The Richmond palladium and sun-telegram. [volume] (Richmond, Ind.) 1907-1939, 1918-06-18
ILLEGAL FEES
PAID FOR j. s.
CONTRACTS BY
BUSINESS men
Millions Of Dollars Paid in
Fees to Agents Claiming to
Control Government War
Contracts.

(By Associated Press.)

WASHINGTON. June 1S.--Several
thousand letters and documents con-
tanning proof OF an elaborate system
Of obtaining government contracts on
the illegal contingent fee base were
received today by the department of
raids on hundreds of contractors bus
mess offices, late yesterday.
The commission paid on these con-
tracts, it was disclosed, ranged from
5 to 20 per cent and the aggregate
fees probably ran into millions of dol
lars Evidence was discovered of
hundreds Of contracts made under
these arrangements heretofore unsus-
pected by the department of justice.
Manufacturers were threatened in
many cases with being deprived Of
contracts If they refused to negotiate
with these agents on commission
compensation plan. Some agents re-
presented that they had special in
fluence over members of congress.
Manufacturers Offer Help.
In addition to these documents, 9TH
er information came to the depart
ment from manufacturers who had
been solicited by commission agents
located In Washington. The manu-
facturers offered their assistance in
stamping out the illegal system.
An immediate result of the disclos-
ure was letter sent by Attorney
General Gregory to heads Of all gov
ernment departments making war con-
tracts, proposing that all future con-
tracts should contain clause pledging
the manufacturer not to employ any
third party in negotiations with the
government.
Further evidence of an extensive
plot to defraud the government on
war contracts is about to be disclosed
by the government to supplement the
announcement that four men had been
indicted in Washington on charges of
accepting commissions from manufac-
turers for negotiating war orders and
that valuable information had been
gathered in a nationwide raid yester-
day on the business Offices of several
hundred manufacturing concerns.
Arrest May Follow.
Reports OF the success of these
raids began to reach the department
OF justice today, from it's secret agents
They will be studied carefully to dis
cover how widespread the illegal prac-
tice was, and it Is said, may be fol-
lowed shortly by arrest of a number
OF men suspected of acting as contin-
sent fee agents.
The war and navy departments are
inquiring into their respective con-
tract letting systems, and it has been
indicated any officer found guilty of
improper action will be court-mar.
tailed.
For two months, department of
Justice investigation, directed by AS
sistant Attorney General Huston
Thompson, has been under way to run
down persons violating the old law
forbidding negotiation of contingent
fee contracts. Early in April, the de-
partment gave out a statement warn
ing contractors to deal directly with
the government. and not to pay COM
missions to middlemen.
Hundreds of inquiries were received
as result of this warning, and from
these developed number of cases in
which manufacturers were solicited
by contingent free agents operating In
Washington to employ them These
men were shadowed, and the result
was the indictment yesterday of the
four business men.
The system of contract abuse de- !
veloped first during the civil war and
prompted enactment of law forbid |
ding sub-letting of contracts. This |
later was interpreted by the members
OF the supreme court as prohibiting
the payment of commissions to agents !
who obtained contracts. The govern
ment under the law has the right 10
annul the contract and the manufac. |
turer cannot recover.
Statute is Cited.
The department of justice TODAY |
called attention to the section of the |
statute as follows;
That no contract or order. or any |
interest therein, shall be transferred /,
by the party or parties to whom such !
contact or order may be given to any
other party or parties, and that any
such transfer shall cause the annul-
ment OF the contract or order trans
ferred, so far as the United States are
concerned: Provided. that all rights |
of action are hereby reserved to the !
United States for any breach of such
contract by the contracting party or
parties"
Only one case of proven copnivance !
between an army officer and a con-
tractor to procure government con-
tract has developed from the war. The |
case was brought to light recently in
Battle Creek, Mich. The contractor
was sentenced to five years in the
peniten,iary and the officer was given
sentence of 20 years by courtmar-
tial.