New-York tribune., 1920-11-18


had to take care of and disburse the
sum of $3,204, 100000. 1t was neces-
sary to have accounts Of cash loans to
shipbuilders and of moneys paid to
ship owners on requisitioned vessels.
of which there were 451.
Separate accounts for labor and ma
terials should also have been intro
duced, he said, and books should also
nave been opened on such operations as
Meanwhile, in Washington, contracts
were being entered into, while at Phil
adelphia an enormous construction pro-
gram was going on. Mr.. Gillen said
that the board had no men to devise
simple method of accounting for ali
these operations. In addition, he testi-
fed, it opened books in the thirteen
construction districts with no central
accounting clearing house. The defects
of this lack of system, he said. became
apparent when contractors and operat-
ors began presenting claims for set
tlement. Judge Payne, on assuming
office, the witness said, called attention
to the large number of claims on ships
that had been taken over, but on which
there were no records to base settle
ments.
Scores Of Millions Lost
Those ships which had been reoui-
sitioned at sea upon the entrance of
the United States into the war, the wit
ness said, were not subjected to in
ventory until months after they had
been in operation, with the result that
many claims had to be made on the
basis of the operators word. In set
I thing such claims overpoyment Of scores
Of millions Of dollars were made, until
all claims were stopped and subjected
to settlement on the basis Of negotia-
! ton, he testified.
Mr.. Gillen explained that in order to
curtail TIE chaos in claim settlements
Joseph Cotton, member of the board,
and Rear Admiral Washington l..
Capps, general manager of the Fleet
Corporation, laid down rule limiting
the governments liabilities in the cases
Of requisitioned ships. This rule, he
said, saved the government $3.50 600
600. He said the requs sition program
called for an expend ture of $80O000,-
600, and that the construction division
had no records of inventories in the
Yards and no record of payments made
by owners for labor. etc.
One of the claims settled without
eny scientific and correct basis for
such settlement, Mr.. Gillcn said, was
that Of a Norwegian company. On
There was considerable talk about the
Shipping Board, at that time, that the
claim could have been settled for g
much smaller sum. Auditors were sent
to Norway to make an investigation
and under the application of the Cot
ton rule, Mr.. Gillen said, it was dis
covered that the government had over
paid to the Norwegian contractors
$23 100000.
AS a specific instance, Mr.. Gillen
mentioned the oil tanker William JEFF
ferson, which was under construction
at the Union Iron Works. When taken
over this ship was about 90 per cent
complete. Tho owner of the William
Jefferson had contracted TO pay
$1,O35, 900. He had paid on account
s672,0O0 and in the final settlement
received s2,57O,0oo, the witness said,
or more than double his contract price.
Mr.. Gillen added that the government
paid over 100000 additional to COM
plete the ship.
Violated Cotton Rule
The trouble with this settlement, Mr..
Gillen said, was that it was made in
Washington and in violation of the
Cotton rule without the knowledge of
the Fleet Corporation and in total dis
regard of the absence of yard data.
Another settlement made with
Christiania group Of Norwegian ship
ping men, Mr.. Gillen said, was on a
claim to the amount of $42,O00,O0
This was ultimately scaled down to
S34 100000. The sum that should have
been paid, it developed later. the wit
ness said, was $11,0OO,00O. He called
the method of settlement In this case
horsetrading.
Mr.. Gillen said that contracts were
gambled on in Norway and illustrated
it as follows:
Suppose a contractor had contract
calling for $3.50 deadweight ton.
Pending the settlement he sold it for
S172 desdweight ton. This process
of driving up the figures would con-
tinue until. in some cases, the last
holder of the contract would put in
a claim. for $500 a deadweight ton.
obtained by putting auditors on the
contractors books.
In the settlement Of the claim Of the
Mitaui Company, Japanese concern,
for ships commandeered at the yards
Of the Skinner e. Eddy Corporation, at
Seattle. Mr.. Gillen testified, the gov
ernment also paid profteer prices. Be-
cause the Japanese company had con-
tracted at price of $2s5 deadweight
ton, he said, it was permitted to pass
that figure on for settlement to the
Shipping Board.
Mr.. Gillen mentioned a third Nor
wegian group of ship owners which