testimony. However, my point is that rarely in the sale of wheat in this area is it done by letter. It is done by word of mouth. Senator THYE. The persons who go down to the pit, to which you had reference, are members of the firms; are they not? Mr. NICHOLS. Yes. Senator THYE. They are certified as members of that association? Mr. NICHOLS. Yes. Senator THYE. And they have a right to the floor. I couldn't go down on the floor. Mr. NICHOLS. Not a stranger. Senator THYE. And nobody would pay any attention to the wiggles I make in my fingers. This was not a transaction. This transaction happened to be with millers somewhere else in the United States. I have to recognize that what is done here on the board of trade is a little narrowly sensed, and they are licensed and they are members of that board of trade. They are known, their bond and everything is known to everybody in the pit. In this particular instance, it happened to be done with a firm down here in the southern part of the United States. I could be wrong, but it would seem to me that it is a little bit different than what you referred to, Mr. Nichols, as a transaction on the board of trade when that is open and operating. Mr. MOSKOVITZ. Are you referring to the Transit Grain Co. when you say down in the southern part of the United States? Senator THYE. I don't care to identify anyone in particular. I am just referring to what Mr. Kellogg said that he transacted most of his business by telephone and yet when we get into the record here we find there are some records on some other transactions. It seems strange to me there should be a record in some transactions and absolutely no record in other transactions. Mr. MOZKOVITZ. I don't want to prolong this any longer than necessary, but with respect to Transit Grain Co., all of the sales made by Bunge Corp. were in bond. That is the Canadian wheat. I have told Mr. Guinane that and so I think the Senator is familiar with it. Senator THYE. All right, gentlemen, have you completed your statements for the moment? Mr. MOSKOVITZ. Yes; I believe so. Senator THYE. All right, is there anyone else who has a comment? (No response.) Senator THYE. We will meet again, but for this afternoon, we stand recessed. (Thereupon, at 4:55 p. m., the committee adjourned to reconvene at Galveston, Tex., on Tuesday, October 13, 1953.) IMPORTATION OF FEED WHEAT TUESDAY, OCTOBER 13, 1953 UNITED STATES SENATE, SUBCOMMITTEE OF THE COMMITTEE ON AGRICULTURE AND FORESTRY, Galveston, Tex. The subcommittee met, pursuant to notice, at 10 a. m., in room 517, United States Post Office Building, Galveston, Tex., Senator Edward J. Thye of Minnesota presiding. Present: Senators Thye (chairman), Young, and Ellender. We are down here for the purpose of trying to get some information. We held a hearing in Minneapolis last week, and the Senate Committee on Agriculture and Forestry, of which I am privileged to be a member, after learning that approximately 60 million bushels of wheat, classified as wheat unfit for human consumption, had been imported from Canada into the United States, during the years 1950, 1951, and 1952, instituted an investigation to determine the reasons for this large increase in importations. In years prior to 1950, the importation of this class of wheat was comparatively small and confined to its intended use as livestock and poultry feed. The committee conducted hearings at Washington which revealed that a substantial portion of the 60 million bushels had been diverted into various channels in direct competition with undamaged United States wheat. We found that this activity by a small group was disrupting the support programs put into effect by Congress to assist the American wheat farmer, and was making our wheat-import limitations ineffective. We found also that the Government was being defrauded of large sums of money in improper collection of subsidies under the International Wheat Agreement. The hearings uncovered one important outlet where over a million bushels of wheat, classified as "wheat unfit for human consumption," had been mixed with and substituted for good United States wheat owned by Commodity Credit Corporation and others. This operation involved irregular payments to elevator operators of approximately $150,000. Since the Washington hearings were held, certain safeguards have been placed in effect to prevent future abuse, and other safeguards are being considered. The hearings being conducted at Minneapolis and at Galveston, Tex., are to explore other methods and outlets which were used to dispose of this wheat, and to obtain other information and records which have been denied to a Government investigating agency. All testimony will be under oath. Our first witness this morning is Mr. John P. Cunningham. 333 TESTIMONY OF JOHN P. CUNNINGHAM, OFFICE OF COMPLIANCE AND INVESTIGATION, PRODUCTION AND MARKETING ADMINISTRATION, U. S. DEPARTMENT OF AGRICULTURE, DALLAS, TEX. (The witness was sworn by the chairman.) Mr. GUINANE. Will you please give your full name and title to the reporter? Mr. CUNNINGHAM. John P. Cunningham, special agent, Office of Compliance and Investigation, Production and Marketing Administration, of the Department of Agriculture. Mr. GUINANE. Mr. Cunningham, you have conducted considerable investigation into the importation of wheat into this country, classified as "Wheat unfit for human consumption"? Mr. CUNNINGHAM. Yes, sir. Mr. GUINANE. And that investigation has led you to several cities, has it? Mr. CUNNINGHAM. Yes, sir. Mr. GUINANE. And has led you to elevator B at Galveston, Tex.? Mr. CUNNINGHAM. Yes, sir. Mr. GUINANE. Tell us how it was that you conducted the investigation at elevator B and other places concerning this wheat. Mr. CUNNINGHAM. 1,110,517 bushels of sample grade dark north spring wheat, unfit for human consumption, was shipped to elevator B from the Minneapolis-Duluth-Superior area. And in addition to that 42,639 bushels of sample grade durum and sample grade mixed wheat of the same classification was shipped to elevator B. In examining the records The CHAIRMAN. Mr. Cunningham, did that come in bond to the area? Mr. CUNNINGHAM. No, sir. The CHAIRMAN. It did not? Mr. CUNNINGHAM. No, sir. The CHAIRMAN. In other words, the duty had been paid on that grain at the port of entry? Mr. CUNNINGHAM. Yes. The CHAIRMAN. And then it came on as free grain, it was not in bond? Mr. CUNNINGHAM. That's right. Senator ELLENDER. Where was the port of entry? Mr. CUNNINGHAM. The port of entry was the Duluth-Minneapolis area, up there. Senator ELLENDER. Was any change en route to Galveston, that is, did it come in the same cars or in bulk? Mr. CUNNINGHAM. It came to Duluth in ships from Canada. Mr. CUNNINGHAM. It was loaded on boxcars at the port of entry and it was shipped through Minneapolis, and then some of it came here direct and some was transshipped in various methods. Senator ELLENDER. Are you certain that the wheat that was unloaded from the ships onto the cars passed customs? Mr. CUNNINGHAM. Yes. Senator ELLENDER. It was then shipped direct to Galveston? The CHAIRMAN. You may proceed. Mr. GUINANE. Go ahead. Mr. CUNNINGHAM. In examining the records of Bunge Corp. of Kansas City, it was noted that the chargeoffs showing the disposition of this wheat included a number of ships on which subsidy had been claimed under the International Wheat Agreement and ships on which subsidy had not been claimed. So, in order to determine the disposition of this wheat, it was necessary for us to determine the quantities of this grain that was charged off to the various ships exported through elevator B. Mr. GUINANE. How is this wheat described or how was it described when it arrived at Galveston and at Kansas City? Mr. CUNNINGHAM. It was described as sample grade dark northern spring wheat. Mr. GUINANE. And your Division had traced that wheat through the port of entry, Duluth-Superior, as wheat unfit for human consumption? Mr. CUNNINGHAM. Yes, sir. Mr. GUINANE. When was your first contact with elevator B. Mr. CUNNINGHAM. My first contact with elevator B was on March 26, 1953. Mr. GUINANE. Who was that with? Mr. CUNNINGHAM. We contacted Mr. E. H. Thornton, Sr., who is vice chairman and general manager of Galveston wharves. Mr. GUINANE. What was the general conversation? Mr. CUNNINGHAM. We requested Mr. Thornton to make his records available, showing the chargeoffs to the ships, showing the disposition of this wheat. And he informed us that the Commodity Credit Corporation did not have an agreement with him and, therefore, we were not entitled to examine the records of elevator B. Mr. GUINANE. What did you then do? Mr. CUNNINGHAM. Well, on April 17 our office in Washington contacted Mr. Thornton, who was in Washington at that time, and requested permission to examine his records. At that time, he said the records of elevator B would be made available if Bunge Corp. would authorize him to do so. And on April 20, Mr. Robert F. Straub, president of Bunge Corp., advised our office that he had telephoned and telegraphed Mr. Thornton to make these records available. Mr. GUINANE. Did you get in contact with Mr. Thornton, Sr.? Mr. CUNNINGHAM. Yes, on the following day, on April 21, Mr. E. H. Thornton, Sr., was contacted and the records in connection with the Canadian wheat were requested. At that time we were checking into a complaint by the Swiss Government, wherein it was alleged that Canadian wheat was contained in cargoes on which the international wheat subsidy had been paid. Mr. GUINANE. Was that an official complaint of the Swiss Government to the United States Government? Mr. CUNNINGHAM. Yes, sir. At that time, he also refused to make the records available. So, on April 23, we again interviewed Mr. Thornton and requested his |