WAR CLAIMS ACT AMENDMENTS HEARING BEFORE AN AD HOC SUBCOMMITTEE OF THE COMMITTEE ON THE JUDICIARY UNITED STATES SENATE NINETY THIRD CONGRESS SECOND SESSION ON S. 1728 TO INCREASE BENEFITS PROVIDED TO AMERICAN CIVILIAN INTERNEES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP75B00380R000500380003-7
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 121
• Document Creation Date: December 9, 2016
• Document Release Date: August 24, 2001
• Sequence Number: 3
• Publication Date: December 3, 1974
• Content Type: OPEN

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WAR CLAIMS ACT AMENDMENTS
HEARING
AD HOC SUBCOMMITTEE
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
NINETY-THIRD CONGRESS
SECOND SESSION
ON
S. 1728
TO INCREASE BENEFITS PROVIDED TO AMERICAN
CIVILIAN INTERNEES IN SOUTHEAST ASIA
U.S. GOVERNMENT PRINTING OFFICE
44-828 WASHINGTON : 1976
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COMMITTEE ON THE JUDICIARY
JAMES O. EASTLAND, Mississippi, Chairman
JOHN L. McCLEL:LAN, Arkansas
SAM J. ERVIN, JR., North Carolina
PHILIP A. HART, Michigan
EDWARD M. KENNEDY, Massachusetts
BIRCH BAYH, Indiana
QUENTIN N. BURDICK, North Dakota
ROBERT C. BYRD, West Virginia
JOHN V. TUNNET, California
ROMAN L. HRUSKA, Nebraska
HIRAM L. FONG, Hawaii
HUGH SCOTT, Pennsylvania
STROM THURMOND, South Carolina
MARLOW W. COOK, Kentucky
CHARLES MCC. MATHIAS, JR., Maryland
EDWARD J. GURNEY, Florida
AD Hoc SUBCOMMITTEE ON WAR CLAIMS ACT AMENDMENTS
QUENTIN N. BURDICK, North Dakota, Chairman
BIRCH BAYH, Indiana HIRAM L. FONG, Hawaii
WILLIAM P. WESTPHAL, C kief Counsel
B:aIAN C. SODTHWELL, Deputy Counsel
(II)
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TO INCREASE BENEFITS PROVIDED TO AMERICAN
CIVILIAN INTERNEES IN SOUTHEAST ASIA
TUESDAY, DECEMBER 3, 1974
U.S. SENATE,
AD Hoc, SUBCOMMITTEE
OF THE COMMITTEE ON THE JUDICIARY,
Washington, D.C.
The subcommittee met, pursuant to notice, at 10 a.m., in room 6202,
Dirksen Senate Office Building, Senator Quentin N. Burdick presiding.
Present : Senators Burdick and Fong.
Also present : William P. Westphal, chief counsel : Brian C. South-
well, deputy counsel; and Kathy M. Coulter, clerk.
Senator BURDICK. This morning we are meeting to receive testi-
mony on S. 1728 which contains proposed amendments to the War
Claims Act of 1948.
There are two separate amendments, the first providing an increase
in benefits paid to civilian internees in Southeast Asia from the present
$60 per month to $150 per month. This would be paid out of the War
Claims Fund and would amount to a total of approximately $275,000.
This measure was passed by the Senate on October 8, 1973, and sent
to the House. It was amended by the House to provide certain priorities
in payment of claims by individuals and corporations for property
lost in World War II which is the subject of today's hearing.
The War Claims Act was intended to provide some measure of relief
to U.S. citizens and U.S. corporations who suffered injury, death or
property loss as a result of the hostilities with Japan and Germany.
They were to be paid as a matter of grace from the moneys received
from the sale of enemy assets.
Because the claimants had no vested rights in the fund and because
full payment of all claims was unlikely, Congress authorized payment
through a system of priorities based on equity.
Personal injury and death claims were given first priority, with
claims of small businesses, and those of $10,000 or less also paid in full.
In 1970 further amendments gave full satisfaction of claims by reli-
gious, charitable, and similar nonprofit organizations and authorized
additional payments not to exceed $35,000 of which $11,000 has been
paid to date. All claims not yet fully satisfied were to take from the
balance on a pro rata basis.
Six thousand six hundred and ninety-two claims have been fully
satisfied of approximately 7,000 total claims. The total expenditure
to date is approximately $350 million. The remaining 161 corporate
and 187 individual claims represent the largest of the nonpriority
awards.
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The payments which have been made to date can best be summarized'.
as follows :
Thirty-four death and personal injury awards paid in full totalling
$510,035.
Two hundred and fifty-one small business awards paid in full.
totalling $12,026,093.
Five thousand six hundred and thirty-four awards of $10,000 or less
paid in full tomlling $13,059,352.
Thirty-three religious, charitable and nonprofit awards paid in full.
totalling $24,189,313.
Eight hundred and eighty-six individuals have received payment of
$35,276,571 leaving 187 individuals with a remaining unpaid claim.
balance of $6,578,916.
One hundred and ninety-nine corporations have received payment.
of $249,441,491 leaving 161 corporations with a remaining unpaid
claim balance of $94,700,830.
The amendment made by the House has now proposed a payment
priority which would satisfy all individual claims up to $500,000 and
pay up to $50,000 on each corporate claim with the balance of any
funds remaining after these priority awards to be divided pro rata
by the corporations. This proposal would require an additional $6 mil-
lion in priority payments and reduce the pro rata fund accordingly.
It is anticipated that a total of $20 million will be available for both
the priority and the pro rata disbursement from the fund. Under the
present law, priority payments would take approximately $5,300,000
leaving a fund of $14,700,000 to be distributed pro rata. The House
amendment would require $11,300,000 in priority payments and reduce
the pro rata fund to $8,700,000.
At our hearing today we will hear from various claimants, individual
and corporate, who, variously support or oppose the House amend-
ment. Before calling our first witness a copy of S. 1728 as passed by
the House will be incorporated in. the hearing record and be received
without objection.
(The bill, S. 1728, follows:]
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Union Calendar No. 560
93D CONGRESS S. 1728
2,D SESSION
[Report No. 93-1179]
OCTOBER 9,1973
Referred to the Committee on Interstate and Foreign Commerce
JULY 3,1974
Reported with amendments, committed to the Committee of the Whole House
on the State of the Union, and ordered to be printed
AN ACT
To increase benefits provided to American civilian internees in
Southeast Asia.
1 Be it enacted by the Senate and House of Representa-
2 tives of the United States of America in Congress assembled,
3 That seet=ie b (i) (3) of the War Claims Ae of 4048
4 -(60 App: U.S.G. 2000-)- is amended to substitute
5 144-50L for
6 That section 5(i)(3) of the War Claims Act of 1948 (50
7 App. U.S.C. 200-4(i)(3)) is amended by striking out
8 "$60" and inserting in lieu thereof "$150".
9 SEC. 2. (a) Section 213(a) (3) of the War Claims Act
10 of 1948 (50 App. U.S.C. 20171(a) (3)) is amended to
11 read as follows:
I
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"(3) Thereafter, payments from time to time on ac-
2 count of the other awards made to individuals pursuant to
3 section 202 and not compensated in full under paragraph
4 (1) or (2) of this subsection in an amount which shall be
the, same for each award or in the amount of the award,
whichever is less. The total', payment pursuant to this para-
graph on account of any award shall not exceed $500,000.".
(b) Section 213(a) of such Act is amended by redesig-
9 noting paragraph (4) as paragraph (5) and inserting after
10 parag7 aph (3) the following new paragraph:
11 "(4) Thereafter, payments from time to time on account
12. of the other awards made to corporations pursuant to section
13 202 and not compensated in full under paragraph (1) or
14 (2) of this subsection in an amount which shall be the same
15 for eaeh award or in the amount of the award, whichever is
16 less. The total payment pursuant to this paragraph on account
17 of any award shall not exceed $59,000.".
Amend the title so as to read: "An Act to amend the
War Claims Act of 1948 to increase benefits provided to
A iueriean civilian internees in Southeast Asia and to pro-
vide for additional payments on awards made to individuals
wid corporations under that Act.".
Passed the Senate October 8, 1973.
Attest: FRANCIS R. VALEO,
Secretary.
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Senator BuRDicK. Also the House hearing record will be incorpo-
rated by reference only.
Our first witness is Congressman Eckhardt.
Welcome, Congressman.
STATEMENT OF HON. BOB ECKHARDT, A REPRESENTATIVE IN
CONGRESS FROM THE EIGHTH CONGRESSIONAL DISTRICT OF
THE STATE OF TEXAS
Mr. ECKHARDT. Mr. Chairman, I certainly appreciate this commit-
tee's hearing me today, and I appear here only because I was most
active in setting up the hearing in the subcommittee on the House
side, since John Moss, the chairman of my subcommittee, was at the
time recuperating from an operation.
I must say frankly that the merits of the bill that.passed the
House ultimately, that is, S. 1728, came to me as the result of study-
ing the problean here involved, and hearing the witnesses to it. I think
it first must be clearly understood-and I am sure that the members
of the committee do understand it, but perhaps it is not generally
understood by members of either body-that this of course is not the
same as a claim in bankruptcy in which various claimants are making
a claim against a contractual interest. It constitutes in effect a rather
bounteous grace on the part of the Government to try to do the best
that can be done to relieve the suffering of certain American citizens
who suffered loss because of action taken by the enemy. Typically,
these claims arise from Nazis taking over a family-owned corporation
or a family-owned business in which there was an American interest,
for instance, the case of the children of someone who may have been
a national of Germany.
Now of course the claims include both corporate and private in-
dividual claims. As is known, the amount available is very inadequate
to satisfy all the claims and thechairman has set out basically what I
have said in the first few pages of my testimony. I would only repeat
to say that there remain unpaid portions of 186 awards to individuals.
My figures indicate a total of $6,525,000, Mr. Chairman. I think that
is roughly the same as the chairman stated. There also remains 161
awards to corporations, totaling $94,700,000. The remaining assets
of the War Claims Fund, however, 'are far less than the total of these
unpaid awards.
Mr. Chairman, under existing law each award holder would receive
up to $24,000 plus a pro rata share of the amount remaining in the
Fund, if any, after the $24,000 distribution. Thus, under the existing
law the corporate award holders would receive 96 percent of all pro
rata distribution..
Now we in the House, recognizing that the funds are not ad uate
and recognizing that to follow the present system would result in
rather small recovery by those who had lost everything they had in
connection with certain actions by enemy forces, typically of course
the Nazis seizing the business of Jewish extraction in Germany-we
felt that preference should be given to the individual claims. This
would cost the corporate claim holders approximately 20 cents on the
dollar, but it would give really substantial reparation to those who
lost all they 'had. In other words, it is the difference between making
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whole those who were the victims of a disaster and making whole those
w ho engaged in a, business enterprise and ultimately lost.
Mr. Chairman, to give a typical example of one, of the major cor-
porate contena.er's case, I could use the case of Boise Cascade. I hope
the committee will understand that what I say here is of course in no
way to detract from counsel who represent the, various corporate claim
holders, because of course they are concerned about recovery of several
million dollars for their clients and it is quite understandable that they
would take the position that the, present law should continue in effect.
When I was practicing law, you know, I used to say to some of my
colleagues on the other side of the table somewhat facetiously that
1 wished I was on their side because if they won, they had a degree
of victory, and if they lost, they knew that justice had been done. And
I am also quite sure that even some of the advocates must understand
that this is a question really of fundamental justice.
But getting back to the case of Boise Cascade, it goes something
like this. Boise's claim arises from the loss of Shanghai Power Co.,
which was purchased by or was a part of American & Foreign Power
Co. American and Foreign had completely written off Shanghai as
worthless at the time that it consolidated with Ebasco Industries. Sub-
sequently Ebasco was purchased by Boise Cascade, and therefore, af-
ter 30 years with four changes in corporate structure and with pur-
chasers always anticipating the lack of any value with respect to
Shanghai, Boise was nevertheless able to recover $5 million up to the
present time on the claim for Shanghai. And if this bill is not passed, it
will recover another $3 million.
On the other side of the scale we had a number of persons-and in-
cidentally, that happens to be information that was contained in Boise
Cascade's corporate publication, which I have a copy of, and I should
like to ask permission to have it made a part of the record at this point.
Senator BuFDicx. It, will be so inserted.
[The corporate publication referred to follows:]
(By Alice Dieter)
Boise Cascade may benefit financially from the dramatic and sudden change
iu relations between the U.S. and China. The money, which the company has
never really counted on and doesn't today, would come from a settlement of U.S.
claims totaling $200 million for American property expropriated by the Chinese
in 1950.
Boise Cascade's claim is based on its ownership of 80 percent of the common
stock of the venerable Shanghai Power Company, a property worth $56 million
which came to Boise Cascade in 1969 through its merger with Ebasco Indus`ries.
The Shanghai property has never been carried by Boise Cascade as either an
asset or a liability. In fact, even Ebasco's predecessors had written, the property
off many years ago.
Interest in the Shanghai Power matter has heightened considerably since it
became evident that relations between the U.S. and China were moving toward
relative cordiality. Settling old business debts is an invariable prelude to re-
establising formal diplomatic recognition, which is considered a virtual cer-
tainty in the case of China and the U.S.
The story of Shanghai Power is a fascinating bit of recent history. When
the government of the People's Republic of China took over the electrical utility
it acquired what was by anyone's standards one of the world's important utility
properties.
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Shanghai Power began in 1901 as the electrical department of the municipal
council administering Shanghai's famous International Settlement. Under the
now repudiated concept of "extraterritoriality," foreign nationals doing business
in China operated under laws of their own countries. Thus the International
Settlement was, in effect, a western city within China.
The Shanghai Municipal Council sought a buyer for the utility in 1929 because
management responsibilities were becoming more than the council wanted to
handle. The successful bidder was the Shanghai Power Company, an offshoot of
American & Foreign Power Company, a U.S. corporation with extensive utility
holdings in Latin America. American & Foreign Power eventually merged with
Electric Bond and Share to become Ebasco just two years before Dbasco merged
with Boise Cascade.
After its successful bid, Shanghai Power found itself with a steam generation
and electrical distribution system already producing 535 million kilowatt hours
annually.
During the 1930s, both Chinese and foreign industrial developers were attracted
to Shanghai by the power company's rates, then the lowest in the world; its
+ abundant supply of electrical energy ; the treaty port status of Shanghai ; and the
relative stability of the area, in part made possible by the presence of powerful
foreign gunboats. During this period, from 50 to 75% of China's industrial
capacity was in the Shanghai area, and Shanghai Power's annual kilowatt out-
put eventually passed the billion mark. Even today all of Alaska is consuming only
a little over one billion kilowatt hours.
Letters written by the power company's original officers describe with enthusi-
asm the size and potential of their new acquisition's operating area. With some-
what less enthusiasm, the American businessmen reflected on the British way
of doing business, marked by the tradition of taking time for tea no matter what
and on dealing with the Chinese, whose thousands of years of highly cultured
existence dictated that in all things they be subtle, oblique and, of course,
inscrutable.
Reginald Edwards, Shanghai Power's secretary-treasurer and the last U.S.
manager to leave following the expropriation, reported that from the very begin-
ning the policy was to gradually build a management nucleus of Chinese. As a
result, the western executive corps of 70 was reduced to 25 by 1945, when Shang-
hai Power began to rebuild following the end of the war with Japan.
The impact of the Japanese incursion into China was first felt by Shanghai
Power in 1937 and reflected in the American & Foreign Power Company's annual
report for that year. The Japanese Army had captured Shanghai. The company
suffered some loss of transmission and distribution equipment during the infa-
mous bombing of Shanghai. There was also a significant drop in power usage
and revenue.
The 1937 bombing and subsequent fighting were reported to shareholders as the
"Shanghai incident." Considering the magnitude of the struggle, the damage was
slight and by year's end demand for power was again on the upswing.
Under Japanese influence, the International Settlement continued to exist ini-
tially. One newspaper described it as "a small piece of neutral territory in the
middle of a battlefield." Local Chinese officials were simply displaced by
Japanese.
Subsequent reports to stockholders indicated a growing electrical output, but
any business benefits were outweighed by political and economic instability. In-
flation kept exchange rates zooming as Chinese currency lost value, the output
of Chinese coal mines was lost and the cost of fuel to operate the electrical gen-
erators increased significantly. Transportation costs climbed, too, as the war in
Europe began and much of the world's merchant shipping fleet was drawn into
the task of supplying the allied war effort.
By 1941, even Shanghai lost its unique status. Japanese presence became mili-
tary occupation. Officers of Shanghai Power were interned. As far as share-
holders were concerned, the property in China was written off in 1941 and never
again appeared as an asset on the books.
When the war in the Pacific ended in 1945, the officers of Shanghai Power,
some still living in internment camps, quickly repossessed the company. Its
generating plant had been severely disabled and its crucial supply of coal totally
depleted.
For the next four years Shanghai Power, along with the city of Shanghai,
worked to rebuild and expand. Shareholders of American & Foreign Power
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were given yearly reports of plant repairs and additions and of expanding power
capacity as the area grew and the economy revived.
But turmoil in China continued. The civil war, interrupted by the Japanese
invasion, resumed. It was a Mantle struggle for control of a sleeping giant oi'
s00 million people, untold natural resources and developmental potential. No
matter who won, the future of foreign investors was to remain uncertain.
Shanghai Power Company operated entirely on its local income and resources.
Authorities allowed no exchange for payout to foreign shareholders.
So, in spite of the optimistic reports of increased power capacity and a growing;
market, realities; dictated that the investment could not he safety reinstates,
as a corporate asset.
In 1950, with the final triumph of the People's Army led by Mao Tse-tung and
fhe flight of Chiang Kai-shek and the Nationalists to Formosa, came the last
word: "None of the foreign staff remains in Shanghai. Shanghai Power now has
uo contact with the Chinese locations and no direct knowledge of their operations."
Before that filial leave-taking. company officials witnessed Nationalist planes
from Formosa. Creak a pledge not to bomb the company's operating facilities.
After the deliberate bombing, which Mao's regime viewed as U.S. inspired,
company officers were required to spend daylight hours within the company's
main generating plant as insurance against furl her bombing.
From that day on the major concern was to secure exit visas and transporta-
tion to get western personnel safely out of China.
Shanghai Power existed for western interests only as sheaves of corporate
records, volumes of annual reports, correspondence, charts and photographs,
and in the testimony before war claims commissions convened to establish. the
value of expropriated property.
That value was first recognized in 1967 when Ebasco was awarded $4.8
million in compensation for damage and loss to property sustained during the
war years. Claim payments came from the liquidation of Japanese and German
holdings seized at the start of World War 11. '1 lie payments amounted to 61.3? on
the dollar.
In a quirk of legal fate, the claims payment to Shanghai Power was again
frozen by the U.S., this time as it Chinese asset because, by law, the company
is a "Chinese entity." Ilbasco was allowed only reimbursement for pension
payments made to retired Shanghai Power employees and an additional sunn to
continue their pensions and cover expenses entailed in claims actions.
The current claim for $56 million was certified under the International Claims
Act of 1949 and, with claims for other expropriations, is the subject of negotia-
tions with Pekin;, now. These negotiations will determine what share, if any, of a
settlement Boise Cascade will realize. And the situation is certainly not simple.
Negotiations must also decide the final release of $78 million in Chinese assets
frozen and held in this country since 1950, including funds belonging to Shanghai
Power.
And, although Congress would probably not b:- receptive, there may be pressures
to present additional claims against China, claims that were not filed during the
18-month period in the mid-1960, when the international Claims Commission
existed. New claims allowed now would undonSatedly reduce the size of the even-
tual share each valid claimant would receive on its lost investment or property.
Even if all these loose ends are tied up, there is still another roadblock to a
final closing of Shanghai Power's books. Some stocks and bonds issued by the
company exclusively within China in the early :1930s were pegged to the Shanghai shy,.
tael, a local currency.
Hoping to facilitate settlement, Boise Cascade asked a Delaware court to deter-
mine the value of these Chinese securities. In a recent decision which is still sub-
ject to appeal, the court held to the classical ec!onomie theory that a currency is
only as valuable as its government can guarantee. Political disruption and con-
sequent. inflation erased the value of the Shanghai tael and succeeding currency
issues, the court said. Near the end of the 1940s. $111.5 million Chinese dollars
were equal to only $1 (Tl.S. ).
The pace of justice and diplomacy considered, it will be some time before the
matter of Shanghai Power is ended.
The human side of this small part of history is the story of men and women
who worked to build the largest electrical generating and distribution facility in
all of China.
Reginald Edwards, the former Shanghai Power executive, writes about his
experience from his retirement home in England. "Looking back on the 20-odd
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years period the company existed under American management, from a detached
point of view as I can see now, it was quite magnificently run under fantastic
conditions. Throughout there was virtually no return to the shareholders. But
by 1949 we were able to hand over the plant and materials in the same state as
in 1941. The plant had been renewed and rehabilitated completely and converted
twice-coal to oil, oil to coal.
"The importance to China generally and to Shanghai itself cannot be over-
emphasized. The company had nothing to show for 20 years of endeavour except
total loss. The gain went to China."
Mr. ECI HARDT. On the other side of the coin, Mr. Chairman, the
claims of the individuals are typically of this nature, for instance,
someone may have had a family business like say a bakery. They may
have escaped confiscation of the bakery for a particular period of time
by using some family business name or family corporation, but ulti-
mately it was discovered that it was say, the Greenberg bakery and
was ultimately seized by the Nazis. Everything was lost in that case.
The persons involved in such a venture were not in a position to
choose where they engaged in risk. They were simply doing the best
they could to hold their family business intact.
I should hasten to say that none of these claims can be made by
other than citizens of the United States who at the time of the loss
were citizens of the United States. So I think that there is a vast dif-
ference between the two categories of the plaintiffs. The person losing
say, the family bakery would ultimately receive only a relatively small
part of the loss of an entire family fortune if we do not change the law
at this time.
Now those it seems to me are the points which sustain the merits
of the action that has been taken up to this time. I certainly thank
the committee for this opportunity.
Senator BURDICK. Well, Congressman, you have presented a good
case for your proposition.
Mr. ECKIIARDT. Thank you, sir.
Senator BURDICK. I have some questions. You say that if the indi-
vidual claims are paid in full, that the corporate claims will be paid
out at the rate of 80 cents on the dollar?
Mr. ECKHARDT. I don't believe it would run that high.
Senator BURDICK. Well you said it would cost them 20 cents on the
dollar.
Mr. ECKHARDT. It would cost them 20 cents on the dollar of their
recovery. Their recovery would be reduced by 20 percent if the indi-
vidual claims were paid first, in other words.
Senator BuRDICK. I am still saying that they get 80 percent of their
claim?
Mr. ECKHARDT. They get 80 percent of their entitlement under this
claim. I think we may just be bickering with words. I think generally
though what you say is correct; yes.
Senator BURDICK. With the $20 million available for payout, if the
individuals are paid in full, then their entitlement, Mr. Eckhardt,
based upon the $20 million, would be reduced 20 cents on the dollar. Is
that another way of putting it?
Mr. ECKHARDT. Yes; the amount they would receive if the House
amendment became the law, Senator, would be reduced by 20 percent.
Senator BuRnrcx. In other words your $20 million is undivided at
this particular moment, correct? Let us say it is. And if the individ-
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uals are paid out in -full on this entitlement, the corporations then
would have to be reduced by 20 percent?
Mr. EcxnARerr. That is right.
Senator BURDICK. Why should we take a different rule than we use
in bankruptcy cases? There is no such preference when you have a
bankruptcy claim, is there?
Mr. EOKHARDT. Mr. Chairman, that is what I started out saying,
that I think this has to be distingushed from a case in which persons
are making a claim against a fund to which they have a contractual
right. In such a case T think as a matter of constitutional law, we can-
not destroy their contract. Sometimes we do individuals injustice by
following that rule, but we are bound to do it because there is a con-
tractual right to a claim against the fund which remains, which is less
than enough to pay the whole amount.
And in this instance of course, nobody has a contractual right or
any property right in the fund at all. The entitlement which is created,
was created by statute. The fund comes from the sale of enemy assets
that we seized and of course those assets had nothing to do with the
assets of say Boise Cascade or any of the individuals involved. The
question is, to what extent and in what manner will we divide this
fund, which we have complete control over and in which nobody has
a contractual right or a property right, and how do we best handle
this to achieve the highest degree of equity? That I think is the dif-
ference between the bankruptcy situation and the one here.
Senator Brn;nrcic. You say that when weighing or balancing the
equities, an individual has lost everything and the corporations are
still in existence.
Mr. ECKHARDT. That is correct. The corporation in the first place
risked only a small part of its total capital, but they would take up
the major part of the remaining amount. But, as I say, as a proportion
of the total investment of the corporation, the claim was very smnall.
As I pointed out, it is extremely difficult to get funds back to
those who lost them 30 years ago iin a corporate situation because the
corporation's stockholders have changed even in the normal situation.
And as I say, the example I gave of Boise Cascade, well, in that one
there were even a number of acquisitions; there were three or four
acquisitions or consolidations that occurred in the 30-year period.
But in the case of an individual, Senator Burdick, it is that person
who has the loss and it, is that, person who is recompensed for the loss.
I should also mention that a number of these claims are insurance
claims. In a case like that, of course, the insurance company was will-
ing to take a risk overseas say in Germany and willing to take a risk
overseas say in France. The insurance company was drawing premiums
from all its risk taking. Now in Germany it lost whereas in France
perhaps it didn't. Of course., also it has great investments in the
United States.
The thing is that the insurance comnanv was in the business of risk
taking and was paid for that risk taking through premiums. but it is
now attemptin.a to recover the losses where it bet and lost. Now that
is not the situation of the individual.
Senator FrNO. May I interject here?
Senator Burnzcx. Certainly.
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Senator Form. You say the insurance company is in the business of
taking losses and is paid premiums to take that risk. If you say that,
why do you class insurance corporations with other corporations in
the same class?
Mr. ECKHARDT. Well, Senator Fong, perhaps there is a different
equity there too. It is difficult for me to see much justification for an
insurance company's recovery, but even in the case of a large corpo-
ration, the large corporation is risking only a small part of its capital
because it expects a gain with respect to its investment. Perhaps that
gain was considerable before the taking of the property. So it at least
had the choice of running the risk overseas or not running it.
In the case of virtually all of the individual claims, there was no
choice at all. This was a matter of family savings.
Senator FONG. Now the insurance company claims, are these sub-
rogation claims?
Mr. ECKHARDT. I think some of them are. I am not sure about that,
but I think that is correct. Counsel could probably verify that.
Mr. WESTPHAL. That is my understanding, Senator Fong, that they
are filed on a subrogated basis and they have received about 65 per-
cent to date.
Senator FONG. I see. So insurance companies are actually now taking
the place of the person who was at a loss? In other words it paid the
person under the insurance policy, and now they are asking to be
subrogated in the place of that person, is that correct?
Mr. ECKHARDT. That would be the case of those subrogations for
corporate losses of the same type as the corporate claims.
Senator FONG. Wouldn't it be fair to give that premium back?
Mr. ECKHARDT. We haven't asked that, and that has not been raised.
Senator FONG. What I am trying to show is, in this business this
is a risk they take.
Mr. ECKHARDT. I think it is.
Senator FONG. And now they are asking to be reimbursed in full
plus the premiums that they have received?
Mr. ECKHARDT. Frankly, I don't think that is too different from the
situation of a company that say purchases Shanghai Power Co. That
was a risk too and it was an understood risk at the time it was taken.
Frequently overseas investment may reap very large and even windfall
profits. On the other hand they may result in the kind of losses that
occurred here.
Senator FoNG. Now a corporation under your formula would lose
20 cents on every dollar. Is that correct?
Mr. ECKHARDT. Well, what I am trying to distinguish between is
that they are not receiving 20 percent less than their entire losses, but
they would receive 20 percent less on their recovery than if the law
remains as it is today. In other words, we would reduce their recovery
by passage of this bill by 20 cents on the dollar in order to give
individual preference.
Senator FONG. In other words if we didn't enact this bill, they would
recover 20 percent more?
Mr. ECKHARDT. That is correct.
Senator FONG. But still they would not be made whole?
Mr. ECKHARDT. Nobody would be made whole.
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Senator F0NG, Yes. Now with the passage of this bill as passed the
house how much would the corporations lose as distinguished from the
individuals? Would the individual be wholly paid?
Mr. ECKHHAR.DT. The individuals have remaining awards totaling
$6,525,000. That is 186 awards. Out of the fund they could be paid
wholly for this amount as I understand. Of course they are really never
wholly paid because what they are getting is their capital losses after
30 years, so nobody is really getting true value.
Senator FONG. That is right, but what we are trying to do now, you
see, we are trying to establish equities. Everybody has suffered. The
corporations have suffered. They haven't used their money. The indi-
vidual has not gotten his money and hasn't used the money.
1-row would the difference between the individual and the corpora-
tion come about if this bill is pas=sed by the Senate, which was passed
by the House?
Mr. ECKHARDT. Well, let me seek. Thera remains in the fund unpaid
portions of 186 awards to individuals, which is $6,525,000, and there
remains 161 awards to corporations, totaling $94,700,000.
Mr. WESTFHAL. Mr. Chairman, I believe I could supply the infor-
mation the Senator wants.
Senator FONG. Would you supply it for us later on?
Mr. WESTPZU.AL. Well, I could give it to you right now.
Senator FONG. All i_ght.
Mr. WESTPirAT,. Under the House amendment, $6.5 million approxi-
mately would be paid to individuals. This would pay individuals in
full. On the part of the House amendment under which each corpora-
tion or corporate claimant would get up to $50,000 on its claim, that
would require $4.8 million. That would leave a balance of $8.7 million,
assuming a total fund of $20 million. So it would leave a balance of
$8.7 million available for pro rata, distributions to corporations.
So that under the House amendment the total payments that would
go to corporations, assuming the $20 million is available, would be ap-
proximately $12.5 million.
Senator FONG. You say $15.5 million?
Mr. WESTPHAL. No; $12.5 million.
Senator FONG. What was that?
Mr. WESTPII&L. No, excuse me, $13 million.
Mr. EGKHARDT. So roughly two-thirds to the corporations and one-
third to the individuals.
Senator Force. You divided the corporations into big corporations
and small corporations, didn't you? Mr. ECKHARDT. Yes; that was under the McCollister amendment,
which honored first up to $50,000, which is an advantage to those with
the relatively smaller claims. That wouldn't necessarily be the smaller
corporations though, but there has been consideration in previous
payments with respect to small business.
Senator FoNG. So some small corporations have been paid in full
already?
Mr. ECKITAHDT. I don't believe anybody has been paid in full.
Mr. WESTPHAL. Small corporations as defined by the Small Business
Administration have been paid in full.
Mr. ECKHARDT. Oh, yes.
Senator F0NG. And what is the rationale on this $50,000?
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Mr. ECKHARDT. The rationale was that when there is-well, actually
this was a compromise that ultimately sort of sold the bill. Mr. McCol-
lister on the Republican side offered this, which seemed pretty equit-
able; that is, that relatively small claims should have a preference over
relatively big ones.
Senator FONG. Do you know what happened in World War I? Do
you know what we did than? I mean, with respect to claims in World
War I did we follow something like this?
Mr. ECKIIARDT. No, sir, I don't. I don't know what happened in
World War I.
Senator FONG. You don't know how they distributed the money?
Mr. ECffiIARDT. No, sir.
Senator FONG. Mr. Chairman, we would like to find that out.
Senator BulmICK. All right, we will do what we can and make it a
part of the record.
[The information referred to follows:]
MEMORANDUM PREPARED RY THE STAFF OF TIIE AD Hoc SUBCOMMITTEE, JANUARY 8,
1975
Re : World War I War Claim Priorities
Claims of damage to person or property as a result of the hostile action of
World War I were governed by the "Settlement of War Claims Act of 1928",
45 Stat. 254. These claims and awards were administered by the Mixed Claims
Settlement Commission.
World War I claims varied most markedly from the claims arising from World
War II in that awards were given not only to U.S. nationals for their claims
against the Axis powers but also to German, Austrian and Hungarian nationals
for certain losses caused by the United States.
To pay these various awards seized assets were liquidated to create the "Ger-
man Special Deposit Account" from which all claims were paid.
Section 4(c) of the Act enumerated the priorities of payment from the fund.
Awards of U.S. nationals were given first priority and were distributed as
follows :
(1) Payment of all expenses of administration of the Act
(2) Payment of all awards of U.S. nationals for death and personal injury
(3) Payment of all awards of U.S. nationals other than death or personal
injury and up to $100,000
(4) Payment of all U.S. nationals with awards over $100,000 up to 80
per cent of the remaining balance after payment under priority 3.
The remaining distribution priorities are directed to awards of foreign nationals
and the United States government.
Senator FONG. I have no further questions.
Senator BURDICK. What are the facts in regard to the corporations
taking tax losses on their claims whereas individuals I am advised
have not? Would you tell us about that?
Mr. ECKHARDT. Well there was a difference in the results from tax
benefits enjoyed by the corporate award holders because of their losses
The corporate award holders have collectively taken more than $37
million in tax benefits as the result of the deduction taken from U.S.
income taxes. Such tax benefits, coupled with subsequent payments
under the War Claims Act, have allowed many corporations to recover
almost the entire amount of their loss.
These tax deductions were not of benefit to individuals because even
though the individuals were all U.S. citizens at the time of their loss
under the terms of the War Claims Act, judicial interpretation of the
deduction provisions of the Internal Revenue Code relating to pre-
sumed rate of loss prevented most individuals from taking the deduc-
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tions. U.S. corporations were unaffected by this interpretation and
remained free ~so deduct their losses.
Senator BuiwICK. What you are saying is that if the corporations
have gotten a benefit of some $37 million, they actually got a great
deal of tax benefit and no individual got any tax benefit in income tax
returns?
Mr. ECKHARDT. I think that our records before our committee show
they didn't. There is also this problem that in order to show a tax loss,
Senator, you have to make something in which you could write off
your losses against. The corporations were always in a position to write
this off against their earnings, but of course a lot of the individuals
simply were making nothing. A lot of them were elderly people and
a lot of them were sirr,ply living off the interest of their investment,
which was then removed.
Now at this point there was nothing for them to take a loss against.
Senator FONG. But if they did take a tax loss, don't you think that
should be taken into consideration?
Mr. ECKHARDT. There has been sorne consideration taken with
respect to deductions for tax losses ; yes.
Senator Foxe. For individuals?
Mr. ECKHAR]Yr. In the cases of all claimants, as I understand it; yes.
But of course that consideration can't correct the fact that some people
have been totally reimbursed through tax losses.
Mr. WVr sTPH.tr.. Mr. Chairman, if I could just ask a couple of clarify-
ing questions here?
Senator BURDICK. Fine.
Mr. WEsTPnAL. Uneer the War Claims Act of 1948 there was a pro-
vision which said that any corporation which claimed. a tax loss on
account of any of these war losses had to report their claim of a
tax loss to the War Claims Commission, and in turn the War Claims
Commission was required to deduct the amount of tax benefit resulting
from that claimed tax loss, that is, deduct it from the amount of the
award which was made to that corporate claimant.
Now by virtue I believe of section 206 of the War Claims Act, which
is section 2017(E) under title 50 of the appendix, any corporation
which reported a tax loss was then granted a tax exemption insofar
as any payments made on their claim was concerned. So that a corpora-
tion for example which claimed a tax loss, whether it be $400 or $4.,000,
and thereafter received any payments at all on its claim, it would be
exempt from any income taxation on it.
Now to the extent that a corporation might receive a claim of 100
percent from the War Claims Commission, that payment would be
entirely tax exempt whether it were treated as a capital or ordinary
income or on any other basis. If it is taxable, it is granted an exemp-
tion. Now that applies, only to corporations. That is my understanding
of the law, Mr. Chairman. Is that yours, Congressman?
Mr. ECIKHARDT. I certainly thank counsel for the clarifying state-
ment. I understand it the same wav.
Senator BURDICK. But because of the operation of the Internal Rev-
enue Service Code or because an individual had no income, he had no
tax benefits from tax losses?
Mr. ECKHARDT. That is generally the case from the testimony we
received, and I think it is uniformly the case.
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Senator FONG. May I ask a question. When the corporation filed its
claim was the tax loss a deductible item in that claim or did they file
a full claim disregarding the tax loss they took?
Mr. WESTPHAL. Senator, my understanding-and it can be corrected
by Mr. McClellan who will be a later witness-'but my understanding
is that the corporation filed its claim in the full amount and the Com-
mission determined the value of the property which it lost in the full
amount, and then by virtue of this law, it was required to deduct from
that full value the amount of any tax benefit received by that corpora-
tion as the result of a claimed tax loss.
Senator FONG. Take, for example, if the corporation had a $1 million
loss and they took $50,000 out of it as tax loss, what would their claim
be?
Mr. WESTPHAL. That would reduce their claim to $950,000.
Senator FONG. So the figure is $950,000?
Mr. WESTPHAL. That is correct.
Senator FONG. And you said the corporation's stockholders are en-
tirely different from the stockholders who were then the stockholders?
Mr. ECKIIARDT. In 30 years it would be a very great change, yes. In
some instances these has been an entire supplanting of previous cor-
porations by sale or merger in which these losses have already been
taken into account.
Senator FONG. As I understand it, some of these corporations were
incorporated by persons who wanted to get away from losing their
property so they took their personal property and made several organi-
zations or corporations?
Mr. ECKHARDT. No, sir. Actually the claims by a. corporation are only
for corporate losses, the individual claims may be the interest of an
individual in a corporation and he must be an American citizen-in
other words, you see, I am talking about totally owned family type
corporations.
Senator FONG. And how did you treat them?
Mr. ECKHARDT. They are the individual claimed losses, you see?
Senator FONG. And they are treated as individuals and -are not
treated as corporations?
Mr. ECKHARDT. That is right.
Mr. WESTPHAL. Mr. Chairman, may I just ask one question here?
Senator BURDICK. Yes.
Mr. WESTPHAL. You make reference to Boise Cascade involving the
Shanghai powerplant. It is my understanding that the claim was
filed and allowed in the amount of approximately $7 million and some
fraction and that in 1967 or 1969, as a result of the payment authorized
by Congress, some $4 million was paid on that claim. Now that was
paid, according to my understanding, to Ebasco and not to Boise
Cascade; Ebasco being a predecessor of Boise Cascade. $4 million was
paid and I think you refer to it as a $5 million payment. Now that
payment was made to Ebasco prior to 1969 when Boise Cascade ac-
quired all the corporate stock and assets of Ebasco. Do you have
anything to indicate that my understanding is incorrect?
Mr. ECKHARDT. I think that is correct. I think that is probably cov-
ered in this attachment.
Mr. WESTPHAL. There will be a witness from Boise Cascade later
on and we can attempt to clarify the facts at that time. That is my
understanding of what the facts and the record shows though.
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Mr. EcKHARU/r. The attachment I have here is called the Venerable
Shanghai Power Co. and is written by Alice Dieter. As I under-
stand it, Boise Cascade's claim is based on its ownership of 80 percent
of the common stock of the Venerable Shanghai Power Co., a prop-
erty worth $56 million., which came to Boise Cascade in 1969 through
its merger with Ebasco industries. The Shanghai property has never
been carried by Boise Cascade as either an asset or liability. In fact,
even Ebasco's predecessor had written the property off many years
ago. By 1941 even Shanghai lost its unique status and the offices of
Shanghai Power Co. were interned. As far as the shareholders are
concerned, the property in China was written off in 1941 and never
again appeared as an asset on the books.
So, Mr. Westphal, I am not sure who got the money or whether it
was one of the successors in line, but I am sure that you must be correct
if you have looked into the matter, Mr. Westphal, that Ebasco was
the one that received it.
Mr. WIESTPRAL. In any event that can he clarified by a later witness.
Mr. EcKHARDT. That is right. Whoever was the owner of Shanghai
at the time of that claim I am sure received the money and that
would of course appear clearly on the record.
Senator BURDTCK. Well Ebasco became a part of Boise Cascade?
Mr. ECKHARDT.That, is right.
Senator BURDIOK. So when they got the money, whether that became
a part of Boise Cascade or not is a question we will have to ask a
later witness.
Mr. ECKHARDT. That is right, and of course, Boise is now claiming
the additional amount.
Senator BURDICK. Well thank you very much, Congressman.
Mr. ECKHAFDT. Thank you very much. Mr. Chairman, may I ask
that the full statement be incorporated into the record ?
Senator 13u:mICK. Without objection, that will be received and
placed in the record.
[The prepared statement of Bob Eckhardt follows:]
ON AMENDING THE WAIL CLAIMS ACT
STATEMENT OF CONGRESSMAN BOB ECKIIARDT (.3)-TEXAS), BEFORE A SUBCOMMITTEE
OF THE SENATE JUDICIARY COMMITTEE, DECEMBER 3, 1974
f. appreciate the opportunity to testify before this Subcommittee in support of
S. 1728, as amended by the House of Representatives. I am a member of the Sub-
committee on Commerce and Finance of the house Interstate and Foreign Com-
merce Committee which held hearings on this bill and which added the House
amendments.
On October 8, 1973, the Senate passed S. 1728 to amend the War Claims Act
to provide additional compensation to U.S. civilians who had been held prisoner
during the Vietnam war to give them the same benefits as those enjoyed by mili-
tary prisoners or war. On November i, 1973, the House Subcommittee on Com-
mn.erce and Finance held hearings on S. 1728 and also on two House bills to
amend the War claims Act to give individuals a priority over corporations in the
payment for awards for property losses suffered during World War II. The Sub-
committee examined these proposals in great detail, approved them, and com-
bined them into a single bill, S. 1728. That bill was subsequently further amended
and reported by the full Interstate and Foreign Commerce Committee, and it
was passed by Vie House by a vote of 368-17 on August 12, 1974. Since then S.
1728 has been awaiting Senate action on the House amendments.
The War Claims Act was passed to compensate U.S. citizens for losses suffered
in World War L[ out of he assets of German and Japanese nationals seized by
the U.S. Government during the War. The Act created the Foreign Claims Settle?
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ment commission to adjudicate each claim for an award. All claims have now
been adjudicated. Awardholders in four priority categories created by previous
legislation have been paid in full, as follows : (1) awards based on death or
personal injury; (2) awards to small business corporations; (3) awards under
$10,000; and (4) awards to charitable and religious organizations. There remain
unpaid portions of 186 awards to individuals (totaling $6,525,000) and 161 awards
to corporations (totaling $94,700,000). The remaining assets of the War Claims
Fund, however, are far less than the total of these unpaid awards. Under exist-
ing law, each awardholder would receive up to $24,000, plus a pro rata share of
the amount remaining in the Fund, if any, after the $24,000 distribution. Thus,
under existing law, the corporate awardholders would receive over 96 percent
of all pro rata distributions.
Recognizing that all the remaining outstanding awards cannot be paid in full,
the Subcommittee, the full Committee and the House of Representatives concluded
that the losses suffered by individuals as a class were of such a fundamentally
different character from the losses of corporations as a class that the individual
awardholders should be given priority in the payment of their awards. The
4 marked contrast between the two kinds of losses compelled such legislative con-
clusion. The individuals' awards were the result of loss of homes, personal belong-
ings and small family-owned and operated businesses. In most cases the indi-
viduals lost everything they had. In every case in which an individual award was
based on a business loss that business was family owned. Some of these businesses
were corporations, some not, but the critical point, in my view was that the in-
dividuals did not simply lose an investment ; they lost the core to economic
survival. In comparison, the corporate awardholders lost assets of foreign sub-
sidiaries that constituted a very small portion of their overall net assets. Every
major corporate awardholders is a large, publicly held multinational corpora-
tion which emerged from the war relatively unscathed, well prepared to do busi-
ness as usual. Thus, the personal disasters suffered by the individuals differed
so fundamentally from the relatively insignificant investment losses suffered by
the corporations in their immediacy, severity and totality as, to justify a priority
to individual awards within the spirit and intent of the War Claims Act.
It is pertinent here, I think, to note that many of the individual awardholders
who sustained those losses are now elderly persons living on small fixed incomes.
Most of them receive scant Social Security benefits since they spent most of their
productive years abroad. Full payment of their War Claims awards would go a
long way toward providing a final financial stake for them now. Such payments
would be at small cost to the corporations because the aggregate amount of the
individual awards is so small compared to the aggregate amount of the corpo-
rate awards that enactment of S. 1728 would cost the corporate awardholders
only about twenty cents on each dollar of their award balance.
It is also pertinent to note that the individual awardholders either suffered
the loss themselves or are the widows or children of those who did. Many of the
corporate awardholders, on the other hand, are conglomerates that derive their
claims as a result of the acquisition of the companies 'suffering the loss many
years after the loss had occurred. In some cases the acquiring company paid
little or nothing for the stock of the acquired company since its assets had been
substantially reduced by the loss they had sustained. A good example of such an
acquisition involves Boise Cascade, one of the most vocal opponents of S. 1728.
Boise's loss is based on a loss suffered by the Shanghai Power Company in 1941.
At the time of the loss, Shanghai Power was a subsidiary of American and For-
eign Power. Many years ago, A&FP wrote the assets of Shanghai Power down to
zero. A&FP merged with Ebasco in 1967 and Ebasco was acquired by Boise Cas-
cade in 1969. Both Boise and Ebasco have always carried the Shanghai Power
stock on their books at zero. Boise now seeks to recover $3 million in compensa-
tion for the losses suffered by Shanghai Power (A&FP having -already received
almost $5 million from the War Claims Fund). These facts are set forth in an
item that appeared in the "Boise Cascade Quarterly" of February 1974, which
I ask to be included in this record of hearings.
Boise Cascade's claim for compensation is far more remote sand far less com-
pelling than the claim of an individual who saw his home, personal property or
small family business destroyed in the war. Under any principle of equity these
two claims cannot be regarded as equivalent. S. 1728 would not deny Boise a
right to compensation. It would merely give priority to claims of greater
immediacy.
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Even in those cases in which the present corporate award-holder is the com-
pany that suffered the loss, many of the present stockholders are not the stock-
holders of 30 years ago that suffered the loss. By contrast, the individual award-
holders are the Very persons or the widows or children of the persons who suf-
fered the loss.
Every individual awardholder is a United States citizen. It was the basic
purpose of the War Claims Act to compensate U.S. citizens for their loss. Some
of the stockholders of the corporate awardholders are foreign nationals who have
participaited and will participa to in payments fromthe Fund.
In addition to the fundamental difference in the character and personal im-
pact of the war losses between individuals as a class and corporations as a class
there is a significant difference in the benefits already received by the two
classes. This difference results from the tax benefits enjoyed by the corporate
awardholders because of their losses. The corporate awardholders have collec-
tively taken more, Than $37,000,000 in tax benefits as a result of deductions from
U.S. income tax. Such tax benefits, coupled with subsequent payments under
the War Claims Act, have allowed many corporations to recover almost the en-
tire amount of their loss. These tax deduction:: were not of benefit to individuals
because, even though the individuals were all U.S. citizens at the time of their
loss under the terms of the War Claims Act, judicial interpretation of the de-
duction provisior. of the Internal Revenue Code (relating to presumed date of
loss) prevented most individuals from taking n deduction. U.S. corporations were
unaffected by this interpretation and remained free to deduct their losses.
Furthermore,, corporate claimants may also ;lave taken substantial deductions
from state and local taxes as a result of their war losses. These tax benefits were
not taken into account at all in granting of war claims awards.
Many corporate awardholders may also have received substantial tax and
other benefits after the war from foreign governments because of their'war losses.
These benefits were unavailable to individuals. Foreign tax benefits were not
taken into account in the granting of war claims awards.
lany of the corporate claimants are insurar ce companies which insured risks
at high rates during the war years and paid out proceeds on the policies they
had written. These insurance companies, which have been subrogated to the rights
of the insured corporations, have already received significant compensation for
their losses through their premiums.
The present corporate awardholders have already received more than $150
million from the War Claims Fund. Through this recovery, together with their
tax benefits, they have received in compensation for their losses more than 11
times as much as the individual awardholders.
In summary, the individual awardholders suffered losses that were more
severe than those of the corporations, but they have recovered a smaller portion
of their losses.
In the past, the Congress has created numerous priorities for payment under
the War Claims Act. Therefore, creation of a priority for individual awardholders
as provided by S. 1728 would set no precedent, but rather would continue the
established pattern of weighing the equities among different classes of
awardholders.
It is especially important that the Congress enact this bill during this session.
Another distribution from the War Claims Fund-perhaps the final distributio?n-
is scheduled to he made early in 1975. Therefore, if this bill is not enacted now
the issue may well be rendered moot by this prospective distribution. I believe
that a compelling case for S. 1728 has been made, and I urge the Subcommittee
to recommend that the Senate adopt the bill as amended by the House.
Senator BIT DICK. Our next w'Ltness is Mr. Wayland McClellan,
General Counsel for the Foreign Claims Settlement Commission.
STATEMENT OF WAYLAND McCLEIJAN, GENERAL COUNSEL,
FOR'EI'GN CLAIMS SETTLEMENT COMMISSION
Mr. MCCr,Fr,r,.AN. Good morning, Mr. Chairman, and members of
the subcommittee. I appreciate this opportunity of appearing here this
morning. I have to apologize for not having a written statement. I
explained to Mr. Westphal that we at the Commission had made a
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full report on this legislation and the amendment by the House com-
mittee that was chaired by Congressman Eckhardt in his subcommit-
tee, and we would just like to reiterate our position that we are, op-
posed to the changing of the payment priorities as reported out and
passed by the House of Representatives.
We feel that all of the small claimants have already been taken
care of. We feel that even though there are individual claimants who
have unpaid balances on awards, that these are not the so-called
small claimants. The Congress in the initial enactment of this legisla-
tion took care of what they thought the equities were insofar as small
claimants were concerned. They paid the death claims first and they
paid the small business corporations and small business people as de-
terminated by the Small Business Administration. They paid up to
$10,000. After that they had a pro rata payment then based upon the
money that was available in the war claims fund.
The Congress also decided at a, later date that there were other peo-
ple who should be taken care of and these were the charitable groups
that the chairman referred to this morning.
Initially the Commission opposed that change but we compromised
or rather the Congress compromised by adding an amendment to say
that they would pay the charitable groups in full, but they also raised
the amount from $10,000 to $35,000. The Commission then withdrew
its opposition to that amendment when they raised the priority to
$35,000 and we felt that this would be sufficient to take care of all of
the so-called small claimants and the equities would be served by doing
this.
Now the amendment that the House has passed in our opinion is
bad precedent. We feel that this could affect-I mean we feel the In-
ternational Claims Settlement Act, which the Commission also ad-
ministers, would be affected, and it could hamper the Department of
State in its negotiations with various countries on claims agreements
if they feel that once an agreement is concluded based on a set of
rules, that we go back and change the rules in the middle of the game.
I think that would be bad precedent for the Congress to do.
Now, of course, as Mr. Eckhardt has said, this is strictly a matter
that is within the purview of the Congress. You can do this. There
is no law that will prevent the Congress from doing this, but we feel
that it is bad precedent. And I don't want to prolong this because I
think Mr. Eckhardt has made a very good statement. I notice we have
a lot of witnesses here. So our position is already in the record and
I think that my time and the committee's time would be better served
if I just referred by reference to our statement, which you already in-
corporated, and also answered any questions that the committee may
have.
I think that this would be a better procedure if you so desire.
Senator BuRDICK. Well, we certainly appreciate that approach. It
is always helpful to get at the meat of the thing. You say that all
claims of individuals up to $35,000 were either paid or will have been
paid under present law?
Mr. McCLELLAN. They probably will be paid under present law.
That is correct. They have already received up to $10,000. Let us say
you have $100,000 or a $200,000 claim. So they got $10,000 initially.
And when the program was completed in May of 1967 and we made
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our final report to the Secretary of the Treasury, who is the paying
agent, he was able to pay an additional 61.3 percent of the award. in
excess of the $10,000, of the amount of the award in excess of $10,000.
In 1972 or 1973 there was another deposit. The charitable and reli-
gious groups received a priority and then they paid out an additional
$11,000. So the claimants we are talking about now have received
substantial amounts on the awards that, have been granted. All the
strtall claimants in our opinion have been paid in full.
Senator BURDICK. That is what I am getting at. Under the present
law they haven't been paid all yet, but they will be paid up to $35,000?
Mr. MCCLELLAN. TTp to $35,000; yes.
Senator B1rRnICK. For each individual claim?
Mr. MCCL,Fr,r Ax. That is correct.
Senator BURDICK. Then we are talking about claims between $35,000
and $500,000, aren't we, in the House amendment?
Mr. MCCLELL,AN. Well, that is approximately what we are talking
about.
Senator BURDICK. Well, when the $35,000 payments are completed,
what percentage of the small claimants will that take care of?
Mr. McCrxu,AN. Well this should be all of them. It all depends
really, on what, we are calling small claimants.
Senator BURDICK. My staff tells me all the small claimants will
be taken care of except 43.
Mr. McCr,FT.r AN. That is correct.
Senator BURDICK. Of course, their claims would range from up-
wards of $35,000 to $500,000?
Mr. MCCLFLT AN. Yes, sir, that is correct.
Senator Brmoicx. Now in this group of individual claimants are
there small companies?
Mr. MCCLELLAN. I wouldn't consider them very small. We made a
study when this bill was first introduced and we examined all of
the individual awards that had unpaid balances. Many of them were
based upon. ownership interests in corporations that themselves couldn't
qualify. I mean, the statute that we administer requires that in order
to qualify as a corporate claimant, the corporation had to be organized
in one of the 50 States or one of the territories or the District of Colum-
bia, and the outstanding stock must have been owned by natural per-
sons who were U.S. citizens to the extent of at least 50 percent.
Now some of these individuals who have unpaid balances, claimed
through corporations that were incorporated in Germany, for example,
while that corporation itself could not. qualify as a claimant, individ-
uals
came in for their proportionate stockholder interest in this Ger-
man corporation. Frankly, we just don't see the difference between that
type of a corporation and an American corporation. We feel that
this is discriminatory toward the American corporations. I am not
going to argue the relative merits of whether or not a family holding
was cloaked in a corporate structure to try to protect themselves from
confiscation under the Nazis. This may have been true in some cases,
but I am sure this is not true in every case where you have individuals
with unpaid balances.
Senator Fox(}. If I as an individual had $10,000 in a German corpo-
ration as a stockholder, then I would have a claim then for $10,000?
Mr. MCCLELLAN. For your stockholder interest. Let us say you had
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100,000 outstanding shares of stocks, and you owned 10,000, you
would be entitled to claim 10 percent of the total loss sustained by the
German corporation.
Senator FONG. But if I had that share in the American corporation,
I would not be?
Mr. MCCLELLAN. You could not file.
Senator FONG. I could not file?
Mr. MCCLELLAN. Only the corporation could file.
Senator FONG. Only the corporation?
Mr. MCCLELLAN. That is correct.
Senator FONG. It is my understanding that any Federal tax savings
were deducted from the amount of the awards made to the corpo-
rations.
Mr. MCCLELLAN. That is correct. The statute required the Commis-
sion to deduct this from the total amount of the award. Mr. Westphal,
I think, directly stated in answer to your previous question, Senator,
that if you had a loss of let us say $100,000 and the corporation re-
ceived tax benefits of $10,000, we would say that the loss was $100,000,
but the award granted would be $90,000 because the law requires the
Commission to deduct from the loss the tax benefits received on ac-
count of this loss.
Senator FONG. Was any consideration given to deductions for corpo-
rate, State, or local tax savings?
Mr. MCCLELLAN. No.
Senator FONG. That is to say you took the tax saving as a Federal
tax saving?
Mr. MCCLELLAN. That is correct.
Senator FONG. What about the State tax savings?
Mr. MCCLELLAN. I don't think this entered into it.
Senator FONG. That didn't enter in?
Mr. MCCLELLAN. No.
Senator FONG. So if the corporation say out of $10,000, which he
saved because of Federal tax losses, saved that much and then he saved
$1,000 on a State loss, that $1,000 would not have been computed?
Mr. MCCLELLAN. Well, it may have been. I can't answer that
definitely because the practical administration of this was as follows :
The corporations were required to submit a statement under oath
that stated the amount of tax benefits that they had received on
account of the same loss for which the claim was made.
Senator FONG. I see. That would have been included?
Mr. MCCLELLAN. They may have included this in their affidavit. I
can't answer definitely they did not include this into their considera-
tion. I am sure, some of the representatives of the corporations would
be able to answer that because they are, I am sure, thoroughly familiar
with how they arrived at the affidavits that they presented to the
Commission under oath as to what benefits they did receive.
Senator FONG. I see. So the benefits were not confined to Federal
tax losses?
Mr. MCCLELLAN. That could be. I just can't answer that definitely
because I don't know what they considered when the corporations
furnished this information to the Commission, and I would guess that
any accountant on the corporate staff would probably include the
State taxes also.
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Senator FONG. Could you ascertain that for us?
Mr. MCCLMLAN. Yes we can. There was one other question that
maybe I just ought to clarify just a little bit and that was asked of
Mr. Eckhardt :in connection with the insurance company claims.
,\s you all know, during World War II the U.S. Government in
order to get supplies to Europe and to the war areas encouraged insur-
ance companies to underwrite these losses in order to encourage private
shipment to send supplies to our force,, who were fighting all over
the world. Now the statute that we have administered required the
Commission to pay the net losses to the insurance company. This would
mean that any premiums that they had received would have to be
deducted from the amount of the losses for which they would certify
in their favor. So it is not a windfall in chat the insurance companies
got the premiums, they paid out, and then they recovered the full
amount of the loss. 't'his is the net loss the insurance company receives.
Senator FOND. Subsequent to the war when these corporations went
back and reestablished their businessess there, were there any tax
considerations given to these corporations?
Mr. MCCLELLAN. Most of these corporations in Germany, for ex-
ample, were required to pay into a fund in Germany. They have what
they call an equalization of burdens law in Germany which re-
quired many of the corporations that made money during the war
to pay into a fund to pay certain benefits to people who sustained
losses in Germany that. were not covered by our particular statute.,
Senator FONG. Do you know whether these companies that reestab-
lished their businesses were paid by foreign governments?
Mr. MCCLELLAN. I would doubt very seriously that an American
corporation thit sustained losses would receive any benefits from a
foreign government. I can't say definitely, but I doubt this very
seriously because I don't think that the laws that were enacted by the
' \rest German Government after -World War II made any provision
for this type o. thing, and I am sure that some of the representatives
here, who have corporations that did reestablish operations in Ger-
many, could answer this.
Senator Far G. Do you know how we took care of the war claims
in World War I ?
Mr. MCCLELLAN. It was a mixed claims commission that was estab-
lished. It was a German-American mixed claims commission. My
Commission of course, wasn't even in existence then.
The German Government did make payments, but I am not sure
exactly what the payment priorities were. As a matter of fact, some
payments are still being made by the Treasury Department on some
of these awards that were granted by the mixed claims commission.
I am not sure whether there was any priority established on this.
Senator FONG. And you say that the War Claims Commission is
against. this am endment by the House?
Mr. MCCLELLAN. Yes, we, are opposed to it. We just don't feel that
the precedent is good. We feel that the small claimants, or the so-
called needy claimants have already been taken care of, and we feel
that this is discriminatory toward the American corporations. We
feel that at this point in the payment procedure all the very needy
people have already been paid.
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I don't think there are any welfare cases at this point of time.
Most of these individuals were large claimants. And if you look at the
unpaid balances on the charts that appear in the House hearing
record that the Commission submitted, many of these unpaid balances
are well in excess of $1 million. I don't call this a very small claim.
Senator FONG. Does the War Claims Commission feel that the law
should be left alone?
Mr. MCCLELLAN. We think it should be left exactly the way it is
now.
Senator FONG. Do you think that is fair?
Mr. MCCLELLAN. We think it is fair. We think that the Congress
has already expanded the priorities which would take care of the so-
called needy cases and the small claimants.
Senator FoNG. In the case of the corporations you said that if they
had a claim of $200,000, they were paid initially $10,000?
Mr. MCCLELLAN. $10,000.
Senator FONG. Was that increased to $35,000 afterward?
Mr. MCCLELLAN. No. What happened is they got the $10,000 and
then they got 61.3 percent of the amount in excess of $10,000, the un-
paid balance, and then they got an additional $11,000.
Senator FONG. Oh, they get an additional $11,000?
Mr. MCCLELLAN. Yes, sir.
Senator FONG. And that $11,000 came from what?
Mr. MCCLELLAN. A deposit that was made in the war claims fund
around 1970 or 1971 or 1972.
Senator FONG. So a claimant who had $200,000 in a claim would get
$10,000?,
Mr. MCCLELLAN. That is correct.
Senator FONG. And then he would get how much of the balance, of
the $190,000 ?
Mr. MCCLELLAN. Well the second payment he got was 61.3 percent
of $190,000 and then he got a third payment of $11,000.
Senator FONG. So he would have gotten about $136,000 already?
Mr. MCCLELLAN. Yes; and you see the pro ration under the present
law doesn't come into effect until the $35,000 is paid.
They have to pay across-the-board payments up to $35,000 so there
wouldn't be any pro ration under the present statute until another
$24,000 is paid.
Senator FONG. You mean the $10,000 will be increased then by an-
other $14,000 ? No, by another $24,000 ?
Mr. MCCLELLAN, Well this is a question that the lawyers in the
Treasury Department are going to have to figure out if the statute
remains the same; that is, whether or not this amount we set at $35,-
000 means $35,000 in addition to the $10,000 or whether or not it
means an additional $25,000. The language is not clear.
Senator FONG. That is not clear.
Mr. MCCLELLAN. It is not clear on that but the Treasury Depart-
ment lawyers are studying this. I don't think they have reached
any conclusion as to whether or not they would interpret that to mean
an additional $35,000-no, an additional $25,000. My personal view
is that it means an additional $35,000. So this would be the $10,000
plus the $35,000.
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Senator Foie. So initially you had $10,000 and then from your
interpretation they would have to have another $35,000.
Mr. MCCLELLAN. That is correct.
Senator BUIDIarc. I. think I have this figured out now. Are you
through?
Senator FONG. Yes,
Senator Brrznrcx. Now as I understand it, in April of 1967 a $10.,000
payment was made to all claimants?
Mr. MCCLELLAN. Well that is not exactly true. In some cases it was
true.
Senator BITE-MCI- What cases wouldn't it be true?
Mr. MCCr.ELLAN. It would depend on when the claim was adjr idi-
ea,ted by the Commission. You see, we started this program back in
1963 and between 1964 and 1965 we issued decisions on claims. There
came a point in time when the Treasury Department fig fired that they
had enough money in the fund in order to pay at least $10,000 after
they had paid the priority payments of death, personal injury, and
small business claims. And when they had enough money in the pro-
.-ram and we had progressed into the program to the extent that they
felt they could safely pay $1.0,000 without depleting the fund, then
they started making the initial payments on these claims.
For example, somebody brought up the Shanghai Power claim this
morning. It just happened that in April of 1967 a $10,000 payment
was made on that particular claim and----
Senator BIILDTCIi. My point is sometime the $10,000 was paid?
Mr. MCCLELLAN. That is correct.
Senator BliuDICK- Let me give you an example here. Let us take a
rnan with a $100.000 claim. He got $10,000; correct?
"MIr. MC'CLrLLAN. Yes, sir.
Senator BURDICK. And that reduced it to $90,000. And then he got
61.3 percent in October of 1067 of the $90,000. And I figured it out.,
and that would be $5:5,170. Then he got on November 11 of 1971 an-
(it her $11.000; correct ?
Mr. MCCLrLL.AN. That is right.
Senator Buiwicic. Now, if the present law is carried out where he
gets another $24,000 to make up the balance of the amount, then when
1 add that up I get 5100,170.
Mr. MCCLrLL.AN. Well, he wouldn't get more than what the award
was.
Senator BURDICK. No.
M r. MCCL ELLAN. It, would be up to. Let us say he had an unpaid
balance of $11!,000,, then he would get $12,000.
Senator Brrr;niax. In that you are right. My point is if the present
law is carried out, a man with $100,000 in a claim would be paid in
I'~il] ?
1/fr. MCCLELLAN. That is correct. That, is assuming we get the money.
Senator BTTRDTCK. You say the ]-present law guarantees the balance of
$4,000 to make that $;15,000 payment, correct?
M"r. MGCL.LLAN. This is assuming that the funds are put into the
war claims fund. You see, what has happened is that the only money
that is currently available to eo into the war claims funds is $5 million.
You see, the Department of Justice through its Civil Division liqui-
dates the German assets. They turn over what they call their freed
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balance to the Commission for deposits to the war claims fund. Now,
the mechanics is this. Say we can get $5 million to put in the war
claims fund. The Commission gets a check from the Treasury De-
partment for $5 million made out to the Foreign Claims Settlement
Commission. We in turn deposit 10 percent of this to the general fund
of the Treasury to reimburse the United States for administrative ex-
penses and the 90 percent is put into the war claims fund. This is how
the Commission's administration expenses are reimbursed from the
U.S. Government. Then when this money goes into the fund, the Treas-
ury Department figures out how much can be paid for each claimant.
Now, so far as we know, there is only $5 million currently available.
Now, $15 million more may be available at some future time, but
nobody can guarantee this because some of these assets are still tied
up in litigation. They may have to return it to the original owner, you
see. So when we talk about $20 million, I am just not sure of the exact
figure.
Senator BURDICIC. But you are talking about the mechanics now.
What I am saying is the law authorizes the payment of $24,000 when
and if it is available.
Mr. MCCLELLAN. Only if it is available.
Senator BURDICK. Yes, sir, that is correct. The mechanics of how
it becomes available have been described, but what I am saying
Mr. McCLELLAN. Then, if it becomes available, your example is cor-
rect, Senator.
Senator FONG. The corporations would get that $24,000, too?
Mr. MCCLELLAN. Yes, everybody.
Senator FONG. So if you don't have enough money, they wouldn't
get theirs?
Senator BURDICK. You say they would have to be paid back, too?
Mr. MCCLELLAN. Everybody is treated the same way across the board.
If they have enough money to get another $10,000, then everybody will
get another $10,000.
Senator FONG. And if you have enough money to get the $24,000
Mr. MCCLELLAN. Then they would get their $24,000.
Senator BURDICK. On my example of $100,000, they would be paid in
full?
Mr. MCCLELLAN. Yes, sir.
Senator Bunnlcii. That is under the present law?
Mr. MCCLELLAN. Yes, sir.
Senator BuRnicK. And that would take care of nonprofit organiza-
tions and everybody else?
Mr. MCCLELLAN. Well, nonprofit people have been paid in full
already.
Senator BURDICK. Then over and above this are still the 43 claimants
who under this formula would not be paid in full?
Mr. MCCLELLAN. That is correct.
Senator BURDICK. These are individual claimants. And under your
recommendation they should share with the corporations the balance
of the fund ?
Mr. MCCLELLAN. That is correct.
Senator BURDICK. Thank you, I understand your position now.
Senator FoNG. The 43 individuals, concerning those, what would be
the lowest claim that would be made for these 43 individuals?
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Mr. McCLELLAN. I am not sure I have that, but we can figure it out,
I can furnish it to the. staff person when I get back to my office.
Senator Fowo. Will you furnish it to the committee?
Mr. MCCLELLAN. Yes, sir.
Senator FONG}. And this would take care of those individuals above
a certain claim.?
Mr. MCCLELS,..AN. Yes, sir. We can get that.
Senator BURDICK. I have also figured out on my little pad here that
for one who had a $200,000 claim, under the present law he would have
received up to this date $165,400 leaving a balance of some $34,600
and some, which would be paid under a fair distribution, pro rata basis.
Mr. MCCLELLAN. Not on a pro rata basis yet. It won't be until you
net up to $35,000.
Senator BunDICK. Well, I have the $24,000 in there. I said he would
have a $34,600 balance and he would share the remaining money with
everybody else?
Mr. McCLELLAN. That is correct.
Senator BuRDICK..And that would bring it up, of course, much
higher, too?
Mr. McCI.ELLAN. Yes, sir.
Senator BmwieK. So we have it little bit of the picture.
Mr. McCLELLAN. Of course, we are also interested in the other part
of this bill that we haven't discussed here this morning.
Senator BURDICK. Well, let's discuss it.
Mr. McCLELLAN. And the Senate passed it some time -ago. We are
getting quite a bit of correspondence from civilian Americans who
were interned in Southeast Asia during the Vietnam conflict, and of
course we have told them that this body has passed that legislation,
but it has been held up. We do have toanswer a lot of correspondence
on these type of claims, and I would hope that the committee would
take this into consideration.
Senator Fort. You are for the first part of the bill that the Senate
passed?
Mr. MCCLELLAN. Oh, yes, sir; that we are in favor of.
Senator Bunnicx. I understand there isn't much objection to that
either?
Mr. McCLELLAN. No, I don't think anybody could object to that.
Senator BURDICK. The staff has a, couple of questions.
Mr. WESTPHAL. Mr. McClellan, on the last point you mentioned, this
bill as it originally passed the Senate over a year ago provided that
civilian internees' compensation for the period of their internment
in Southeast Asia would be increased from $60 a month to $150 a
month. Is that the part you refer to ?
Mr. MCCLELLAN. Yes, Sir.
Mr. WESTiIiAL. Now, that payment to them, whether it is $60 or
$150, would be made out of this same war claims fund that we are
talking about. "Correct?
Mr. MCCLELL;AN. No, sir; that isn't correct.
Mr. WESTPIIAL. What fund are those payments to civilian internees
front?
Mr. MCCLELLAN. Those. are appropriated funds. You see, the -war
claims are being paid out of the -war claims fund which is separate.
We have two funds, in effect. We have two different funds within the
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Treasury Department. The claims covered by the House amendment
are paid from liquidated assets, but the claims for the civilian internees
in Southeast Asia are paid from moneys appropriated from Congress
from taxpayer funds.
Mr. WESTPHAL. All right. Now then, on the matter of the claims
that are covered by these two House amendments to the Senate bill
and thus to clear this 'thing up, this arises under the original War
Claims Act of 1948, does it not?
Mr. MCCLELLAN. That is correct.
Mr. WESTPHAL. And without being technical, briefly what is in-
volved here is that when that was first passed, it provided u means of
liquidating these belligerent assets that were in this country, and the
job of liquidating of 'those assets was turned over to the Justice
Department.
Mr. MCCLELLAN. Yes, sir.
Mr. WESTPHAL. And from 1948 when that law was passed and for
the next 12 or 14 years, the Justice Department was engaged in liqui-
dating a large number of those assets, were they not?
Mr. MCCLELLAN. Yes, sir.
Mr. WESTPHAL. During that period of time, was the Commission, of
which you are counsel, in existence? Was the War Claims Commission
in existence?
Mr. MCCLELLAN. We, the Commission, came into existence in-well,
we were officially organized in 1949.
Mr. WESTPHAL. All right. Now, then, by 1962 the Justice Depart-
ment liquidiated enough claims and turned the money over to the Treas-
ury Department, earmarked for this war claims fund, so that there
were some funds available for distribution?
Mr. MCCLELLAN. That is correct, Sir.
Mr. WESTPHAL. And in the original provisions of the law, Congress
did state some priorities, did they not?
Mr. MCCLELLAN. Yes, they did.
Mr. WESTPHAL. They first created a priority to pay in full all claims
for death or personal injury arising out of belligerent actions?
Mr. MCCLELLAN. That is correct.
Mr. WESTPHAL. And the second priority that Congress created was a
priority for all small business claims?
Mr. MCCLELLAN. Yes; that is right.
Mr. WESTPHAL. And as the Chairman's opening statement indicated,
some 251 small business claims in the total amount of $12 million were
paid?
Mr. MCCLELLAN. Yes, sir.
Mr. WESTPHAL. And a third priority that Congress created in the
history of this war claims legislation was a priority to pay all claims
under $10,000; to pay them in full?
Mr. MCCLELLAN. Yes, sir; that is correct.
Mr. WESTPHAL. Whether these were corporate claims or individual
claims, but still to pay them in full?
Mr. McCLELLAN. It didn't make a bit of difference.
Mr. WESTPHAL. If the claim was under $10,000, then it was paid in
full and some 5,630 of those claims were paid in full at a cost of some
$13 million?
Mr. MCCLELLAN. That is correct.
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Mr. WESTPHAL. Now then, in 1962 there were still about 1,000 claims
left that involved essentially property loss. These were claims made by
corporate insurance companies, corporations, and by individuals anti
by individuals representing their ownership in a so-called family cor-
poration that was used as a guise to hide assets that otherwise the
Nazis would have confiscated?
Mr. MCCLFI.LAN. Yes, sir. The exception to this is, as you say, 11 - 962.
Well, the 1962, act was the statute that provided for the death and
personal injury as well as the small business and
Mr. WESTPHHAL. Yea; but what I am saying is that Congress origi-
nally started out and created three priorities.
Mr. MCCLFLLAN. That is correct.
Mr. WFBTYrrAL. All right. And those priorities were for the death.
and personal claims, small businesses, and all claims under $10,000,
whether filed by corporations or by individuals?
Mr. Mc CLFLLAN. That is right.
Mr. WESTPr3AL. And then in 1962 Congrss passed an amndment
which said that every claimant., both corporate and individual, shoulcl
get $10,000 paid on the claims?
Mr. McCLEra,AN. The chronology here is not exactly right. In Oc-
tober of 1962 Congress passed title 2 of the War Claims Act. You. see,
Public Law 87-846 was enacted on October 22 of 1962. This is the
statute that authorized the death and personal injury claims and. the
small business claims or any war damage claims that arose during
World War 11 in certain areas of Europe and the Pacific.
Now, that statute had a section which set forth the priorities that
you have just, enumerated. Now, this is the way the statute stayed until.
;zr'o,ind 1.971, f believe, which was when the Congress changed the
payment provision and they authorized another priority, and this was
the priority that said that charitable, religious, and other groups shall
be paid in full. They had already received initial payments, so they
got the unpaid balances of that money at that date. This is when
the Justice De-oartment turned over approximately $13 million, which
was put into the fund, and that money enabled the Treasury De-
partment to wipe the books clean so far as the charitable groups were
concerned and allowed them to pay the $11,000 in 1972 that we talked
about a little earlier.
Mr. WF,sTPFCAL. All right. So basicallly, what has happened in the
history of this payment on claims under the War Claims Act of 1948
is that when funds were available for payout, Congress created certain
priorities. The first priority they created was the payment in full of
all claims for death or personal injury. The second priority they ere-
a.ted was the payment in full of all claims by small business. The third
priority they created was the payment of all claims under $10,000 in
full. The fourth priority they created was the payments of all claims
by religious, charitable, and nonprofit corporations. Those claims were
paid off?
Mr. MCCLFLLAN. Yes.
Mr. WESTPH-AL. So then-and I am referring now to a table that
was published in the House report on this bill on page 5-so that
again what we had was a total of 886 individual claims, 199 corporate
claims, and 1 claim apparently by the United States. Now, in regard
to those claims, what Congress authorized was the payment of $10,000
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 29
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on each of those claims plus 61.3 percent of the amount of the award
to each and every one of those claimants, whether corporate, individ-
ual, insurance, or whatever?
Mr. MCCLELLAN. Right.
Mr. WESTPHAL. Now, then in the 1970 amendments, what Congress
authorized was a total payment of $35,000, or rather up to $35,000
on each and every claim remaining unpaid after these prior payments
that I have referred to; isn't that true?
Mr. MCCLELLAN. Yes, Sir.
Mr. WESTPHAL. And some time after that 1970 amendment, the Com-
mission paid '$11,000 of that $35,000 congressional authorization
correct?
Mr. MCCLELLAN. That is right.
Mr. WESTPHAL. And as the law now stands, there remains to be paid
$24,000 of that $35,000 previously authorized by the Congress.
Mr. MCCLELLAN. That is right.
Mr. WESTPHAL. Now you have suggested that there may be some
question as to whether there is $24,000 remaining to be paid, or only
$14,000 to be paid, but in any event, the hearings in the House and
the House consideration of the bill and in fact, the position taken by
all the claimants is that the prior $10,000 payment is not a deduction
from the $35,000 and only the $11,000 payment is a deduction from it,
and there remains to be paid $24,000?
Mr. MCCLELLAN. That is my interpretation.
Mr. WESTPHAL. All right.
Mr. MCCLELLAN. But the Treasury Department lawyers will have to
make this interpretation. Maybe this is good to have this on record
now and to let them know what your feeling is on this because there is
some disagreement on it.
Senator BURDICK. Is there some question about this?
Mr. MCCLELLAN. I think there is some question.
Senator BURDICK. Well, we better fix the question.
Senator FONG. The question is on whether the $24,000 is to be paid
or the $35,000 is to be paid?
Mr. WESTPHAL. Or whether the $24,000 is to be paid or $14,000 is to
be paid.
Mr. WESTPHAL. There is some question as to whether or not when
the $35,000 figure was put in by the Congress, whether this meant
an additional $35,000 or whether this meant an additional $25,000,
to the $10,000. So if you add the additional $10,000 and then $25,-
000 and then $35,000, there is some question as to
Senator BURDICK. Well, we would like to have an opinion by your
counsel because this makes a difference on how we act.
We would like to have, a firm opinion from you.
Mr. MCCLELLAN. Well, I will submit it to you on this. I will have
to ask
Senator BURDICK. Because I have been going on the assumption
there is another $24,000 to be paid to everybody. I am assuming that.
Mr. MCCLELLAN. Well, this is the question we ought to clarify,
and our position is that you are correct that there is another $24,-
000. Now, there is some question within the Treasury Department,
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 Approved For Release 2001/08/2da CIA-RDP75B0038OR000500380003-7
I believe. I have talked to some of the lawyers over there as to how
they view this, and there is some question,.
I gave them my opinion. At the time it wasn't in writing, but I
would. be glad to put it into writing for this subcommittee as to what
this means.
Senator FoNG. So the question will be whether another $14,000 is
clue?
Senator BURDICK. No. Another $24,000.
Senator FoNG. Oh, another $24.,000? Is that the question?
Mr. MCCLFLLAN. Yes.
Senator FoN'G. And your position is another $24,000 is due?
Mr. MCCLELLAN. Another $24,000, yes, sir; that is correct.
Senator FOND. That is you are giving them the full benefit of the
4-3r
,000?
Mr. MCCLFLLAN. Right.
Senator FoNco. With no deduction?
Mr. MCCLFLLAN. With no deductions, yes, sir. That is correct.
Mr. WESTIurAL. So that from where we stand today or where; we
stand now or where we stood at the time the House made this amend-
Inent to the bill, it is that after these other payments and priorities
and everything that we previously discussed today, there remains 187
individual claims which are unpaid to the extent of approximately
.,x'6.5 million?
Mr. MCCLELLAN. Yes, sir, that is correct.
Mr. WESTPHAL. And there are 161 corporate claims that are unpaid
in the amount of $94.7 million?
Mr. MCCLELLAN. That is correct.
Mr. WFSTPHAL. So that there is a total of $101.2 million of claims
that are presently unsatisfied?
Mr. MCCLFLLAN. That is correct.
Mr. WESTPHAL. And again, the assumption made in the House pro-
reedings is that there would be approximately $20 million yet to be-
come available under this War Claims Act system of payments. That
would be approximately the maximum?
Mr. MCCLFLLAN. We feel that that would be the maximum.
Mr. WFSTPEAL. All right.
Now, then, what the House did was, Looking in anticipation of $20
million becoming available, they then legislated yet another priority
to apply to the $20 million that is anticipated. Is that correct?
Mr. MC,CLFaa,AN. I would have to assume that this is what they did.
Sir.
Mr. '"TFSTPIIAL. Well, they did. They gave a priority to individual
claims to pay them in full, did they not?
Mr. MCCLELLAN. Yes.
Mr. WESTPHCAL. All right. Now, then, as to what is the status of the
187 individual claims and the 160 and some corporate claims the com-
mittee has received and incorporated into the record by reference to
the House hearing report on this legislation, on pages 32 through 37
of that report are tables that list each and every one of these 187 indi-
vidual claims and each and every one of the 161 corporate claims. Is
that not true?
Mr. MCCLFLLAN. Yes, sir.
Mr. WFSTPI[AL. All right, now. Those tables show four categories of
claims remaining; there are corporate insurance claims, which as
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 Approved For Release 2001/08/29 : UA-RDP75B00380R000500380003-7
shown by the summary on page 33 total $15 million to begin with, and
they have already received $9.9 million, which is approximately on
the average 65.1 percent of the face of the claim, and there is,an unpaid
balance of $5.2 million. Is that correct?
Mr. MCCLELLAN. Yes.
Mr. WESTPHAL. All right. Now, then, if you look at the individual
claims within that category, for example, Guarantee Insurance Co. has
received 98.9 percent of its original award, and no insurance company
has received less than 61.3 percent of its original award. Isn't that true?
Mr. MCCLELLAN. Yes, sir, it is.
Mr. WESTPIiAL. Excuse me, 61.1 as shown in the table.
Mr. McCLELLAN. Yes.
Mr. WESTPHAL. Now, then, for corporate and partnership and such
claims, generally there was a total amount awarded to that category
of $230.9 million in awards made by your Commission of which $141.5
million has already been paid, and those corporate claims generally
have been paid on the average of 60 percent of their claim, leaving
them a balance of $89 million yet to be paid or actually, 89.4. So that
between the corporate insurance and the corporate general claims,
they add up to the $94.6 million or the $94.7 million that is still unpaid
insofar as corporate claims are concerned?
Mr. MCCLELLAN. That is right.
Mr. WESTPHAL. Now, continuing on by reference to this House re-
port, they then list three categories of claims that are treated as in-
dividual claims. One is labeled "Corporate and Partnership Individual
Claims"; this again being generally regarded as situations where
claims resulted from the fact that a family in Germany formed a cor-
poration in order to keep their property from being confiscated had the
individual been learned. That is generally the type of situation, is it
not ?
Mr. McCLELLAN. I would assume that some of these claims would
involve that situation. I can't say that all of them do, but some.
Mr. WESTPHAL. All right. But in any event, they fell into one of the
categories by statute which you were authorized to treat as a claim?
Mr. MCCLELLAN. That is right.
Mr. WESTPHAL. Now, those claims total $7.3 million, of which $5.1
million has already been paid or an average of 70.6 percent, leaving
$2.1 million still unpaid? Then you have a category of individual
claims which originally totaled $7.2 million, of which they have re-
ceived $5.5 million, for an average of 76.3 percent of the award being
paid. There remains $1.7 million yet to be paid, correct?
Mr. MCCLELLAN. That is correct.
Mr. WESTPHAL. Then you have a mixed claims category, which
again is an individual classification, and they totaled originally $8.9
million. They have already been paid $6.2 million. The average per-
cent there is 69.8 percent of awards being paid; they have an unpaid
balance of $2.7 million. Correct?
Senator FONC. On that point, on the mixed claims, may I ask about
the three claims here almost at the end of the schedule?
Mr. McCLELLAN. Yes, sir, I see those.
Senator FONG. Eric Warburg, Gisela Wyanski, and Anita Warburg.
Mr. MCCLELLAN. Yes, sir ; I see.
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 Approved For Release 2001/08/2: CIA-RDP75B00380R000500380003-7
Senator FONG. The award to Eric Warburg was $389,863.23 and
the same amount for the other two. One has been paid $372,152.05 and
another has been paid $381,007.64 and another has been paid the same
amount. So in one case, 95.5 percent had been paid, and in the other
two cases, 97.7 percent had been paid. How were they paid so much
in relation to the others?
Mr. MCCLELLAN. The only explanation that I can give for this is
that I would have to go back and look at the decision on this.
There is a possibility that some portion of the award may have
been paid as small business. You see what happened is that we had
some claims that were based on individually owned property and we
also had corporate owned property. Now the corporate owned property
may have qualified as a small. business concern, and it may have been
paid in full on that particular part of the award, and the pro ration
on the other part comes in on the individually owned property as
opposed to the small business award. I know that there are some
individual cla-.mants here who would fit that example that I gave,
but anyway, o:a these three, I just don't know unless f looked at the
files on those. I would be glad to do so.
Senator ForrG. There is a claim here of almost $400,000, and they
got about 97 percent of their claim already paid.
Mr. MCCLELLAN. That is correct. It took a lot of work to get these
charts together, and we have a very small staff. We devoted a lot of
time to do this. We thought that the Congress ought to have the figures
so that they would know exactly what each person is getting and the
types of claims that we are talking about. I mean, you can talk about
individual claims, which may be completely different, than a corpora-
tion claim, or where a person is operating a two-man partnership.
I mean, you could have a situation where they had a small apartment
house that they used to make income off of as opposed to a big corpora-
tion. This is different *rom some of these claims, where you had family
owned businesses which were really not small businesses at all. They
were very big businesses, and they have interest in these corporations
or they inherited interest in these corporations in Germany or Europe
or wherever the damage has occurred, and they are not really small.
This is why we feel that it is important that these statistics be studied
because this indicates that what we are talking about now at this point
in the payment stage are really people who have received substantial
payments on t:ieir awards. And nobody ever can really be made whole
iii legislation like this. It was never intended for it. Congress knew
when they initially passed this legislation that everybody wouldn't
he made whole. This is an effort to alleviate some of the losses that
American citizens sustained as a result of World War IT.
Senator BuiwicK. You said that small corporations were paid out?
Mr. MCCLE'LLAN. Yes, sir.
Senator BURDICK. What is your definition of small? What is your
definition of a small business?
Mr. MCCLELLAN. We didn't get into this. They had to qualify under
the Small Business Act. There was a question on our claim form
which asked whether or not they qualified as a small business concern.
If they said yes. we sent a questionnaire to the Small Business Admin-
istration and they made that determination based on the provisions
of the Small Business Act. They communicated with the claimants
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and they secured the information as to the number of employees and
things like this, and their income. I am sure that this was the basis on
which the Small Business Administration made the determination
and they would certify to the figures that John Doe is a small business
concern, and so on.
Senator BURDICK. He may have a claim of $300,000 or $400,000 or
$500,000, though?
Mr. MCCLELLAN. Oh, sure.
Senator BURDICK. And they were paid in full?
Mr. MCCLELLAN. Yes, Sir.
Mr. WESTPHAL. I have just two more points I would like to clarify,
Mr. Chairman.
As I read the House report and their amendment, they set forth
basically as the basis for their amendment, which would give a pref-
erence to individuals as compared to corporations, the fact that under
the law, corporations got tax benefits and tax exemptions, which no
individual got. Now, in our conversation on Monday after you returned
to Washington, I asked you whether the Commission could furnish
us with a list of those corporations which took a tax loss and reported
that tax loss to you so that this committee might know which of those
161 remaining corporate claimants took a tax loss which you deducted
from their award, and then which in turn were granted a tax exemption
on any payments made by the Commission under this War Claims Act.
Now, would you explain to the committee what your capacity is to
furnish the committee with a list itemizing which of the corporations
took the tax loss, and how much of it they took?
Mr. MCCLELLAN. We can furnish that information to the committee.
We don't have it today, but we can furnish it. Our files are retired to
the Federal Records Center out in Maryland. It takes some time to
get some of these files back. We will furnish this information to the
committee.
I think a study has been made by some of the witnesses that may
appear here today as to how many of these corporations did that.
Mr. WESTPHAL. Well, one of the witnesses has attached to his pre-
pared statement that he is to submit to the committee a list of corpora-
tions and the amount of the tax loss which they claimed, but until
we hear from that witness, we don't know what source compiled that
list, or whether it is accurate.
Mr. MCCLELLAN. They probably got it from our own agency. We
have been very cooperative to both sides on this issue. We made what
records we could available to them.
Mr. WESTPHAL. Let me ask you, how long do you think it would
take to do this?
Mr. MCCLELLAN.' I think you could do it in a couple of days.
Mr. WESTPHAL. Mr. Chairman, I would suggest the witness be re-
quired to furnish that to the committee as soon as possible.
Mr. MCCLELLAN. I would be glad to.
Senator BURDICK. Fine, and that will be placed in the record.
[The information referred to follows:]
[Editor's Note : The following is the response of Mr. McClellan to
the tax information request of the subcommittee:]
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 Approved For Release 2001/08/24 CIA-RDP75B0038OR000500380003-7
Chairman, Ad floe Subcommittee, Committee on the Judiciary, U.S. Senate,
Washington, D.C.
DEAR MR. CHAIRMAN: At the hearing on the bill, S. 1728, held December 3,
1.974, you requested that the Commission furnish information concerning the
tax benefits der:.ved by corporations having unpaid balances on awards granted
cinder Title II of the War Claims Act of 194*, as amended. Enclosed is a list or
the corporations with the tax benefits derived, if any, on account of the losses that
were the subject matter of the claims. This list generally corresponds to the list:
that appears on pages 32-34 of the transcript: of the hearing held on November
7, 1973, by the Subcommittee on Commerce and Finance of the Committee on
Interstate and Foreign Commerce. House of Representatives.
I would like 1:0 clarify my response to certain questions relative to whether
the tax benefits deducted from awards by the Commission included state or
foreign tax benefits that. may have been derived by these corporations. tinder
Section 206(b) of the War Claims Act of 1948 (50 U.S.C. App. 2017e, the Coramis-
;ion was required to deduct from these corporate awards the Federal tax bene-
fits. State or foreign tax benefits were not considered. It should also be noted
that this statute did not require the deduction of any tax benefit that individuals
may have received. Thus, our claim forms were not designed to obtain this
information.
During the course of the hearing, the issue arose regarding whether paragraph
3, which was added to Section 213(a) of the War Claims Act by Public Law
91-571, approved December 24, 1970, required that the $10,000 payment author-
ized in paragraph 2 be counted when computing the $35,000 ceiling set forth
in the said paragraph. While there is testimony on the bills, H.R. 2669 and S. 941,
the proposals which became Public Law 91-571 to the effect that the $10,000
should be counted to reach the $35,000 ceiling, the Senate report (S. Rept. No.
91-1375) on H.R. 2669, makes it clear that the new $35,000 ceiling on payments
in paragraph 3 was in addition to the $10,000 referred to in paragraph 2.
Therefore, the Commission Is in full agreement with the view on this issue
t xpressed by the Chairman at the hearing.
The Commissi.on is pleased to furnish this information.
Very truly yours,
WAYLAND D. MCCLELLAN,
General Counsel.
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12027
12027
13521
8556
8592
8596
8610
8567
14803
14967
14967
19237
19231
19253
19627
19628
19629
19647
1
TAX
BENEFITS
CLAIM 02 I
DEBIVE1>
dome 'f naura.-ce Co.-many
None
home Ill; urunar Company
$ 1,941.09
insurance Co. of No. America
4,672.32
Home Insurance Company
986.18
Insurance Co. of No. America
10,506.90
Guardian Life Ins. Company of.
America
None
Insurance Co. of No. America
6,356.58
Home Insurance Company
634.82
Aetna Casualty & Surety Co.
11,967.53
Northeastern insurance Co. of
Hartford
None
Quaker City Insurance Co.
None
Node Island Insurance Co.
None
N. Y. Underwriters Ins. Co.
None
acific Ins. Co. of New York
None
igilant Insurance Co.
19,402.86
ankers & Shippers Ins. Co. o
New York
uaranty Security Ins. Co.
Providence Wash. Insurance Co
5609
19817
Universal Insurance Co.
6510
19969
Aetna Casualty & Surety Co.
8560
20012
Aetna Casualty & Surety Co.
8561
20013
Agriculture Insurance Co.
8562
20014
Agriculture Insurance Co.
8553
20015
American Home Insurance Co.
5564
20016
American Home Insurance Co.
8565
20017
American Re-Insurance Co.
8571
20019
Continental Insurance Co.
5572
20020
Continental Insurance Co.
8573
20021
Federal Insurance Co.
5575
20022
Fireman's Ins. Co. of Newark
New Jersey
20024
Great American Ins. Company
20025
llanover Insurance Company
20026
Hartford Fire Insurance Co.
19P(.3
None
None
None
24,811.36
6,039.81
None
None
None
7,292.31
None
None
None
None
None
None
None
None
None
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 Approved For Release 2001/08/2936 CIA-RDP75B0038OR000500380003-7
,07
97
-97
10 ~01;
,98
20~ 05
:)0
20,05
201 03
20007
20008
8557
20306
8557
20306
8558
20308
8558
20308
8570
20309
8570
20309
8581
20180
8582
20189
8586
20131
8502
20128
8606
20129
8583
20492
8501
20494
8605
20495
8566
20018
8576
20023
8568
20955
8594
20957
8611
20960
8608
20959
Sb08
20959
8595
21249
8595
21249
8514
2095.5 1
8539
20101 1
8587
21250
8595
21241)
10731
20961
St. Pnul Fire & Marine Ins
Cum7asy
Pt 000ix Insurance Company
Providence Mast,. Ins, Co.
Reinsurance Corporation o
New York
Niagara Fice Ins. Company
Reliance Insurance Co.
Reliance Insurance Co.
Aetna Insurance Co.
Aetna Insurance Co.
Aetna Casualty & Surety Co.
Aetna Casualty & Surety Co.
Phoenix Insurance Co.
TAX
BENEFITS
DERIVED
11,822.84
None
None
None
None
4141.72
None
4,232.00
None
Phoenix Insurance Co.
452.00
Fireman's rand Ins. Co.
None
Fireman's Fund Ins. Co.
None
Insurance Co. of No. America
63,47'1.14
Reliance Insurance Co.
None
Monarch Life Insurance Co.
74,9:9.32
Some Insurance Company
None
Reliance Insurance Company
None
Security Insurance Company
None
Atlantic Mutual Ins. Company
None
Glens Falls Insurance Co.
None
Boston Old Colony Ins. Co.
None
North River Insurance Co.
40,014.90
t9astchester Fire Ins. Co.
6,936.08
U.S. Fire Insurance Co.
195,55`.29
U.S. Fire Insurance Co.
39F.45
Boston Old Colony Ins. Co.
Boston Old Colony Ins. Co.
Fireman's Fund lnsurance Co.
None
None
None
Merchants Fire Assurance Cor2
of New York
Insurance Co of No. America
Boston Old Colony Ins. Co.
Equitable Life Society of
U.S.
P,elian.' In,; lance Co., etc.
None
144,078.50
None
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IAX
GH4(17111
111110HD
lin iv%r s.~L 1.^.at To, uu Co.
1~ our restrict the number of people involved and necessarily make a let
of subjective judgments.
Mr. \VESTP[[AL. The only merger I have ever been connected with
was a railroad merger and I know there they counted every acre of
land -rant and, what, the coal potential and oil potential and timber
l roteiitial of it was and they made an evaluation of it in an attempt to
arrive at a figure which would represent the relative stockownership
t.ha.t the old stockholders had in the company. I know that is normal
for Iirerger procedures.
I am wondering if that is the same: practice you had in spending
over $500 million on this merger?
Mr. (ir.UTE. No, it was not.
Senator BirRDICK. Thank you very much then. Do you have. any
other documents to present?
Mr. CLUTE. No.
`ienator BrRDICIC. Our next witness will be Mr. Charles Mack,
,lirector of public and government affairs, CPC International, Inc.
STATEMENT OF CHARLES MACK, DIRECTOR OF PUBLIC AND GOV.
ERNMENT AFFAIRS, CPC INTERNATIONAL, INC., ACCOMPANIED
BY HAROLD PLIMPTON, JR., VICE PRESIDENT, NATIONAL AF.
FAIRS, AND STEPHEN R. CONAFAY, STAFF ATTORNEY
Mr. PLIMPTON. Mr. Chairman, I am Ilarold Plimpton, Jr., vice
president of CPC International formerly known as Corn Products Co.
am here to introduce my associates, Mr. Mack, who will deliver our
[ estimony, and Mr. Conafay, but I wanted if I could, Mr. Chairman,
to stress the fact that our new name of CPC International in no wayy
evolved from any merger, acquisition, or divestment of the corpora-
iion. It is the same company it was. We didn't think the name o,-,2
Corn orn Products Co. property described the diversity of the growing
rorhoration.
CPC is a company with $8.5 million of unpaid claim balances. Thai;
underscores pretty strenuously our intensive efforts and also our grate-
fu iness at the. opportunity to be here.
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 Approved For Release 2001/08/29 : CIA-RDP75B0038OR000500380003-7
I would like to. introduce Charles S. Mack, director of public and
government affairs of the corporation, and also Stephen R. Conafay,
attorney in our company.
We are here to answer questions later on if it seems necessary.
Senator BURDICK. Very fine.
Mr. NECK. Thank you, Mr. Plimpton and Mr. Chairman. We are
grateful to the subcommittee for this opportunity to appear before
you : this afternoon to express the objections of CPC International,
Inc., to enactment of the House amendments to S. 1728.
We do have a statement, which we would be grateful if it might
appear in the record. With your permission I will try to hit simply
some of the highlights in an effort to save some of the subcommittee's
time.
Senator BURDICK. That is very good. Your full statement will be
in ado, a part of the record without objection.
[The prepared statement of Charles S. Mack follows:]
8TATEi4ENT OF CIIARLES S. MACK, DIRECTOR OF PUBLIC AND GOVERNMENT AFFAIRS,
CPC INTERNATIONAL, INC., ACCOMPANIED BY HAROLD PLIMPTON, JR., VICE PRES-
IDENT-NATIONAL AFFAIRS, AND 'sTEP$EN R. CONAFAY, STAFF ATTORNEY
Mr. Chairman and members of the subcommittee, we are grateful for this
opportunity to express the objections of CPC International, Inc., to enactment
of the House amendments to S. 1728. My name is Charles S. Mack, Director of
Public and Government Affairs for CPC. With me are Harold Plimpton, Jr., Vice
President-National Affairs, and Stephen R. Conafay, Staff Attorney.
S. 1728 AND ROUSE AMENDMENTS
As originally proposed, S. 1728 sought to amend Section 5 of the War Claims
Act for the purpose of increasing the detention benefits of civilian internees of
the Southeast Asia conflict. This is meritorious legislation and it is unfortunate
that it has been clouded by two irrelevant and highly controversial amendments.
The House amendments address themselves not to internee benefits, but rather
to establishing new priorities for payments from the War Claims Fund. The first
Mouse amendment grants priority of payment to all individual awardees,, before
.any distribution to corporate claimants. The second House amendment proposes
that each corporate awardee receive.an award in equal amounts up to $50,000
Or the. amount of the award, whichever is less.
BASIS OF CPC's CLAIM
CPC International-then Corn Products Refining Company-was one of the
first U. S. Corporations to invest in productive facilities abroad. By the time
of World War II, CPC had large interests in Europe and the Far East, principally
in food manufacturing plants. By the end of the War, however, virtually all of
.CPC's properties in Germany, Czechoslovakia, and the Far East, had been expro-
.eriated or otherwise lost, Included in this loss was a corn milling plant in Barby,
Germany which was at the time, the largest food processing plant in Central
Europe. The Barby plant was one of a number dismantled and shipped to the
'Soviet Union, with the consent of the United States Government, under the
Potsdam Agreement.
under the War Claims Act, CPC was able to claim a portion of these losses.
WV,e received a gross award from the Foreign Claims Settlement Commission of
some $26 million, for a net award of approximately $22 million. Of this sum,
some $14 million has been recovered, leaving about $8 million of proven losses
for which CPC has not yet been compensated. It is this substantial unpaid
balance which is the basis of CPC's vital concern,with, the proposed amendments.
It should be emphasized at this point that no Federal appropriations have
ever been involved in these payments. The source of payments derive entirely
from German and Japanese assets seized by the United States during World
War II.
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L OBJECTIONS To INDIVIDUAL PRIORITY AMENDMENT
a. The individual amendments will benefit only 43 Individuals, with nine
of the individuals getting the lion's share.
The present law requires that each ind Ividual and corporate awardee be
granted all additional $24,000 (or the amount of their award whichever is less)
from any additional monies which become available to the War Crimes Funi,
before pro rata distribution begins. It. Is significant then, that under the present
law, 146 of the 1819 individual claimants will to fully compensated for the a:mourct
of their awards.--without any further action by the Congress. In other words.
only 43 individuals stand to benefit by enactment of this amendment.
b. These 43 individuals have already received substantial amounts from prior
war claims distributions (see Exhibit).
It is interesting to note that of these 43 awardees, 31 have already been paid
ai. least ." ICl0,i10"J each. And under present law (which grants an additional $29,-
000 to each) 42 of the 43 awardees will eventually receive over $100,0003--
without any change in the law. Furthermore, enactment of the individual priority
a mcndnent will result in these same 43 individuals getting 83% of all payments
to individuals. (That is. these 43 will receive some $5.5 million of the approsi-
tinately $t;.5 million which would be distributed to individuals under the amend-
uient.) Even more disturbing is the fact that: of these select 43 individuals who
would benefit by a change in the law, it. mere nine will receive nearly two-thirds of
the funds distributed to individuals. (These 9 individuals will receive as
million of the $5.5 million awarded to the 43.)
CI'C seriously questions whether the Senate will want to enact legislation whic-a
lienefits principally such a handful of individuals-particularly, since previous
legislation has long since satisfied proven hardship cases, including death and
injury, small businesses, and charitable, religious, and non-profit organizations.
e. CI'C believes that enactment of the amen(T:nent will establish an unjustifiable
precedent.
The situation before us Is akin to a. bankruptcy proceeding, in that there are
insufficient funds available to satisfy all claimants. We see no reason to break
front the long standing law or pro rata distribution, particularly when most of
the individuals seeking priority of payment would have difficulty establishing
I liemselves as "hardship" cases.
41. It is wrong to enact preferential rights for individuals because of alleged tai:
benefits received by some corporations.
Some individual claimants argue that an injustice exists since corporations
received tax deductions for their war losses while individuals did not. Therefore,
they argue, this injustice should be remedied by giving individual claimants ?a
priority to the monies available in the War Claims Fund.
We refute this argument as nonsense. Some corporations did not get any tax
deductions for their losses. And while other corporations, like ourselves, did
.btain tax benefits, these benefits were deducted from the awards granted by the
Commission. In other words, all present corporate awards are net of tax benefits,
^fhere has been no double benefit as Implied by individual claimants.
II. OBJECTIONS TO AMENDMENT WHICH WOULD GRANT UP TO $50,000 TO EACH
CORPORATE CLAIMANT
(tPC holds that the second amendment, which proposes that each corporate
a vardee receive equal payments of up to $50.000 or the amount of their award,
has even less validity than. the Individual priority amendment.
In its report,-,he House Committee reasoned that "equitable considerations"
led the Committee members to adopt the amendment. However, the Committee
report did not explain "equitable considerations" and. therefore, we can only
guess at why the Committee felt It necessary to give preference to small awar-lees.
We suppose that the House Committee must have reasoned : "The smaller the
award, the smaller the company. Therefore, to help the small businessman., we
will give him preference on his claims."
1 close examination of the facts, however, Indicates that this reasoning Is fal-
lacious, and. in fact, should the amendment pass, the effect would be to create
mn inequitable situation.
' On. awardee, Itlrlch Strauss, is a double awardee-having been granted an "[ndi-
'i,lial" award and a "Mixed" award. For the purpose of this data, each award Is treated
cparately.
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Specifically, we object to this amendment on the following grounds :
a. Those Claimants Qualifying as Small Businessmen Have Already Received
Compensation for the Full Amount of Their Award.
It is important to remember that previous War Claims legislation enacted in
1962, has already made provisions for small business claimants. Those claim-
ants qualifying as small businessmen were granted a priority, and, therefore,
have been fully compensated for the amount of their claim. This fact refutes the
reasoning that this amendment will benefit the "small businessmen."
b. CPC Objects to This Amendment Because it is Erroneous to Believe that
"Small Claims" Means Small Corporations.
On the contrary, some of the smaller claims outstanding are held by such
corporate giants as Westinghouse, Borg-Warner, S. S. Kresge, and Studebaker-
Worthington. Some of the claimants who will benefit the most by passage of the
amendment are not small corporations, but are very large.
c. Enactment of the Amendment Will Have the Effect of Reverse Pro Rata
Distribution.
This amendment favors the small corporate awardee, at the expense of the-
large awardee. Those corporations who have $50,000 or less will receive full
compensation for their award, while large awardees will have the amount avail-
able for pro rata distribution reduced by the amount awarded to the small
claimants. Traditionally, when claimants face a situation in which insufficient
amounts are available to satisfy all claims, the amount available is awarded on,
a pro rata basis. Under the proposed amendment, this approach would be over--
thrown. The inherent unfairness of the amendment is best summarized by Con-
gressman Kuykendall's remarks in his supplemental views to the House report..
He said : "Such a scheme cannot commend itself as good law or simple justice..
It must be based on the premise that the more one lost, the less entitled lie is to
reimbursement."
d. This Amendment Discriminates in Favor of Insurance Claimants Over
Manufacturing Claimants.
Total corporate awards (combining insurance and manufacturing 'corpora-
tions) amount to approximately $94.7 million. Of this, approximately $5.3 mil-
lion, or 6%0, constitutes awards to insurance companies. The remainder, approxi-
materly $89.4 million, or 94%, is attributable to manufacturing corporate claims.
however, if the amendment is passed, insurance companies will receive about
20% of the benefits assuming $10 million remains for distribution. It is difficult, in
view of these statistics, to discern how "equitable considerations" will be servedi
when insurance companies will get disproportionate relief.
Both of these amendments are inequitable and ill-founded. The first amendment
would benefit only a handful of individuals, while the second amendment pro-
vides discriminatory relief to those who have lost the least, over those who have
lost the most.
Moreover, CPC asks that the continued legislative crippling of our claims.should'
stop. The War Claims Act has already established a string of precedents for pri=ority of payouts; first death and personal injury claims were given priority,-
then small businesses ; later, religious, charitable, and non-profit organizations
and finally, in effect, all other small claimants up to $35,000.
Whether some or all of these priorities have some merit is not the point, what
is important is that the legislation now before you is not unique, but rather the
latest in a succession of actions which have steadily undermined the ability of
companies such as ours to obtain our rightful share of the limited funds available
for recompense of our losses-losses which we suffered in the first place with
the tacit consent of the U.S. Government.
In light of these factors, CPC International urges that the subcommittee rec-
ommend against both the House Amendments.
This list gives the names of the 43 individuals who would benefit by enactment
of the individual priority amendment-the amounts they have received' to date-
and the minimum amount they will eventually receive if no change is made in,the
present law.2
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Iftnimuaa amount
unticipated under
present law, prior to
Ancount paid to date and e?aimants namo: pro rata distrTh Lion
$795,177, Edith Tietz------------------------------------------
$819.177
$786,018, Gunter Berman-----------------------------------------
801.018
$786,018, Ernest Heriaan------------------------------------------
810,018
$751,808, E1s':er Schultz-------------------------------------------
775, 505
$661,208, Arnold Bernstein---------------------------------------
685, '208
$478,644, Marie Garbaty------------------------------------------
502, 644
$405,431, Ulrick Strauss----------------------------------------
429, 431
$402,123, Stefanie Schwerin---------------------------------------
426, 123
$364,564, Ella Garbaty------------------------------------------
388, 564
$309,809, Alfred Maron-----------------------------------------
333.809
$304,401, Albert Spenner----------------------------------------
328.401
$267,426, Harold Nel,enzal--------------- ------------------------
291.426
$244,622, Gertrude Iteiss---------------- ------------------------
268,622
$223;256, Betty Papa-iek------------------ -----------------------
247,256
$195,070, Hannah Sigman---------------------------------------
219.070
$175,267, Adana Koc--------------------------------------------
199, 267
$170,951, Luis Roever-------------------------------------------
194,951
$170,951, Rudolf Roever-----------------------------------------
194, 951
$156.015, Eris Kaufman----------------------------------------
180,015
$149,957, Michael Devenis---------------------------------------
173.957
$141,709, Louise Mesick-----------------------------------------
165, 709
$134,190, Suzanne Von Schuehing--------- -----------------------
158,190
$132,529, Herman Tietz-------------------------------------------
156, 529
$132,529, Rosalie Tietz------------------------------------------
156.529
$130,523, Heinz `wolf-------------------------------------------
154,523
$126,987, Ed Budd, Jr-------------------------------------------
150,987
$126,436, Alois Chronowsk----------------------------------------
150,436
$121,668, Samuel Coleman ----------------------------------------
145,665
$115,194, Rachel Dickey --------- ----------_-____________-------
139,194
$110,219, Adalbert von Gontard--------------------L-------------
134,219
$106,820, Eli Tronkenhiem---------------------------------------
130,820
$96,168, Ulrick Strauss------------------------------------------
120,168
$94,493, Louise May Hardy --------------------------------------
118.493
$90,761, Alfred Bach --------------------------------------------
114, 761
$89,565, Robert Stein ---------------------- ----------------------
113, 561
$88,080, Stan-, ey Siigman------------------------------------------
112, 080
$85,009, Evelyn Parker -------------------------------------------
109. 0011
$82.446, Hella Stanton------------------------------------------
106.640
$79,081, Robert Steckler ------------------------------------------
103.081
$78,573, Hildegard Palm-----------------------------------------
102.573
$77,240, Ann Unger--------------------------------------------
101.240
$76,701, Carla Palm ---------------------- ----------------------
100. 701
$61,392, Samuel Landau----------------------------------------
85,392
11Ir. M.a(lx. Thank You. CI'C International. as Mr. Plimpton said,
was then known as Corn Products Refining Co., and was one of the
first U.S. corporations to invest in productive facilities abroad. In fact.
1'119 was the year in which we opened our first overseas plant. By the =
time of World 1Var TT, CPC had large interests in Europe and the Far
East, principally- in food mannfa.cturing plants. By the end of the war.
however, virtually all of CPC's properties in Cxermanv, Czechoslo-
vakia, and. the Far East, had been expropriated or otherwise lost.
Included in this lose was a corn milling plant in Barbv, Germany,
v-hich was at the time the largest food-producing plant in central
Europe. The FEarhv plant was one of a number of plants ,physically
dismantled and shipped back to the Soviet Union, with the consent of
the U.S. Government. under the Potsdam agreement.
Under the War Claims Act CPC was able to claim part of these
losses for a. net worth of approximately- $22 million and of which some
$14 million has been recovered, leaving about $8 million in proven losses
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for which we have not yet been compensated. It is this very substantial
unpaid balance which is the basis of our vital concern about the pro-
posed amendments.
Air. Clute addressed himself very eloquently and very knowledge-
ably to the objections which we would certainly share, too, in enactment
of the individual preference amendment, and I would simply highlight
a couple of those before moving on and discussing the second amend-
ment in a little greater detail.
We would note with reference to the preference amendment that it
will benefit only 43 individuals with 9 of those individuals getting the
lion's share; that is, some two-thirds in fact of the benefits which would
accrue to the individuals under this legislation. If the amendment is
enacted, the amount that would be received by nine individuals and
the details on that can be found in the appendix exhibit to our
statement.
Second, these 43 individuals have already received substantial
amounts from prior war claims distributions and, indeed, without any
change in the law all but one will eventually receive over $100,000.
Mr. Chairman, we certainly question whether the Senate at this time
of national economic crises will really want to spend its time and
really want to spend the Nation's resources in enacting legislation
which benefits principally such a handful of individuals, particularly
since it has been noted that previous legislation has long since satisfied
proven hardship cases including death and injury, small business,
and charitable and religious organizations.
We concur too that the statement that enactment of the preference
amendment will establish an unjustifiable and perhaps a dangerous
legal precedent., and we think it is wrong to enact preference for in-
dividuals because of alleged tax benefits received by some corporations.
Mr. Chairman, there is no double benefits. In our case our award
was net of tax benefits.
Now let me move on if I may, Mr. Chairman, and spend a moment
or two on the second amendment, which would grant up to $50,000 to
each corporate claimant.
CPC holds that the second amendment, which proposes that each
corporate awardee receive equal payments of up to $50.000 or the
amount of their award, has even less validity than the ' individual
priority amendment.
In fact, Air. Chairman, it is a mystery amendment. Nobody is really
sure who is for this and nobody has come before this subcommittee
to speak for it and it suggests a mystery as to why it was even put into
the law.
The House report talked about "equitable considerations" which led
committee members to adopt the amendment, but the report does not
state what those equitable considerations are. In fact, I was present at
the meeting of the full House committee when this was added to the
bill and there was hardly any discussion of what "equitable consider-
ations" were, so we can only speculate that the committee must have
somehow felt it necessary to give preference to small awardees on the
reasoning that the smaller the award, the smaller the company and
therefore it helped the small businessman.
A close examination on the facts, indicate this reasoning is fallacious,
and, in fact, should the amendment pass, we believe the effect will
be to create an inequitable situation.
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Our specific, objections are these :
First of all, those claimants qualifying as small businessmen have
already received compensation for the full amount of their award.
This was done in the legislation enacted in 1962. It fully compensated
them, and therefore those who are small businessmen have been taken
care of and so we will not address ourselves to them.
Second fallacy we believe is that small! claims do not denote small
corporations. On the contrary, some of the smaller claims outstanding
are held by companies such as Westinghouse, Borg-Warner, S. S.
Kresge, and Stadebaker-Worthington. These are distinguished cor-
porations, but they pare very large corporations.
The third point is that enactment of the amendment will have the
effect of reverse pro rata distribution. This amendment, favors the
small corporate awardee, who has, as I just said, not necessarily been
a small company and he gets awarded at the expense. of the large
aw.ardee. Those corporations who have $50,000 or less outstanding will
receive full compensation for their awards, while large awardees will
have the amount available for pro rata distribution reduced by the
amount awardec to the small claimants.
'traditionally, when claimants face a situation in which insufficient
amounts are available to satisfy all claims, the amount available is
awarded on a pro rata basis. Under the proposed amendment, this
approach would be overthrown. The inherent unfairness of the amend-
ment is best summarized by Congressman Kuykendall's remarks in
his supplemental views to the House report. He said-
such a scheme cannot commend itself as good law or simple justice. It must
be based on the premise that the moire one lost, the less entitled he is to
reimbursement.
Fourth, this amendment discriminates in favor of insurance claim-
ants over mairafacturng claimants and other companies. Total
corporate awards, that is combining insurance and manufacturing;
corporations, amount to approximately $94.7 million. Of this, approx-
imately $5.3 million, or 6 percent, constitutes awards to insurance
companies. The remainder, approximately $80.4 million, or 94 percent,
is attributable to manufacturing corporate claims. However, if the
amendment is passed, insurance companies will receive about 20 percent
of the benefits assuming $1.0 million remains for distribution. It is
very difficult to discern how "equitable considerations" will be served
when insurance companies will get disproportionate relief.
I would add that this morning Congressman Eckhardt sitting in this.
chair noted that insurance companies were paid to take risks. I would
ask if indeed the House committee felt that way, then I, for one, am
at a complete loss why they would want to give these insurance com-
panies a special break, which the McCollister amendment would
indeed do.
Both of these amendments are inequitable and ill-founded. The first
amendment would benefit only a Handful of individuals, while the
second amendment provides discrirninator ;y relief to those who have
lost. the least, over those who have lost the most.
Perhaps most important though, Mr. Chairman, is that CPC asks,
that the continued legislative crippling of our claims should stop.
The War Claims Aet has already established a string of precedents.
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for priority of payouts; first death and personal injury claims were
given priority; then small businesses; later, religious, charitable, and
nonprofit organizations; and finally, in effect, all other small claimants
up to $35,000.
Whether some or all of these priorities have some merit is not the
point, what is important is that the legislation now before you is not
unique, but rather the latest in a succession of actions which have
steadily undermined the ability of companies such as ours to obtain
our rightful share of the limited funds available for recompense of
our losses ; losses which we suffered in the first place with the tacit
consent of the U.S. Government.
In light of these factors, CPC International urges that the sub-
committee recommend against both the House amendments.
We thank you for your attention and consideration, Mr. Chairman.
Senator BURDICK. Thank you very much for your contribution to-
day. In this list of claimants I presume you start with the largest
figure first and then go on down?
Mr. MACK. Yes, sir.
Senator BURDICK. You go down as the amount decreases?
Mr. MACK. Yes.
Senator BURDICK. You said that individual preferences will benefit
only 43 individuals with 9 individuals getting the lion's share. Now
would those nine be the first nine of the list?
Mr. MACK. Yes they are. They would receive, Mr. Chairman, in
dollar totals, that is of the $5.6 million total awards $3.6 million would
go to those nine.
Senator BURDICK. I understand. I was just wondering if you started
from the top on down and I presume it would be from the top on down ?
Mr. MACK. Yes, sir.
Mr.'vVESTPIIAL.I just have a couple of questions. How many claims
-does CPC or Corn Products Co., have pending before the War Claims
Commission?
Mr. MACK. Three.
Mr. WESTPHAL. And one was in the original awarded amount of
;$15.3 million and another one was in the amount of $6.3 million and
the third one was in the amount of approximately $800,000, is that
not correct?
Mr. MACK. I think those are correct. Mr. Conafay has those but, yes,
sir, that is substantially correct, totaling about $22 million in our net
award.
Mr. WESTPHAL. Right, now those awards were made to CPC by
the War Claims Commission after first deducting some $2,353,000 of
tax benefits which CPC received?
Mr. MACK. That would be slightly more-I mean, there would be
slightly more than that. Our gross award was $26 million. The tax
benefit: was $4 million in round figures.
Mr. WESTPITAL. The $4 million was the tax benefit in round numbers?
Mr. MACK. Yes, sir.
Mr. WESTrrrAL. Now on those three claims you have received as I
understand it from your statement, approximately $14 million. Is
that right?
Mr. MACK. That is right.
Mr. WESTPIIAL. So out of $26 million worth of property you have
received in tax benefits plus claims made some $18 million?
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Mr. MACK. That would be correct.
Mr. WESTPHAL. And the $14 million which you have received by
virtue of the law has been exempt from all forms of taxation whether
it is ordinary income or capital gains by virtue of you having reported
41io tax loss benefit which you received?
Mr. MACK. I ',weld yield to Mr. C'onafay on that question.
Mr. CON,yFAY. That is correct.
Mfr. WESTPI IAL. I have no further questions.
Mfr. CoXAFAY. I might point out there that I know that some of the
individual claimants have said that they are not entitled to this tax-
free income or their awards will be subject to taxation or may be
sul_hject to taxation, and I will submit a memorandum concerning that
opinion to the committee.
Mr. MTES'rPHAL. Would you do so?
Mr. CONAFAY. Yes, Sir.
Air. WES'rPrrps,. And again these dollar, values we are talking about
are dollar values around 1939 or 1941?
Mr. MACK. Well these assets were overrun at the end of World War
Il.
-If-,'. WESTPHAL. All right. And the $4 million worth of tax benefit--
"(,I[, in other words, you have $4 million in taxes. What returns for
w hat. vea.rs was the $4 million saved in?,
Mfr. MAv'"K. 1941.
.t1r. WWESTPHAL. So the assets were. ,it 1941 valuations and the tax
dollars you saved were at 1941 valuations and the $4 million in 1941 is
worth iiiore than $4 mil ion today?
Mr. MACK. Well I might note that while that is true, Mr. Westphal,
there is another aspect here which hasn't been discussed. We talked
about cash flow. Mr. Roever talked about cash flow earlier. The
entire' }basis; of our award was the physical assets. Most of our manu-
facturing facilities were in Eastern Europe. This is a gigantic market
wl.ic}i grew even more in the 3(1 years since and which would have been
served by the Barby plant. There is no way a dollar figure can be put
on the market loss which would be attributed to that plant, but that
would also have been worth vastly more than the $4 million then or
now.
Mr. WrSTPIIAL. Did you reestablish any of these plants after World
War Ii ?
'Tr'. ATAC K. Not in tha East. We have, plants in the West. We have
planets gin'\Vest (1-ermany, but none in East Germany.
1Ir. W'EC'rptrAL.. Tn reestablishing those plants, there has been a con-
tiituiiig allegation here by some of the individual. proponents of the
I-Touse amendmeent that. some of those governments made tax conces-
sions when businesses were reestablished over there. Did you receive
any sii h tax concessions for the businesses vou. did start?
fr. J\f A('K. To the best of my knowledge, no.
.llr. CONAFAY. We are unaware of any. That was a new argument
that came np and we were just made aware of it today. I will look
info it but in ta._dking to our tax counsel today he has been unaware of
any was did receive.
\l". MACK. We will doublecheck that, but to the best of our knowl-
edge we have received none.
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Senator BURntcK. You made an interesting observation that the size
of the claim didn't necessarily reflect the size of the corporation.
Mr. MACK... That is right.
Senator BURDICK. Are there examples in this list of claims where
the claim, let us say, of a small business corporation is larger than the
claim of a large business corporation?
Mr. MACK. I am sure-and it is very easy to go through this list-
but I am sure you can find relatively smaller companies with larger
claims than some of the large corporations.
Mr. PLIMPTON. Mr. Chairman, Westinghouse has a $17,000 claim. I
think that pretty well answers that question.
Senator Buitnicic. That is all, gentlemen. Thank you very much.
Our next witness will be Mr. William Munroe, USM Corp. Welcome
to the committee, Mr. Munroe.
} STATEMENT OF WILLIAM C. MUNROE, JR., INTERNATIONAL
COUNSEL, USM CORP.
Mr. MUNROL. Mr. Chairman, I am here in place of our general coun-
sel, Mr. Robert Maynard who has been ill and is unable to come on
doctor's orders. He prepared our claim. He traveled through Germany
and central Europe in the sixties putting this together and is cer-
tainly the person most knowledgable of it.
USM Corp. appears in the claim as United Shoe Machinery Corp.,
which was our name up until about 1968.
Now I will give you a little bit about the background of our claim.
The losses were suffered primarily due to damage to factories, ware-
houses, and manufacturing equipment from air raids during World
War II. As documented in our claim, the damage to the business pre-
mises of some of our subsidiaries ranged to 90 percent of some build-
ings. There were four separate companies involved, with three in
Germany. Of these three, two were 100 percent owned subsidiaries and
had been since the early 1900's. The third in Germany was 79 percent
owned at the time of loss and is now 100 percent owned.
There was a small company in Denmark that suffered some losses
that were covered by the War Claims Act.
USM Corp. asked to testify today basically for two reasons : first
because we read in the House testimony and again a point was made
this morning of claims that the corporations had all received tax
benefits. As I recite in our statement, our foreign claims settlement
decision, W-21327 states :
On the basis of the entire record, the Commission concludes that claimant is
entitled to an award in the amount of $5,231,219 for losses due to military opera-
tions of war or special measures under Section 202(a) of the Act. Claimant has
stated under oath that no tax benefit has been derived on account of the losses
which are the subject of this claim.
In support of that, Mr. Manard asked our independent auditors
Coopers and Lybrand to determine and certify that we had received
no tax benefit and by letter to Mr. Manard dated November 23 of
1966, they wrote-and I will quote in part, and if you want a copy of
this I can get it for you-they wrote :
In connection with your application for compensation under the War Claims
Act of 1948 as amended for certain losses of real and tangible property in-
.curred during World War II you have asked us to make a limited review of
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your Federal income tax returns and. those of certain subsidiary corporations
Tor the purpose of determining the amount, if any, of Federal tax benefits
derived from any deductions claimed for the losses for which you have filed your
rlaini.
They then proceed to list our foreign companies covered by the
claims, the years which they reviewed which were 1938 through 1965,
and then in their final paragraph stated :
Based upon this review we have concluded that in none of the years covered
?lbereby slid you or any of the domestic subsidiary corporations listed above
cake any deduction or loss which relates to the investment in any of the for-
?eign corporations listed above. Accordingly in our opinion neither you nor ammm'
of said domestic subsidiary corporations has received any federal tax benefits
in and of the above years with respect to the investment. in such foreign
-corporations.
The other reason for appearing today was that in bringing this bila
to the attention of various Members of the Congress we received from
one of them a copy of this memorandum, which I believe is the same
one alluded to earlier entitled "Memorandum : Financial Condition of
Individual Awardholders." This memorandum recited I believe 113
cases and not. the 11 that was alluded to earlier, and says in part, with..
out referring to any of the named individuals, but reads:
'Elie following are specific examples illustrating the financial condition of
the individual awardholders under the war Claims Act of 1948 and the fol-
lowing cases are typical.
After reciting the cases it says :
Tile above cases are generally typical of the entire class of award holders.
Most of these individuals are elderly persons beyond their productive ;,ears;
o ud have few sources of income, and many dr., not qualify for 'substantial social.
security payments because their productive years were spent out of the U.S,
It finally concludes :
Enactment of 6.1728 would provide for many of them a financial state adequate
to support them in their declining years.
And we. wish to bring that to the attention of the committee,
11, it. has not already been brought to their attention, that of the per-
sons listed ei~zgit will already be fully compensated under the $24,000
that: they will receive under the present law and the implication it
appeared to as was that they needed this amount to be compensated
trod that is not the case.
Senator Bmnamcn. Does that paper show the 11 you are referring
to 'I
Mr. Aft-Nizot:. The document lists 12 persons and if you take these
1-2 pei?s;ons and then look at pages 32 to 37 of the committee hearings
before the House, you will see that ma;-t of these individuals have---
,%vell, in one case as little as a few hundred dollars to recover, which
won 1d he more than covered by the $24,000 payment.
Senator Brnozci. I mean did that memorandum show the names of
the 11 people?
All'. MUNRof:. Yes, hir, it does have the names. '\ ould you like a,
copy
Senator B1rr;;nTCT:.. Would you mind putting a star beside those that
111 have been fully paid before you submit it?
Mr. Nll-lpmf,. Certainly. They have not been fully paid. They will
b,, fully paid with the $24,000.
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Senator I3unDica.. Before you submit it to' the desk up here, would
you do that so we can see it?
Mr. MUNROE. Yes.
In summary, sir, we believe that every justifiable preference for
Individual and small claimants has already been granted and prefer-
ences which would be granted under the proposed amendments are
for the reasons stated inequitable to USM Corp. and its shareholders
and it should therefore be opposed.
[The prepared statement of William Munroe follows:]
STATEMENT OI' WILLIAM C. MUNROE, JR., oN S. 1728 AT A HEARING HELD DY
TIIE SENATE COMMITTEE ON THE JUDICIARY
Mr. Chairman : USM Corporation is a United States corporation having a
remaining unpaid award of just over two million dollars under the War Claim
Act of 1948, as amended. Until 1968 we were known as United Shoe Machinery
Corporation, and it is in that name that our claim and award appear in the
records of the Foreign Claims Settlement Commission.
USM's. award arises out of its share ownership in three German and one
Danish subsidiary. In three of these cases the ownership was, and remains, one
i hundred per cent. In the fourth, the ownership at the time of loss was 79%,
but is now 100%. In each case, USM has owned these companies since the
early 1900's.
The losses suffered were primarily damage to factories, warehouses, offices
and manufacturing equipment from air raids during the War. As documented
in USM's claim, damage to the business premises of USM's subsidiaries ranged
up to 90% of some buildings.
Proponents of the preference for individual claimants over corporate claimants
have made much of the tax benefits received by the corporate claimants under
Section 127 of the Internal Revenue Code.
USM Corporation received no tax benefits under this or other Sections of
the Code, because USM at no time deducted its losses in these subsidiaries. USM's
Foreign Claims Settlement Decision W-21327 states :
"Ou the basis of the entire record, the Commission concludes that claimant is
entitled to an award in the amount of $5,231,219 for losses due to military opera-
tions of war or special measures under Section 202(a) of the Act. Claimant has
stated under oath that no tax benefit has been derived on account of the losses
which are the subject of this claim."
The validity of USM's statement under oath has been verified by independent
auditors, Coopers & Lybrand.
USlli' Corporation did not appear in opposition to the 1970 amendment to the
War Claims Act which assured all claimants an additional $24,000 or full payment,
whichever was less. The 1970 amendment would provide full payment for 144 of
the 187 individual claimants who still have unpaid balances. USM strongly believes
that no basis has been shown for now further amending the law to provide an
absolute preference for the remaining 43 largest individual claimants over U.S.
corporate claimants.
Furthermore, from the statistics set forth on pages 32-37 of the Hearings held
November 7, 1973, before the Subcommittee on Commerce and Finance of the
Commerce Committee of the House, it would appear that of these 43 individuals,
payment in full of the remaining balances of the five largest individual claims
would total almost 2.3 million dollars.
USM has seen no persuasive reasons for granting preference to such sub-
stantial individual claimants over U.S. corporate claimants.
USM Corporation has been in existence since 1.899. the large majority of its
shareholders have during that time been U.S. citizens and for many years it
has encouraged share ownership by its employees and through direct and in-
direct ownership a substantial percentage of USM's present and retired
American employees are shareholders of this Corporation.
We believe that every justifiable preference for individual and small claim-
ants has already been granted and that the preferences which would be granted
under the proposed amendment are, for the reasons stated, inequitable to U.SM
Corporation and its shareholders, and should therefore be opposed.
Thank you.
WILLIAM C. MUNROE, Jr.,
International Counsel.
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Memorandum: Financial Condition of Individual Awardholders
The following are specific examples illustrating the financial condition of the
individual awardholders under the War Claims Act of 1948. The following cases
are typical.
Lilli Bernstein of New York City is a widow 78 years old. The firm of which
her husband was a partner is 4L bankruptcy and the vast majority of her
previous recoveries under the War Claim, Act have gone to :pay Creditors. She
lives on the balance of her award. in a small apartment. The unpaid balance
of her award is $393,000, payment of which would make her financially secure.
Ulrich ,Strauss of Los Angeles is in his 70's and works as a short order cook.
His income is less than $5,000 per year. The unpaid portions of his, two awards
total about $300,000.
Siefffried Aram* of New York ie 81 years old and has an income of about
$3,000 per year. While the unpaid portion of phis award is quite small, any
amount he can recover would be an important addition to his meager income.
Berbert Jov.7dtl* of Long Island City,'New York, is an elderly man withan
income of about $5,000 per year. Payment of his $24,000 award would mnkc a
substantial di8'erence in his financial condition.
Eli :Prockenheim of Brooklyn, New York is 80 years old and lives with his
ailing wife an an income of $9,000 per year. Much of his income goes to'meet her
medical expenses. Payment of their $43,000 award 'Would be of enormous benefit
to the couple.
The Bell`fafrsity* of San Francisco consists of'l0 Children of Edward fell. All
of them were interned in a Japanese concentration camp during the war. While
their incomes vary, all are modest, and payment of their relatively small awards
would be a significant benefit to them.
Helen APting"nri* of New York is a 78-year-old widow living on small social
Security payments. Since the bulk of her husband's career was spent in Germany
the Social Security payments she receives are very small.'Mrs. Allington is ill,
ant Fpayment of hol, $7,000 award would help her greatly.
Er .e.t Lormuw* of New York lives on a small income. Though both.-he and
his wife are past 70, both still hold jobs to support themselves. Their $14,Oa)
award substantially'exce?ds their current combined incomes.
lffnst Ratkantu,* nep ierb of the German minister who signed the Versailles
Treaty ending World War 1, lives in New'York on an income of about'$9,000.
Mr. Ratnanau is elderly and has relatively few productive years ahead of him.
Adele Geyer* is over 90 years old and lives in a nursing home. Payment of
her $10,000 award would alleviate the financial burden of maintaining her in
the home.
Carla Palm* of Fort Thomas, Kentucky is SI years old and an invalidrequir-
ing constant care. Payment of her~$25,900 award would help pay the heavy cost
of this care. $24,185.34 ($165.34) will remain unpaid.
Ernest H"nsn of Los Angeles is a wealthy man who does not-require pay-
ment of his award in order to live comfortably. He has supported the effort to
pass S. 1728 primarily because he believes that the'principle of S. 1728 is sound
and that these individuals, many of whom he has come to know, are deserving
of this-relief andneed it badly.
The 'above eases are gerrerally typical of the entire class of individual award-
holders. Most of these individuals are elderly persons beyond their productive
years and have few sources of income. Many do not qualify for substantial
Social Security payments because their productive years were spent outside the
United States. The fruits of their labors were lost in the war and are the basis
of their War Claims awards. Enactment of S. 1728 would 'provide for many of
them a final financial stake to support them In their declining years.
Senator Buiznrcic.. Is that your statement then?
Mr. MiaNizor:. Yes.
Senator RTTRDICK. All right. Thank you very much. Can you ex-
plain, M. Munroe, the reason why TTSM did not tike a tax loss in
the, 140's when the property Was lo A or destroyed'$
Mr.MUNROn. Sir, we tried to determine that. We were unable to.
The best conclusion tha : we were able, to reach was that we had owned
*Tbrge individuals will be fully paid under the present law providing an additional
$24,000 or remaining unpaid award, whichever is less.
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these properties going back prior to World War I and we had gotten
them back after World War I and we think we must have assumed we
were going to win this one also and we kept them on the books. We
did not take a tax loss for them.
That may seem inadequate, but that is the only thing I can-well,
we have been unable to determine really why they did not take it tax
loss at that time. There was basis and it could have been done.
Senator BURDICK. If we assume under any formula of priorities that
USM will never receive 100 percent payment of claims of $5.2 million,
could it claim a tax loss in the year in which the Claims Commission
makes its final payment leaving a balance due and owing on your
claim?
Mr. MUNROE. I am not a fax attorney, sir, but I don't believe that
we could.
Senator BURDICK. In other words you would suppose that if $2
million was paid out of the $5 million claim you could not claim the
$3 million at that point?
Mr. MUNROE. I don't believe that we could, but, as I say I am not a
tax attorney.
Senator BURDicx. If you find to the contrary, would you let us
know?
Mr. MUNROE. Yes.
Senator BURDICK. After the award did USM reactivate these three
German and one Danish subsidiaries?
Mr. MUNROE. They did, sir.
Senator BURDICK. They are operating?
Mr. MUNRoE. They are operating now and we have rebuilt them.
Senator BURDICK. In doing so did you receive any'War concessions, either
tax or otherwise, because of the loss sustained in the ?
Mr. MUNROE. We could find no tax benefits that we received. Mr.
McClellan I believe this morning alluded to something called the
equalization of burdens taxes, which were payments required from
corporations to be made to the Government of Germany by German
corporations and it is my understanding that we did make such pay-
ments, but we did receive no benefits.
Also as for just taking deductive losses, in reviewing the financial
statements of those companies for those years, it would appear to us
that we operated at a loss during the years immediately subsequent to
World War II and therefore didn't have profits against which we
could take such losses.
[ED NOTE. The following is Mr. Munroe's response to the tax infor-
mation request by the subcommittee.]
USM CORPORATION,
Hon. QUENTIN N. Buanicn Boston, Marls., December 6, 1971.
,
U.S. Senate,
Senate Office Building,
Washington, D.C.
DEAR SENATOR Buanicx : In my testimony last Tuesday afternoon in opposition
to granting additional preferences to. individuals as proposed by S. 1728 (amend-
ment to the War Claims Act of 1948), I stated that USM Corporation had re-
ceived no Federal Income Tax benefit from the losses it suffered due to damage to
and loss of property of its German subsidiaries in World War II.
Following my testimony, you Inquired whether USM would be able to obtain
any tax benefit from these losses in the event that USM was unable to recover
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the full amount of its foreign claim award. I advised you that I did not See that
it could but I was not a tax specialist, and you asked that I verify this,
I have since reviewed the matter with our Tai: Counsel, and I am assured that
it is much too late to take a deduction for the original loss, that we cannot at
any time take any deduction for the difference between our award and such lesser
amounts as we receive, and further, that all amounts received by USM under
the award are subject to Federal Income :Lax.
I wish to take ,his opportunity to express -my thanks to the Committee on
beh;iif of USM Corporation for the opportunity to be heard on this matter. I
have not previously had occasion to testify before a Senate Committee and
I v ae most impres; ed by the willingness of both you and Senator Fong to devote
the better part of a day to serious consideration of this rather complex matter.
which. though important to us, undoubtedly constitutes such a minor part of
jyoiir concerns.
Sincerely yours.
WILLIAM C. MUNROE. Jr.
.icimator 111TILOION. Any questions?
11r. 1' TESTPIIA:'... I don`t know whether they are questions, but I would
"tike, to clear up one thing for the record, Mr. Chairman. Several of
the % itnesses have made reference to various memorandums that were
eireulated. I think the record should show or will show that the
mcnnorandums, which Mfr. Munroe has referred to, which contains the
D 3Oale r_' 1,2 of the indi,,Tidual claimants by name and which you ?ire
niarking ui> to show which eight will be paid. in full, was prepared by
and included in it brochure that was prepared by attorneys Cronus
rind Greenwold on behalf of individual claimants as a group and
+haat memorandum may have been submitted by them directly to every
Memher of the Senate or every member of the full committee as :Far
as T know.
As far as the staff of this ad hoc subcommittee is concerned, Senator,
tl,ce owdv memorandums that were submitted for perusal for the three
members of the ad hoc subcommittee were these : One was a memoran-
(lmn entitled "Summary of Arguments" in favor of the House amend-
meet,, to S. 1728, whieb was copied or Xeroxed from the presentation
made by Crolius and Greenwold on beli.alf of the individuals; and
ti!- ether memorandum was a memorandum prepared by CPO Inter-
n.11.ional, which seemed to the committee staff to summarize the con-
tertinris made by corporate claimants as a group and for the purpose
o 6' the record I would are this time ask that; both of these memorandums
be, made a part of the record so that ads persons involved could see
that staff attempted to make it fair presentation to the three members
of the ad hoc cominittte by submitting summary arguments made on
behalf of both individuals and corporations.
Tf that could be marked as a committee exhibit and received, I
would appreciate it.
t~nator BURDICK. Treat will. be received,.
'I'lis memorandum referred to follows:]
Com-miTrrun ExilnuT 1
FiORT SUMMARY OF ARGUMENTS ITT FAVOR OF THE HOUSE
AMENDMENTS TO 5. 1728
1. Individual awards are based on the loss of homes, personal tie-
lwt_aings and small family businesses. In most cases, the individuals
lost all they had. The corporate awardholders are almost exclusively
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large multinational corporations that lost only a small fraction of their
total assets. The corporations suffered losses, but the individuals
suffered disasters.
2. The corporate awardholders have taken more than $35 million in
tax deductions as a result of their losses and have had the use of the
money they saved for over 30 years. A thorough and diligent search has
disclosed no individual shareholders who took tax deductions. Cor-
porations have therefore recovered a much higher percentage of their-
losses. (A detailed memo on this subject is attached at tab I).)
3. The majority of individual. awardholders are elderly persons.
Many of them live on small fixed incomes and receive little in the way
of social security payments since their productive years were spent
abroad. Their war claims awards represent a final financial stake to
support them in their declining years. (A detailed memorandum on
this subject is attached at tab C.) by contrast, at least 96 percent of
the unpaid corporate awards are held by large companies whose stock,
or whose parent company's stock, is traded on the New York or Ameri-
can Stock Exchange. All small business corporations have already been
=.z id in full under a previous priority.
4. Granting priority to individuals would reduce the amounts avail-
able to corporate awardholders by only about 5 cents on the dollar.
By contrast, the failure tc give individuals a priority would result in
a permanent loss to individuals of about 70 percent of their unpaid
awards. Under existing law, corporations would receive about 93
percent of all pro rata pa vurents and more than 83 percent of all pay-
ments to corporate awardholders would go to the 13 largest corporate
awardholders.
5. Many corporate awards are held by corporations that acquired
the stock of the company that actually suffered the loss many years
after the loss was incurred. In some cases, the acquiring corporation
paid litle or nothing for the stock of the company suffering the loss.
Recovery by such acquiring corporations would be a total windfall
to these corporations. The individuals are the very persons who suf-
fered the losses, or, in some cases, the children of those who suffered
the loss. In all cases, the individual awards have remained in the
family.
6. Corporations received large tax and other benefits from foreign
governments in compensation for their losses when they reestablished
their operations abroad after the war. Individuals received no such
benefit.
7. In order to receive an award, claimants had to provide documen-
tary proof of their ownership of the property that had been lost. Many
individuals lost their documents in the war. U.S. corporations, which
maintained extensive records in this country, were able to document
a much greater percentage of their losses and hence received awards
to cover a, larger portion of their losses.
8. All individual awardholders are U.S. citizens. Many of the stock-
holders of the corporate awards are foreign nationals. The basic theory
o'the War Claims Act. is to compensate U.S. citizens. The priority for
individuals furthers that purpose.
9. S. 1728, as amended, passed the Rouse by a vote of 368-17.
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Summary:
It is suggested. that because of the reasons outlined in this memo-
randum the Senate reject the amendments proposed by the House.
In the alternative, we suggest that the issues are of sufficient import
to warrant at least a hearing by the committee, before resolution.
1; ackaround:
The War Claims Act (50 U.S.C. app. 2017) was enacted to pay awards
to those Americans who lost their lives and had property destroyed
in enemy lands during the Second World War. As the law presently
stands, all awardees (both individuals and corporations) are to be
paid up to $35,000, or the amount of their award, Whichever is less.
All awardees (with a few exceptions 1) have been paid at least $11,01)0
of their award. Ili fact, as will be shown later, some awardees have
received in excess of $100,000. In any case, awardees can expect to
receive an additional $24,000 (or the full amount of their remaining
claiIll, if their award does not total $35,000) before pro rata distribu-
tionbegins,
Proposed legislation:
Senate. bill 1718 (S-1728) was passed by the Senate last year con-
tailning but one section, which increased payments to American civil-
ialis held as prisoners of war during the Vietnam conflict. The House
Commerce Committee then adopted amendments which were passed
by the House in July 1974. The House amendments proposed :
(1) That all individual awardees receive the full amount of
their award prior to any funds being distributed to corporate
awardees; and
(2) That before pro rata distribution shall take place among
corporations, all corporate awardees shall be paid $50,000, or the
fall amount of their award, whichever is less.
Dicussion
REASONS WHY AHZFNDMENT-WHICH GIVES INDIVIDUAL AWARDEES PREF-
ERENCE OVER CORPORATIONS--SHOT LD NOT BE ENACTED
1. No legal, precedent
I' nder present law, there is no legal precedent which places individ-
uals on a separate and :ligher footing than corporations. On the con-
trary, the law of bankruptcy, corporate liquidations, commercial
credl-it., et cetera, places corporations and individuals on an equal foot-
in* q. That is, where inadequate funds remain to satisfy all claims, the
fluids are distributed pro rata to those claimants with the greath.st
claim. No distinction is made as to whether the claimants are individ-
uals or eorpor. ations.
The instant case should provide no rationale for exception. In fact,
establishment o:t such a priority could prove a dangerous precedent;
particularly in light of similar claims which may arise out of national-
izal ions in Cuba, et cetera.
Annie awardees, those who suffered physical injury, small business claimants, and
eleemosynary institutions. have been paid in full.
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2. Only 43 individuals will benefit by. enactment of this amendment
Enactment of this amendment will benefit only 43 individuals. All
other individual awardees will receive the full amount of their award,
when under the present law, distribution of $24,000 is made. Many of
the remaining: 43 claimants who will not receive the full amount of
their award are wealthy individuals who cannot be considered to be
living under "necessitous circumstances." Iii, fact,,even a cursory review
of the statistics filed by the Foreign Claims Settlement Commission
(see page 35 of the House hearings) shows that many of these individ-
uals have already been compensated to a large degree. For example:
(1) If the present law granting $24,000 per claimant is allowed
to stand, the average amount received by the 43 claimants will
be in excess of $200,000 apiece;
(2) If the present law granting $24,000 per claimant is allowed
to stand, 16 of the 43 claimants will have been awarded in excess
of $200,000 apiece;
(3) If the present law granting $24,000 per claimant is allowed
to stand, 41 of the 43 claimants will have been awarded in excess
of $100,000 apiece;
(4), Finally, if the amendment is allowed to pass, 9 of these 43
claimants will take a lion's portion of 62 percent of the individual
awards.
In light of these statistics, it is difficult to justify that individuals
should receive preference over corporations.
3. It would be wrong to enact preferential rights for individuals be-
cause of alleged tax benefits received by corporations
Some individual claimants argue that an injustice exists in that
corporations received tax deductions for their war claims while in-
dividuals did not. Therefore, they argue, this injustice should be
remedied by giving individual claimants a priority to the moneys
available-the war claims fund.
We refute this argument as nonsense. A. review of the facts show
that some corporations did not get any tax deductions. for their war
claims. And while other corporations did obtain tax benefits, these
benefits were deducted, frorn, the awards granted by the Commission.,
In other words, all present corporate awards are net of tax benefits,
There has been no double benefit as implied by some individuals.
REASONS WHY AMENDI ENT-WHICH ALLOWS $50,000 FOR EVERY CORPO-
RATE CLAWANT OR AMOUNT OF AWARD, WHICHEVER IS LESS-SIIOULD BE
REJECTED
In its report, the House committee reasoned that "equitable con-
siderations" led the committee members to adopt the amendment.
However, the committee report did not explain "equitable considera-
tions" and, therefore, we can only guess at why the committee felt it
necessary to give preference to small awardees. Nevertheless, it seems
reasonable to assume that the committee reasoned: "The smaller the
award, the smaller the company. Therefore, to help the small business-
man, we will give him preference on his claims." A close examination
of the facts, however, indicates that this reasoning is fallacious; and
in fact, should the amendment pass, the effect would be to create an
inequitable situation.
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Specifically, we object to the amendment on three grounds. They are:
1. Those claimants qualifying as small i isinessmen have received com-
pensation for the full amount of ther,award
It is important to remember that the War Claims Act has already
made provision for small business claimants under section 2017-1 (50
App. USCA 2017). Those claimants qualifying as small businessmen
(along with charitable nonprofit organizations) received compensation
for the full amount of their claim. Secondly, some of the smaller out-
standing claims are held by such corporate giants as Westinghouse,
Borg-Warner., S. S. Kresge, and Studebaker-Worthington. Our point
is this : The amendment does not actually favor the small businessman.
The truly small businessman has already been compensated for his lose,
and furthermore, some of the claimants who will benefit the most by
passage of the amendment are not small corporations, but on the con-
trary, are very large.
The proposed amendment discrimina Fes against manufacturing cor-
porations, in favor of insurance companies
To illustrate this point, consider the following statistics :
Total corporate awards (combining insurance and manufacturing
corporations) amount to approximately $94.7 million. Of this, approxi-
mately $5.3 million, or 6 percent, constitutes awards to insurance com-
panies. The remainder, approximately $89.4 million, or 94 percent, is
attributable to manufacturing corporate claims. However, if the
amendment is passed, insurance companies will receive 20 percent of
the fund's moneys, assuming $10 million remains for distribution (see
app. A). It is difficult, in view of these statistics, to discern how
"equitable considerations" will be served when the amendment ob-
viously benefits insurance companies to the detriment of manufacturing
coporations.
3. Enactment of the amendment swill give preference to those corpora-
tions who have lost the least, over those corporations who have
suffered ti most
This amendment favors the small corporate awardee, at the expense
of the large awardee. Those corporations who have $50,000 or less wilt
receive full compensation for their award, while large awardees will
have the amount available for pro rata distribution reduced by the
amount awarded to the small claimants. Traditionally, when claimants
face a situation in wIr.ch insufficient amounts are available to satisfy all
claims, the amount available is awarded on a pro rata basis. Under the
proposed amendment, this approach `mould be overthrown. The in-
herent unfairness of the amendment is best summarized by Congress-
man Kuykendall's remarks in his supplemental views. He said : "Such a
scheme cannot commend itself as good law or simple justice. It (this
amendment) must be based on the premise that the more one lost, the
iess entitled ha is to reimbursement." Obviously, this is an inequitable
proposal.
In summary, then, we feel that the amendment is patently inequitable
lsecause it does not necessarily help the small businessman; it dis-
criminates in favor of insurance compa:?ues, and it overthrows the nor-
mal priorities by compensating one who has lost the least, before com-
pensating those who have lost the most.
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Senator BURDICK. This is not a court of law, but we are trying to get
the exhibits pretty well identified here. Any more questions?
Mr. WEsTPRAL. No, I have none.
Senator BURDICK. Well, thank you very much.
The next and I believe the last witness is Mr. Thomas Davenport,
corporate counsel for Budd Co.
STATEMENT OF THOMAS DAVENPORT, CORPORATE COUNSEL, BUDD
CO., ACCOMPANIED BY RICHARD TOWSLEY, MANAGER, TAX
ADMINISTRATION
Mr. DAVENPORT. This is Mr. Towsley who is our tax expert, and
he is with me in case you have some questions that he can fill in, sir.
Senator BURDICK. All right. I might ask him a question right now.
Mr. Towsley, suppose after the fund is liquidated and we find out
that company A has only been paid half of the claim and there is 50
percent of the claim unpaid. Now, at that point could a corporation
-claim any kind of a tax loss?
Mr. TowsLEY. No, there would be no loss deduction available for
that difference. There might conceivably be a loss of liquidation meas-
ured by the difference between the cost of the subsidiary and the as-
sets received, whatever they may be, if the company were less than
80-percent owned. That is all. The answer to your question is no.
Senator BURDICK. Well, T carry some low-priced stock with the ever-
present hope that some day it may do something. Five years from
now I may decide to call it worthless. I have the option at that point,
haven't I, to declare a loss?
Mr. TOWSLEY. As an individual, as a shareholder, if your stock
becomes worthless, this is a capital loss, yes.
Senator BuRDmczi. But you can't use the same argument with the
war claims? You always have hopes that they might be paid in full?
Mr. TowsL,EY. Yes, but I know of no provision in the law which
would permit you to take a deduction for the amount of the claim
specifically.
Senator Bonnier. All right. Thank you very much for the pro-
fessional opinion. You may proceed.
Mr. DAVENPORT. We have presented a copy of our statement so I
won't proceed to read it, but I would like to emphasize a few points.
We are representing the Budd Co., and the Budd Co. has some 23,-
'000 shareholders and some 18,000 employees, and all of them and us,
too, are interested in the House amendments. We are primarily an
automobile parts supplier. We are, along with the industry, having
problems and facing a liquidity crisis. Any further payment on this
award is of great importance to us.
We are here to say that we believe the proposed amendment is un-
fair because on the one hand it proposes to distinguish treatment of
a class of individual claimants from the class of corporate claimants
which amounts to an ultimate denial of the balance of the corporate
claims, but on the other hand, the proposed amendment would ignore
distinct differences within the class of individuals and within the class
of corporate claimants. We believe that the only equitable alterna-
tive to pro rata payments would be to give separate consideration
to the situation of each claimant. Conversely, we do not believe that
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100
all corporations should be penalized as a class because some received
major tax benefits or were otherwise able to reduce the effect of their
losses.
Significantly the Budd Co. did receive a tax benefit but the award
was in the order of $2,860,000. The tax effect was $16,300.58. This
is less than 6/10 of a percent of the reognized loss.
The tax treatment of the Budd Co. was dictated by the subsidiary
structure of the investments in prewar Germany. We can't exactly
tell you the reason why no greater tax effect was available, but we
can assure you that that was the total tax effect of the war loss. There
was no further significant tax consideration until Budd finally dis-
solved the subsidiary structure some 30 years later.
In 1971 the Budd Co.'s corporate income tax was reduced by aA
amount equivalent to 30 percent of the unpaid balance of the award.
It is significant, however, that that 30 percent will be reassessed when-
ever and to whatever extent Budd receives a further payment on the
balance of the award.
Concerning the statement made on page 20 of the hearing of No-
vember 7, 1973, which indicated it typical corporation with it war loss
of $1 million would receive some 90 percent of its loss in tax benefits.
Well, we fail to find any way of identifying such a typical corporation.
Certainly the Budd Co. is not. such a corporation. W e don't believe that
that median corporation exists.
We have put; in some of the statistics in our formal statement as to
that, but I don`t think I need to repeat them. I would just like, to say
that we have no objection to a small claim preference on a level to
be determined by Congress. It has already fixed it at $35,000, but, we
think the proposal to give individuals fall priority clearly constitutes
an unfair and unreasonable preference. We have knowledge Only of
the Budd Co.',,; situation specifically as to this.
Mr. Chairman, we had insignificant tax benefits, and we have reason
to believe that many other corporations also have not realized the
significant benefits that are attributed t;o their situation.
We respectfully oppose the amendments and are willing to answer
any questions you may have.
Senator Bmu~rcn. Thank you very much for your contribution. Any
questions?
Mr. WFS'rr1rAr,, I just: have, a couple, Mr. Chairman. Your statement,
Mr. Davenport, says that in 1971 the Budd Co's corporate, income tax
was reduced by an amount calculated at 30 percent of the unpaid
balance of the award, that is, the award of $2.8 million. Now I under-
stood the chairman to ask Mr. Towsley, your tax counsel, whether
it was possible to claim it tax loss; at such time as the War Claims
Commission determine? that they have made their final payout and
there is no more money to be paid. out, end here you are, under the
chairman's example, with an unpaid claim of $3 million and he asked,
assuming you hcd been carrying that claim as an asset on your books,
could you then write) that off. Mr. Towsley told the chairman that you
couldn't, yet in i_971, apparently a loss was taken for some assets that
were destroyed back during 1939 to 1945. Could either you or Mr.
Towsley explain that?
Mr. 1)AVr.xroxr. We would like to. I should have perhaps given some
more detail. We had it manufacturing facility in what became East
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Berlin. It made automobile stampings and made automobile bodies as
such. We lost all of that production facility. There was left a corporate
shell that had some patient properties, and that corporate shell was
continued. Then eventually the corporate shell was liquidated. At the
time of the liquidation it was necessary for us to show that we had
received this war claim award.
Mr. WESTPIIAL. In other words what you are saying is that the
amount you had received up to 1971 on your claim of $2.8 million had
to be taken into account when you determined what loss you had
sustained by liquidation of one of your wholly owned subsidiaries. Is
that about what you are trying to tell me?
Mr. DAVENPORT. That is about it.
Mr. WESTPIIAL. Is that essentially it, Mr. Towsley?
Mr. TowSLEY. That is essentially it. The question I believe from
Mr. Burdick was, could we take a loss when the claim against the
War Claims Commission became worthless and the answer is that no
we could not.
In this case we had a subsidiary and that subsidiary domestically
owned the foreign subsidiary. The foreign subsidiary Ambe Budd did
survive the war although it had nothing left. It was continued in busi-
ness, but not as an operating company. When it continued in business,
it collected some royalties and so forth. Eventually 30 years later that
foreign subsidiary Ambe Budd was liquidated. When it was liquidated,
we received some $27,000 as our share of the assets in liquidation. That
was all. Our loss, which Zve deducted at that time as a capital loss, is the
loss resulting from the liquidation of an investment in stock of a
foreign corporation.
The loss is measured as the difference between our investment costs
and that $27,000. There is one more point I wish to make. The point
I wish to make is that the $1.7 million payment on our award did not
come home tax free. It was treated by the Internal Revenue Service as
a reduction of the basis of our investment.
Mr. WESTPHHAL. In the return that you filed for the taxable year
1971?
Mr. TOWSLEY. Yes.
Mr. WE, STrriAL. All right; now then, as I understand what you have
explained to me, it is that you had a wholly owned subsidiary that you
carried on the books of USM as having certain value
Mr. TowSLEY. The Budd Co. and not USM.
Mr. WESTPHAL. Excuse me, the Budd Co., as having a certain value.
Now when that wholly owned subsidiary was liquidated
Mr. TOWSLEY. Not wholly owned, sir.
Mr. WESTrrrAL. In which you had an interest.
Mr. TowsrY. Yes.
Mr. WESTPHAL. Now when that was liquidated, you received $27,000
from the liquidation?
Mr. TOWSLEY. Yes.
Mr. WESTPIIAL. You had been carrying your stock ownership on
your books at a higher value?
Mr. TowSLEY. No, sir; we get a little bit more complicated here.
The investment had disappeared from the books back in the 1940's.
I can go into more detail if need be
Mr. WESTPHAL. No.
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Mr. TOWSLEY. But there was no i:nvestm ent whatsoever on our books ;
however, the tax basis is a matter of record entirely apart from what
we had on our books. We had a tax basis of $2.7 million, which is
coincidentally about the same as the amount of the award.
Mr. WESTPHAL. So that here we have the situation you just ex-
plained to us which is a situation where one corporation owned part
but not all. of the shares of stock of another corporation and whether
it ccarried it on its books as having a value or not, it nevertheless had
an acquisition cost basis which for tax purposes would allow you to
el to im a tax loss at the time you received only $27,000 in liquidation ?
Mr. Towsra y, That is correct.
Mr. WESTPIIAL. Were you present in the hearing room when I was
trying to determine what the cost basis was of Shanghai Power Co.
as .acquired by Boise Cascade?
Mr. Towsr.FY. Yes, sir.
Mr. WESTPHi L. Would you care to present an opinion as to whether
the tax treatrnccnt you received might be available under the same
provision of the Internal Revenue Service to Boise Cascade in con-
nection with this Ebasco matter?
Mr. TOWSLEY. I don't believe I can give any opinion or any com-
ment on the Boise Cascade situation. It appeared to be a rather com-
plic-ated and complex merger situation involving exchanges of stock
and groups of assets, e cetera. I could say nothing further on that..
'.lr. vVESTPJIAr.,Thankvou.Ihave nothing further.
Senator Bunrrcx. Thank you very much.
`file prepared statement of Thomas I;lavenport in full follows:-!
aiy nurse is Thomas I. Davenport. I am Corporate Counsel for The Budd
Cam- Michigan, Mr. Richard F. Tcusley, our Manager, Tax Administration,
a3 t ;.;c:.;ct;is The Budd Company. I have a very short statement; Mr. Tousley is
pr , ja -- I to ;.;ive more details and we are both ready to answer any questions.
We appreciate the opportunity to give the viewpoint of one corporation in
op ,.,.:ition to any unfair discrimination among claimants. There are some 18,000
ene)rioye'S and some 23,000 shareholders receiving our newsletters, all having an
iub'rest in the health and assets of The Budd Company. Though perhaps I)eft(,.r
ke ?~.,z 'oar i?s railway passenger cars, 80% of the Company's production is for
th?' : ?ttotnoiive industry.
t e believe the prouose-l amendment is unfair because, on the one hand, it
prto distinguish treatment of the class of individual claimants from the
class of corporate claimants, amounting; to an ultimate denial of the balance of
th=r nts. There are numerous instances among the corporate
nwa rds. in which the company that actually suffered the loss has long since been
acquired by the present awardholder. By contraat, the individual awards are
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all held by the persons who suffered the loss or by members of the family that
suffered the loss.
Fifth. Many corporate awardholders were eligible for substantial tax and
other benefits from foreign governments after the war as incentives for reestab-
lishing their operations in those countires. These benefits, which further com-
pem;ated the corporations for their losses, were in no way taken into account in
the calculation of their war claims awards. Such benefits were unavailable to the
individual awardholders.
Sixth. Many of the corporate awardholders are insurance companies that
insured risks overseas at premium rates to reflect the risks of war. These
companies were then subrogated to the rights of the insured. The substantial
premiums received by these insurance companies were not taken account of in
the calculation of war claims awards. No individual awardholder is in a com-
parable position.
Seventh. Full payment of the individual awards will not substantially affect
the amounts that will be available to pay corporate awards, The corporate awards
total about $94.7 million. There will be only about $20 million at most available
for` payment of all awards-both corporate and individual. Thus, even under
existing law, the corporations will receive at most about 20 cents on the dollar.
Since the total amount payable to individuals is only $6.5 million, giving a
priority to individuals will reduce the corporate recovery by only a few cents
on the dollar.
Eighth. The corporate awards represent a greater percentage of the actual
losses of the corporate awardholders than the individual awards represent of
the actual losses of the individuals. In the granting of awards, the Foreign
Claims Settlement Commission required documentary proof of the loss for which
an award was sought. Many individuals who suffered property losses also lost
their documentary proof of ownership in the war. Large U.S. corporations that
maintained extensive records in this country did not have similar problems and
hence were able to document a much higher percentage of their actual loss than
were individuals.
Ninth. All the individual awardholders are U.S. citizens. The War Claims Act
required that an individual be a U.S. citizen at the time his loss in order to be
eligible for an award. By contrast, a corporation need only have been incorporated
in the United States and 50 percent of its assets owned by U.S. nationals in order
to qualify. A not insubstantial portion of the stock of many corporate award-
holders is held by foreign nationals. Since the basic purpose of the War Claims
Act was to compensate U.S. citizens for their losses, this purpose is more
consistently served by allowing individual awardholders, all of whom are U.S
citizens, a priority.
These are compelling reasons I submit, in behalf of enactment of a priority
for individuals in the payment of World War II war claims awards. I hope,
therefore, that the Subcommittee will recommend acceptance by the Senate of
the House amendment of S. 1728.
lion. QUENTIN N. BURDICK,
U.S. Senate,
Washington, D.C.
DEPARTMENT OP STATE,
Washington, D.C., December 2,19711.
DEAR SENATOR BUR.DICK : I am writing to urge favorable consideration of S.
1728 by the special Subcommittee you are chairing for the Committee on the
Judiciary. The basic purpose of this bill is to increase detention benefits for
our civilian prisoners of war under the War Claims Act to $150 per month-
equivalent to the benefit provided for our military POW's. It is now more than
twenty months since our men returned from captivity in Indochina, which makes
this a matter of urgent priority. By the action of your Subcommittee I hope
it will be possible to move to final approval of this legislation before the Congress
adjourns.
We recognize that the bill as approved by the House contains a second section
relating to a different provision of the War Claims Act. The Department has
testified against this amendment because it would discriminate against corporate
claimants in favor of certain individual claimants and would establish an
undesirable precedent. The Department favors equal treatment of all claimants
without preference.
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In fairness to our civilian POW's, however, and regardless of the merits of
this other section, we hope a way can be found to gain final approval of the
civilian benefit section before the Ccngress adjourns.
Cord in ly,
LINwoon Ffor,TON,
Assistant Secretary
for Congressional hole (ion?.
GENERAT, Fit.RCTRIC Co.,
Vets York, N.Y., November 27,197 y.
Hon. JAMES n. E s s e r
(71,airmarr, ,luclic4twy Cornrnittee,
t7.i. Senate, W"rribihcgton, D.C.
T)SAR (;-TIAuRuAN T:ASTLAND: This letter i;, in opposition to S. 1728. as amended
by the House to alter the preferences estalilished for payments under the V9a.r
Claims Act of 1948 by providing for priority payments to individual claimants
ill the full amount of their award before any further pro-rata distributions to
other claimants may be made.
We are in agreement with the statemen ~` in opposition to the amendments
by the Foreign Claims Settlement Commission. We would like to present this
brief additional statement viewing the proposed legislation from the viewpoiif
of (;eneral Electric Company shareholders.
As it stands, the statute already contains significant preferences for individual
claimants. Under these preferences, claimants with an award of $100,000 or ben
will he paid in full before any further pro-rata distributions will be made.
']'his results from the fact that an individual claimant will have re,,eived
$10,(X)0 under paragraph 2 of Section 213(x) of the Act, as well as 61.8% cf
the remaining $90,000 of his award, i.e., $55,170. Thereafter, the addition :l
w35,000 preference added in 1970 through a new paragraph 3 comes into applico-
lion. Under this preference an additional payment of $11,000 to each claimant
has already been coo do, As the funds become available, an additional "non
pro-rata" payment of $24,000 must be made for an aggregate preference wont
t :x100,000.
We believe that claims in excess of $100,000 should not be considered to lie
small claims entitled to preferential treatment. This is particularly true wilier.
claims of such size are considered in the context of the shareholders of General
11'.eetrie. We have nearly 300,000 shareholders who own less than 50 shares
c1 stock, an inveretnient of less than $2,000 at current market. There are rot:ghly
200,000 shnreholr'ers who own between 50 and 300 shares, an investment between
$2,000 and x20,000. Fairness and equity between individuals, whether they be
corporate shareholders or direct claimants, require that preference to individuals
t wt be extended beyond the full compensation to claimants with awards of nln
to $100.000. which is already provided for.
Very truly yours,
W'ir_AT,TRa H. GLASS.
Counsel.
S r:mfor Brim xcT;, nnrl. then there foil nrs a list of letters beginning
w th Mr. Ernest U. Lorman of New York City and ending with Nor-
Ill.),iodic of Sil 'or Spring, Md., which Will be put in the record with-
out objection.
(The letters referred to follow:]
ERNRST H. T.ORMAN,
New York N.Y., July 25,1974.
Hon. JAMES 0. ILASTT.AND,
11. S. Senate,
Washington, D.C.
IISAR SENATOR FASTT.AND: I am asking your support of S. 1725, as amended, a
bill to amend the War Claims Act of 1945, which has been reported by the House
Committee on Interstate and Foreign Commerce and is at present: pending before
the House Riles Committee'. This bill originated in the Senate Judiciary Com-
mittee and passed the Senate on October 8, 1973. The House Committee on Inteer-
staTe and Foreign Comrnerre reported this bill on July 3. 1974. and added all
amendment to the War Claims Act previously embodied in two House bills, H.R.
4870 and 11.11. 1729, giving individual II.S_ citizens who are awardholders under
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that Act a priority over corporate awardholders in further payments from the
War Claims Fund in compensation for losses suffered in World War II. The Sub-
-committee on Commerce and Finance unanimously approved it during compre-
hensive hearings.
I am an individual awardholder claiming payment for the loss of two fully
equipped factories and adjacent property. I received an award from the Foreign
Claims Settlement Commission to compensate me for this loss, but unless S. 1728
is passed, most of the funds available for payment of this award will go instead
to big corporations, such as Exxon and IT&T, rather than to individuals such as
myself. Since the War Claims Fund-consisting entirely of enemy assets seized
by the United States Government during World War II, and containing no funds
appropriated by Congress-is too small to pay all awards fully, a substantial
part of my loss will never be paid unless S. 1728 is enacted.
There are two important reasons for this legislation :
(1) The large corporate awardholders lost a minute fraction of their corporate
assets, while individual U.S. citizens, such as myself, lost homes, personal belong-
ings, and small family businesses, in short, all they had.
(2) The corporations could claim millions of dollars in tax deductions under
a special provision of the Tax Code as a result of their losses, while individuals
were unable to take advantage of these deductions. Thus, between their tax deduc-
tions and the large payments already received by corporations under the War
Claims Act, the corporate awardholders have recovered a much greater part of
their loss than have individual U.S. citizens.
I do hope that S. 1728 will be passed by the House very soon, as I am no longer
young and have already waited a long time for this final settlement. I therefore
urge you to give your active support in assuring that the Senate will concur in
the House amendment of S. 1728 when the bill returns to the Senate.
Sincerely yours,
Ilan. JAMES O. EASTLAND,
U.S. Senate, Washington, D.C.
DEAR SENATOR EASTLAND : This is to ask your support for bill S. 1728 which is
to amend the War Claims Act of 1948, and now pending before the House Rules
Committee. It would amend the War Claims Act to give individual U.S. citizens,
who have been awarded but not fully paid priority over corporate awardholders
in any further payments for losses suffered during World War II. The Subcom-
mittee on Commerce and Finance held comprehensive hearings on this amend-
ment and unanimously approved it.
illy husband is a retired physician, 80 years old, I am 70. I am deriving my
awards from the loss of my private house, and the loss of considerable business
assets. The award was received by the Foreign Claims Settlement Commission to
compensate these losses. Unless S. 1728 is passed a substantial part of my losses
will not be compensated, and the vast majority of the funds available will go
to big corporate awardholders such as Exxon, and ITT. The War Claims Fund
consists entirely of enemy assets seized by the U.S. Government during World
War II, and no funds appropriated by Congress.
The important reasons for this legislation are:
(1) The individual U.S. citizens, such as myself, lost homes, personal belong-
ings, and small businesses. Most individual awardholders lost nearly all they
had.
(2) Corporate awardholders took tax deducations of millions of dollars under
a special provision of the Tax-Code as result of their losses and used and saved
their money over 30 years. The individual awardholders did not have these
advantages. Therefore through their tax deductions and the large payments
already made to the corporations under the War Claims Act the corporate
awardholders have recovered a significantly greater percentage of their loss
than the individual U.S. citizens.
I am hopeful that S. 1728 will be passed by the House in the near future, and
I urge you to do your utmost in assuring that the Senate will concur in the
House amendment of S. 1728 when the bill returns to the Senate.
Thank you very much for your help on this legislation.
Very sincerely yours,
LATHE OSTWALD,
1851E Vallejo Street,
an Francisco, Calif.
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Holl. JAMES EASTLAND,
U.S. Senate,
Washington, D.C.
WAI.rr,R A. MARON,
152 Miil Spring Road,
Manhasset, N.Y., August 21, 1974.
DEAR SENATOR EASTLAND: I understand that the House has approved the
above bill as amended, and am writing to enlist your support when it comes
up for joint action.
I am an individual awardholder, having received my award from the Foreign
Claims Settlement Commission in compensation for the loss of property in Past
Germany.
As you know, the moneys remaining in the War Claims Fund do not suffice
to pay all claims fully; and unless S. 1728 as amended is enacted, by far the
largest part of these funds will go to big corporate awardholders like EXXON
and ITT, leaving a substantial portion of my loss-and the losses of all indi-
vidual awardholders--uncompensated.
As you also know, corporate awardholders (whose losses in any event amounted
to only small fractions of their total assets) have already recovered a con-
siderably larger percentage of their loses than individuals, on basis of cor-
porate tax deductions permitted them in addition to the original War Claims
Fund payments they received.
It would therefore, in my thinking, be no more than fair and equitable that
8. 1728 as amended he made into law, to assist all individual awardholders
such as myself.
Very truly yours,
11011. JAMES O. EASTLAND,
U.S. Senate, IVaslington, D.C.
HEINZ O. WOLFF, M.D.,
112 Sunni/brook Road,
Bronleville. N.Y., July 31, 1974.
DEAR SENATOR : I am writing to ask your support for S. 1728, as amended, a
bill to amend the War Claims Act of 1848, which has been reported by the House
Committee on Interstate and Foreign Commerce and is now pending before the
Douse Rules Committee. This bill originated in the Senate Judiciary Committee
and passed the :Ienlte on Oetober 8, 1973. Tl,e House Committee on Interstate
and Foreign Cummu?er e reported this bill on July 3, 1974, and added an an?end-
ment (previously embodied in two House hills, H.R. 4870 and H.R. 1729) which
would amend the War Claims Act to give individual U.S. citizens under that Act
a priority over ccrporate awardholders in further payments from the War Claims
Fund, for losses Suffered in World Warr II. The Subcommittee on Commerce and
Finance held extensive hearings on this amendment and unanimously approved it.
I received an award for the loss of real property in Germany. but unless S. 1728
is passed the vast majority of the funds available for payment for this award
will go instead to big corporate awardholders such as Exxon and IT&T. Since
the War Claims bund-consisting entirely of cnermy assets seized by the U iited
States Government during World War II is too small to pay all awards, this
means that a substantial part of my loss will go uncompensated unless S. 1728 is
enacted.
There are two main reasons for the proposed legislation:
(1) In contrast to the large corporations who lost a fraction of their
corporate assets, individual U.S. citizens who suffered losses, such as myself, lost
hulnes, personal belongings, and small family businesses. Most of them lost all or
nearly all they h?ed.
(2) The corporate awardholders took large tax deductions, under a special
provision of the Tax Code, as a result of their losses. In(dividuals, however.
could not take tax deductions for their losses. Thus, between their tax deduc-
tions and the large payments already made to corporations under the War
Claims Act. the corporate awardholders have recovered a significantly greater-
percentage of their loss than have individual 11.S. citizens.
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I hope that S. 1728 will be passed by the House in the near future, and I ask
you to take an active role in assuring that the Senate will concur in the House
amendment of S. 1728 when the bill returns to the Senate.
Thank you for your assistance in this legislation.
Sincerely yours,
HEINZ WOLFF.
Hon. JAMES O. EASTLAND, JULY 20, 1974.
U.S. Senate,
Washington, D.C.
DEAR SENATOR EASTLAND: Please support Bill S. 1728. I am a U.S. Citizen,
who has suffered great losses in World War 2. My former residence, personal
belongings and business interests have all been lost. As a senior citizen I will
never be able to recoup these losses. Please help me by supporting Bill S. 1728.
Thank you very much.
(Mrs.) LILLI SAMPSON,
1080 Chestnut Street,
San Francisco, Calif.
NANCY GEPHART,
1777 Stoneh.ouse Lane,
Senator QUENTIN M. BURDICK, Cincinnati, Ohio, AugnNt 10, 1974.
U.S. Senate,
Washington, D.C.
DEAR SENATOR BURDICK: It is my understanding that the Senate will soon
receive the War Claims Act of 1948, bill number S. 1728 as amended. I would
like for the Senate to consider this as soon as possible and to approve S. 1728.
'This bill originated in the Senate on October 8, 1973. The House Committee
on Interstate and Foreign Commerce reported this bill on July 3, 1974 and added
an amendment, previously embodied in two House bills, II.R. 4870 and II.R.
1729, which would amend the War Claims Act to give individual U.S. citizens
priority over corporate claimants in further payments of World War II losses.
The House Rules Committee heard testimony on this issue on July 30, 1974 and
w^as to consider it on August 6, 1974.
I need your support on this bill so that payment to U.S. citizens for World
War II losses can be settled in the near future.
Corporate claimants took millions of dollars in tax deductions for their losses
which individual claimants were not able to take.
My personal interest is a part of Claim W. 9529; decision W. 21512 for a total
of $70,425 dated May 3, 1907 of which $58,040.33 has been paid. This leaves an
unpaid balance of $12,384.67.
This claim is for real estate located in Hamburg, Germany which was bombed
during the war.
The
1943. illy rfather mentioned
as the admiiistra or of herder by m a ea.nd sp nt onsid w ho died in
for many years until his death last year in efforts to receive compensation due
the estate.
I would greatly appreciate your assistance in helping us receive the unpaid
balance due so that the claim can be settled.
Sincerely yours,
WIIITESTONE, N. Y.,
Senator JAMES O. EASTLAND, A24?gn?4t 1,, 1971.
Chairman, Senate Judiciary Committee,
Washington, D.C.:
Urge your support of Senate bill No. S-1728, allowing individual U.S. citizens
to receive awards for losses suffered in World War II under the War Claims
Act of 1948.
RUDOLF ROEVER.
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['telegram l
BEVERLY HILLS, CALIF.,
August 13, 1974.
Senator JAMES O. EASTLAND,
Capitol Hill, D.C.:
I respectfully urge your concurrence in the House amendments to S. 1728.
This would restore priority payments to individual war claimants without use
of appropriate funds and extend benefits to us civilian prisoners held in North
Vietnam.
Sincerely,
HAROLD NEBENZAL.
NEW YORK, N.Y.,
August 13,1974.
Senator JAMES EASTLAND,
Serrate Office Builds:n.7,
Washington, 1).C.:
Please urge the Senate to concur in the House amendment to,S. 1728 adopted
yesterday by a vote of 368 to 17 to provide just compensation to individual U.S.
citizens who suffered losses: in World War II. The bill also provides benefits for
U.S. civilians held as prisoners of war in North Vietnam. vICIiOTAS R. DOMAH.
NEW Yonx, N.Y.,
August 14,1974.
Senator JAMI s EABTLAND,
Senate Of/ice Building,
Washington, D.C.:
As an award holder, 1. urge you to favorably consider and support bill S. 1728
when it comes up for action in the Judiciary Committee.
I3espcCtfull , HENRY H. ARNHOLD.
ST. PETERS)mRG, FLA.,
August 13,1974.
I3otl. JAMES EASTLAND,
Washington, D.C.
Please vote for S. 1728, the purpose of which is to restore to individuals
equality with corporations in their claims for damages sustained in World
Wt l" lI. IT. C. BARREIT.
SILVER SPRING, MD.,
August 26,19""4.
Senator JAMES EASTLAND,
Washington, D.C.
Earnestly solicit your endorsement of pending bill S. 1728 regarding foreign
claims. NORMA JOEVO.
?~nstor J~irl[DrCK. 1 also weilld 1i',.e to include a sfatement of the
s~a,l o~ the ,mate Fir;ance CoIrlmittee Cli the tax ilmPPlications of this
1e,-ri