Senator KEFAUVER. This shows also that you went to see Mr. English, that Mr. English told you all about it, that you were considering going to see Mr. Harris of the Aluminum Office.

Mr. COSDON. Yes, sir.

Senator KEFAUVER. Mr. Roach had already written him on August 7 that he might want to go down to see him personally.

Mr. COSDON. My recollection is that Mr. Harris at that time was, I believe his exact title was, Director of Aluminum. He was known as the aluminum czar, and the whole purpose of such a contact or my suggesting such a contact was for the purpose of seeing if in the particular position and office that he occupied, there was any reason because of the then situation, that he might want to intercede with Interior and ODM, in order to have the certificate issued.

Senator KEFAUVER. Mr. English is the man who finally recommended the certificate to Mr. Wycoff and Mr. Gray, is he not? Mr. COSDON. Yes, sir.

Senator KEFAUVER. And Mr. Harris comes into the picture and you wrote him on August 7, 1953, Mr. Roach.

What were you writing him about then?

Mr. ROACH. Senator, I have no recollection of that in 1953. I may well have written him. I do not deny that, but I have absolutely no recollection of it.

Senator KEFAUVER. Apparently you were trying to work through Mr. Harris to help him get you the tax certificate way back in September 1953.

Mr. ROACH. Well, that would not be unusual, Senator. We had just filed the application.

Mr. COSDON. Senator, to the best of my recollection, although I suggested this to Mr. Roach, and he apparently wrote to Mr. Harris, there was nothing further that I did in this regard, and there is nothing that I know or have any recollection of that Mr. Roach did, and certainly we know that these certificates were not issued. Senator KEFAUVER. All right.

Well, the letter has been read.

Mr. BOONE. Senator, if I may recall, we have been engaged, as you know, in three hearings. The first is the Senate hearing, the Kilgore hearing, the second is what is called the Chudoff hearing, and this hearing.

Now, in the first hearing, the Kilgore hearing, a tremendous number of our records were subpenaed. Senator, there are virtually a roomful of them and those exhibits, may I say to you and to this committee, to this day, have not been released.

Now, as I recall, the Washington records, am I right, Mr. Cosdon, were sent to New York?

Mr. COSDON. Yes, sir.

Mr. BOONE. Whether they were ever returned, I am not certain, because those records have not been released.

I spoke to Mr. Clifford about it today and he said there must be some mistake about it because he said they were intended to be released.

Senator KEFAUVER. Mr. Boone, this is one of such letters, but this is a photostat of the letter which you apparently still have.

Mr. BOONE. Mr. Clifford took the photostats of all the letters.
Senator KEFAUVER. This is a photostat.

Mr. CLIFFORD. This is a photostat and we took no originals. It is my understanding that Ebasco was told at that time that the materials were released and if there was hardship to Ebasco, so far as I know, since the hearings concluded on September 23, 1955, no protest has been made.

Senator KEFAUVER. Anyway, you have only a photostat. They have got the original.

Mr. CLIFFORD. That is right.

Mr. BOONE. If we have the original, we will send it down to you. Senator KEFAUVER. We do not want the original, we have a photostat.

Mr. BOONE. We just want to explain that.

Senator KEFAUVER. You see, we subpenaed the records that Mr. Cosdon had. You had the original copy and did not send that up. Mr. BOONE. I made it clear to Mr. Dixon that we were only giving these records that we had in the Washington office. You know we received very short notice on that matter and we in good faith attempted to comply with the subpena, but I will look for that exhibit. Senator KEFAUVER. It certainly shows there has been a very close relationship between Mr. Cosdon, and the Ebasco people here, with Mr. English, who is in the Interior Department, who finally acted on this matter.

I do not know if Senator Watkins wants to ask any further questions or not, gentlemen.

He did not express himself very definitely.

Off the record.

(Off the record discussion.)

Senator KEFAUVER. We will undertake to contact Senator Watkins and let you know within an hour or an hour and a half as to whether he has any more questions to ask and, if not, with the further information that we have asked you to get on some points, we will stand in recess subject to the call of the Chair.

(Whereupon, at 5:45 p. m. the committee adjourned subject to the call of the Chair.)

RAPID AMORTIZATION IN REGULATED INDUSTRIES

TUESDAY, JUNE 18, 1957

UNITED STATES SENATE,

SUBCOMMITTEE ON ANTITRUST AND MONOPOLY
OF THE COMMITTEE ON THE JUDICIARY,

Washington, D. C.

The subcommittee met, pursuant to adjournment, at 10:30 a. m., in room 457, Senate Office Building, Senator Estes Kefauver presiding. Present: Senators Kefauver (chairman), O'Mahoney, Wiley, Carroll, and Dirksen.

Also present: Paul Rand Dixon, counsel and staff director; Dr. John M. Blair, chief economist; Philip Layton and George Clifford, attorneys; Ray Cole, investigator; Carlile Bolton-Smith, counsel to Senator Wiley; and Peter Chumbris, counsel for minority.

Senator KEFAUVER. The committee will come to order.

I would first like to say that I am sure the subcommittee is gratified to know that ODM has changed its rules so as to publicly announce on a daily basis the issuance of tax-amortization certificates. At the same time information is to be given to the officials of the companies involved. As chairman of this subcommittee, I want to congratulate you, Mr. Gray, upon that change in procedure.

STATEMENT OF GORDON GRAY, DIRECTOR, OFFICE OF DEFENSE MOBILIZATION, ACCOMPANIED BY CHARLES H. KENDALL, COUNSEL, ODM-Resumed

Mr. GRAY. That's right.

Senator KEFAUVER. Is it in the form of an order or is there a press release in connection with it?

Mr. GRAY. I think there was a press release; yes. I think it was published in the press.

Senator KEFAUVER. I saw a notice of it in the Wall Street Journal. I didn't know whether there was a formal order about it or not.

Mr. GRAY. It was my instruction that this be done. I don't know that I signed a piece of paper.

Senator KEFAUVER. We are glad it has been done.

For your information we have had the staff of the committee make a study of stock trading and behavior in quite a number of other cases between the time the Idaho Power decision was made and the company was notified and when the notice was made public. The staff has found in quite a number of other instances a similar behavior in stock trading similar to that of the Idaho Power Co. This was not a single occurrence and I am sure this new order will be helpful.

Mr. Gray, first may I announce that Senator O'Mahoney was here but he had to make a quorum at the Interior Committee and he said he would return shortly. Senator Dirksen is at the White House and we expect him to be here shortly also.

Mr. Gray, when you testified here the first time, your testimony was that the Interior Department, the delegate agency for electric power matters of ODM, had recommended the granting of the rapid tax writeoff certificates to the Idaho Power Co. You referred in your statement to a letter written by the Interior Department during the time Mr. McKay was Secretary, which I believe was in October 1955; and then later on, when information was requested from the Interior Department, we were furnished a letter which had subsequently been written by Mr. Fred Seaton, the present Secretary of the Interior, dated March 11, 1957, recommending against the issuance of the certificates. I felt, as chairman, you should have advised the committee of the letter, which was withheld from the committee. After we had received the letter from the Interior Department, ODM sent us a copy or perhaps the original of the letter.

The other day in a telephone conversation with Dr. Flemming, your predecessor as Administrator of the Office of Defense Mobilization, he advised me that there was attached to Mr. Seaton's letter of March 11, 1957, a full memorandum dealing with the Idaho Power Co. rapid tax writeoffs and throwing a great deal of light on this subject.

I must say this issue has been one that needs light thrown on it. It has been rather mysterious to me that the delegate agency recommended against the issuance of a certificate but this information was not readily given by you to Senator Byrd's committee or to this committee. We now find out that there was a memorandum by Mr. Flemming dealing with this entire subject which I felt might throw light upon the circumstances an dispel some of the mystery that has been generated in connection with it.

In your testimony, Mr. Gray, you had referred to the fact that Dr. Flemming wrote you a memorandum concerning several matters but my conversation with him was the first that I found out there was a specific memorandum attached to Mr. Seaton's letter. When his letter was finally brought up here by you-and I have the original here apparently- there was no memorandum attached to it. We have not had an opportunity of studying the memorandum. Did you receive such a memorandum from Dr. Flemming?

Mr. GRAY. I received a number of memorandums from Dr. Flemming about pending matters, Senator, and engaged in various discussions with him about matters pending when he departed the Office. And there was a memorandum specifically addressing itself to the Idaho Power Co. tax application.

Senator KEFAUVER. It is my impression that this memorandum of Dr. Flemming's is specifically with reference to the Idaho Power Co. It took exceptions to the possible granting of rapid tax amortization. The memorandum would certainly have required further consultation concerning, if not an outright recommendation against, the granting of the tax certificates.

Will you produce the memorandum so we can study and consider it?

Mr. GRAY. No; I cannot produce it, Mr. Chairman.

Senator KEFAUVER. Why can you not produce it, Mr. Gray?

Mr. GRAY. Because, Mr. Chairman, this was not an official communication which involved the process of granting the certificates, the memorandum does not reflect a conversation or conversations that I had with Dr. Flemming, and I consider this as one of those matters of consultation and advice within the executive branch which I am under a duty not to discuss, with respect to which I am under a duty not to discuss under executive privilege.

Senator KEFAUVER. You claim the memorandum is privileged? Mr. GRAY. Yes.

Senator KEFAUVER. On what grounds do you claim it is privileged? Mr. GRAY. On the grounds that this involved, as I just stated, along with conversations with Dr. Flemming, various discussions about the Idaho Power applications which I do not consider a part of the official record of action in this case.

Senator KEFAUVER. It must be borne in mind that you had been in office only a short time, Dr. Gray, when you acted upon this application and received Mr. Seaton's letter through Dr. Flemming. At the time you received Dr. Flemming's memorandum, there was also a letter from Senators and Congressmen, dated February 6, 1956, which asked for a public hearing to receive information and advice with reference to the consideration of the granting of these rapid tax amortization certificates.

I believe this is the first instance where the Secretary of the Interior had recommended against the issuance of a certificate and where his recommendation as the chief of the delegate agency had been overruled. It must be borne in mind that Mr. Roach did not make up his mind until after April 1, when the Supreme Court decision was handed down, that he was going to finish Oxbow by 1958 and that information had not been communicated to you until after you had made up your mind.

It should be kept in mind that Dr. Flemming had certainly greater information about this than you had, Mr. Gray. It must be kept in mind that there was either advice or certain people in the White House were advised or consulted about this matter.

This involves a large amount of the taxpayers' money. I cannot imagine you pleading privilege in connection with this memorandum, Mr. Gray.

Mr. GRAY. Is that a question?

Senator KEFAUVER. Yes, sir. Do you take all those matters into consideration?

Mr. GRAY. Yes, sir. I think I am entitled to advert to some of the things that you have said, Senator, because you have not asked questions. You have made a long statement. In the first place, as I said to the subcommittee in my last appearance before it, the March 11 letter of Secretary Seaton to which you have referred, I had not discussed it nor was I in a position to present it at the time of the Byrd committee hearings or the first hearings of this subcommittee because I had been advised there was a serious question of executive privilege. I told your committee this the last time I appeared. I also I think the record will show-I indicated to you that on the morning of May 27, which was the date of my last appearance before this committee I had been advised that this letter was not covered by executive privilege and I therefore had determined to present