secretary Lane promised to sponsor legislation for their protection. This he did by shortly thereafter causing to be introduced in Congress a bill entitled "An act to provide further for the national security and defense by encouraging the production, conserving the supply, and controlling the distribution of those ores and metals and minerals which have formerly been largely imported or of which there is or may be an inadequate supply.'

After some delay in the Congress, due to press of other war emergencies, the House of Representatives passed this bill early in 1918. After further delay the Senate passed the bill and it was approved October 5, 1918.

In appearing before the committee in advocating the passage of this bill-and I refer to the hearing before the Committee on Mines and Mining Secretary Lane, sponsoring the legislation in accordance with his promise to Ashcraft and Wilkinson, referred to his activities, and referred particularly to the activities of his agent, Mr. Callaway, and without throwing any bouquets he held the Chestatee Corporation up as an example of what could be done in other mines in the country. As I say, Secretary Lane, sponsoring this legislation that I have referred to, and referring to the activities of Mr. Callaway, his agent, said, among other things-and I am quoting now from House Report No. 493, Sixty-fifth Congress, second session, page 2:

Callaway is a very live man *

* that man has developed five mines since the middle of last year. * * * The men who owned these properties were not familiar with matters of large finance, did not know how to go about getting out their products and getting the money. * * * So he gave these men guidance and support with the result that there has been that development which is very promising.

He went on to say:

That is the kind of thing that can be done throughout the United States, provided you can give some kind of guaranty that the man who develops these properties * * * can be assured that he will get his money out of the investment that he puts into the development of these mines.

The Secretary's request to the Ashcraft-Wilkinson Co. is admitted in the report and finding in the Chestatee case in the following words and I am quoting now from Senate Document 224, Seventieth Congress, second session, page 59; and that document, gentlemen of the committee, was in response to a resolution of the Senate during the years that had elapsed, requesting the Secretary to transmit to the Senate all the rules and regulations and promulgations under which he acted, and for convenience that was printed in this. document.

In that document there are these words: "This claimant had a partially developed plant"—referring to the Chestatee Co.'s claim, which was claim no. 1-"had a partially developed plant at the time of Government interference."

And then at page 61 of the same document there is this statement: In this particular case * * * the then Secretary of the Interior personally requested one of the claimants to operate the properties on a big scale, which claimant at first declined to do unless the Government should underwrite the venture. This, of course, was impossible, but after some delay the Secretary, through his personal agent, requested Ashcraft and Wilkinson to use their influence to induce the claimant to enlarge his operations, and further, he asked them to assist in financing him.

Ashcraft and Wilkinson did so use their influence, and with success, and did finance claimant, for which financing claimant is obligated for a large amount.

Then, at page 64 of the same document, there is this language:

The amount of money required to meet the Government's demands was so great as to make the securing of it by ordinary means almost impossible.

The activities of the Government to induce Ashcraft and Wilkinson to finance claimant so that war needs might be met quickly and in large measure were personal, direct, and effective. The fact that Secretary Lane, who himself had a part not only in the stimulation of the claimant, but, through suggestion, in the financing, recognized that Ashcraft and Wilkinson had performed a service to the Government is evidence of that service.

Still quoting from the same document, at page 67:

In reviewing this claim I have been struck by the magnitude of the expenditures and the possibilities of output. The very bigness of it tended to lead an examiner unconsciously to fail to give the claimant full justice. The record shows that the then Secretary of the Interior, realizing no doubt that this property presented opportunities for the biggest production of pyrites in the entire country, used every means in his power to persuade the claimant to develop it. His full influence short of underwriting the project, was exerted. Always, too, there was the realization that the claimant, in responding to the Government's request, would suffer great financial loss, notwithstanding the generous provisions of the War Minerals Relief Act.

That was quoted from a report adopted by one of the Secretaries of the Interior under an amendment of this act passed in 1921, which resulted in a second partial award, and that statement will be found on page 58 of the Senate Document 224, Seventieth Congress, second session.

Responding to this Government insistence, Ashcraft-Wilkinson Co. loaned the Chestatee Corporation $695,000, taking its notes bearing 6-percent interest. The Government at all times, or almost continuously, had its engineers and other representatives on the ground.

Engineer Julihn, reporting to the Bureau of Mines, Department of the Interior, by letter from the Chestatee mine, dated November 28, 1917, said:

Arriving here as the first point of my itinerary, I quickly realized that the possibilities of this mine must be much greater than those of any other I would visit, and that no estimation of it could be made in cursory fashion. It is an enterprise of enormous potentialities in a formative state being attacked vigorously by capable men with adequate capital.

Again, on December 6, 1917 in reporting to the Bureau, Mr. Julihn said and he was the authorized representative of the Government on the ground, cooperating and advising how to proceed: the executive personnel is all that could be desired. There is no lack of money as the enterprise is adequately financed on a fine, clean basis.

Mr. Chairman, may I make this statement of opinion here? The War Minerals Relief Act has been referred to, and the awards thereunder as gratuities. It does seem to me, certainly in view of the original act of 1918, sponsored by the Secretary of the Interior, which provided for an appropriation, and which provided that in the event that the Government shall, in effect, take over, or requisition or use properties, that it shall make just compensation for their use.

And then, in the event that the just compensation tendered is not satisfactory to the claimant, the claimant had the right to accept 75 percent of what was offered, and then sue the Government for the balance. That is the provision of the act of 1918.

The first amendment, in the act of 1919, which is generally referred to as the war mineral relief statute, provided that the Secretary shall adjust and liquidate and pay the net losses sustained by reason of complying with the request or demand of the Secretary.

I respectfully submit, gentlemen, that that being an amendment to the act under which the war-minerals producers enjoyed the right to just compensation, and to sue if they did not receive it, it-the act of 1919-is, in effect, an interpretation by Congress of the act of 1918 as to what shall constitute just compensation; to wit, the restoration of net losses.

Until those net losses have been paid, as they are determined by the Secretary of the Interior, I think the duty of the Government to the producers has not been discharged.

Furthermore the Government not only requested me to borrow the money, but it found the people to loan it to me. Not only did it do so, but its authorized representative on the ground reported that the financing was on a fine, clean basis, thereby morally approving it.

It received the benefits of the expenditure and the awards which have been made me from time to time, after I have had to go four times through the Supreme Court of the United States in order to get my decision affirmed, have resulted in the payment to me as losses. the amount of the principal of the loan borrowed.

But under a peculiar decision, I respectfully submit, of the Supreme Court last May, it ruled that the interest I paid on that loan must be arbitrarily cut off as of the date of the passage of the relief act.

Proceeding in orderly fashion, the enterprise was enlarged, its capacity practically quadrupled, by the expenditure of $695,000 borrowed from the Ashcraft-Wilkinson Co. and funds from other sources, amounting to a total expenditure of approximately $1,140,000, and deliveries of the larger output were being made when the war ended.

The Secretary of the Interior, under the advice of the Attorney General, declined to administer the War Minerals Act of October 5, 1918, on the ground that the war having terminated he could not consistently use any part of the $50,000,000 appropriation carried by that act for the purchase of minerals no longer needed by the Government, and proposed in lieu thereof to repay net losses sustained by producers who had complied with the Government request or demand to supply the urgent needs of the Nation in the prosecution of the war. Accordingly, he sponsored and assisted in the passage of section 5 of the act of March 2, 1919, which gave him authority, "to adjust, liquidate and pay net losses * * * suffered by reason of money expended and obligations incurred in producing or preparing to produce pyrites * * * in response to the request or demand of the Secretary of the Interior * * * to supply the urgent needs of the Nation in the prosecution of the war."

Under this authority, the Chestatee Corporation, giving due credit for salvage value and other items, filed its claim for $914,000, plus interest payments and accruals on borrowed money and credit purchases.

Partial payment was made-and I ask that this be noted particularly partial payment was made, amounting to $223,000 on October 25, 1919; many items of loss being ruled out, including the item of interest on borrowed capital.

We continued the pressing of the Chestatee claim before Congress, and a hearing before the House Committee on Mines and Mining, in the Sixty-sixth Congress, second session, House Joint Resolution 170, in which the Chestatee case was featured, resulted in the passage of the act of November 16, 1921, which required the Secretary of the Interior to reopen the cases, correct errors, and so forth.

The testimony at that hearing, of which there was some 600 pages, resulted in a favorable report, which is in the record of that hearing, particularly a statement made by Mr. Otis Wingo, which I will refer to later on.

As I say, that resulted in a favorable report in which it was said that the committee was of the opinion that the Secretary of the Interior, or the commission appointed by him, had misinterpreted the legislation and misapplied the law to the facts, and other words to that effect, and favorably reported out the bill which was passed in 1921, under which it was provided that such claimants who have heretofore filed their claims "shall be paid such net losses as they may have incurred", and as they are in justice and equity entitled to, from the appropriation carried by the original act.

I filed a claim, presenting the claim under that amendment, and under that amendment second award of $469,784 was made to the Chestatee Corporation.

Under the act of November 16, 1921, as I said, the Chestatee Corporation was awarded a further amount on October 5, 1922, amounting to $469,784. In this award many items of loss, including interest paid and accrued on borrowed capital, were still denied. Appeal was then made by the Chestatee Corporation to the courts, and in 1924 the Supreme Court of the District of Columbia and the Court of Appeals, District of Columbia, upheld the contentions of the Chestatee Corporation and directed the Secretary of the Interior to include in his adjustments and payments "interest paid and obligated to be paid upon borrowed capital." After these decisions Congress passed the act of June 7, 1924, removed the limit of $8,500,000 total provided by the act of March 2, 1919, in order "to enable the Secretary of the Interior to lawfully pay adjudicated claims." Subsequently in 1925, the Supreme Court of the United States ruled that the courts had no jurisdiction, that the decision of the Secretary of the Interior under the act was final and conclusive and that no court had jurisdiction.

Whereupon the matter, being again carried to the Congress, it passed, the act of February 13, 1929. This act conferred jurisdiction on the same courts which had previously rendered decision in the Chestatee case as to interest on borrowed capital.

Under this authority the Chestatee Corporation filed two actions in court. In one case claim was made for losses sustained by reason on interest paid and obligated to be paid upon borrowed capital. In the other case claim was made for refund of losses sustained by reason of several items of loss theretofore denied by the Secretary. Both these cases again going through to the Supreme Court of the United States that court affirmed the Chestatee Corporation's claim as to every item claimed, including interest paid and due to be paid on borrowed capital, affirming the lower courts. Under these decisions the Chestatee case was reopened by the then Secretary of the Interior and a third award was made on March 14, 1932, as to interest and