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had not come into proper agreement with the congressional committees, and therefore the whole project should be kicked overboard.

Mr. Casey. On the first point that you make, Senator, with respect to the agreement to dispose of this project, it is my personal view that, as doubtful as the legality is with respect to the construction of this project, there can be no question but that they violated the law in the disposal of the property; that the law clearly says that, prior to the disposition of any property constructed under this act, they will come into agreement with the Naval Affairs Committees of the Senate and House. What they did do was enter into a lease contract that might extend over 30 years, and then subsequent to the execution of the contract merely send a copy of the contract to the two committees; the letter sent by Senator Walsh back to the Navy Department was purely a personal acknowledgment of the receipt of that contract, and his own request to be advised on the project as it continued.

Senator FERGUSON. Did you look into the records of the Naval Affairs Committees as to whether or not there was any official action by the committees on this proposed selling of this property?

Mr. CASEY. No, Senator, primarily because Public Law 289, which they now cite both for construction and disposition of the project, was brought to our attention for the first time after the report to the Congress had been made.

Senator FERGUSON. I would like to have you look into those two questions and report to the committee on what you find as to whether or not the act was actually followed. As I understand it, the personal letter of Senator Walsh is certainly not a compliance with the law, and I think it is time our own committees follow the law. We are asking other departments to follow the law, and they have counsel to ascertain if we do follow the law, and if the committees do not follow the law, it calls for action by the Congress.

Mr. FISHER. That would not be compliance with the law, Senator. if the committee had sat down and thought over it very carefully and written the Navy Department a letter back, because they are supposed to come into agreement before the Department acts.

Senator FERGUSON. But I am talking about whether or not there was even a ratification. I understand you contend that not only was the construction illegal, but the so-called "lease" or "sale" was illegal.

Mr. FISHER. And everybody has conceded that the House Naval Affairs Committee did not even acknowledge receipt of the contract.

Senator FERGUSON. And this subcommittee had no authority to act as a committee? That would be your contention?

Mr. FISHER. Yes, indeed.

Senator FERGUSON. But you have not searched the records, which I think you ought to do, and see what the official records of those committees show, and send them up here.

Mr. FISHER. We will be glad to do that.

(The following documents, in addition to the letters referred to in the testimony, were found in the committee files :)

UNITED STATES SENATE,
COMMITTEE ON NAVAL AFFAIRS,

May 7, 1945. To all members of the Senate Naval Affairs Committee:

The standing orders of the committee read in part as follows: "That each member of the committee shall be furnished with a copy of the report of the Secretary

of the Navy regarding the proposed acquisition of land, and after a lapse of 3 days, except in cases in which questions arise or in which objection is made, the chairman be authorized to approve the proposed acquisition of land.” The Navy Department has referred to the committee for its consideration the following projects : Project No. 3370 San Diego, Calif.

Project No. 338C Los Angeles, Calif.

352C Seattle, Wash. 339C Los Angeles, Calif.

353C Whidbey Island, Wash. 3400 Madera, Calif.

354C Hawaii. 341C Point Montara, Calif.

3550 Hawaii. 342C San Francisco, Calif.

3560 Los Angeles, Calif. 343C Hartford, Conn.

357C Dubuque, Iowa. 344C Fort Lauderdale, Fla.

358C Philadelphia, Pa. 3450 Chicago, Ill.

359C Imperial County, Calif. 346C Indianapolis, Ind.

360C New leases and renewal of 347C Long Island, N. Y.

leases. 348C Cleveland, Ohio

361C Hawaii. 349C Portland, Oreg.

362C Swarthmore, Pa. 350C Harrisburg, Pa.

3630 Oakland, Calif. 3510 Clallum Co., Wash.

364C New York, N. Y. It is requested that I be informed if any member of the committee objects to the acquisition of land as proposed by the Department and desires that the committee hold hearings on these projects.

If no members of the committee object to these proposed acquisitions of land, I shall report to the Secretary of the Navy on May 14, 1945, that the Senate Naval Affairs Committee does not object to the acquisition, by lease or otherwise, of the land which they propose to acquire.

DAVID I. WALSH,

Chairman. Senator O'CONOR. Counsel, just on the very point to which you refer, do you have in mind what could have happened if the Senate Naval Affairs Committee had determined that it was unwise to dispose of the project? Because, as I understand it, the October 1945 contract having already been consummated, and the mere notification given to the Senate Naval Affairs Committee, which made just a formal acknowledgement with no statement of attitudesuppose the Naval Affairs Committee had decided it would be unwise to dispose of it, what could have happened?

Mr. CASEY. I assume if they had decided that at that time, the Navy thereupon would have terminated their construction of the aqueduct until they had come into agreement with the Naval Affairs Committee, because the whole aqueduct was being constructed for the sole purpose of turning it over to the city of San Diego.

Senator O'CONOR. But it does occur to me, bearing on the original purpose, that the contract would have been executed, and the committee notified, when it could not do very much about it so far as that particular contract was concerned.

Mr. Casey. That is probably true. The law says that prior to the disposition of the property they should come into agreement.

Senator O'CONOR. I understand, but what could have happened if the committee had taken an adverse position! I do not see how they could nullify what had already been done.

Senator ROBERTSON. I want the record to show at this point that I disagree with the opinion expressed by this witness, that the sole purpose of this aqueduct was to turn it over to the city of San Diego. I think this record should show that we intend to stay in San Diego with one of the largest naval establishments that we have in continental United States, and if we stay there we have got to have water.

The CHAIRMAN. You might proceed now, Senator McCarthy, with your line of questioning.

Senator MCCARTHY. I am personally concerned at this particular time with determining the legality or illegality of the Navy's acts in starting this construction. With that in mind I find in the recordand I have no doubt that from examining the record, certainly as you gentlemen have, if you find anything wrong you will call it to my attention-I find that the Navy did submit to both of these committees a plan under which the Navy Department, the War Department, and the Federal Works Agency were to share in the cost of the construction of this aqueduct. I find, as the chairman has mentioned, a letter from Senator Walsh dated May 14, 1945; a letter dated May 16, 1945, from Carl Vinson, letters which might well be construed as approval of the project.

Now, am I correct in this, that at some subsequent date it was determined that the Navy would take that project over and complete it all alone?

Mr. CASEY. No, Senator, the War Department has already transferred $1,500,000 to the Navy for their part of it.

Senator McCARTHY. How about the Federal Works Agency?

Mr. CASEY. The Federal Works Agency was called upon to advance their $3,500,000 some time in the summer of 1945, and to the first request made, I believe, by the Chief of the Bureau of Yards and Docks there was received a reply from the Administrator of the Federal Works Agency in which he said, in effect, and this was after August 14, 1945, VJ-day:

With the termination of hostilities, I now find it incumbent upon me to review all my Lanham Act projects, and in connection with this San Diego aqueduct I believe I will have to get approval of the Appropriations Committees of the Senate and House before I would be authorized to make the allocation that I originally agreed to make.

Then subsequently the Administrator wrote a letter in which he refused to even go that far. He didn't want to go before the Senate and House Committees on Appropriations, and said that they no longer had the money to make the allocation, and that when they were before the Senate Committee on Appropriations in connection with their appropriation in early 1945, they obtained the very definite impression that the Appropriations Committee did not want them to make this $3,500,000 allocation for the San Diego project, and by virtue of them not wanting to make that allocation they put a specific limitation in their appropriation to the effect that priority should be given to projects costing less than $250,000.

Senator McCARTHY. At the time the Federal Works Agency refused to participate in the buliding of this aqueduct—at that time had any work on the project been started ?

Mr. Casey. Our records show that the first contract was let on May 14, 1945. It is my impression from reading that contract that it was a contract to furnish, I think, certain steel castings or something, and there was a production schedule listed in the contract, and production was not to start until September 1945, the fourth quarter of 1945.

There was a contract let, I believe, on May 18, 1945; another contract let on July 28, 1945. Our records show that no work had been

commenced on either of these contracts, with the exception of the construction of an administration building for the Navy out there on the site where the work was going to commence.

Senator McCARTHY. Let me interrupt you there. Can you give me any information as to the date that the Federal Works Agency refused to participate?

Mr. Casey. Yes, sir.
Mr. FISHER. November 15, 1945.

Senator McCARTHY. Is there anything in the record anywhere to indicate that after the Federal Works Agency withdrew from participation in this project, they then informed the House or Senate Naval Affairs Committees of their action?

Mr. CASEY. No, sir.

Senator McCARTHY. Do you find anything in the record to indicate an approval by either of these two committees of the Navy proceeding on its own after the Federal Works Agency had withdrawn?

Mr. FISHER. No, sir; we don't find anything that would even indicate that either of those committees knows to this day that the Federal Works Agency is out of the picture.

Senator McCarthy. I understand that both of you gentlemen are lawyers ?

Mr. FISHER. Yes, sir.

Senator McCARTHY. We may disagree as to the interpretation of Public Law 289, but assuming that the interpretation I have indicated is correct, then the correspondence would indicate that the Navy had attempted to comply with my conception of this act?

Mr. FISHER. Yes, sir.

Senator McCARTHY. At a later date, moreover, when they found that the Federal Works Agency had withdrawn, would that, in your opinion, alter the project and the plans to the extent that, even if my interpretation of it is correct, in your opinion would the Navy then be called upon to notify both committees of this substantial change in the plans, and get their approval at that time?

Mr. FISHER. I believe it would, inasmuch as this was going to require $3,500,000 more of Navy funds to be expended for the project, which is as much as the Navy had asked for all of the naval districts in Public Law 289, that one item itself.

The CHAIRMAN. The estimated right-of-way, which the Senate Naval Affairs Committee did approve the acquisition of, was $130,000.

Mr. FISHER. I don't know what the cost of those was—relatively small, I would think.

Senator MCCARTHY. If I might make an observation at this point, this is an act the construction of which may be in doubt. I believe legal minds can very easily differ as to the proper construction of this act, and my off-hand thought is that the Navy was justified in construing this act as I now construe it. We find here unusual things done by the House Committee on Naval Affairs. The subcommittee, with two men present, attempts to approve some 12 projects, including this project that involved an expenditure of some $14,000,000. However, I do not believe that it was incumbent upon the Navy to check as to the propriety of the action of this subcommittee.

Senator FERGUSON. I do not agree with the able Senator on that.

Senator McCARTHY. Let me go a little further, so you will have my thought.

My thought, however, is this, that when one Federal agency withdrew, the Federal agency which originally had proposed to contribute some $3,500,000, which would be about 30 percent of the cost of the project when they withdrew, there would be such a substantial change in the over-all project that, even construing the act as I construe it, and as the Navy apparently construed it, I believe they would be legally bound to then resubmit the plan to both committees and again get approval of the changed plans. Would you agree with that, Judge ?

Senator FERGUSON. I would agree with the last part of it. I do not want to take the first step.

I would like to see what is in the Navy files from counsel on these points, on these letters, whether they had legal advice when they did act.

Senator McCARTHY. I have no further questions.

Senator FERGUSON. Mr. Chairman, might I ask one question? Do you know anything about contract N-406-S, 14098, dated October 1, 1944, in relation to a contract with the city of Tacoma, Wash., to build a 12-inch water line, and also contract No. 4069542, dated the 21st of June 1944 for the California-Oregon Power Co., Medford, Oreg. ?

Mr. FISHER. We are not familiar with either one of those.

Senator FERGUSON. I notice they make the claim that copies of the
above contract were furnished to the Government Accounting Office.
That might have been recently.
Mr. FISHER. It

may
have been some time ago, but

we

do not get to see all the contracts. We have, I suppose, 50,000 or 60,000 contracts a day come into the office. I am speaking just for the two of us now. Someone in the General Accounting Office, no doubt, has seen those.

Senator FERGUSON. Do you know whether any objections have been raised to those two contracts?

Mr. FISHER. No; I do not.

Senator FERGUSON. They seem to be somewhat along the same line as the present contract. Could you get data on those, so far as the General Accounting Office is concerned?

Mr. FISHER. That is N-406-S, 14098?

Senator FERGUSON. Yes; and 4069542. If you will get those two, they may throw light on the subject also.

Mr. FISHER. I shall be glad to.
(The following memorandum was subsequently submitted :)

GENERAL ACCOUNTING OFFICE,

Washington, March 26, 1947.
MEMORANDUM

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During the hearings recently held by the Senate Committee on Expenditures in the Executive Departments in connection with a report to the Congress by the Comptroller General concerning the construction by the Navy Department of an aqueduct near San Diego, Calif., Senator Ferguson asked whether the same objections which were being made to the contract in the San Diego case were applicable to two other contracts, namely, contract No. N-406-S–9542, dated June 21, 1944, with the California-Oregon Power Co., and contract No. N-406-S–14098, dated October 1, 1944, with the city of Tacoma, Department of Public Utilities, water division. The referred-to contracts have been examined and the following comments with respect thereto are submitted for the information of the committee.

The two contracts are substantially alike in many respects, including the nature of the work to be performed and the terms and conditions under which payment therefor is to be made by the Government. The California-Oregon Power Co. con

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