Mr. CHASE. How long after your principal started on this contract was Government work done on a cost-plus basis?

Mr. HENDRY. It started in right away, just as soon as the war started. Just as soon as the war started, these other contractors came in with cost-plus contracts-certainly within a month or so after the war started.

Mr. CHASE. That was going on in the immediate neighborhood when Mr. Lovell was carrying on his operations?

Mr. HENDRY. It was carried on right at the side of his building. Mr. CHASE. Yet your principal never protested to any official of the Government about the way this other work was going on?

Mr. HENDRY. He could not say anything about that. That was not something with which they had to do. That was an independent matter. If he had protested about the other contracts, the agents of the Government would have told him they were none of his business. The lump-sum contract was made before the war, but the cost-plus contracts were let after the war to get things done quickly, regardless of cost. In those cost-plus contracts there was no chance to lose, whereas the other people who had lump-sum contracts had to complete the work within the contract price or else lose. Contractors would not undertake building during the war for a set amount on account of war conditions.

The CHAIRMAN. Let us stand adjourned until some future date, so as to give members of the committee a chance to digest this case, and you, Mr. Hendry, a chance to file any additional proof that you desire to file.

(Thereupon at 3.40 o'clock p. m., Wednesday, February 8, 1928, the committee adjourned to meet at the call of the chairman.)

HEARINGS

BEFORE THE

COMMITTEE ON WAR CLAIMS HOUSE OF REPRESENTATIVES

SEVENTIETH CONGRESS

FIRST SESSION

ON

H. R. 5935

A BILL FOR THE RELIEF OF THE MCATEER
SHIPBUILDING CO. (INC.)

MCATEER SHIPBUILDING CO. (INC.)

HOUSE OF RepresentaTIVES,

COMMITTEE ON WAR CLAIMS,
Wednesday, February 8, 1928.

Subcommittee No. 4 this day met at 2.30 o'clock p. m., Hon. Hubert H. Peavey (chairman) presiding.

The CHAIRMAN. This subcommittee has met this afternoon for consideration of H. R. 5935, which is a bill introduced by Mr. Miller of Washington for the relief of the McAteer Shipbuilding Co. (Inc.). (The bill in question reads as follows:)

[H. R. 5935, Seventieth Congress, first session]

A BILL For the relief of the McAteer Shipbuilding Company, Incorporated

Be it enacted by the Senate and House of Representatives of the United States in Congress assembled, That the Secretary of the Treasury be, and he is hereby, authorized and directed to pay, out of any money in the Treasury not otherwise appropriated, the sum of $50,000 in full settlement of all claims of the McAteer Shipbuilding Company, Incorporated, against the United States for losses and damages growing out of and suffered under a contract dated June 30, 1917, for the construction of the steamer El Aquario.

The CHAIRMAN. Mr. Miller is here and I will ask him to make a statement to the committee. There is nobody here to represent the Government.

STATEMENT OF HON. JOHN F. MILLER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON

Mr. MILLER. Mr. Chairman and gentlemen of the committee, this is a bill introduced by myself, as has been stated by the chairman, for the relief of the McAteer Shipbuilding Co. (Inc.), of Seattle, Wash. It provides:

That the Secretary of the Treasury be, and he is hereby, authorized and directed to pay, out of any money in the Treasury not otherwise appropriated, the sum of $50,000 in full settlement of all claims of the McAteer Shipbuilding Company, Incorporated, against the United States for losses and damages growing out of and suffered under a contract dated June 30, 1917, for the construction of the steamer El Aquario.

I may say that the McAteer Shipbuilding Co. (Inc.), of Seattle, had a contract from the Government to construct this steamer, and out of that contract has developed a rather tragic state of affairs. This concern was crushed financially, Mr. McAteer himself went down to his grave discouraged and brokenhearted. His successors and his widow and sons brought this suit in the United States Court of Claims for $254,000 on account of this contract. The suit is pending, as I understand.

The attorneys got together, the attorney for the Government and the attorney for the McAteer Shipbuilding Co., and agreed that if they could settle this case for $50,000 they would do so. It was thought, on the part of the McAteer Co., that such a settlement would salvage, in a manner, the wreck.

The CHAIRMAN. I should like to ask whether there have been any prior negotiations looking to a settlement or an agreement in relation to this case out of court?

Mr. MILLER. No; not before they went to the Court of Claims. As I understand, this case has been referred to the Department of Justice and to the War Department, and there is a report by the War Department here at this time. I think it would be proper to have the report read at this time.

The CHAIRMAN. That will be done by the clerk at this time. (The clerk read as follows:)

Hon. JAMES G. STRONG,

Chairman Committee on War Claims,

WAR DEPARTMENT, Washington, D. C., December 23, 1927.

House of Representatives.

DEAR MR. STRONG: I am in receipt of your letter of December 13, 1927, inclosing copy of H. R. 5925, providing for the payment of $50,000 to the McAteer Shipbuilding Co. (Inc.), in full settlement of all claims against the United States for damages and losses arising out of its contract with the Government dated June 20, 1917.

On July 8, 1921, the Judge Advocate General's office reviewed the claim of the McAteer Shipbuilding Co. (Inc.), for $124,815.68, which the company alleged represented losses incurred by reason of the failure of the Government to make timely deliveries of steel at stated prices for the construction of a steel vessel under the terms of the contract.

The conclusion was reached that the facts then before the War Department did not warrant a determination that the Government was obligated to procure the steel, and that if it was so obligated, its failure in this respect constituted & breach of contract, giving rise to a claim for unliquidated damages, and that the Secretary of War was without authority to settle such a claim.

Subsequently the entire record relating to the claim was transmitted to the Attorney General (in whose custody it now is) for use in the Government's defense of a suit instituted by the shipbuilding company in the Court of Claims on July 12, 1926, to recover $254,000, occasioned by the alleged breach of contract. On May 14, 1927, the Attorney General submitted for my consideration an offer by the attorney for the plaintiff to settle its claim against the Government by the payment to it of $50,000, which proposal the Attorney General was advised the War Department was willing to accept as for the best interests of the Government, provided, of course, he concurred therein. Subsequently, and on June 18, 1927, the Attorney General advised me that, after a careful review of the facts, the Department of Justice was of opinion that such a settlement was in the interests of the Government.

Both the Department of Justice and the War Department believe that such a disposition of this matter will adequately meet the equities involved in this claim, and will result in a material saving to the Government, including the considerable expense of further litigation.

This proposed legislation has been submitted to the Director of the Bureau of the Budget who advises that the proposed legislation is not in conflict with the financial program of the President. I therefore recommend favorable action on the bill submitted.

Sincerely yours,

DWIGHT F. DAVIS, Secretary of War.

The CHAIRMAN. I would like to know from members of the subcommittee what their pleasure is with reference to considering this bill. Do you desire to go into the question of the bill on its merits or do you want to be governed by these recommendations of the two departments?