Page 2
Mr. WEICHEL. When you collect, what kind of a contract do you have, that they have to pay the whole course, they buy the course and pay for it whether they stay in it or not? Is that the kind that you have? Mr. BETHKE. We have a contract. We try to enroll people for the entire course at the time of enrollment. We do that because we can offer a better proposition to them. Mr. WEICHEL. 10 percent less? Mr. BETHKE. That is for cash. The reduction for enrolling for the entire course is a good deal more than 10 percent, of course. Mr. WEICHEL. What do you sign them up, with a note for the whole $200 Mr. BETHKE. We use no notes. We do not sue for tuition. Mr. WEICHEL. When did you stop suing for tuition ? Mr. BETHKE. Several years ago. Mr. WEICHEL. Just several years ago. For a period of several years ago you had been suing on these contracts for 2 years, and if a man only stayed for 6 months you wanted to collect all the money. That was the principle they all operated on. Mr. BETHKE. We sued in some cases. Not many suits as a whole; no. Mr. WEICHEL. With reference to the Veterans' Administration, the contracts that you made with them, did they have to pay the $225, and then if the man only went 6 months, how much did you give back to the Government? Mr. BETHKE. The charges on the veterans course were all itemized. They were itemized for texts and lesson material or supplies, and for lessons, and for registration fee. The payments were made as the men progressed. If he did not do any work, we did not get any pay, but the matriculation fee. Mr. WEICHEL. For instance, in a course for a year, you say it cost $125. Did the Government pay you $125 when the man started ?, Mr. BETHKE. No. The Government paid us nothing when he started. We, however, upon delivery, would bill them. Mr. WEICHEL. How much would you bill them when the man registered? Mr. BETHKE. It varied a little bit. The registration fee varied, as I remember, from five to seven and a half. Mr. WEICHEL. To start on a year's course, how much did the Government pay you, $25 for books in the first how many lessons? Mr. BETHKE. No. It would vary. There is hardly ever a charge. It is somewhere between $10 and $15 at the most. Mr. WEICHEL. That is the first month. How much did you bill the Government for the next month? Mr. BETHKE. On the basis of the lessons completed. That would average a little less than $2 a lesson. Mr. WEICHEL. At the end of 6 months, how much would the Government be billed on $125 course? Mr. BETHKE. Depending on what work the man did. If he did not do any work, there would not be any more billing or any more pay. Mr. WEICHEL. In other words, you now adopt the principle over there, if they do not continue there is no more billing and the Veterans' Administration did not make any agreement with you to pay for services that were not taken by the veteran? Page 3
Mr. WEICHEL. I mean, Do you pay the 28 accountants who examine the papers of 8,000 correspondence students in accounting the same pay as one who is examining a paper of auto mechanics? Do they get the same pay? Mr. BETHKE. We do not offer any courses in trade or mechanical fields. Mr. WEICHEL. What other courses do you offer? Mr. BETHKE. For example, law. We have a full-time law staff there, men who have their college degrees and law degrees and are members of the bar. We have three men who are doing part-time work. They are practicing lawyers who have some special work. Mr. WEICHEL. With reference to some of the nonprofessional courses, what courses do you have? You mentioned law and accounting. How many do you have in law? Mr. BETHKE. About 4,000. Mr. WEICHEL. How many people read the answers to those questions? Mr. BETHKE. Six people altogether. Mr. WEICHEL. What other courses do you have? Mr. BETHKE. For example, we pioneered in the field of traffic-management training for railway and industrial traffic managers, and so on. In that field, the members of the staff all have their degrees and are all licensed practitioners before the Interstate Commerce Commission. Mr. WEICHEL. Do they have degrees in traffic management ? Mr. BETHKE. The college degrees. Mr. WEICHEL. What kind of a degree? Mr. BETHKE. Most of them are graduates of school of commerce. Mr. WEICHEL. There are no degrees with that. I am familiar with that course. I started that. I am familiar with it. Mr. BETHKE. Oh, yes. Mr. WEICHEL. You had some papers and lectures by Professor Schott from the University of Michigan and some people. It was a very thin course, as I remember it. Mr. BETHKE. That was in the early day; yes. Mr. WEICHEL. What other courses do you have there? Mr. BETHKE. Business administration. Mr. WEICHEL. Business administration ? Mr. BETHKE. Yes. Mr. WEICHEL. How many instructors or paper readers do you have altogether in all the courses? Mr. BETHKE. I know you are asking the information, but will you pardon me by making this comment; We don't have what they call paper readers. Mr. WEICHEL. You call the instructors? Mr. BETHKE. We have no examination that can be answered out of a textbook or that can be answered by "Yes" or "No" or anything of that sort. It is always a problem situation which requires professional judgment in analyzing the material to determine the type of understanding and solution which the student gives. The CHAIRMAN. Mr. Weichel, we have about 2 minutes more on this. Will you try to get through in that time, at least? Page 4
sion of the committee, I would like to insert here three brief paragraphs from the Report of the President's Commission on Higher Education (vol. III, pp. 21–22) relative to that position. Also I should like to add that the President's Commission was composed of intelligent persons and, without casting any reflection on the intelligence of private-school people, I should like to add that there was not a private school man or woman among them. Following is the Commission's statement about proprietary schools: Most States provide in their laws governing corporations for two types of educational institutions. One of these is the nonprofit type. Their educational property is exempt from taxation. The other type is the proprie tary institution. * * * The commonest illustration of this latter type are the private business colleges and the private technical schools. Without doubt they play a very important role in our educational system. They should be strengthened and fitted more effectively into the total educational program of the State. For decades the proprietary business college was almost the only institution offering practical training for office workers. The high schools and a few nonprofit colleges now share in that service. When automobiles first appeared in large numbers, the proprietary auto mechanics schools trained most of the garage workers. Now the public and private nonprofit trade schools share in that service. So in many other fields. Before the public system can adjust to new demands, private initiative steps in and establishes schools. We think we had an illustration yesterday, Mr. Chairman, in the testimony of Mrs. Roth in the cooking school in Connecticut. Hundreds of thousands of students are in attendance at the proprietary schools today. The commonly accepted theory seems to be that since they operate for profit, they are outside the family of education institutions. Ar ne choosing to patronize them does so without benefit of any public assurance as to their standards. The President's Commission then concludes “That theory is unsound. Regardless of statements of this character on the important place filled by private schools in American education made by men and women of intelligence and by the fact of the long and honorable record of such schools, the Veterans' Administration, proceeding in accordance with its own mistaken ideas and prejudices, has placed the private schools on trial before the American people and those veterans who attended them or who might have wished to attend them. These statements have tended to create the impression that all private schools as such are fly-by-night affairs and operated by opportunists and profiteers. At a meeting of the advisory committee to the Administrator, held in January 1949, I was voted the right to present to the Administrator a minority report in defense of S. 2596, now Public Law 610. In that report (second paragraph, p. 5), I referred to the injury done to all private schools and their reputations because of the existence of a relatively small unethical group. In that same paragraph, I also said: Yet the honorable proprietary schools are subject to the restrictive and punitive regulations by which the Veterans' Administration has in the past attempted to control the abuses of a few. To show that the Administrator had the authority to deal with unethical schools and did deal with them, also to prove that proprietary schools were not the only problem children of or trouble makers for the Veterans' Administration, I should like to quote from Page 5
My own thinking on the subject of the cost-analysis formula and its purpose was stated in detail at a hearing of a subcommittee of the Committee on Veterans Affairs, February 6, 1948 (House of Representatives, 80th Cong., pp. 208 and 209). New Schools: The Veterans' Administration has had much to say about new schools until the impression is inescapable that it is prejudiced against new schools. As I stated in a report to the Administrator, January 25, 1950: It was anticipated by Congress that in order to meet the tremendous volume of educational training which would be sought by returning veterans there would be new schools created in the already well-established fields of education. In addition it was recognized that there were vast new fields of employment and opportunity such as television, radar, plastics, etc., where inadequate facilities existed or none at all. Furthermore, it was specifically brought out in the debate on Public Law 346 in the House of Representatives that new schools would have to be established in certain areas, especially in the Southeast, where previously there had been insufficient student demand to support efficient and self-sustaining educational facilities. Congress debated this question of "new schools" very thoroughly when originally considering Public Law 346. And later on I shall show where that was absolutely worked out as they thought it would be. When Congressman Dondero, of Michigan, offered an amendment limiting the educational program under Public Law 346 to "existing" institutions, it was defeated with Mr. Vorys, of Ohio, Mr. Cunningham, of Iowa, and Mr. Rankin, of Mississippi, speaking definitely against such restriction. Knowing what we know now, "existing” institutions would have been unable to meet the demand. Veterans' attendance at below-college-level schools: Undue and continued emphasis has been placed upon the number of veterans who entered training in schools below the college level. Yet the number of veterans who attended such schools was not excessive. The VA report, on page 35, print 210, states: During fiscal year 1949, 560,000 or more than 56 percent of the veterans who entered training for the first time, entered training in schools below college level. During the period July 1 to November 30, 1949, there were 250,000 additional new entrants into this type of training. In addition, a substantial number of veterans have shifted from other kinds of training or have resumed training after having discontinued it. The fact that 56 percent of veterans entering training for the first time should have entered schools below the college level need not have been surprising as 62 percent of them were not eligible to enter any other type of school. This is true of even business schools who adhered to the standards of their association as most of the 560, that is, of the national council, are reported to have done which required high-school graduation. As a matter of fact the largest percentage of such increase in attendance occurred in one section of the country. In commenting on such increases the Veterans' Administration, on page 33, of print 210, second paragraph, says: Recent increases in enrollment in schools below collegiate level have been proportionately greater in the Southeastern States than in any of the other major geographic areas of the country. Page 6
The CHAIRMAN. Now, Mr. Rasely, you mentioned changes in I believe you would agree that we should not have permitted a veteran who completed a barbering course to go to a bakers' school, or anything like that. Mr. RASELY. That I think is true. That, I think, should have been determined by advisement, and I think it was. I think those abuses as they arose were corrected. I believe we are talking today about situations that have been corrected a long time back. Take the flight schools. Instruction 1 corrected that and I believed knocked out more than 50 percent of the flight schools. I have the figure, Mr. Chairman. There were 1,249 business schools in the program. 1,189 were old-time schools, or 95.2 percent. Those are the Veterans' Administration figures. So it is infinitesimal from the standpoint of new schools in the businessschool field. Mr. CHUDOFF. I have had some complaints from veterans who go to train under the training-school program and also work in private industry. Now, they work in a certain type of industry that works them around the clock. They work 1 week from 8 to 4, the following week from 8 to 12, and the following week from midnight to 8. They tell me that they were not allowed to make up that time in schools. Now, how does the Veterans' Administration handle a problem like that, where they actually go to the day school, but they want to go to the night school on the day that they work the day-school shift. Now, is it possible to work something out like that? Mr. RASELY. It would be very difficult, if you work an 8-hour day, to also go to a school 5 hours, if that is what you mean. Mr. CHUDOFF. Well, there were thousands of men doing it. I mean, you cannot expect the man who has one, two, or three children to do that on $120 a month. They are going to upholsterers' schools, for example. Has the Veterans' Administration in that case, to your knowledge, allowed them to make up the time in a night school ? I mean, if a man is going to an upholsterers' school and works on a sofa, does it make any difference whether he works on it from 5 to 10, or any other hours? Mr. RASELY. So far as I know there were those three-shift schools, and so far as I know they were allowed by the Veterans' Administration. Mr. CHUDOFF. I have some complaints that they would not allow them to do it. Mr. RASELY. I know of a few business schools that have run on a two-shift plan, and I think it was allowed. There may be cases where it was not, but that I would not have any knowledge of. Mr. CHUDOFF. Mr. Page, what is the policy of the Veterans' Administration on a situation like that? Mr. PAGE. Congressman, as to how a school can handle a thing like that, where a man enrolls in a class and it is irregular as to progress, where would he fit in the next day or the next week? Mr. CHUDOFF. He is now learning how to make a sofa. What is the difference whether he is learning to make a sofa from 8 to 4 in the afternoon or from 5 to 11 at night? Does it make any difference? Will it make any difference whether he works any of those hours? Let us take a man who goes to upholstery school. He goes along and practically works under the supervision of an instructor by himself, does he not? Page 7
trade, and vocational schools. No allowance for reasonable absences greater than 10 percent will be considered by this office, nor any reasonable absence greater than one session per month for evening courses. 8. Uniform clauses used when and where appropriate provide your office and this office with a simplified contract which may be prepared in less time and reviewed in less time than where no uniformity of expression exists. Also, their use assures all concerned of greater original correctness in contracts. Is this not published in any way that schools would know about it at the time it comes out? Is there no way they will know about this? Mr. MONK. They will not know, Congressman, until the regional office advises them. I would like to clear up, on that letter, what I believe to be an erroneous impression given by Mr. Rasely: That if the school exceeded the 5 percent in each individual case they would have to go to New York to get that absence excused. That is not what that letter says. That letter says that in order to make a contract that exceeds the 5 percent the arrangement must be cleared through the special assistant's office, but after the contract is made certainly the individual case does not go to New York. The CHAIRMAN. The said that “any allowance greater than 5 percent for day courses will require complete justification to this office.” Mr. Monk. That is in making the contract, Congressman. But not in the case of the individual veteran. Mr. RASELY. Well, that is not understood by your regional offices. Mr. FERGUSON. Mr. Monk, are there any other regions that are operating under similar instructions? Mr. Monk. Practically all of the regions. The CHAIRMAN. What problems will a school encounter which has been in existence since October and which has had some absences, as Mr. Rasely just mentioned? It just seems to me that the school should know this is coming up, and when it comes out it should be published so that the schools will be aware of it. Mr. Monk. Well, it is my opinion, Congressman, that in the case of Mr. Rasely's school, for example, that will not affect his school at all. The CHAIRMAN. Will this be retroactive as to any school? In other words, will it go back to cover a peri back to cover a period that they knew nothing about ? Will it be retroactive as to any school? Mr. MONK. It would cover the period of the contract, if the contact is retroactive on this date. Mr. Rose. It would be retroactive, then? That is your answer, Mr. Monk? Mr. Monk. Right. The CHAIRMAN. I am afraid of any law or regulation that is retroactive. Mr. RASELY. I can answer the question there, Congressman. On the contract already written, the question was asked as to what would happen as to the contract already written when this directive comes out, and the answer was that there will be a supplement to the contract covering this. The CHAIRMAN. A supplement to the contract covering it. Well, Mr. Rasely, we appreciate your coming down. We have investigations going on at this time in the colleges on a number of other phases of this, and we expect our committee to continue. Page 8
tise for veterans in our State. We dare not advertise we are approved The CHAIRMAN. Thank you, Mr. Rasely. The committee will be adjourned until further notice. (Whereupon, at 5:05 p. m., the committee recessed, subject to the calì of the Chair.) Page 9
tise for veterans in our State. We dare not advertise we are approved The CHAIRMAN. Thank you, Mr. Rasely. The committee will be adjourned until further notice. (Whereupon, at 5:05 p. m., the committee recessed, subject to the calì of the Chair.) Page 10
HOUSE SELECT COMMITTEE TO INVESTIGATE EDUCATIONAL PROGRAM UNDER GI BILL
OLIN E. TEAGUE, Texas, Chairman CLAIR ENGLE, California BERNARD W. KEARNEY, New York JOE L. EVINS, Tennessee J. GLENN BEALL, Maryland RICHARD BOLLING, Missouri ALVIN F. WEICHEL, Ohio EARL CHUDOFF, Pennsylvania HUBERT B. SCUDDER, California GEORGE M. ROSE, Staf Member GEORGE W. FISHER, Clerk Page 11
Statement by-Continued Page 508 Rubin, Elizabeth Estelle, Fort Worth, Tex---- 225 Scott, George Arden, president, United States Jewelers Supply Co., Chicago, Ill. 182 Sears, John H., Sears School of Trades, Cleveland, Ohio--- 1211 Sims, George W., Jr., Terre Haute School of Watchmaking, Terre Haute, Ind.. 29, 41 Stevenson, Frank G., Dallas, Tex_-- 247 543 Ward, Sam Brooks, Fort Worth, Tex. 310, 321 Watson, Vedder B., Greenville, S: C---- 340 Wolf, Ray C., vice president, C. & E. Marshall Co., Chicago, Ill_- 361 Wright, David V., Jr., Conroe, Tex_- 336 Letters, statements, memorandums, etc., submitted for the record by- Beer, Robert D., manager, regional office, Chicago 6, Ill., memo dated January 12, 1950, to Director, Education and Training Service, for Vocational Rehabilitation and Education, Veterans', Administra- tion, Washington, D. C------ 104 Bergman, T. A., letter, September 28, 1950, to Lew Feldherr-- 620 Bigelow, A. Caryl, letter, October 24, 1950, to managers of all VA offices. 659 Breedent, C. E., director, Atlanta Watchmakers Trade School, letter September 12, 1950, to C. & E. Marshall Co., attention: R. C. Wolf, vice president. 180 Caruthers, J. W., jewelry, four pages of accounts_- 82-85 Caruthers School of Horology, draft No. 447, payment of $976.35 to C. & E. Marshall Co-- 80 Dickensheets, H. F., manager, Veterans' Administration, Pass-a- Grille regional office, St. Petersburg, Fla., letter, October 14, 1949, to James A. Esser... 170 Dunn, Paul, Los Angeles branch of C. & E. Marshall Co., memorandum, July 7, 1948, from C. E. Van Dusen -- 426 Educational Gap in Higher Education, graph. 644 Esposito, Anthony, owner, Esposito School of Watch Repairing, Phila- delphia, Pa., letter to C. & E. Marshall Co.- 190, 388 Esser, James A., owner, Tampa Horological School : C. & E. Marshall Co., letter to, February 24, 1950, attention: Ray C. Wolf- 151 Dickensheets, H. F., letter to, October 8, 1949– 169 Teague, Hon. Olin E., letter to, December 28, 1950_ 169 Gill, G. H., auditor, Bank of Hampton Roads, letter, November 24, 629 Green, Harry G., president, Phillips Business College, Lynchburg, Va., letters from : Dean, H. A., contact section, Veterans Administration, Roan- oke, Va.: August 13, 1948.- 603 September 8, 1948_. 603 Stoddard, C. M., Chief, Vocational Rehabilitation and Education Division, Veterans' Administration, November 1, 1948_ 604 Heiss, G. M., Chief, Vocational Rehabilitation and Education Division, Veterans' Administration, regional office No. 12, letter, November 27, 1950, to Capitol Radio Engineering Institute, Inc.- 586 Jennings, C. J., of Texas Trade School, letter, May 16, 1950, to C. & E. Marshall Co., attention: C. E. Van Dusen.- 15 Johnson, H. Glenn, chief, training facilities section, regional office, Cleveland, Ohio, letter, July 5, 1950, to Sears School of Trades, Inc. 131 Lenderman, William M., Dallas, Tex., statement- 249 Marshall, C. & E., commission check, $1,138.34, and list of invoices_ 18 Page, Frank M., Chief, Training Facilities Division, VA branch office, letters: February 14, 1949_ 605 March 11, 1949 606 August 2, 1950- 615 August 29, 1950_ 619 Page 12
Mr. FERGUSON. What is your position with that company? Mr. JENNINGS. The same. Mr. FERGUSON. The secretary treasurer? Mr. JENNINGS. Yes, sir. Mr. FERGUSON. Are you connected with any other school or supply company which has to do with the educational instruction of the veteran trainees or with the supplying of horological tools? Mr. JENNINGS. I have no connection with any other school, but I am president of General Trading Corp., which is a representative of C. & E. Marshall Co. Mr. FERGUSON. It is a representative of whom? Mr. JENNINGS. C. & E. Marshall Co.-sales representative. Mr. FERGUSON. When were the Texas Trade and Southern Trade Schools formed, Mr. Jennings? Mr. JENNINGS. Texas Trade School began operations in April of 1946, and, of course, it was formed prior to that. Mr. FERGUSON. How about the Southern Trade School? Mr. JENNINGS. I disremember the date of that. It is sometime later. Mr. FERGUSON. When did you begin training veterans under the GI bill? Mr. JENNINGS. April 20 or 22—I disremember-1946. Mr. FERGUSON. In 1946? Mr. JENNINGS. Yes, sir. Mr. FERGUSON. What was your policy, Mr. Jennings, in regard to your purchase of tools, supplies, and equipment for the Texas and Southern Trade Schools? Mr. JENNINGS. At what time, sir? Mr. FERGUSON. In 1946, when your school was first organized. . Mr. JENNINGS. What was the policy, you mean- Mr. FERGUSON. What was your general policy? Do you have any particular suppliers from whom you purchased tools at that time? Mr. JENNINGS. Yes, sir. William R. Katz Co. and Gould Co. Mr. FERGUSON. In what manner did you purchase it? Did you purcase it on an open-account basis? Mr. JENNINGS. Yes, sir. Mr. FERGUSON. Did you at that time get any bids in connection with your purchase of tools, or was it just a direct purchase ? Mr. JENNINGS. Just direct. Mr. FERGUSON. Do the Texas Trade School and the Southern Trade School operate any other schools anywhere in the country? Mr. JENNINGS. Other than Dallas, Tex., you mean? Southern has no schools in Dallas. Mr. FERGUSON. Southern has none in Dallas? It is located where, did you say? Mr. JENNINGS. The home office is in Dallas. Mr. FERGUSON. And where is the Southern Trade School itself, the actual school? Mr. FERGUSON. They operate the New Orleans Trade School in New Orleans, La.; the Rapides Parish Trade Institute in Alexandria, La.; and the New Mexico Trade School in Albuquerque, N. Mex. Mr. FERGUSON. How about the Texas Trade School, Mr. Jennings. Do they operate any other school? Page 13
Mr. FERGUSON. Then you went along just on a direct-purchase basis, of the quantities of tools that you required? Mr. JENNINGS. From them, you mean? Mr. FERGUSON. From the Marshall Co. Mr. JENNINGS. No, sir. Later they came to us with the proposition that they would allow certain discounts. Mr. FERGUSON. That they would allow certain discounts ? Mr. JENNINGS. Yes, sir. And therefore, naturally, of course, we accepted the proposition. Mr. FERGUSON. This was in 1948, Mr. Jennings, or thereabouts? Mr. JENNINGS. I believe that is right. Mr. FERGUSON. Now, between what percentages did these discounts range? Mr. JENNINGS. I am not for sure, but it is 331/3 to 40 or 45 percent; I do not remember exactly. Mr. FERGUSON. Somewhere in the range of 3313 to 45 percent? Mr. JENNINGS. You would be safe in saying 331/3 and 40, and it might have been more; I do not remember. Mr. FERGUSON. What was their practice and policy, Mr. Jennings, in billing the Veterans' Administration, in regard to these tools which were purchased ? Mr. JENNINGS. The schools, you mean? Mr. FERGUSON. Yes. Mr. JENNINGS. Exactly as invoiced. Mr. FERGUSON. The invoice price, which to you, the net price, was the retail less the discount? Mr. JENNINGS. That was our general procedure. Mr. FERGUSON. And that was the price at which these tools were billed to the Veterans' Administration? Mr. JENNINGS. Other than personal error, yes. Mr. FERGUSON. We notice, Mr. Jennings, from material in your files, and also interviews which investigators in the field have had with you, that at a later date these discount arrangements between the Marshall Co. and yourself were discontinued. Can you tell us generally and briefly the history, in connection with that, of the dealings between yourself and the Marshall Co.? Mr. JENNINGS. Yes, sir. C. & E. Marshall Co. objected to discounts, or the tools being sold at a discount. They didn't like that. Mr. FERGUSON. What reasons did they give you for that? Mr. JENNINGS. Because students going to their regular source couldn't buy at a discount, and they have to buy at the list price, or anyone else. Therefore, they did not choose that anyone should have that discount. Mr. FERGUSON. In other words, that was the reason they advanced to you? Mr. JENNINGS. That is the reason they advanced to us. Mr. FERGUSON. Do you remember which particular individual of the Marshall Co. advanced these reasons to you, Mr. Jennings? Mr. JENNINGS. Mr. Wolf, I believe. We had a letter from him in, I think, January of 1949, to that effect. Mr. FERGUSON. Will you hand this to Mr. Jennings, please? (Document handed to Mr. Jennings.) Mr. FERGUSON. Is that the letter to which you refer, Mr. Jennings? Mr. JENNINGS. Yes, sir. Page 14
Mr. FERGUSON. In January of 1950 ? Mr. JENNINGS. That is right. Mr. FERGUSON. Who are the officers of that corporation, Mr. Jennings? Mr. JENNINGS. I am president, and Millard J. Heath is vice president, and R. C. Phillips is secretary and treasurer. Mr. FERGUSON. Who are the directors of that corporation? Mr. JENNINGS. Myself, R. C. Phillips, Millard J. Heath, Bob Cowan, and W. J. Melton. Mr. FERGUSON. Who are the stockholders of that corporation, Mr. Jennings? Mr. JENNINGS. Who are the stockholders! Mr. FERGUSON. Are they too numerous to designate? Mr. JENNINGS. Yes, sir; I couldn't name all of them. Mr. FERGUSON. What stock interest, approximately, do you hold in the corporation ? Mr. JENNINGS. I can tell you exactly. I own 52 shares, $50 a share, in a $15,000 corporation. Mr. FERGUSON. For what specific purposes was this corporation organized! What were your stated purposes in the articles of incorporation? Mr. JENNINGS. It is a tool supply house, a general supply house. Mr. FERGUSON. When did you actively begin to do business through the medium of this corporation, I mean to any extent where you were actually acting as a supply house? Mr. JENNINGS. Quite some while ago. Mr. FERGUSON. Let me see. It was organized in January of 1950. Mr. JENNINGS. We have been doing business there ever since that time, of course. Mr. FERGUSON. It was in May, approximately, that this General Trading Corp., was designated by the Marshali Co. as an outfit to receive a commission? Mr. JENNINGS. That is right. Mr. FERGUSON. Did the General Trading Corp. ever actually take any orders for tools for the Marshall Co.! Did they actually forward invoices, under their own invoices on their own letterheads, to the C. & E. Marshall Co.? Mr. JENNINGS. That is right. Mr. FERGUSON. Did they ever do this in connection with orders for the Texas Trade School or the Southern Trade School? Mr. JENNINGS. Yes, sir. Mr. FERGUSON. Did they actually ever handle any of the orders ? Did they ever receive any material and did they ever do any physical handling of the tools and supplies which came from the Marshall Co.? Mr. JENNINGS. No; the fact of the matter is that the General Trading Corp. has never billed either the Southern or the Texas Trade School for any tools. Mr. FERGUSON. They never have? Mr. JENNINGS. No. Mr. FERGUSON. There have actually been no direct transactions between the General Trading Corp. and either the Texas Trade School or the Southern Trade School? Mr. JENNINGS. That is right. Page 15
Mr. JENNING. Oh, no, sir. Mr. WEICHEL. You certainly tried to put a halo around yourself and set up the whole phony deal. Mr. JENNINGS. It is incorrect Mr. WEICHEL. I am going to ask the chairman with reference to the laws on criminal conspiracy, and a special investigation by the United States district attorney covering this very phony deal that you just testified to. You set it up yourself to get the money and put it in your pocket. Mr. JENNINGS. No, sir. Mr. WEICHEL. I want in the record the laws on criminal conspiracy and the further investigation with reference to this gentleman setting the thing up himself, the way he testified to it here. Mr. JENNINGS. Mr. Teague, may I ask who the gentleman is? The CHAIRMAN. The gentleman talking is Congressman Weichel, from Ohio, and all of this will be available to a United States attorney. All this committee can do is shed light on what happened, and from there on it is up to the United States attorney as to what takes place after that. Mr. WEICHEL. I would ask that there be put in the record the laws of criminal conspiracy to defraud the Government, and the basic facts. I would like to have the counsel read that. The CHAIRMAN. We will ask the counsel to do that. Mr. Evins. Mr. Jennings, you stated at the outset that the Marshall Co. invited you or asked you to accept this discount, is that correct, originally, when the plan was first started, and they proposed giving you a discount? Mr. JENNINGS. They proposed giving the school, individuals in the school. Mr. Evins. The school a discount. And how long did the school receive that discount before the plan was changed, how many months? Mr. JENNINGS. Sometime, I can't answer it definitely, but sometime in 1948. Mr. Evins. Well, more than a year? It ran for more than a year? Mr. JENNINGS. For more than a year. Mr. Evins. You received the discount for more than a year, and can you give us any estimation or actual statement as to how much the discount averaged each month, per month, on the tools that you purchased ? Mr. JENNINGS. No, sir; I can't. Mr. Evins. Can you give us an approximation? Mr. JENNINGS. Let us just say that the amount that was listed in red would be an approximation of the whole time through. Mr. Evins. That is $1,138.34 for 3 months, which this General Trading Corp. got later, and would you say that they were getting the approximate amount which you received before the plan was changed ? Mr. JENNINGS. Perhaps it could be more or less, I do not know. Mr. Evins. Well, $1,138.34 is the amount which the school received or the Trading Corp. received for 3 months, and you could break that down into each month and multiply it by more than 12, and that is how long you received it, and that would be an approximation of the amount of discount which you received during the time you had this arrangement with the C. & E. Marshall Co.? Page 16
Mr. JENNINGS. He had charge of the educational program at the Braniff Airways in Dallas. Mr. WEICHEL. What is that, a private airways school? Mr. JENNINGS. It is no school at all. Mr. WEICHEL. What is it? Mr. JENNINGS. It is just like American or Eastern Air Lines. It is Braniff Airways. Mr. WEICHEL. And who else? Mr. JENNINGS. These two gentlemen are educators. Mr. Melton is an attorney, and I was in the insurance business. Mr. WEICHEL. In the insurance business? Mr. JENNINGS. Yes, sir. Mr. WEICHEL. Selling insurance ? Mr. JENNINGS. I was office manager. Mr. WEICHEL. Selling life insurance? Mr. JENNINGS. Office manager. Mr. WEICHEL. And then you formed this nonprofit organization, and what were the purposes of it? Mr. JENNINGS. Éducation. Mr. WEICHEL. Was there any money put in it! Mr. JENNINGS. There was no money. Mr. WEICHEL. For the purposes of education; then did you become an officer of it? Mr. JENNINGS. Yes, sir. Mr. WEICHEL. After it was formed, then what did you start to do, in 1946, this nonprofit thing. What did you start to do there? Mr. JENNINGS. What did I start to do? Mr. WEICHEL. What did this nonprofit organization start to do? Did anybody receive any salaries in it! Mr. JENNINGS. I did not receive any salary until 1947. Mr. WEICHEL. In 1947, the year afterward. And how much salary were you set up for? Beginning in 1946, it was set up; and you got it in 1947. Mr. JENNINGS. I do not remember how much salary I was receiving then. Mr. WEICHEL. You do not remember how much salary, only three years ago? Mr. JENNINGS. I know how much I am getting now. Mr. WEICHEL. I asked you about 1947, and you do not know how much? Mr. JENNINGS. I will say it was around $6,000. Mr. WEICHEL. Does the corporation have any books? Mr. JENNINGS. Yes, sir. The CHAIRMAN. He was not asked to bring his books, and I am sure he can put that in the record later. Mr. WEICHEL. You were set up for $6,000 ? Mr. JENNINGS. Let us say that. I don't know. Mr. WEICHEL. We want to know what it is, and you ought to know. Mr. JENNINGS. I can give it to you. Mr. WEICHEL. It is set up for $6,000. And who else in this nonprofit organization was set up for a salary besides you! Mr. JENNINGS. The other officers who were actively engaged. Mr. WEICHEL. How much were these others set up for on salary, in 1946, and you got it in 1947? How much was that? Page 17
Now, the corporation was set up thus: I have a son who is 20 years old, whom I think is one of the best watch material salesman in Indiana. We set it up solely with the idea of building a business for him. Mr. FERGUSON. Was this corporation organized solely on your own initiative? Mr. SIMs. Yes, sir. Mr. FERGUSON. Has anyone suggested that it would be a good idea, other than the chamber of commerce? Mr. Sims. No. If I had known of this previous man's testimony, my life with C. & E. Marshall Co. might have been a little easier over the last couple of years. No sir; I had to raise my own money, which I did by notes. To secure my initial investment in watch material with the Č. & E. Marshall Co., I had to set up a line of credit, backed by one of our influential Terre Haute citizens, to make it possible, and in turn I had to sign notes for this material from C. & E. Marshall Co., their credit regulations being very severe, and in some instances, particularly mine, I was never offered the opportunity to set up a corporation, such as this one I just listened to. I started by borrowing $3,000, which I opened the corporation with, borrowed capital, which bought my corporation stock at no par value. Mr. FERGUSON. In other words, Mr. Sims, this corporation is all your own and it is under your complete control? Mr. Sims. Yes, sir. Mr. FERGUSON. No one else has any financial interest in it other than yourself and the stockholders? Mr. Sims. And the stockholders in the company. Mr. FERGUSON. Does C. & E. Marshall Co. have any financial interest in this corporation? Mr. SIMs. No; C. & E. Marshall Co. has absolutely no financial interest in it, other than notes that are signed against the corporation. Mr. FERGUSON. Have they ever attempted to exercise any degree of control over the corporation or over the school? Mr. Sims. Not any more than any other business which owns an indebtedness of the corporation. Naturally, they are interested that we do good business, that we might retire these obligations which we have made to them. We have bought some $36,000 worth of watch material which, I think from my records you will find is more than the tools we have bought for the school. You see, our policy in the school is to issue the tools as a boy needs them. When a veteran comes into our training institution, he is not given a gob of tools for which he has to be responsible over a full 18 months' training program. As he needs a tool, that tool is issued to him. So, perhaps we are not a very good tool buyer. We are not a big tool buyer. Mr. FERGUSON. You buy from the C. & E. Marshall Co. through the George W. Sims & Son Co.? Mr. SIMs. Not altogether. We have suppliers in New York who furnish us our balance wheels and hairsprings. Mr. FERGUSON. I think you misunderstood. The George W. Sims & Sons Co. buys through C. & E. Marshall Co.? Page 18
Mr. FERGUSON. What is the import of that letter? Will you please identify that? Mr. Sims. During the negotiations in 1949, our contract officer, Mr. Schaup, in justifying our bid forms, it was necessary for our last contract of 1949 May I change that? The suggestion of this letter was made over the telephone to Mr. Ray Wolf by our contract officer in Indiana. I do not have a copy of this letter in my files, although this is my signature. Mr. FERGUSON. Do you have any idea whether that letter was written in your office, Mr. Sims? Mr. Sims. Apparently, it was. It has my signature. I do not have a copy of this letter. I have searched diligently, even after the gentleman was down in Terre Haute, looking through my records. I searched even after he left, and I have never been able to find a copy of this letter. I do know a telephone conversation such as this took place between Mr. Wolf and Mr. Schaup, our contract officer, in trying to justify the material house, which in my opinion needs no justification. This is my signature. Mr. FERGUSON. Incidentally, Mr. Sims, have you had any expression from the Marshall Co. of their reaction to your letter of December 2, 1950? Mr. SIMs. No; I have never contacted them and they have never contacted me. Mr. FERGUSON. Since you have written the letter revoking the guaranty, you have heard nothing from them? Mr. SIMs. No. In fact, I have not talked to Marshall since this investigation has started. Mr. FERGUSON. Mr. Sims, I have here a photostatic copy of a letter addressed to you by Mr. Ray C. Wolf. The photostat is quite illegible. We have had a typewritten copy made, which I would like you to look at and identify as an exact copy of the photostat. (The letter dated September 7, 1949, from Ray C. Wolf, to George W. Sims, was marked "Exhibit No. 6" for identification.) Mr. Sims. That is the letter in which he refers to cutting the staff? Mr. FERGUSON. That is the letter where he refers to cancellation of $25,000 worth of insurance policies. I will read a part of this. It is to Mr. George W. Sims, and signed by Mr. Ray C. Wolf, vice president of the Marshall Co., under date of September 7, 1949. Since my last visit with you last week, I hope you have started working on the several things we discussed and that these various changes will be the means of starting both your tool business and the school on a substantial profit-building Success. In this letter I want to mention the various things that I have in mind and I believe that it is in accord with your own understanding. This is addressed to you as president of George W. Sims & Sons, not as the operator of the school. First, the two new $25,000 insurance policies are to be canceled immediately. Second, effective September 1, you and Mrs. Sims are to be on a salary basis for a total of $600 per month. Third, your son, Bill, is to be on the road as a salesman steadily and, until we have further discussions on this matter, no other salesman is to be employed. Fourth, you are to spend at least 1 day each week in various towns in your locality, lining up new students and calling on retail trade. Fifth, you are to advertise in the local papers for students in a night class, and, if you can get sufficient enrolled, that class is to be started. Page 19
Wr. WEICHEL. How many people are employed in this school, teaching these 100 students ? Mr. Sims. We maintain the faculty as the State board of education sets it up, one instructor for each 20 students. Mr. WEICHEL. So you got $34,000 for- Mr. Sims. Their salaries- Mr. WEICHEL. Just a minute. You had $34,000 for tuition. And you had how many instructors? One for each 20 ? Mr. SIMs. That is right. Mr. WEICHEL. So you had 5 instructors? Mr. Sims. Right. A registrar and 4 janitors to maintain the school. Four janitors and the registrar, and their total salaries were $21,557.31. Mr. WEICHEL. How many people is that? How much did you: pay each instructor of the five Mr. SIMs. They run from $65:a week to $85. Mr. WEICHEL. How much did you pay each one for a year? Mr. SIMs. Well, let us see—there is one that draws $65 a week, They will run from $3,500 a year to $4,500 a year. Mr. WEICHEL. How much did you pay the janitors? Mr. Sims. $20 a week. Mr. WEICHEL. For 4 janitors? Mr. Sims. Yes, sir. Mr. WEICHEL. And who are the other people? Mr. Sims. A registrar, who makes $10 a week. Mr. WEICHEL. Who else? Were those relations of yours? Mr. SIMs. Oh, no; I haven't any. Mr. WEICHEL. How much did you pay out, then, for salaries, according to these figures ? Mr. SIMs. $21,557.37. Mr. WEICHEL. And then that is $13,000 that went to you, then? Mr. Sims. We have other expenses in here on that operation. You see, we have a light bill. Light and power was $1,362. Mr. WEICHEL. The only people you have in there are from the Government? Are those the only people you have in this thing? Mr. SIMs. We have State students and cash students. Mr. WEICHEL. Are you charging all of the expenses and all of the costs Mr. Sims. I am giving you the cost. Mr. WEICHEL. What I am trying to find out it: On this $49,000 you got from the Government, you got that for how many students? Mr. Sims. For around a hundred. Mr. WEICHEL. I am just talking about the part you got from the Government. Mr. Sims. I don't have those figures separated. Mr. WEICHEL. How many other students did you have there? Mr. Sims. We have four State students, and I have about six or seven cash students. Mr. WEICHEL. Cash? Mr. Sims. Those paying cash for their courses. Mr. WEICHEL. You mean there are the State students and those who pay cash, and the rest is all Government business? Mr. Sims. No; part of them are State. It costs the same for one as it does the other. Page 20
Mr. FERGUSON. What reasons did he advance for your dropping it? Mr. Sims. Sims & Son was paying that one. Mr. FERGUSON. Sims & Son was paying that? Mr. Sims. Yes. And Sims & Son couldn't afford to carry that much. Mr. FERGUSON. In other words then, he was interested from what standpoint ? Mr. Sims. Seeing that the Sims & Son functioned properly. We were in debt about $35,000 or $36,000 at the time for watch materialnot watch material, tools, and naturally, the man owning that much indebtness was interested in whether Sims & Son was going to make any money. The school wasn't making money. Mr. FERGUSON. The other policy he referred to was the one he suggested you take out at a cheap rate to guarantee the loan? Mr. Sims. I believe that was the group insurance policy which they carry on their employees. How I fit into the picture we have never been able to get that quite understood. I don't know whether we have a letter to that effect, but I couldn't understand who the beneficiary was going to be, and if it was other than my wife I was not interested in the group insurance policy. Term insurance, I believe it was, or group. It may have included their branch office managers or distributors and so on down the line. Mr. FERGUSON. So that was the reason they advanced for why they would hold the policy? Mr. SIMs. Yes. Mr. FERGUSON. Did it ever occur to you, Mr. Sims, or did you ever consider that a lot of these requests were going into what yo might term your personal business, second, your operation of the school, and thirdly, the operation of the supply company? Mr. Sims. Yes; on many instances. But I think that is quite normal, if you are using borrowed capital. If you are borrowing from any lending institution, I think you will find that they are going to watch pretty closely into your business. Mr. FERGUSON. Wouldn't some of these discussions have a bearing on cost analysis data, which would be submitted to the Veterans' Administration, in connection with your negotiating contracts with them? Mr. Sims. Well, Marshall was never brought into any consideration on our cost analyses with the Veterans' Administration. Mr. FERGUSON. Let me clarify that, perhaps, Mr. Sims. Suppose you limit your salaries, we will say, for instructors, to $2,500 a year. Now, suppose again, that in advertising for students, which was suggested to you, to increase the number of students you sold, and so forth, suppose that $2,500 was entirely inadequate to have the necessary staff with which to instruct the increased number of enrollees. Mr. Sims. I never paid any attention to these instructions or these suggestions that came out. Mr. FERGUSON. In other words, these came to you and you just passed them on and you paid no attention to them? Mr. Sims. Right. Mr. FERGUSON. Why did you not pay attention to them? Let me put it that way. Mr. Sims. Our interest is in making watchmakers in Indiana. We are under a very rigid State board of commerce in Indiana. We are handling disabled veterans, which, is my opinion, none of us can do Page 21
Mr. WEICHEL. When you made the contract, the first contract, with the Veterans' Administration, did you tell them that you were using a solely owned corporation of your own, and selling to yourself as running the school, and the difference in cost? Did you tell them that? Mr. Sims. I was not buying from myself. When we opened the school, we only bought from the Sims & Son. Mr. WEICHEL. How long were you buying from yourself! Mr. Sims. We have only been buying from ourselves a couple of years. Mr. WEICHEL. Did you tell the Veterans' Administration that you were buying from yourself! Mr. Sims. They went over our books. Mr. WEICHEL. How many years did you wait to tell the Veterans' Administration that? Mr. Sims. The Veterans' Administration were quite familiar with our operations while we were buying from this individual supplier, Burton M. Reed & Co., of Springfield. We had become involved in a $5,000 lawsuit for improper tools that were being furnished to the Veterans' Administration. These tools were inadequate and sold at high prices, $126.50 for a lathe, a hundred and some dollars for a staking tool, which is Mr. WEICHEL. Will you please read the question for the gentleman? Mr. WEICHEL. How many years did you wait? Did you wait 2 years before you told the Veterans' Administration that you were selling to yourself! Mr. Sims. They came in and inspected our books. Mr. WEICHEL. They came in and found it out. You didn't tell them you were doing it? Mr. Sims. We bought from C. & E. Marshall. Mr. Sims. No, because we informed them, because the Veterans Administration were in a lawsuit with us. Mr. WEICHEL. After 2 years they found out, or you told them? Mr. SIMs. No. When we were involved in this lawsuit the Veterans' Administration came into our school and were very familiar with our tools. In fact, they were with us in this lawsuit, Federal lawsuit, at the time we started buying. Mr. WEICHEL. Do you want to answer the question, whether you told them you were buying from yourself? Do you want to answer that question? Mr. Sims. Certainly. I told them we were buying from ourselves. Mr. WEICHEL. You told them before you started buying from yourself that you were going to buy from yourself and charge those prices, and they said that that was all right, did they? Mr. Šims. That we were going to set up Sims & Son, the corporation, which we did. Mr. WEICHEL. You told them that was your own people? Page 22
Mr. Sims. Oh, yes. We are the sole responsible man as to whether we interrupt them or use up their subsistence and sell them $228 worth of tools. Mr. WEICHEL. You are the sole person who determines that? Mr. SIMs. Yes. We have to determine whether they are advancing properly. Mr. WEICHEL. Doesn't the Veterans' Administration do anything with reference to the expenditure of this Government money, to determine whether anything is going on! Mr. Sims. It is a little difficult for them. Mr. WEICHEL. Did they delegate that power to you? Mr. Sims. I think you will find that in most schools. Mr. WEICHEL. I asked you if they delegated it to you? Mr. Sims. Certainly. We are responsible as to whether they stay in. Mr. WEICHEL. They delegate that power to you, as to how long you want to keep them? You kept 380 as many as 3 months, but the whole amount you kept altogether was only $100? Mr. Sims. Yes. We could have had 600 if we had wanted to. Mr. WEICHEL. That was a pretty nice way for the Veterans' Administration to treat you, to delegate the power to you. You could up or down your income as you saw fit, or keep them for $1,800 ? Mr. SIMs. We could have kept 600 and sold $136,000 worth of tools. We could have made the profits tremendously. Mr. WEICHEL. But it would look bad to keep 600, worse than what you kept. Mr. SIMs. No, because our watchmakers are now working in the trade, and we are proud of them. Mr. WEICHEL. Out of four-hundred-and-forty-some you kept one hundred and the other ones you keep as long as you determine, up to $1,800 ? Mr. Sims. No. We have a set rule, if a boy does not progress properly at the end of 90 days, he is out. Mr. WEICHEL. Then you keep them for 3 months ? Mr. WEICHEL. And the Veterans Administration lets you determine it? Is that it? Mr. Sims. Well, with the fact that our boys are all going out into the field—we only have four out of our many graduates who haven't stayed in the field—I think we are pretty well qualified. Mr. WEICHEL. As to this insurance you talk about paying out of Sims, Inc., the corporation paid the premiums and the policy or policies were payable to your wife as beneficiary? Mr. Sims. Right. Mr. WEICHEL. And that was reflected in the cost of operation which you let the Veterans Administration have, things that were the private benefit of your wife, and not for the cost of operation of the corporation? Was that given in the costs to the Veterans Administration? Mr. SIMS. The over-all costMr. WEICHEL. I say that was added in? Mr. Sims. Certainly. Mr. WEICHEL. That ran the cost up; did it not? Mr. Sims. Right. But without the insurance, supposing I had died? What would have happened to these veterans the Government had, we will say, $30,000 or $40,000 invested in? Had I passed away, what would have happened to the Government's investment there? Page 23
Mr. BACHUS. We have that set of books as accountants, and from the records that we have, J. W. Caruthers is sole owner of both schools. Mr. FERGUSON. Of both schools? Mr. BACHUS. Yes. Mr. FERGUSON. They are sole proprietorships? Mr. BACHUS. Yes. Mr. FERGUSON. There is no other person interested in them? Mr. Bachus. That is right. Mr. FERGUSON. You say you are accountants for them? Mr. BACHUS. Yes, sir. Mr. FERGUSON. How long have you been representing them as accountants ? Mr. BACHUS. Since the first of 1947. Mr. FERGUSON. When the Caruthers school went into existence! Mr. Bachus. Yes—no, now wait. We represented the jewelry store prior to that time, but the school for 2 or 3 months was in operation before we got the school records. It had a different set-up. Mr. FERGUSON. But you have successively since that time been the accountants for that school? Mr. BACHUS. That is right. Mr. FERGUSON. When the Waco school came into existence in 1949, you also took the job of accountancy for them? Mr. BACHUS. Yes, sir. Mr. FERGUSON. Do you have any interest in them other than your association as accountants? Mr. BACHUS. None whatsoever. Mr. FERGUSON. Does Mr. Caruthers have any interest in the Trojan Watch & Tool Supply Co.? Mr. Bachus. None whatsoever. Mr. FERGUSON. Just briefly, Mr. Bachus, what is your policy in the ordering of tools from C. & E. Marshall, and billing to the Waco and Caruthers' schools and delivery of tools? Mr. Bachus. Prior—that is, up to January 1, these orders were received by us. They in turn were ordered from this office. Mr. FERGUSON. Excuse me. That is January 1 of this year? Mr. Bachus. Yes, sir; that is prior to January 1. C. & E. Marshall shipped these tools to use. We checked the tools and in turn delivered them to the school. We found thereafter that that was too expensive; we couldn't do it. Mr. FERGUSON. In other words, they were shipping direct to you and you were handling, processing, and shipping them to the school? Mr. Bachus. That is right. We tried to work out a deal on that so we got the school—that is, Mr. Caruthers—to take it up with the Veterans’ Administration, and have these tools shipped direct to the school. Mr. FERGUSON. And Mr. Caruthers did take that up with the Veterans' Administration ? Mr. BACHUS. That is right. I think so. Mr. FERGUSON. Do you know with whom he spoke about that arrangement? Mr. BACHUS. No, I don't. But, you see, there was a packing list of these tools. Of course, we, being the accountants, assumed a little responsibility there of seeing that this packing list had been duly checked and signed. That comes back into the office, and we bill them Page 24
on Trojan Watch & Tool Supply Co. stationery to the school. Of course, C. & E. Marshall Co. charges our brokers' cost. Mr. FERGUSON. Who places the orders, Mr. Bachus ! Mr. Bachus. Do you mean to us? Mr. FERGUSON. To the Marshall Co. Mr. Bachus. I do. Mr. FERGUSON. You actually send the order for delivery to them? Mr. BACHUS. With a few exceptions. Sometimes the school will order direct. If they do, it is shipped to them and we get the billing on it, with few exceptions. Mr. FERGUSON. To your knowledge, Mr. Bachus, did either one of these schools ever purchase tools direct from the C. & E. Marshall Co.? Mr. Bachus. Not to my knowledge. Mr. FERGUSON. In other words, from 1947, for the Caruthers School, and from 1949 for the Waco School, the policy or system that you just described has been applicable? Mr. BACHUS. Yes, sir. Mr. FERGUSON. You ordered from the Marshall Co. and at first it was delivered to you, at which time you did a certain amount of processing and after January 1, of this year you eliminated that expense? Mr. Bachus. Yes, sir. Mr. FERGUSON. Mr. Caruthers went to the Veterans Administration and requested that Marshall be able to ship directly to them? Mr. BACHUS. That is right. Mr. FERGUSON. How were payments made for these tools? Do you know, Mr. Bachus ? Mr. BachUS. Of course the deal was at that time that this accounting be kept strictly on a current basis, every 30 days. Mr. FERGUSON. Thirty days net? Mr. Bachus. Now finally, we got a 60-day extension, and then we got a 90-day extension. The result was that by January 1 we had finally worked it down to where we owed C. & E. Marshall Co. some $11,000. We weren't getting anywhere that way. Mr. FERGUSON. Let me interrupt you just a moment. When did Mr. Caruthers request that you furnish his school with tools and suplies? Mr. Bachus. That was along in 1947. Mr. FERGUSON. That was at the inception of the first school? Mr. Bachus. That is right. The only way we have been able to handle it and even come out of debt with C. & E. Marshall Co. was to have these tools shipped COD., either on our order or his order, and we are credited with the brokers fee. Mr. FERGUSON. Is there any reason why the C. & E. Marshall Co. could not sell directly to the Caruthers School back in 1947 ? Mr. BACHUS. I have asked that question. But of course, being a little familiar with the Jewelers' Board of Trade—not too cor sant with them—this was what was passed on, it may be authentic, I don't know: They tell me this, I don't know. This exists in diamonds. We have bought quite a few diamonds, and we can buy diamonds as a broker cheaper than I mean at a lesser price than the largest jewelry store in town. They said the same condition could exist, that if he bought these tools, or anything else direct, if he was in the busi Page 25
Mr. CARUTHERS. This letter here is a form letter that we make up, and our secretary sends 15 or 20 to any jewelry house in the country. That happens to be one that my brother Mr. FERGUSON. One went to the C. & E. Marshall Co.; one went to the U. S. Jewelers Supply Co.; and one went to Mr. Bachus. Mr. CARUTHERS. That is right, and I am sure a lot of others. That just happens to be two that he used there. Those all go to my brother, and he or his secretary mails them out. Mr. FERGUSON. I may be mistaken, Mr. Caruthers, but my recollection of your testimony is that you knew of this jewelry supply company but you didn't know anybody in it and had not done business with them. Mr. CARUTHERS. We take the jewelers' answers, as I told you; we run off a ditto letter; and my secretary takes the jewelers' buyers guide and anybody we can hear of that sells tools; and she sends this form letter to them to bid on the tools, or if we get their price for tools before we have bids on them. That is sent in this particular case to my brother, and he uses whatever tool bids he sees fit to use if they will bid to where we can supply them. Mr. FERGUSON. Do you recollect that you on any of these three bids, the three outfits-C. & E. Marshall, U. S. Jewelers Supply Co., and Trojan Watch & Tool Supply Co.-obtained the order? Mr. CARUTHERS. Do I what? Mr. FERGUSON. Do you recollect in this particular instance which of the three of these bids that you have seen here got the order? Mr. CARUTHERS. My brother was visiting with me Sunday, and he: asked me if Mr. Bachus had mailed us invoices and he had gotten some tools. So from that I guess he must have ordered the tools. I don't know about that. Mr. Bachus. I can answer that. He has had two shipments of tools since that time. They came c. o. d. We have a copy of those invoices. Mr. FERGUSON. Is that in relation to this? Mr. BACHUS. Yes. Mr. FERGUSON. So you got the order? Mr. BACHUS. Evidently we did. Mr. FERGUSON. Just from a casual examination of these, Mr.. Caruthers—they just came in this morning-it looks as though each one of these bids lists the exact same price for each and every item in here, and I would like to hand them to you and ask you to go through them. You may be familiar with tools and supplies, and just spot-check it enough to see if I am correct in that assumption. (Exhibits 8, 9, 10, 11 and 12 handed to witness.) Nr. CARUTHERS. I think you are definitely wrong. The first item on C. & E. Marshall is “Twist drill, $12.75," and the first item on U. Si Jewelers Supply is Mr. FERGUSON. I believe the pages are mixed there as to the items, Mr. Caruthers. I think two of them are the same, and in the other one page is out of order. Page 26
Mr. FERGUSON. Was this ever mentioned to you, Mr. Bachus, by Mr. Wolf? Mr. BACHUS. Yes, it was. Mr. FERGUSON. He told you that he wanted Mr. Caruthers to guarantee the payment? Mr. BACHUS. Í don't know whether it was exactly in that substance or not, but I do know he was very unhappy at that time about the account, because it was several thousand dollars and he wasn't getting his money paid like it should be. Mr. FERGUSON. What is the address of the Trojan Watch & Tool Supply Co. Mr. BACHUS. 20512 East Ferguson Street. Mr. FERGUSON. What is the address of the Caruthers School? Mr. BACHUS. We use box 728. We are 1231/2 North Spring, and then we have the basement at 1231/2 and 11142 North Spring. Mr. FERGUSON. Were the Trojan Co. and the school ever located in the same building ? Mr. CARUTHERS. Not in the same building. There is a stairway that goes up. You go up the same stairway and turn to the left now, and in the upstairs part you turn to the right to go into one of our classrooms. In that respect they are located in the same building. It is not owned by the same company. I have a lease on my building and he has this different owner. It happens that we use the same stairway to our classroom. Mr. FERGUSON. Mr. Bachus, have you ever remitted in any form or fashion any of the moneys received by you as commissions from the Marshall Čo. to Mr. Caruthers? Mr. BACHUS. I have not. Mr. FERGUSON. At the present time what is the status of your account with the Marshall Co.? Mr. Bachus. My account is paid up, and they are due us any current brokerage that there might be on any invoices that have been delivered on this new contract. Mr. FERGUSON. You are all completely clear. There is nothing owing there. Mr. BACHUS. No. Mr. FERGUSON. Is there anything owing to you by Mr. Caruthers? Mr. BACHUS. There is. Mr. FERGUSON. What amount is that, Mr. Bachus? Mr. Bachus, this is only in relation to the school. If there is anything owing to you personally, we are not interested in Mr. Caruthers' personal business? Mr. Bachus. It would be only in relation to the school. I think it is around $11,000. I have it secured by notes. Mr. FERGUSON. That is represented by tools and supplies which you have furnished ? Mr. BACHUS. Yes. Mr. Evins. Mr. Bachus, I believe you stated you are an accountant. Mr. BACHUS. Yes, sir. |
