Mr. WILLIAMS. And the startling thing to me was that a company would pledge an account to a factor from the Federal Reserve Bank of St. Louis or American Borg-Warner or Frigidaire Division of General Motors and a lot of nationally known concerns, and take 80 percent, and when the account was paid, the factor would keep the 20 percent in a cash account, and apply 80 percent on the loan, and they were paying 1 or 112 percent a month for that kind of paper. Senator MCCARTHY. Let us get back to my question, and if we cannot get it from you we will get it from somebody else. As I say, testimony before the committee to date indicates there was a tremendous increase in Government business during 1949-50. Now, something occurred between September 30 and October 17 that decided you that you would recommend an additional loan of $100,000. My question is this: Was that because of increased Government business? Mr. WILLIAMS. I do not know, sir. I think it was increased business. They were pushing sales; they were trying to get in the black, trying to make money, and I think the record shows they were trying to increase sales. I don't know what percentage were Government or commercial, but I think our St. Louis agency people probably could tell you the answer. Senator MCCARTHY. Are you aware of the fact that there was practically no increase in the business with private concerns, but that the increase came almost exclusively because of additional Government business during that period of time? Are you aware of that fact? Mr. WILLIAMS. No, sir; I was not aware of it. Senator MCCARTHY. Do you know anything about that situation? Mr. WILLIAMS. Nothing whatsoever. All I ever saw was the list of accounts and the contracts, and so forth, in the files. Senator MCCARTHY. But some of the accounts pledged were Government accounts, right? Mr. WILLIAMS. Yes, sir. Senator MCCARTHY. Just one other question: Then I understand that there was a firm loan of $265,000 made. That was secured by a mortgage; that the $300,000 was a maximum, and you loaned the $300,000 as they would bring in accounts to you and pledge the accounts. Mr. WILLIAMS. That is right, sir. Senator MCCARTHY. Yes. Senator HOEY. Any further questions? Just one question: Mr. Williams, did the records show what fees for attorneys were paid in connection with this by the Lithofold Co. ? Mr. WILLIAMS. Well, exhibit E in the files showed that there were no fees claimed, and so forth, and at no time was the RFC ever requested to approve any fee. To my knowledge no fee has ever been approved one way or another. Senator HOEY. All right. Thank you very much, Mr. Williams. Mr. J. A. Toole? Senator MCCLELLAN. May I ask you one question? Senator HOEY. I beg pardon, Senator McClellan. Senator MCCLELLAN. In the course of these proceedings in which you testified regarding loans and transactions with this company, have you ever been called by anyone outside of the corporation, as an attor ney or as an official of the Government or anyone else or to make a special request of you for a discussion of this loan with you? Mr. WILLIAMS. No, sir. Senator MCCLELLAN. Had anybody contacted you in the course of your deliberations or considerations of this matter, all of these transactions, with the Lithofold Co.? Mr. WILLIAMS. No, sir. Senator MCCLELLAN. That is one of the purposes of this investigation, and I think we ought to have the answer to all of those questions. Mr. WILLIAMS. So far as I am personally concerned, it was strictly a business transaction. I think it was a good one. It was paid in full, and while I may make mistakes, so far as this one is concerned,. I don't think I would have done any differently if I had known how the outcome was going to be. Thank you very much. Senator HOEY. Thank you, Mr. Williams. Mr. Toole? I will state to the photographers that Mr. Toole has had a recent illness, and he does not wish his picture to be taken. Senator NIXON. Before Mr. Williams leaves, can I ask him one question? Senator HOEY. Yes. Senator NIXON. Mr. Williams, how often did you discuss this loan with Mr. Green? How many times did you discuss this loan, approximately, with Mr. Green? Mr. WILLIAMS. I never discussed it with him at all. He was just with Mr. Blauner, and I never knew he knew any of the details. He was just there the first time; he didn't come back the second time, and I never discussed it with him. Senator NIXON. You never discussed it with him? Mr. WILLIAMS. Yes, sir. Senator MUNDT. Do I understand the loan was paid in full on August 31, 1950? Mr. WILLIAMS. Yes, sir; every payment and all interest on the dot. Senator HOEY. All right. Mr. Toole, you will stand up, please, sir. Hold up your right hand. Do you solemnly swear the testimony you will give in this hearing shall be the truth, the whole truth, and nothing but the truth, so help you God? Mr. TOOLE. I do. Senator HOEY. Give your name and address to the reporter. TESTIMONY OF JOHN ERNEST TOOLE Mr. TOOLE. Yes, sir. John Ernest Toole, 820 Park Avenue, New York City, N. Y. Senator HOEY. Where is your residence? Has it been in New York for several years? Mr. TOOLE. Well, for the past 4 years at that same address, 820 Park Avenue. Senator HOEY. Yes. Mr. TOOLE. Prior to that time, for about-excuse me-about 212 years, I made my, headquarters at the Governor Clinton Hotel. I had previously lived in Washington, D. C., for about 11 years before going to New York, after becoming associated with this company. Senator HOEY. Mr. Toole, what was your connection with the Smaller War Plants? Mr. TOOLE. With the Smaller War Plants I seem to have had a double-barreled title. I was first inducted into office with the title, so the form indicated, of assistant chief loan agent. Subsequently, for some reason, a correction came out headed chief loan analyst, and that is the way the record stands. Senator HOEY. What was your salary with the War Plants? Senator HOEY. $5,600. What time did you resign from that position? Mr. TOOLE. It was sometime early in November 1944. Senator HOEY. When you resigned from that position or after you resigned, at what time did you become connected with American Lithofold? Mr. TOOLE. Almost immediately, with a short time to arrange a few personal matters. Senator HOEY. What salary did you receive from the American Lithofold Co.? Mr. TOOLE. $8,500. Senator HOEY. $8,500. I am going to ask Mr. Flanagan to examine you about the details with which he is familiar. Mr. FLANAGAN. Mr. Toole, in the fall of 1948 were you given any special task by the American Lithofold Corp. with regard to their desire to obtain an RFC loan? Mr. TOOLE. In the fall of 1944? Mr. FLANAGAN. 1948. Mr. TOOLE. 1948; I am sorry. Yes, I was. Mr. FLANAGAN. Who assigned to you the job of trying to put through this RFC loan which they were desirous of obtaining? Mr. TOOLE. Mr. R. J. Blauner, then vice president and general manager, who had active charge of all business of the corporation, executive matters. Mr. FLANAGAN. And at that time you were treasurer of the company, were you not? Mr. TOOLE. Yes, sir. Mr. FLANAGAN. At that time, in the fall of 1948, did you maintain a day-to-day diary of your activities? Mr. TOOLE. Yes, sir; I did. Mr. FLANAGAN. And that diary, as I understand it, was written in longhand by you? Mr. TOOLE. Yes. Mr. FLANAGAN. And you were in the habit of making entries in this diary from day to day as matters would occur? Mr. TOOLE. Well, it was in no sense a matter of inditing or reciting records of all matters that happened; just sort of an informal account of things as happening in my family and otherwise. Of course, there were in little matters of business, I put that down, too, but with no view of keeping an accurate record. Mr. FLANAGAN. This diary not only included your personal affairs, but references to your business transactions. Mr. TOOLE. Quite often; yes, sir. Mr. FLANAGAN. I might state for the record that members of our staff have examined that diary thoroughly, and because of the fact that a large part of it refers to personal matters we did not feel it proper to place that in the record, so we have extracted from that diary every reference to the loan, and his operations with the American Lithofold Corp., and we have typed them up and proofed them against the diary, and any references I make here are direct quotes from his own diary. Now, Mr. Toole, I think it would expedite things-I know you have a copy of these excerpts from your diary there-if we would refer to this diary and go through certain statements in the diary which will indicate the handling of this loan and your contacts with certain officials in the RFC. I will refer you first to December 17, 1948. Mr. TOOLE. December what? Mr. FLANAGAN. December 17, 1948. Mr. TOOLE. Yes, sir. Mr. FLANAGAN. So that we will get the dates straight, according to our chronology that is about 3 or 4 days after the St. Louis agency had declined this loan, and I read this passage from your diary. It starts on the second line of that day: R. J. Blauner telephoned from Washington about 2:30 p. m. advising of the forwarding of our loan papers from the St. Louis agency of RFC to headquarters in Washington. He said this information came from Director Willett via his friend Jim Finnegan. My own wish expressed several times to R. J. B. has been that he should not undertake to use any influence with Howard or any Washington RFC official on this loan. My feeling is that I have the confidence of the leading officials of the RFC to get all the consideration to which we are entitled and any "pressurizing" of a political nature would be in extremely poor taste. Senator NIXON. Excuse me, Mr. Chairman, what is the date of the entry that was just read? Mr. FLANAGAN. December 17, 1948. Mr. Toole, do you now have any independent recollection of this telephone call from Mr. Blauner? Mr. TOOLE. Yes; I have a fair recollection of it. Mr. FLANAGAN. At that time was Mr. Finnegan, to your knowledge, interested in assisting the corporation with this loan? Mr. TOOLE. Well, I could not say positively that I knew he was directly interested in trying to help negotiate the loan, but I knew he had some interest in it, if this is after the period of time which is mentioned in my diary that I met with R. J. Blauner and Finnegan and was requested by Blauner to apprise Mr. Finnegan of what I had been doing with the RFC. I am not sure, just glancing at this record. now, whether that was after or before. Mr. FLANAGAN. But this was before. Mr. TOOLE. This was before. I am not sure then whether I knew he was interested at that time. Mr. FLANAGAN. In any event, this is the first news you had that the loan papers were being sent from the St. Louis to the Washington office. Mr. TOOLE. Yes, sir; that was my only knowledge that I got from Mr. Blauner on the phone. Mr. FLANAGAN. I might state that the record of the RFC, which I am looking at here, indicates that the papers were not actually received in Washington until December 20, 1949. To go on with the next entry in your diary-— Mr. TOOLE. Not December 1948? Mr. FLANAGAN. 1948. To go on with the next entry in your diary, December 21– Senator MUNDT. What year? Mr. FLANAGAN. 1948. The next entry we will discuss is the one of December 21. Now, reading from the fourth line, Mr. Toole, you state this: Called on Ernest Howard at 3 o'clock and later had quite a session with W. J. Rochelle who had been assigned to handle our loan. Bill seemed to think it would be impossible to get the Directors to approve any loan against inventory or accounts receivable as these were distinctly banking loans. Now, who was Mr. Ernest Howard? Mr. TOOLE. Ernest Howard, as I recall at that period, I think he has held several positions since I have known him-I might just interrupt my answer to say that I was with the RFC for 1011⁄2 years in the same office with Ernest Howard, is why my seeming knowledge and friendly relations existed between him and myself. But-excuse me, what was the exact question you asked me then? Mr. FLANAGAN. I said, What was Mr. Howard's position at that time with the RFC? Mr. TOOLE. I think he was manager of the Loan Division, if I am not mistaken. Mr. FLANAGAN. And you had a discussion of your loan with Mr. Howard on that day? Mr. TOOLE. Yes, sir. Mr. FLANAGAN. Who was Mr. Rochelle? Mr. TOOLE. William J. Rochelle was an examiner. Mr. FLANAGAN. And when you refer to "Bill" here, that "Bill seemed to think it would be impossible," and so on, who was Bill? Mr. TOOLE. Well, "Bill" was Bill Rochelle. We all were familiar and friendly, and called each other by our own names when we were well enough known to each other to do that. I called him Bill and he called me J. E. Mr. FLANAGAN. And Mr. Rochelle was subsequently the man who declined this loan, according to this record? Mr. TOOLE. Yes, sir. Senator NIXON. Mr. Flanagan, do I understand that you wish to develop the items in this diary or do you wish questions to be asked as they arise? Mr. FLANAGAN. You can proceed as you desire. Senator NIXON. With regard to the first entry that Mr. Flanagan read from your diary Mr. TOOLE. Yes. Senator NIXON (continuing). What did you mean when you wrote "political influence" in your diary? What discussion had you had that led you to put that in the diary? Mr. TOOLE. Well, the words may seem more real and severe than they are actually, because in a diary I had no thought, I say, at the time that I wrote things down, that I would ever be called on to |