Evening star., 1940-08-25
Defense Profits

OF special interest at this time. be-
cause of the wholesale letting of
Army and Navy contracts for ma
tional defense projects, is a petition
filed with the Supreme Court by So
licitor General Francis Biddle of the
Department of Justice. This plea is
for a review of lower court decisions
| affirming the Bethlehem Steel Com
| pany's claims to what the Govern
ment contends were ''inordinate prof
its" on shipbuilding contracts during
the first World War. The contracts
provided that Bethlehem was to build
ships for the Navy on a basis of cost
plus ten per cent of the estimated
cost, plus special bonus of fifty per
cent of any saving" made in con-
struction-this saving" to be COM
puted by Subtracting the actual cost
of construction from the estimated
cost. The petition charges that the
Bethlehem company submitted ''in-
f1ated" estimates, by which it would
receive more than $25, 100000 profit
on work which cost about S93 900 900,
without running any risk of loss.
In 1925 the Department of Justice
brought suit against Bethlehem to
recl -er alleged excessive profits al
rea-y received by the firm and in
1926 Bethlehem brought a counter
suit to compel payment of more than
$7,500000 additional alleged to be
due under the 10 per cent and
savings sharing provisions of the
contracts. The United States Dis
trict Court for the Eastern District
of Pennsylvania held that the Gov
ernment could not recover any of
the profits already paid and ruled
that\ S5,270,00O additional was due
the company under terms of the con-
tracts. The Circuit Court of Appeals
affirmed the decision. But both
courts criticized the large profits and
the Circuit Court denounced COM
mercial greed" which takes "advan-
tage of the Nations necessities to
secure inordinate profits"
Without attempting to judge the
merits of the claims and counter
claims Of these particular cases,
there can be no disputing the courts
broad thesis that profiteering at the
expense of national preparedness is
unconscionable,n nor with Mr. Biddle's
contention that excessive profit
making should be curbed in the pres
ent emergency. 1t is the Solicitor
Generals avoWed purpose to seek
from the Supreme Court a ruling
which would establish the authority
of the Federal Government to re-
quire private industry to fill defense
contracts on reasonable terms "a
question which, he said, is of 'imme-
diate national concern" 1t may be
that the Supreme Court, which does
not meet until October, will fail to
settle this point if it passes on the
Bethlehem cases. Meanwhile, Con-
gress is trying to solve the problem
through excess profits tax legislation.
There is no reason now to go to die
tatorial extremes in Imposing op-
pressive legislative restrictions on
industry, nor to regiment it along
totalitarian lines, especially in view
of the cooperative spirit which the
National Defense Commission re-
ports it has met in its initial deal
ings with industry. But it is equally
certain that the American people,
faced as they are with the prospect
of heavier tax burdens and greater
sacrifices of all kinds in the interest
of their country's security, will not
knowingly tolerate any waste,
profteering or corruption in the
spending of the billions of dollars
which their representatives in Con-
gress have appropriated for pre-
paredneSS.