Evening star., 1947-12-02
House Group Probing
Billion 0verpayment
On War Contracts
By Robert s. Allen
North Ansriesn Newspaper, AIiiones


Eighteen cases involving $1,000 :
0O0, 600 in frauds or overpayments
on war contracts are being investi-
gated By the House Expenditures
subcommittee headed by Represen-
tative Bender, Republican, of Ohio.
The subcommittee has been ques-
tioning witnesses behind closed
doors, including officials Of the
Army, Air Force, Navy, Maritime
Commission, Reconstruction FL
nance Corp, and the former War
Production Board.
In addition to investigating al
legged frauds and overpayments, Mr..
Bender also is looking into the mat
ter of former Government officials
latter taking jobs at big salaries with
firms that received large war con-
tracts.
rive ulpAtIlCS
Five of the 10 cases being investi-
gated by the subcommittee are the
Springfield Machinery 81 Foundry
Co., defunct subsidiary of the Har-
risburg Machinery. Corp. of Pennsyl-
vania; the Andrews Steel Defense
Corp, a subsidiary of the Andrews
Steel Co. of Kentucky; the Mathei-
son Alkali Works, Inc. the Foote
Mineral Co. and the Brewster Aero
nautical Corp, a New York aircraft
concern which had numerous diff
culties with the Army and Navy
during the war.
According to evidence submitted
to the subcommittee by the General
Accounting Office, the Springfield
Machinery & Foundry Co. received
an order for 80 large mailing ma
chimes at a cost OF, $6,348, 900 from
the Defense Plants Corp. But the
Springfield company. chartered in
February, 1912, as a Delaware cor
poration, never got into production.
According to the GAO, the Govern
ment's loss on this contract was
S615,000. 2
Also, according to the GAO, "engi-
neering inspection and auditing OF
machinery and equipment acquisi-
tions were so weak that antiquated
and damaged machinery was pur-
chased by the Defense Plants Corp.
at excessive costs. Accounting and
auditing controls we're lacking, with
the result that funds advanced to
Springfield were expended improp-
erly. Rents were not collected when
due, and recovery has been stopped
Dy bankruptcy.
Former WPB Aides on Payroll.
ALSO, former employees of WPB.
the sponsoring agency. who had be-
come top executives of Springfield,
were permitted to benefit through
the receipt of salaries from the en-
terprise which may have been exceS-
sive. And material facts were with
held from the Senate War Investi-
eating Committee when inquiry was
made regarding the status Of that
project
e. In its report on the Andrews Steel
Defense Corp, the GAO informed
the Bender subcommittee that the
Defense Plants Corp. lost .$2.278, ,342
UP to September, 1915, when the
corporation suspended operation.
According to the GAO, the De-
re nj q
agreement with the Andrews, Stee
o., the parent firm of the Andrews
Steel Defense Corp, on the recon-
mendation of the War Production
Board. Reviewing the transaction
the GAO states in its report:
1T appears that the Andrews
Steel Co. virtually dictated its own
terms, to the considerable benefit OF
itself, including earning of a man.
agement fee of $359,976 and of plant
and offices rentals of S97 500 for the
operation of an improbable plant
which it had to abandon Also, real
ization of considerable profit on
the sale, nearly at cost, and subse-
quent repurchase at go per cent dis
count, of an Inventory consisting OF
a large part of obsolete and prac-
tically useless items"
Another Report Studied.
Another GAO report on which the
House subcommittee is working, con-
Germs one of the largest investments
in war production facilities made by
the Defense Plants Corp. This was
the nonproft Pratt & Whitney Air
craft Corp. of Missouri, a subsid-
iary of the United Aircraft Corp
engaged in production for the Navy
DPCs gross investment up to June
1945, according to the GAO, was ovel
s77,000,000 However, the plant die
not get into production until aftel
vi day.
by the terms of production
contract with Pratt g. Whitney
dated September IL, 1922 the GAG
report states, "the Navy agreed tt
indemnify the lessee against liabilit!
for loss or damage to DPC property
Because of this undertaking, thu
only protection of the, Government
as whole lay in the lessee's integ
rity, since no accountability couis
be enforced in the case OF missing
or damaged property"
The GAO report also declares tina
Pratt & Whitney objected. to
physical inventory of machinery ant
equipment in the plant. The Ben
der Subcommittee is seeking to as
certain how much was lost by tn
Government in this transaction, ant
exactly who was responsible 10
these losses.
1t was authoritatively reported to
day that some OF the Arms beinl
investigated by the subcommitte
have offered to reimburse the Gov
eminent on the losses charged b.
the GAO.