Evening star., 1942-04-09
Senator Brands
MagnesiumPact
Sinister Fraud
MuIfeusunce Indicated
In Defense Plant Corp,
Bunker Tells Senate
BY the Associated Press.

OelldIOT bunkeT, democrat, OF
Nevada, charged in a Senate ad-
dress today that an agreement
between the Defense Plant Corp.
and Basic Magnesium, Inc, of
Cleveland for construction of a
s63, 100000 magnesite refinery at
Las Vegas, New, is so sinister as
to indicate that some officials of
our Government are guilty of
malfeasance."
He demanded a thorough investi-
cation of the Defense Plant Corp,
a subsidiary of the Reconstruction
Finance Corp, and added:
IF the agreement between the
Defense Plant Corp and Basic Mag
nesium, Inc, represents a cross sec
ton Of conduct on the part of the
Defense Plant Corp, can come to
only one conclusion: We are toler-
atlng the existence of an agency Of
the Government that is so corrupt
that it would make profiteering in
the last war look like petit larceny
by comparison.
The fraud that is being perpe-
trated by the Defense Plant Corp,
is betrayal of the President and
the American people"
1880 Per Cent Profit in Year Seen.
Last week Senator Bunker told
the Senate that Basic Magnesium,
Inc. stood a chance of making a
profit of 4,280 per cent in one year
on an admitted investment of less
than S50,000.
Previously, the special Senate
committee that is investigating ma
tlonal war projects reported that
hearings 1t conducted at Las Vegas
at Senator Bunker's request indi-
Gated that Basic Magnesium, Inc,
was guilty of lone of the most
fragrant attempts at war profiteer-
ing"
Senator Bunker, youngest member
Of the Senate, declared today that
the ramihcations of the transaction
were so far reaching as to project
Basic Magnesium. Inc, into the pic
ture Of international intrigue, in
volving English and German in
| tereSts."
Forty-five per cent of the stock
in Basic Magnesium, Inc, he said,
was owned by Magnesium Elecktron,
Ltd. OF England. The English COM
pany, he added, obtained that in
terest by agreeing to furnish a
magnesium refining process it OBJ
tained under an agreement with I.
! Ph frin Nf
Mining Claims Transferred.
Senator Bunker said the other 55
per cent of the stock was owned by
Basic Refractories, Inc, OF which
Howard P. Eells, jr.. of Cleveland is
president. Basic Refractories OBJ
talned its interest by transferring its
rights in So public domain mining
claims in Nye County, New, to Basic
Magnesium, Inc, on which some de-
velopment work had been done. Mr..
Eells also is president of the subsid-
iary, Basic Magnesium, Inc, Senator
Bunker said.
These claims, on which Basic Re-
| fractories admittedly expended less
than $4,000, represented the sole
assets of Basic Magnesium, Inc. the
corporation which Defense Plant
Corp. is giving 1000 900 to build a
refinery at Las Vegas" Senator
Bunker said.
Neither company, Basic Magne.
SUM, Inc, nor the English company.
Magnesium Elektron, Ltd, had suffi-
clent assets or we're sufficiently
financially responsible to warrant
such an extension of credit on a
sound business basis"
Senator Bunker said terms of the
Defense Plant Corp-Basic Mag
nesium, Inc. agreement provided
that Defense Plant Corp. would paw
the company s1,0O0,000 in case the
plant was sold to some company
other than Basic Magnesium, Inc:
S3OO,OOO for supervising construc-
tlon; S280,000 a year royalty on ore
taken from the public domain
claims, and an estimated $500 900 for
management and operating of the
plant annually. The total was So
100000.
Royalty Boosted Also.
In case of sale of the plant to
other than Basic Magnesium, Inc,
then Tor 10 years the Government
would be required to pay a royalty
OF $780, 900, instead of s280,0OO an
nually, for ore taken from the pub
lie domain claims, Senator Bunker
asserted.
He said the Defense Plant Corp.
agreed to pay all the bills, including
salaries, wages and materials and
contractors fees and certain ex-
penses incurred prior to the culmi-
nation of the agreement.
Prior to the formation of Basic
Magnesium, Inc, and prior to the
signing Of the contract, Basic Re-
fractories claimed to have expended
Ill the promotion of this enterprise
and the negotiation of the contract,
the sum of s211 ,000," said Senator
Bunker.
This no doubt includes Eells' nu-
merouS trips to Washington and en-
tertainment. This sum is now being
repaid by the Defense Plant Corp.
to Basic Refractories.
He said the Defense Plant Corp.
purchased peat moss required for
processing of magnesite and in ad-
dltion lis paying a group of Cana
dian and American distributors an
s84, ,000-a-year bonus for the release
OF all their available stock to Basic
Magnesium, Inc"
The Defense Plant Corp. also
agreed to pay a firm of architects
$4,000 for the privilege of using
plans for 300 demountable houses
at the Las Vegas plant-plans which
had previously been used on another
Government project" Senator Bum
ker charged.
Thus the Government bought
the same plans twice.
THE Defense Plant Corp. Is now
paying travelling expenses and SAL
aries Of As officials of basic magne-
SUM, now in England studying the
process. At the same time, Defense
Plant Corp. is paying the salaries
Of English technicians who are in
America promoting interests OF their