Senator THYE. For the record. If you can clear the record on this question then, the record should show the exact figures, both ECA and what has gone out under other exports of ECA but if you have the information let's have it. Mr. MCGOWAN. I can't give you the whole picture but STATEMENT OF JOHN J. BACHMANN, CHIEF, ACCOUNTING INVESTIGATION DIVISION, OFFICE OF COMPLIANCE AND INVESTIGATION, PRODUCTION AND MARKETING ADMINISTRATION, UNITED STATES DEPARTMENT OF AGRICULTURE Mr. BACHMANN. Much of that wheat went out under the ECA program. The ECA specified that it must be domestically produced wheat, over and above the ECA and IWA. There were some other shipments but as to the total of exports it was comparatively small. Senator YOUNG. It was not over 10 or 15 shipments. Mr. BACHMANN. It is very small. Senator THYE. The records should have the exact figures. You may proceed. Senator YOUNG. What is your position with the Department of Agriculture, Mr. Bachmann? Mr. BACHMANN. Chief of Accounting Investigation Division of the Office of Compliance and Investigation. Senator YOUNG. May I ask a question at this time. Senator THYE. Yes; you may. Senator YOUNG. There were 1 or 2 more exporters of wheat who were mixing this Canadian feed wheat with good United States wheat who found afterwards that they were wrong and refunded the Government certain sums of money? Mr. BACHMANN. Yes; there were a number of them. Grain companies which blended about a million four hundred bushels of Canadian wheat with substantial quantities of domestic wheat and sold it back to CCC without CCC knowing they were getting a blended Canadian wheat, and CCC exported it under both IWA and ECA and got part of their payment as subsidy money from IWA. Of course, the other part came from ECA to CCC for this export. Senator YOUNG. How did they happen to refund this money; was it after some investigations? Mr. BACHMANN. There were four firms, who on their own refunded some money on purely the Canadian wheat theory. That was, if it was flour made of poor Canadian wheat in a manufactured quantity it had to be exported flour. In other words, four companies did roughly refund some $400,000 on their own initiative. Senator YOUNG. Was that after the investigation was started by the Agriculture Department? Mr. BACHMANN. It was not. That came back before. The others came back subsequently. Senator THYE. In other words they discovered in their accounting that they may have had some Canadian wheat blended with this which they had exported under the International Wheat Agreement. Mr. BACHMANN. That is right. Senator THYE. And because of that they refunded voluntarily before any Government hearings were instituted or before the Department of Agriculture made any check on it? Mr. BACHMANN. That is correct. Senator THYE. And with that this investigation was started. Senator THYE. Any further questions, Senator Young? Senator YOUNG. I am not quite clear. I understood most of the refunds were after the investigation was started? Mr. BACHMANN. Three of the four companies refunded after the investigation had started. Four in all refunded and as a result three or four hundred thousand dollars came in after the investigation came in to Washington. Senator THYE. Now, Mrs. Sarvela was disturbed over the entire transaction and she herself was questioning the transaction. Mr. BACHMANN. All the customs agents were put on notice by the Customs Bureau that the quantities of Canadian wheat should be watched, and that if the quantities grew in size Washington should be notified so that Washington could look to see if some of that wheat was going to improper channels. And in 1950 all of a sudden it mushroomed and she became disturbed and called her people's attention to it. Senator YOUNG. You heard the testimony just before lunch that he had met with Mr. Johnson of the Department of Agriculture in Minneapolis. Who is Mr. Johnson? Mr. BACHMANN. I don't think I know. Mr. GUINANE. He is Mr. Morton Johnson. He is chief grain inspector here for the Department of Agriculture in Minneapolis. Senator THYE. He is a certified grain inspector and is in this area. Mr. GUINANE. He is under subpena for this hearing. Senator THYE. I know he is under subpena and he will testify. He is with the United States Department of Agriculture stationed here in Minneapolis and his duties are to check on grain. If the United States Department of Agriculture wants any inspection whether the grain goes into Commodity Credit Corporation in anyway or anywhere then they ask him to report on it. You may proceed. Mr. GUINANE. I would like to read another letter dated August 24, 1951, from Transit Grain Co., and signed by Julian Scott, to Bunge Corp., Minneapolis. Gentlemen: I have your letter of August 23, and see we were absolutely within our rights I would like to ask to have that letter of August 23, that they referred to, produced if you have it. Mr. MOSKOVITZ. What was that? Mr. GUINANE. The letter of August 23, if you have it. Apparently it is from Bunge to Julian Scott. Mr. MOSKOVITZ. From Bunge to Julian Scott? Mr. GUINANE. Yes; from Julian Scott. Mr. MOSKOVITZ. From Julian Scott to Bunge? Mr. GUINANE. No; it would be from Bunge to Julian Scott. Mr. MOSKOVITZ. I believe you mean from Julian Scott to Bunge. Mr. GUINANE. That is correct, from Julian Scott to Bunge. We request it be produced. [Reading:] and also on the wheat that duty hasn't been paid on so far, we can insist on the customs at both New Orleans and Houston to accept the duty inasmuch as a concession was made between the customs office at Minneapolis to allow business to operate freely. You state, duty should be paid at New Orleans and Houston. This we are attempting to do right now on only that wheat that is available. As stated in our letter of June 6 we thought duty was being paid on this wheat and much to our surprise we learned from Bill Kellogg not so long ago that duty wasn't paid and we have been taking steps ever since then to make amends on this error. Now, he speaks about wheat that is shipped in transit in bond. Mr. KELLOGG. Yes; as I recall all the early shipments were sold in bond and shipped in bond. Mr. GUINANE. Supposedly, and allegedly for export. [Reading:] Of course, we realize that the wheat came in in bond but the issue between Bill and I, also Bob Henderson, when making these trades, was that they took it in in bond on a feed-wheat proposition to escape the full duty but were paying around 71⁄2 to 8 cents per bushel, but to expedite the movement they let it continue in bond. I knew it was rather confusing and maybe I didn't understand it but, you did tell me the wheat came to Duluth by boat and was then loaded in cars and then the cars were shipped to Minneapolis and shipments were broken at Minneapolis. It looks now as though I misconstrued your advice about breaking the shipments at Minneapolis. I thought the shipments broken at Minneapolis came forward as free wheat but in order to expeaite the shipments of it, after breaking the shipments it was too much red tape to remove the bonded feature and you left this on, only to expedite the shipments. Í had understood from Vosika that the manner in which you were entering this wheat, the jurisdiction of the customs ceased when entered. What did he mean in the first paragraph there where he saidwe can insist on the customs at both New Orleans and Houston to accept the duty inasmuch as a concession was made between the customs office at Minneapolis to allow business to operate freely. Do you know what he meant by that? Mr. KELLOGG. No, I do not. Mr. GUINANE. Did you have some contact with the customs office in Minneapolis? Mr. KELLOGG. No, I did not. Mr. GUINANE. Mr. Vosika did? Mr. KELLOGG. Yes. Mr. GUINANE. Mr. Henderson did? Mr. KELLOGG. No, I don't believe he did. Mr. HENDERSON. No, sir. Mr. GUINANE. Did they talk to you here in Minneapolis? Mr. KELLOGG. At the time. Mr. GUINANE. What did they talk to you about here in Minneapolis? Mr. KELLOGG. I don't know. Mr. GUINANE. Was it because they wanted to urge the customs office and Mr. Vaughan to cross out the phrase "unfit for human consumption" and he refused? Mr. KELLOGG. I don't know. Mr. GUINANE. Was there any reason why this wheat was shipped to Minneapolis for other purposes than that? Mr. KELLOGG. I don't know. Mr. GUINANE. Don't you know that it was nothing but a fictitious record here in Minneapolis? Mr. KELLOGG. No, sir. Mr. GUINANE. Isn't that what he meant when he said to let business go on as usual? Mr. KELLOGG. I don't know. Mr. MOSKOVITZ. Mr. Higman testified about this and explained it to us. Mr. GUINANE. But I am talking to a man on the ground floor, or a man who is on the ground floor of this thing. Senator THYE. That is the reason we came here, for the purpose of having the people that actually were here on the ground floor transacting the business testify. That is why we are here and that is why we are going to Galveston. We are just trying to get the facts. Mr. KELLOGG. We would like you to have them. Mr. GUINANE. Now, what did Mr. Henderson and Mr. Vosika tell you they talked about? Mr. KELLOGG. Mr. Henderson said he had never seen him. Mr. GUINANE. What did Mr. Vosika say? Mr. KELLOGG. You will have to ask him about that. Mr. GUINANE. What did they tell you about that, you are in charge of this whole outfit here? Mr. KELLOGG. Yes. Mr. GUINANE. Mr. Vosika was just doing a job? Mr. KELLOGG. That is right. Mr. GUINANE. He didn't get any profit out of it did he? Mr. KELLOGG. That is right. Mr. GUINANE. What did Mr. Vosika see the customs officer here in Minneapolis about? Mr. KELLOGG. I don't know. Mr. GUINANE. It was a very important thing? Mr. KELLOGG. I don't know. Mr. GUINANE. You don't know? Mr. KELLOGG. I do not know, there are a good many details and the man in charge has to turn something over to some department and that is just about the end of it. Senator THYE. Then if you turned this over to someone for the sake of record you tell us who you turned this over to so we can connect the missing link. If you didn't transact the business just let us know and let us have the information as to whom you turned it over. Mr. KELLOGG. In this case, Senator, I would say Mr. Vosika. Senator THYE. And you instructed him to carry through? Mr. KELLOGG. Yes. Mr. GUINANE. But Julian Scott had talked to you, as he had mentioned in this letter. Mr. KELLOGG. Will you read that again, please? Mr. GUINANE. Yes, sir. [Reading:] We thought duty was being paid on this wheat and much to our surprise learned from Bill Kellogg not so long ago that duty wasn't paid and we have been taking steps ever since then to make amends on this error. You are quite familiar with this organization; aren't you? This is back in August 1951. Mr. KELLOGG. It was sold in bond to Julian Scott; naturally the duty wouldn't be paid by us. Mr. GUINANE. That is right. Why did you arrange for him to pay duty? Mr. KELLOGG. For him to pay duty? Mr. GUINANE. You state here that duty should be paid at New Orleans and Houston. Why should they pay duty on it, on grain going out for export? Mr. KELLOGG. I don't know. Mr. GUINANE. Did you get that letter of August 23? Mr. MOSKOVITZ. Yes, just a minute. I want to see myself what is in it. Mr. GUINANE. What does he mean by this statement: Of course, we realize that the wheat came in in bond but the issue between Bill and I, also Bob Henderson, when making these trades, was that they took it in in bond on a feed-wheat proposition to escape the full duty. Is that why you were doing it-to escape the full duty? Mr. KELLOGG. No, sir; as I said, when we sold it in bond there was no reason for us to pay the duty on it. Now as I see and understand it, I may not be correct, but if that wheat had gone right through the port as Canadian wheat the duty wouldn't have to be paid, and I am not sure whether that wheat going into the gulf elevator to mix it with other wheat whether they would have to pay duty on it or not. I am not sure. Mr. MOSKOVITZ. As long as we have a customs man here I would like to know more or know for my own information, are you allowed to pay duty on wheat in bond? Senator THYE. Gladly, but I don't think there is a customs man here. I think for the sake of clarification, if there is a customs official here have him step forward. Good; here is Mr. Horan, the assistant collector of customs at Minneapolis. Mr. MOSKOVITZ. If you have goods in bond are you allowed to pay duty on it? Can you pay duty if you want to? TESTIMONY OF T. P. HORAN, ASSISTANT COLLECTOR OF Mr. HORAN. While it is in bond can you pay duty on it? Mr. HORAN. All merchandise must be entered in the customshouse before duty can be paid. Mr. MOSKOVITZ. Until it is entered we cannot pay duty on it? Mr. GUINANE. I would like to read this letter of August 23, 1951, that has just been handed to Mr. Moskovitz who in turn has just handed it to me. The heading is "Bunge Corp., August 23, 1951. Attention: Mr. Julian Scott." Signed by Walt Vosika: GENTLEMEN: Confirming telephone call this morning we understand you wish to pay duty on some of the bonded Canadian wheat shipped to both New Orleans. La., and Houston, Tex. Are you familiar with this letter, Mr. Kellogg? Mr. KELLOGG. No, sir; I am not. Mr. GUINANE. Will you take a look at it? Tell me whether you ever talked to Mr. Vosika about it. Mr. KELLOGG. No, I never saw the letter. Senator THYE. Who signed it? Mr. GUINANE. Walt Vosika, the general manager and attorney for the Bunge Corp. |