SUPPLEMENTARY STATEMENT FILED BY JOHN J. BACHMANN, CHIEF, ACCOUNTING INVESTIGATION DIVISION, OFFICE OF COMPLIANCE AND INVESTIGATION, PRODUCTION AND MARKETING ADMINISTRATION, UNITED STATES DEPARTMENT OF AGRICULTURE Investigation report of the Office of Compliance and Investigation, PMA, United States Department of Agriculture, dated December 12, 1952, on Flour Mills of America, Inc., Kansas City, Mo., disclosed that frost-damaged Canadian wheat was purchased by FMA from Bunge Corp., through Hallet & Carey Co., Minneapolis, Minn., a brokerage firm wholly owned by Bunge, and by direct importation by FMA from McCabe Grain Co., Ltd., Winnipeg, Canada, FMA received 312,805-40 bushels (the figures following the hyphen indicate fractional bushels expressed in pounds) of frost-damaged Canadian wheat at various units of the corporation from Bunge. FMA's units also received 955,940–40 bushels of frost-damaged Canadian wheat from McCabe. The purchases of Canadian frost-damaged wheat from Bunge were made in eight contracts, as follows: Bushels 89, 475-00 24, 910-00 24, 904-40 24, 892-40 The purchases from McCabe Grain Co., Ltd., were delivered in 13 vessels at Duluth-Superior from May 3, 1951, to December 7, 1951, and shipped to FMA units, the out-of-bond unloading weights being 955,940-40 bushels. Of these total purchases of 1,268,746-20 bushels of Canadian frost-damaged wheat, 813,173-50 bushels were traced, after blending, to the manufacture of flour in various mills of FMA. The earliest date of use of such wheat in manufacture was from March 22 to March 28, 1951, at the North Kansas City Mill. Such milling continued thereafter at various plants until July 1952. The flour produced by FMA was sold as follows: For IWA sales_. For domestic sales__ For Bunge, New York. For other sales___ Total.... Pack-off bags 462, 388. 90 533, 854. 00 136, 307. 00 300, 359. 15 1, 432, 909. 05 Bunge, New York, in the period April 17, 1951, to May 7, 1951, exported 135,187 hundredweight of flour shipped by FMA, and Bunge, New York, claimed and collected subsidies on this flour. (The variation between the 136,307 hundredweight and 135,187 hundredweight is attributed to losses in transit, etc.) The declaration of sale under which subsidies were collected was dated March 27, 1951, for 1,380,000 hundredweight of flour. The quantities in addition to those from FMA were purchased from 10 other mills. The president of Bunge and two other of its officers advised that sometime during February 1951 the Federal Republic of Germany (Western Germany) asked Bunge, New York, to be its agent for procuring about 1,500,000 hundredweight of 80 percent extraction hard wheat flour. Bunge contracted through a Kansas City broker for 1,455,000 bags of nonenriched hard wheat flour from 11 mills. Flour Mills of America, Inc., contracted on February 23, 1951, to provide 400,000 bags of this flour. Bunge advised the Import and Stockpiling Agency for Grain, an agency of the German Government, on February 23, 1951, of having contracted for the flour. Commission to Bunge was to be 1 percent for its buying, over and above free-alongside-ship port price. A confirmed, irrevocable, transferable, divisible letter of credit upon a prime New York bank, in favor of Bunge was to be opened by the buyers. Bunge officers further advised that at the time of entering into the contracts for the flour with the mills, Bunge was not concerned with whether the flour would be milled from wheat wholly grown in the United States or not, inasmuch as the flour was for a foreign purchaser who, though paying in United States dollars, was, it was understood, not paying with funds made available by the United States Government; that even if the German Government had required that the flour be milled from wheat wholly grown in the United States, it is doubtful whether Bunge would have specified to its agent, procuring the flour for them, that it be milled from wheat grown in the United States. Officers of Bunge, New York, had not been aware that Bunge, Minneapllis, had sold frostdamaged Canadian wheat to Flour Mills of America, Inc., one of the mills from which the flour was being procured. However, even if they had known that frost-damaged Canadian wheat had been sold to the aforementioned mill, Bunge, New York, officers still would not have suspected that the flour it was procuring would be milled from part of the Canadian frosted wheat, inasmuch as it did not tell its broker procuring the flour from what mills to buy. Bunge's officers continued: Under the terms of February 23, 1951, contract with representatives of the German Republic, 75,000 hundredweight_bags of flour were shipped. In the interim, the representatives of the German Republic had made inquiries at the office of the Economic Cooperation Administration with reference to allowing them to change its contract with Bunge, New York, to pay for the contracted flour with ECA funds instead of the free dollars as stipulated in the contract of February 23, 1951. The representatives of the German Republic also approached officials of the office of the International Wheat Agreement to allow them to ship the flour under subsidy, thus reducing the amount to be paid out for such flour from ECA funds. Further, when representatives of the German Republic informed Bunge, New York, that efforts were being made to ship the flour then under contract of February 23, 1951, under ECA and IWA, officials of Bunge, New York, advised that it would not be possible to do so inasmuch as the contract for the flour had been executed prior to the application by representatives of the German Republic to ECA and IWA that the payment for the flour come under these two agencies. To overcome the objections of Bunge, New York, relative to the changeover of the contract concluded outside the IWA to a contract within the IWA and a contract concluded in free dollars to contract calling for payment out of ECA funds, officials of the German Mission to the Economic Cooperation Administration arranged a conference in the office of the Commodity Credit Corporation, Washington, D. C. At this meeting there were present C. H. Sparks, assistant secretary, Bunge, New York: officials of the German Mission to the Economic Administration; officials of the Economic Cooperation Administration; and officials of the United States Department of Agriculture. At this conference, Sparks was given to understand that it was not improper for Bunge, New York, to receive an offer from the Import and Stockpiling Agency for Grain for the purchase of the undelivered quantity under the contract of February 23, 1951, of 1,380,000 hundredweight of flour, under the International Wheat Agreement and it would not be improper for Bunge, New York, to cancel the aforementioned contract concluded with German authorities to purchase the equivalent quantity of flour at the full market price and outside the terms of the IWA. Sparks was also given to understand that it was proper for Bunge, New York, to cancel a prior agreement with the German Government with respect to the sale of 1,380,000 hundredweight of flour and that Bunge, New York, file a Notice of Sale reporting that quantity of flour as sold to Germany under ÍWA. This was confirmed by letter of CCC, dated March 16, 1951. Accordingly, Sparks, on March 16, 1951, addressed a letter to the Import and Stockpiling Agency for Grain confirming the agreement at the conference to change the February 23, 1951, contract for 1,380,000 pounds of flour which had been outside IWA to bring this quantity under the IWA. Bunge, New York, continued shipping flour furnished by the 11 milling companies listed in the first contract with representatives of the German Government. Officials of Bunge, New York, did not consider that the change of contracts from payment with free dollars to payment with ECA funds and subsidy funds under IWA would in any way affect its contracts for representatives of the German Government with the 11 mills that were to furnish the flour. The changeover to enable payment from ECA and subsidy funds was an accommodation by Bunge to officials of the German Government, officials of ECA, and officials of IWA, and Bunge did not in any way profit or benefit from the change other than the benefits Bunge already had when drawing its contract with officials of the German Government, February 23, 1951, namely, that Bunge was to receive 1 percent as its commission for its part in the transaction of the acquirement of about 1,500,000 hundred-pound bags of flour for the German Republic. While under the changed setup, Bunge filed a claim and was paid a subsidy on the shipment of the flour, the portion represented by the subsidy, benefited the German Republic in that the price paid Bunge from ECA funds was less the amount of the subsidy; while Bunge paid the millers the full amount for the flour under the terms of its contract of February 23, 1951. There is no indication in the above statements of Bunge officers that anyone was made aware of the fact or possibility that the flour under contract was produced in any part from a blend containing Canadian frost-damaged wheat. Deliveries of flour by FMA began prior to the first receipt of Canadian wheat. Canadian wheat was thereafter used in the manufacture of flour by FMA, shipped by it and traced to export by Bunge. Bunge collected IWA subsidy of $1.28 per hundredweight, or a total of $173,039.36 as part payment of its contract price. This was the subsidy on the 135,187 hundredweight of flour found to have been produced from a blend of Canadian frost-damaged wheat. Senator ELLENDER. May I ask a question of Mr. Thornton? TESTIMONY OF E. H. THORNTON, Sr., VICE CHAIRMAN AND TEX.-Resumed Senator ELLENDER. Mr. Thornton, I have before me a letter dated November 29, 1952, addressed to the Stone Forwarding Co., United States National Bank Building, Galveston, Tex., and signed by you. Will you look at that letter and tell me if that is signed by you? Mr. THORNTON. Yes, sir. Senator ELLENDER. Now, in that letter you state: "We have yours of the 26th instant quoting telegram that you had received from Bunge Corp., New York, advising you that it is essential all wheat shipped to Brazil be of United States origin. We shall be guided accordingly. In this connection, might state that such records as we have in our possession disclose that all wheat stocks in our elevator are of United States origin." Now, the question I wish to ask is: Do you know whether or not you had in the elevator at that time Dark Northern Sample grade wheat? Mr. THORNTON. Yes, sir; we had some Dark Northern Sample grade wheat, spring wheat. Senator ELLENDER. Was that of the same kind and quality that we have been discussing throughout this hearing? Mr. THORNTON. I will have to assume so, Senator, because I couldn't know of my own personal knowledge. Senator ELLENDER. So, when you made this declaration in 1952, you then stated what you stated yesterday, that as far as you knew, this wheat was not of Canadian origin? Mr. THORNTON. That is correct. So far as my knowledge was concerned. Senator ELLENDER. I merely want to put the letter in the record to substantiate what you said yesterday. I suggest we make copies of this and return it to Mr. Perich. Mr. THORNTON. I want to go on record that at all times we made our records available, without any question. The CHAIRMAN. These letters and telegrams will be returned to you, and you are going to furnish us photostatic copies of them. Mr. Perich. (The matter referred to is as follows:) STONE FORWARDING CO., NEW YORK, N. Y., November 26, 1952. United States National Bank Building, Galveston: Essential all wheat shipped Brazil be United States origin. BUNGE CORP. TRAFFIC DEPARTMENT. BUNGE CORP., TRAFFIC DEPARTMENT, STONE FORWARDING Co., Galveston, Tex. NEW YORK, N. Y., November 26, 1952. GENTLEMEN: We confirm wiring you that it was essential that all wheat shipped to Brazil be United States origin. Further, it will be in order for you to consign all Brazil shipments to Banco do Brasil S. Á. We will advise license numbers against each shipment when same are received from our Brazilian office. Very truly yours, Bunge Corp., By GALVESTON, TEX., November 26, 1952. BUNGE CORP., New York, N. Y. GENTLEMEN: This to acknowledge receipt and understanding of your telegram of even date reading as follows: "Essential all wheat shipped Brazil be United States origin." Yours very truly, THE STONE FORWARDING CO. By J. DODDS. GALVESTON, TEX., November 26, 1952. GENTLEMEN: We have received the following telegram from Messrs. Bunge Corp., New York: "Essential all wheat shipped Brazil be United States origin." Kindly be guided accordingly. Yours very truly, THE STONE FORWARDING CO By J. DODDS. Copy to: Messrs. Bunge Corp., New York, N. Y. The STONE FORWARDING CO.: Galveston, Tex. GALVESTON WHARVES, GENTLEMEN: We have yours of the 26th inst. quoting telegram that you had received from Bunge Corp., New York, advising you that it is essential that all wheat shipped to Brazil be of United States origin. We shall be guided accordingly. In this connection might state that such records as we have in our possession disclose that all wheat stocks in our elevator are of United States origin. Very truly yours, E. H. THORNTON, Copies to Bunge Corp., New York, N. Y.; Mr. D. J. Sweeney, Jr. Are there any other questions anyone would like to bring up before this committee before we recess this session? The attorneys are not objecting to any procedures that have been carried out here by the subcommittee. Mr. E. H. THORNTON, Jr. May I ask a question, please? The CHAIRMAN. Yes, you may. Mr. E. H. THORNTON, Jr. We have a great number of records up here. Are we to take them back? You have requested certain details from those to be prepared. I know of no way for him to do that unless we take them back. The CHAIRMAN. Compilation of the records has been requested. The records are yours. You brought them here because we subpenaed the records, and had we desired to have placed in the records they would have been available. Because of the volume of those records, we will tabulate them and have that made available according to the questions we asked. If that is all, the committee stands in recess. (Whereupon, at 2:25 p. m., the committee recessed.) |