Mr. GUINANE. Did you have any other services in addition to storage and handling charges?

Mr. THORNTON. I say, other than we might treat some weeviling, and I think, not this particular wheat, we screened some wheat to get the dust and chaff out of it. We charged them for that. But that is the tariff charge.

Mr. GUINANE. So then, when Bunge would sell this wheat as No. 2 Hard wheat, they would make a considerable profit then as distinguished from the Sample grade wheat they put in your elevator?

Mr. THORNTON. I couldn't answer that question definitely, because I don't know. But it's our objective to let them make the most money possible.

Mr. GUINANE. Do you give the same service to all concerns that put

wheat in there?

Mr. THORNTON. Yes, sir.

Mr. GUINANE. So they can profit from 20 to 30 cents a bushel on every bushel of wheat they put in there?

Mr. THORNTON. We only do business with exporters, and we try to give every exporter as liberal a mix as possible, because we know our competitors are after that same business and are offering to give a better mix than we can.

Mr. GUINANE. Wasn't Commodity Credit Corporation a good customer of yours?

Mr. THORNTON. Yes, sir.

Mr. GUINANE. They put millions of bushels of wheat through there? Mr. THORNTON. Yes, sir. And I think they got good service.

Mr. GUINANE. Do you think they made anything like a profit of 20 cents by putting their wheat in this elevator and you upgraded it? Mr. THORNTON. We had a lawsuit, and I know we upgraded a considerable amount of wheat from Sample grade to No. 2.

Mr. GUINANE. Isn't that the error where you admitted you, in error credited Commodity Credit with 175,000 bushels of poor, moldy, dusty wheat?

Mr. THORNTON. Well, I couldn't call it that. I'd call it Sample grade wheat declared unfit, which was sold at $1.77 a bushel.

Mr. GUINANE. You admitted in that case that you had credited to Commodity Credit Corporation 175,000 bushels of Sample grade wheat, and later admitted that was an error when an investigation was made.

Mr. THORNTON. You didn't state it exactly correct.
Mr. GUINANE. Would you give us your side of that.

Mr. THORNTON. The superintendent of our elevator, through some reason or other, issued a warehouse receipt for 175,000 bushels of three mix, transferred that amount of wheat, three mix, from the Valley Grain Co. account at the time that the Valley Grain Co. didn't have that wheat in the house, transferred that to Commodity Credit Corporation; and the Valley Grain Co. got paid for the three mix. And at that same time, the Valley Grain Co. had our elevator, had 171,000 bushels of Sample grade wheat declared unfit for human consumption, and we admitted to the Commodity Credit Corporation, I did personally, an error and offered to pay off. But they refused to accept my offer. And we, in turn, filed suit against the Valley Grain Co. to recover that difference. And I am still trying to pay the Commodity Credit Corporation for the difference in what they paid

for the wheat and what they sold it for. The Commodity Credit sold that for us and are holding our money.

As a result of that case, the Commodity Credit Corporation has blackmailed using our elevator, and we thought it was totally unfair. We tried to settle with them, offered to put up twice the amount involved, and we invited the Commodity Credit Corporation to sue us and the Valley Grain Co., which they did, months after we filed suit against the Valley Grain Co. And we have been trying to get to trial on that case for a year and a half, and the Federal court keeps postponing it. And we are being crucified not only by the CCC not using our elevator, but they won't ship us any flour or beans. We are being crucified by the CCC.

The CHAIRMAN. How could such an error be committed?

Mr. THORNTON. I wondered, myself. And we relieved the gentleman of his job as soon as I found out about it. I don't condone it. We don't condone it. You know you have to deal with human people somtimes. I don't know what happened. When I found out about it, I relieved this gentleman of his job.

The CHAIRMAN. How long had he been in the employment?
Mr. THORNTON. Thirty-three years, this fellow had been.

The CHAIRMAN. And how long had he been in the position he was then holding?

Mr. THORNTON. He was in that position about, oh, about 3 years. He was assistant superintendent to the elevator before that. The CHAIRMAN. You may proceed.

Mr. GUINANE. So, if you were instrumental in giving a substantial profit to Bunge for mixing wheat, you never did receive anything from Bunge as a consideration for that mixing other than the regular storage and handling charges; is that true?

Mr. THORNTON. All we ever collected from Bunge was the regular storage and handling charges.

Mr. GUINANE. And you didn't receive any money from any representative of Bunge or Stone Forwarding Co.?

Mr. THORNTON. No, sir.

Mr. GUINANE. Nor Gano Grain Co., a subsidiary of Bunge?
Mr. THORNTON. No.

The CHAIRMAN. May I ask this question: Do you know what volume of Bunge's grain that was exported down in this area, that you handled?

Mr. THORNTON. No; I wouldn't know that. We'd like to handle more. But not as much as we should have handled.

The CHAIRMAN. Do you think you have handled as much as 50 percent of the export business of the Bunge Corp. in this area? Mr. THORNTON. I doubt it.

The CHAIRMAN. Then, if you didn't handle 50 percent, what ports handled the rest of it?

Mr. THORNTON. Houston and New Orleans.

The CHAIRMAN. So, you always regretted you were unable to obtain all their business?

Mr. THORNTON. Yes, sir; it's a nice account to an elevator.

The CHAIRMAN. And you were all bidding for it?

Mr. THORNTON. Yes, sir. Competition is very keen for that business.

The CHAIRMAN. So, you were all offering all manners of, you might say, service, in the event they would only increase the business with you?

Mr. THORNTON. Well, I never did make an offer before a boat was loaded that I would give a better mix than what we called a legal mix; but I told him we would try to do better if we could.

The CHAIRMAN. You were all with one eye on the regulatory officials and the other on the spout?

Mr. THORNTON. That's right.

The CHAIRMAN. So at all times you were trying to outguess where the regulatory official was going to be when you pulled the lever that controlled the volume that went through the spout. That is the service you talked about?

Mr. THORNTON. I wouldn't call it that, Senator. It was a matter of meeting competition. In Houston, the Federal inspection is very light; at Port Arthur, they don't have any Federal inspection, and they give us a hundred percent Federal inspection. We have been complaining about it by letter and verbally for 4 years now, and they haven't done anything about it.

Senator ELLENDER. Mr. Thornton, you say you handled a lot of grain for the Commodity Credit Corporation?

Mr. THORNTON. Yes, sir; prior to the time they declared an embargo or blacklist against us.

Senator ELLENDER. Did you use the same mix for the CCC?

Mr. THORNTON. Where ČCC had the offgrades, we mixed out the offgrades.

Senator ELLENDER. Did they have much offgrades?

Mr. THORNTON. Not in proportion to a private shipper.

Senator ELLENDER. But wherever they had some, you performed the same service then as you did for any other private shipper?

Mr. THORNTON. Yes, sir. When the Commodity Credit Corporation was doing business with us, Senator, at one time we loaned Commodity Credit Corporation, out of stock in our elevator, as much as 800,000 bushels out of our elevator. But we would loan them that much wheat or milo maize to help them meet the ships. The ships were here, and when ships are drawing demurrage, somebody has to pay them.

Senator ELLENDER. Did you get any specific instructions from the Commodity Credit Corporation with reference to these mixes?

Mr. THORNTON. They expected every port elevator to mix out their offgrades; and we carried out their expectations.

Senator ELLENDER. Then it's nothing unusual for this matter that you are now talking about that occurred in other elevators in the country, it is a common practice?

Mr. THORNTON. That's right, to upgrade grain to help the customer who is using the elevator. He won't use it if you don't.

Mr. GUINANE. In mixing out the grain for Bunge and others who ship low-grade grain into your elevator to be upgraded, you would use the grain in the elevator to sweeten up or build up your mix; wouldn't you?

Mr. THORNTON. To the extent the stocks were available.

Mr. GUINANE. And Commodity Credit Corporation had plenty of stocks available during the period this Canadian wheat was in your elevator?

Mr. THORNTON. No, sir.

Mr. GUINANE. It did not?

Mr. THORNTON. No, sir. Commodity Credit Corporation shipped its last bushel of grain out of our elevator July 1952, and this volume of Northern Spring wheat came to our elevator subsequent to that date. Mr. GUINANE. Subsequent to that date?

Mr. THORNTON. Yes, sir. The volume did. We received some, of

course.

Mr. GUINANE. I'd like to ask Mr. Cunningham, would you step up here.

TESTIMONY OF JOHN P. CUNNINGHAM, OFFICE OF COMPLIANCE AND INVESTIGATION, PRODUCTION AND MARKETING ADMINISTRATION, UNITED STATES DEPARTMENT OF AGRICULTURE, DALLAS, TEX.-Resumed

Mr. GUINANE. In your examination of the elevator records, during the period Bunge wheat was stored in elevator B, did Commodity Credit Corporation also have wheat in the elevator?

Mr. CUNNINGHAM. Yes, sir. I can give you the exact figures on that.

Canadian wheat started to move in the elevator on April 24.
Mr. THORNTON. In what volume?

The CHAIRMAN. What year?

Mr. CUNNINGHAM. April 24, 1952. It started coming in in small amounts, and Commodity Credit Corporation's wheat moved out, the last ship, on July 23, 1952.

Now, during that period

Senator ELLENDER. Do you mean from April to July?

Mr. CUNNINGHAM. From April 24 to July 23, there were approximately, it looks like about 500,000 bushels of Sample grade Dark Northern Spring wheat of Canadian origin moved into the elevator; because on July 23, the inventory was 294,000 bushels. And there had already been a chargeoff of 153,000 bushels and 4,360 bushelsSenator ELLENDER. Who was the shipper?

Mr. CUNNINGHAM. Bunge Corp.

Mr. THORNTON. The ship loaded in July for Commodity Credit, was that just a small ship, about 30,000? Mr. CUNNINGHAM. Yes.

Mr. THORNTON. They cleaned up their stocks with that ship. Mr. GUINANE. In mixing Sample grade wheat out of the elevator for Bunge and others, you used CCC wheat to build up the mix, did you not?

Mr. THORNTON. No; I don't think so.

Mr. GUINANE. Do you deny definitely you did not?

Mr. THORNTON. I don't know definitely we did.

Mr. GUINANE. Wouldn't you know if you did?

Mr. THORNTON. As I said, we didn't have any CCC wheat in the house to speak of, after May, you might say June 1952.

Mr. GUINANE. July, wasn't it?

Mr. THORNTON. Well, they finished shipping out 30 or 37 bushel lot in July.

Mr. GUINANE. During this period that they shipped out a lot of this wheat, would you deny any CCC wheat was used to build up Bunge wheat?

Mr. THORNTON. I don't know, but I'd say I don't think so.

Mr. GUINANE. Why don't you think so?

Mr. THORNTON. Because we didn't have enough CCC wheat in there to build up.

Mr. GUINANE. When you did have lots of CCC wheat in there previously, didn't you use the same CCC wheat to upgrade other wheat in the elevator?

Mr. THORNTON. We would mix out some other low grades of other private shippers with CCC the same as other elevator men in this

area.

Mr. GUINANE. You mean your men had no instructions not to use CCC wheat?

Mr. THORNTON. We were doing the same thing as other elevator men in the United States did.

Mr. GUINANE. But you did it?

Mr. THORNTON. Yes, we did it.

Senator ELLENDER. Was there any objection on the part of the CCC or anything in the contract to prevent this commingling?

Mr. THORNTON. No. As long as we gave them the outgrade, they were satisfied.

Senator ELLENDER. And this outgrade, that they had previously stored with you?

Mr. THORNTON. Yes.

Mr. GUINANE. Doesn't the contract with CCC specify the elevators cannot take advantage of tolerance?

Mr. THORNTON. Of tolerance?

Mr. GUINANE. Yes.

Mr. THORNTON. You are talking about something else there. We didn't take advantage of any tolerance.

Mr. GUINANE. Grain tolerance.

I'd like to ask a question of Mr. Bachmann, Senator.

The CHAIRMAN. All right.

Mr. GUINANE. You are familiar with the standard rules of grain on mixing and blending, are you?

Mr. BACHMANN. Generally, however I am familiar with the particular terms in the contract at Galveston and Houston which prohibits deliberate blending and taking advantage of tolerances.

Senator ELLENDER. What do you mean by taking advantage of tolerances?

Mr. BACHMANN. A grade may be higher, let's say, than the minimum standard for that grade. The actual wheat may be a higher quality than minimum standard. Ordinarily, in the grain trade, they try to blend out that advantage and bring it down to just the bare grade or quality of wheat that will meet that standard. And any advantages in the grain are blended out. They take advantage of that.

Senator ELLENDER. Who takes this advantage?

Mr. BACHMANN. The elevators.

Senator ELLENDER. And you say CCC has a prohibition in the contract between the CCC and the elevator?