Evening star., 1918-06-18
discriminating Documents Are
Found in Offices Here Hav-
ing Government Contracts
MILLIONS ARE ;SAVED-::
U. S. RESULT OF RAID
Four Arrests Made and Others
Likely to Follow-Attorney Gen.
eral Gregory Takes Sum
mary Action.

Several thousand letters and docu-
ments containing proofs Of an elabo-
rate system Of obtaining government
contracts on the illegal contingent Zee
basis were received today by the De-
partment of Justice from its agents
who conducted raids on hundreds of
contractors business offices late yes
terday.
The commissions 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 hun
arrangements heretofore unsuspected
by the Department of Justice.
Ten Offices Visited Here.
In Washington papers were seized
in ten Offices. The names Of the per-
sons from whom papers were taken
will not be made public. The papers
are being examined and returned as
fast as the Department of Justice has
obtained from them the evidence 1t
desires.
Manufacturers were threatened in
many cases with being deprived Of
contracts il they refused to negotiate
with these agents On a commission
compensation plan. Some agents rep
resented that they had special fnfiu-
ence over members of Congress.
Manufacturers Disclose Facts.
In addition to these documents. 9TH
er Information came to the depart
ment from manufacturers who had
been solicited by contract commission
agents located in Washington. The
manufacturers offered their assistance
in stamping out the Illegal system, :
An immediate result of the disclo-
sures was q letter sent by attorney
General Gregory. to heads of all gov
tracts proposing that saQ, future con-
tractss4A 4AhQy1d contain a clause pledg-
ing fhe niaHtffacturer not to employ
any third party in negotiations with
the government. -
Summary Action Necessary.
"a situation which has arisen in the
matter Of government contracts seems
to me to require summary aNion."
said the Attorney General. lowing to
the tremendous increase in govern
ment business and the speed with
which it must be executed, some
manufacturers because of ignorance
or nisinformation have thought 1t
necessary to negotiate with the gov
ernment. through contract brokers ,or
pnnfinpanf fee fnN1nvva
that the system requires contractor
in making his estimate to load his
bid with the contingent fee item. The
courts have universally condemned
methods employed by. the contingent
fee contractor are often insidious and
reprehensible. and. in view of the
fact that the average fee is per
cent, the resulting cost to the govern
ment is very great.
Covenants Required.
"As a means of breaking up this
ing form of covenants. which the
President requests shall be inserted
in all government contracts:
The contractor expressly warrants
that he has employed no third per-
in his behalf. or to cause or procure
the same to be obtained upon COM
pensation in any way contingent, in
whole or in part. upon such procure
ment: and that he has not paid, or
promised or agreed to pay, to any
third persons. in consideration of
such procurement or in compensation
for services in connection Herewith,
any brokerage, commission or per-
centage upon the amount receivable
by him hereunder. and that he has
not, in estimating the contract price
9amanded by him. included any sum
by reason of any such brokerage,
ior percentage, and that
all moneys payable to him hereunder
are free from obligation to any other
person for services rendered. or sup
posed to have been rendered, in the
Of this contract.
=" He further agrees that aty breach Of
this warranty shall constitute adequate
cause for the annulment of this con-
tract by the United States. and that the
United States may retain to its own use
from any sums due or to become due
brokerage, commission or percentage SO
paid. or agreed to be paid
For Additional Protection.
LAS an additional protection it is re-
quested that your department adopt as
a regulation the following language,
taken from section 2722. page 1876, Re
vised Statutes, as applied to the Navy
land no person shall be received as
a contractor who is not manufacturer
Of or regular dealer in the articles which
he offers to supply
"This will synchronize the action
of officials of your department with |
that of the contractor If prohibited |
by the law from transferring his con-
tract or order, or any interest there |
in. to any other party"
Deduction to Save Million.
ord of all contracts now being exc
cuted aon which it has proof Of the |
payment OF contingent fees; and may |
deduct from the payment to these |
the sum covered in the |