Senator ANDERSON. Just Tanner's statement?

The CHAIRMAN. Just Tanner's statement.

Senator AIKEN. Yes. He had them anyway. He had the Rocky Mount receipts. I do not think there was any question about that. Secretary BRANNAN. The case is simply this

The CHAIRMAN. Will you proceed to explain it then?

Senator AIKEN. I think it ought to be made plain for the committee. Secretary BRANNAN. Tanner had one of his warehouses-I do not remember which one-in New Mexico under the United States Warehousing Act. He had some other warehouses under other acts. He was buying warehouses. He was adding to his warehouses. He decided to go out from under the United States Warehousing Act and therefore he notified us that he was going out from under the United States Warehousing Act, and the minute he went out from under the United States Warehousing Act he lost the right to issue United States warehouse receipts. Therefore he made arrangements, which was the only way in the world it could be done, to surrender his United States warehousing receipts-I mean to get back his United States warehousing receipts and issue the normal receipts that he issued in the normal course of business, which all people who were not under the warehousing act issued in the normal course of their business.

A man from the Kansas City office took the United States warehousing receipts, either took them or sent them to the bank at Cortez, and there was an exchange of receipts.

Now as to the law, it is my understanding, Senator-you have had a chance to read the law ever since this case as well as I have I can only give you my understanding as advised by the Solicitor, that there is no Federal statutory prohibition against a man who has a United States warehouse permit to operate issuing other receipts, but there was an order issued and promulgated under the statutory authority by the Department which prohibited it and which may be construed to have caused it to be a violation of the law because it was a violation of a regulation. But that is about all there is to it.

Senator AIKEN. According to the testimony, the United States warehouse inspectors continued to inspect his plants; that there were United States warehouse receipts there; that they also found the amount of beans which were covered by the United States warehouse receipts, and apparently the Rocky Mount receipts represented the beans which had been sold. That is why he evidently was issuing receipts of two kinds on the Gallup warehouse, I believe.

Senator ANDERSON. Mr. Yohe's testimony is they can't do it. He says he cannot operate partly licensed and partly not licensed. Senator AIKEN. That is right.

Secretary BRANNAN. Under the regulations?

Senator ANDERSON. Under the law. Mr. Yohe said that.

The CHAIRMAN. He is head of the Warehousing Act.

Senator ANDERSON. Has our attorney looked into it? What is that law?

Mr. COTTER. We received the testimony from Mr. Yohe that you have just read. He says under the law you cannot do it.

Senator ANDERSON. That is right, it is not a Department of Agriculture regulation.

Senator AIKEN. The question I though the Secretary would want to clear up was why the PMA authorized what, according to the officials of the United States Warehouse Division, was a violation of the law. I have not read the law, Mr. Secretary.

Secretary BRANNAN. I do not represent to you that I have interpreted the law correctly at all. The Solicitor has gone out to refresh his memory on the law and we will have his opinion.

Senator AIKEN. There was testimony the other day that it was against the law to have a United States warehouse issue two types of receipts as long as it chose to come under the United States Warehousing Act. According to Mr. Tanner he was given permission to do so by the PMA.

The CHAIRMAN. Was any reason given for this switch from United States warehousing to State warehousing?

Secretary BRANNAN. Yes; that he was transferring beans from Colorado to New Mexico. He was transferring them out of some elevators in Colorado down to his elevators in New Mexico.

The CHAIRMAN. And those warehouses to which he was transferring the beans were not under United States warehousing?

Secretary BRANNAN. I believe he had taken them out, or was in the process of taking them out. He was moving them down to New Mexico because they would be close to a rail point and would be more salable, and he wasn't selling them well up to the other place.

Senator ANDERSON. Mr. Yohe's testimony might be of interest at this point. Mr. Yohe testified (beginning at p. 1577) that the warehouse people found that Tanner had a license at five different places; that he had the prescribed form of receipts, the Federal licensed receipts; that he issued that receipt for a long time.

And then we found out that something was not quite right around there and got into a squabble with him. We had heard there were some receipts issued, not our form of receipts. The way we caught it was that examiners came around and found a lot of beans around there that were not covered by Federal receipts; that on previous examination those beans were all covered by Federal receipts. And when we raised the question with him about it, why are all these beans in here and not covered by a Federal receipt, he said, "Well, they were covered. I had issued Federal receipts on them, and when they got to the Commodity Credit office at Kansas City they insisted they did not want that Federal receipt, they wanted what was known as a Rocky Mountain or nonnegotiable receipt." Will you comment on that in connection with the previous testimony?

Secretary BRANNAN. Senator, I don't know. That is Mr. Yohe's testimony or his agent's testimony

Senator ANDERSON. It is Mr. Yohe's testimony.

Secretary BRANNAN. Of the conversation.

The CHAIRMAN. He got that from Tanner, did he not? It was not from the Commodity Credit?

Senator ANDERSON. All right. Senator Aiken said, "That sounds as if the Commodity Credit Corporation directed him to violate the United States Warehouse Act."

Mr. Yohe said, "I don't know who did the directing."

He subsequently says, "We questioned him, but we have not gotten the answer."

Mr. Cotter said, "Therefore, the evidence in the Tanner case indicated that most of the beans were never there. They were over in another State."

Now that is, of course, the point, that when they switched these warehouse receipts, if anybody asked to see the beans, they found the beans were not there, and the matter would have been immediately discovered on which the Government will lose at least half a million dollars. It was the transfer of receipts that led to all the trouble. When under the Federal receipt he had the beans.

Senator KEM. I think we all agree if it is not against the law, it ought to be.

Secretary BRANNAN. We agree to that, and it is against the Department's regulations.

Senator KEM. Was that all you had in mind, Senator Anderson? Senator ANDERSON. Yes. But I mean this indicates that the Commodity Credit office is the one that indicated the switch had to take place, and that therefore that starts the loss on the Tanner case. Secretary BRANNAN. That was Tanner.

The CHAIRMAN. That was Tanner's statement, as I remember. Senator ANDERSON. I recognize this is not the testimony of the Commodity Credit office.

The CHAIRMAN. That is right. He said that the Commodity Credit did.

Senator ANDERSON. That is why I say I hope the attorneys will sometime find out who in the Commodity Credit office permitted the transfer of these receipts which led to the loss that might have run a million dollars.

Senator AIKEN. May run a million dollars, you mean.
Senator ANDERSON. It runs at least $700,000.

Secretary BRANNAN. Senator Anderson, let me just point out to you this: That transfer of receipts or no transfer of receipts, Tanner was selling off his beans.

Senator ANDERSON. That is right.

Secretary BRANNAN. He could have had them under gold labels and it wouldn't have made any difference. Tanner was selling his beans and using them for horses and a lot of other things. The only thing you can say about the switch of receipts was that in one sense of the word that helped him to perpetuate the deception just a slight bit longer. But he had already committed the conversion and had lost the money in other enterprises.

wrong

As a matter of fact, part of the money that derived from the ful sale of beans went into warehouses and trucks that were then in existence, which we took possession of.

Senator ANDERSON. Part of them went to a partner in Texas who,

so far as I know, has never been prosecuted.

Secretary BRANNAN. Well, that may be correct, too, but we are on that case very actively.

Senator ANDERSON. I mean it has been known for a year and a half he had a partner who was taking the beans and disposing of them under an agreement they would split the money.

Secretary BRANNAN. He and his brother were indicted.

Senator KEM. Now, Mr. Secretary, prior to June 1951, no inspections were made of warehouses with which storage agreements were to be made. Is that correct?

Secretary BRANNAN. Well, we were making spot checks.
Senator KEM. They were very infrequent, were they not?

20554-52-pt. 2—51

Secretary BRANNAN. They were infrequent, yes, sir.

Senator KEM. For instance, in the case of Arkadelphia, Ark., warehouse, storage agreement was made with the concern where the physical facilities for storing grain were wholly inadequate. Is that not correct?

Secretary BRANNAN. That is what has proved to be the case.

Senator KEM. And nobody knew that until months afterwards, after the grain had been stored. Is that not true?

Secretary BRANNAN. I am not sure what all the record shows here, but, of course, it is apparent that the Dallas office, either Mr. White or Mr. Solomon, did not follow up upon the information that they had available to them.

Senator ANDERSON. Would you allow me to ask a queseion there? Senator KEM. Just a minute, I want to make this point in that connection.

The testimony is that in 1949 Latham White recommended that county committees be asked to approve or disapprove warehouses. Now, is that not true?

Secretary BRANNAN. I am not aware who made the original recommendation, but, as a matter of fact, it is being done.

Senator KEM. Well, he recommended that in 1949 and here in 1952 we find that being done. Now, how do you account for the lapse of time in the recommendation by Mr. White, which is admittedly a sound one, and the putting into effect of that recommendation? Secretary BRANNAN. It was put in effect in January of 1951, Sen

ator.

Senator KEM. Are you clear on that?

Secretary BRANNAN. I have just been advised of that.

Secretary ANDERSON. On this Dallas office, I was in Dallas a few days ago and was advised that you have a crew-if I have the information correct, that is that is going to make investigations of these warehouses. Who is in charge of that branch?

Mr. GEISLER. In Dallas?

Senator ANDERSON. Yes.

Mr. GEISLER. It is all under Mr. Duggan.

Senator ANDERSON. Is Mr. Bramlette in charge of it?

Mr. GEISLER. I wouldn't know.

Senator ANDERSON. Who would know?

Mr. KRUSE. Mr. Mosley.

Senator ANDERSON. Did you know at the time Mr. Bramlette was placed in charge of this unit in Dallas that he was the man who made the Arkadelphia investigation and recommended the Arkadelphia warehouse facilities against the objections of other people? Is not Mr. Bramlette the man who made the Arkadelphia investigation?

Mr. GEISLER. Mr. Bramlette is the man that made the inspection with Arkadelphia.

Senator ANDERSON. He made the deal with them, did he not?
Mr. GEISLER. That was not my understanding of it.

Senator ANDERSON. Did he not take the financial statement which showed only $600 in money and approved the transaction at Arkadelphia?

Senator KEM. Had not we better get to that with Mr. Kruse?

Senator ANDERSON. I suppose so, but there was a little stir at Dallas: over the fact he had been the individual who had been found to take the hundred-dollar gift certificate and translate it into a suit of clothes, and now he has been placed in charge of the inspection of these facilities down there.

Senator AIKEN. Can we find out whether that information is correct or not, so that it can be placed in the record? I think it should be about at this point in the record.

Senator ANDERSON. I think the Department could advise us whether Mr. Bramlette has been placed in that activity in the last 2 weeks. The Dallas office is hot enough right now.

Senator KEM. Mr. Secretary, I am confused as to when you started these inspections of warehouses. I understood you testified a few minutes ago that was June 1951.

Secretary BRANNAN. You are talking about inspections of warehouses after grain is put in them.

Senator KEM. No; before. I am talking about preliminary inspection.

Secretary BRANNAN. Preliminary inspections by PMA committees started in January of 1951.

Senator KEM. And not in June 1951?

Secretary BRANNAN. That is right.

Senator KEM. I see; and the recommendation was made by Latham White in 1949; is that right?

Secretary BRANNAN. That is what Mr. White says. There is no record of that recommendation at all around the shop.

Senator KEM. Whose responsibility was it to determine the policy with respect to these preliminary inspections of warehouses?

Secretary BRANNAN. Well, I assume it is my responsibility through the staff in the Department.

Senator KEM. Now, is it correct, as was testified in the Dallas office, there was sometimes a lapse of as much as 8 months after a loading order had been placed with the warehouse before the Compliance and Investigation was called in?

Secretary BRANNAN. That is the unfortunate record and that is why we have made personnel changes there.

Senator KEM. Whose responsibility was it to set up procedure in which loading orders would be properly policed?

Secretary BRANNAN. I assume the Secretary by and through his staff for those purposes.

Senator KEM. Do you feel that responsibility was properly discharged?

Secretary BRANNAN. Well, I think, if they had complied with the instructions, we would have discovered the already existing conversions earlier, but I do not believe that we would have very materially interfered with the conversions because those people were on the way to make their fortune-at least, they thought they were.

Senator KEM. What have you done in addition to what you testified to toward locking the door after the horse has been stolen in that. respect? What have you done to remedy this condition? Secretary BRANNAN. I have put the statement in the record. Senator KEM. Nothing besides that. Is that right? Secretary BRANNAN. I