interest of any private operator or group of operators, vested with control of Pacific transportation with the power of such control to oppress private industry.

We respectfully request this board to recall the pending advertisement; to afford each community having a primary interest in these sales, to point out to the board wherein each separate community is prejudiced by the present specifications and to aid the board in formulating specifications which will preserve and maintain as separate units, the lines heretofore established at Government

expense.

This application involves a decision by your board whether you will adhere to your former practice of protecting each individual line so that communities specially interested may bid, or whether you will depart from that practice and adhere to the present specifications which will enable a monopolistic combination to purchase all three lines to the exclusion of individual communities from the privilege of purchasing.

M. G. TENNENT,

In behalf of Washington citizens who desire to purchase the Puget Sound Line.

Senator MCNARY. In connection with the reading of the so-called protest, I recall that you referred to a letter written to Commissioner Myers by Mr. J. F. Hickey, I think.

The CHAIRMAN. By Mr. Hickey, yes.

Senator MCNARY. I have a copy here of Commissioner Myers's answer, dated January 7, 1928, addressed to Hon. J. F. Hickey, president, Tacoma Chamber of Commerce, which I desire to place in the record following the reading of the protest.

Senator FLETCHER. Would you mind reading that, Senator, to preserve the connection. It is not very long.

Senator MCNARY. It is not long.

The CHAIRMAN. Is that in answer to the telegram or in answer to the letter from Mr. Hickey?

Senator MCNARY. In answer to the telegram.

The CHAIRMAN. You referred to a letter. Would you like to have that letter go in the record also? I think, if I remember a paragraph in it, that Mayor Hickey urged the approval of interchange of ports. I think that is correct.

Senator MCNARY. I think it would be well to amplify the record with that letter. This telegram is as follows [reading]:

Hon. J. F. HICKEY,

President Tacoma Chamber of Commerce,

Tacoma, Wash.

JANUARY 7, 1928.

MY DEAR MR. HICKEY: I have your telegram of January 3 and the various papers that were sent to me in reference to Tacoma's request for recognition as a home port for the line out of Puget Sound.

At the time the original papers were prepared the proposition for Tacoma was inserted in the specifications, but as copies thereof were made it was unintentionally omitted. I was very glad to have you call my attention to this omission. It would have made no difference in the original bid, as the final acceptance of the bid for the advertisement would have corrected any discrepancies that might have existed. I hope the proposition as it now stands in the original contract will satisfactorily meet every requirement.

I am inclosing a copy of the resolution in reference to your statement as to interchange of ports. I am quite certain that you would not raise this question if you understood the condition we are trying to correct. There is never any trouble in reference to outgoing cargo from Puget Sound. That costs $60,000 for a voyage. All the trouble has arisen on incoming cargo. Therefore what we are trying to do is to get some of the incoming cargo that lands in California ports, now being handled by foreign ships, to equalize this loss, so that if a private operator should buy these lines there would be no doubt of a revenue sufficient to pay him a profit. As to the question of monopoly, we have one allocation in the Gulf of more ships that the entire fleet on the Pacific. There is no doubt

in my mind that when these ships are advertised the local communities should make a reasonable bid and agree to reasonable performance, for the community will have the support of the board.

I want you to feel perfectly free to advise me directly at any time in reference to the wants of the community, and I shall be glad to do whatever I possibly can to assist you.

Wishing you a happy new year, and thinking you for your kindness to me while I was in Tacoma, I am,

Yours very truly,

A very excellent telegram.

JEFFERSON MYERS, Commissioner.

I have also, Mr. Chairman, a copy of a letter written by J. F. Hickey, president of the Chamber of Commerce of Tacoma, which I desire to submit for the record, addressed to Mr. T. V. O'Connor, chairman of the United States Shipping Board, dated October 11, 1927.

The CHAIRMAN. That is the one I referred to.

Senator McNARY. Yes; and that I submit for the record.

(The letter referred to is here printed in the record, as follows:) OCTOBER 11, 1927.

Mr. T. V. O'CONNOR,

Chairman United States Shipping Board,

Washington, D. C.

DEAR MR. O'CONNOR: This city is interested in the disposition of the AmericanOriental Line freighters, now operating from Seattle to the Orient, and as we understand final decision as to offering these vessels for sale will be taken at a meeting of the board to be held on the 20th of this month this chamber submits the following suggestions for your consideration:

You already have before you a brief prepared by this chamber asking that these vessels be allocated to a Tacoma company for operation and giving statistics as to the volume of business originating at this port. We further call your attention to the fact that the most desirable ships in the line, the passenger vessels operating in the fleet, have already been sold to the present operators of the freight line, and that, on account of the long operation of these vessels by the Dollar interests, whatever of good will and prestige there was attached to the line, both freight and passenger, has passed to the Dollar interests with the sale of the passenger ships, and that when these freighters are taken over by new operators it will be just the same as establishing a new line, as it will be necessary for the new operators to demonstrate that the freighters can be made to pay, and it is only fair that they have sufficient time in which to do this. For that reason this chamber believes that a fairer proposition would be to allocate these ships to a Tacoma company for operation for a certain period, until it can be demonstrated that the line can be made self-sustaining and that when this fact is established the ships should be offered for sale. We understand this has been the universal policy of the board, and we can see no reason for variation in this case.

By selling the passenger ships and good will of the line, you have left only these freight vessels which are rapidly becoming obsolete and therefore of doubtful value.

When these vessels are offered for sale, Tacoma interests desire to bid for them, but we feel, for reason above stated, that it will be very difficult to arrive at a fair value of the line from an earning standpoint.

Further, this chamber believes that it would be unfair and unwise to demand or stipulate for a guaranty period of operation longer than five years. This, as we understand, has been the period exacted so far in all sales made by the board for lines most desirable, and we can see no reason for exacting a longer period on these Pacific lines.

Another provision we desire to urge is greater freedom of ports on both shores of the Pacific. These vessels should be allowed the entire range of ports in the Orient and also allowed to compete at all Pacific ports on the American side. We urge this because the foreign lines, with which we must compete, enjoy that privilege, and if these lines are to be made to pay they should be given every leeway to that end.

In this connection we suggest there are many independent shipping men, nót connected in any way with the present operation of the merchant fleet, whose opinions would be very valuable to the board, if not already obtained.

We submit these matters for the consideration of your honorable body in a spirit of helpful cooperation and in the interest of the continued operation of an American merchant marine.

Yours very truly,

TACOMA CHAMBER OF COMMERCE,
J. F. HICKEY, President.

The CHAIRMAN. I think I should say at this time, too, that I received telegrams from some of the people there, asking that they have an opportunity to appear before the board and present their objections.

I took this matter up as soon as I could after I got it, with Commissioner Myers, he being the commissioner from the Pacific coast up in our territory, and I urged that the preparation of the specifications should be postponed until these people had an opportunity to come down. The commissioner did not think that was necessary, but assured me that the interests of these people would be fully protected when the bids came in, and that was all that was done.

Mr. Grosscup is here appearing as the attorney representing these people, and he will present these matters fully to the committee. Senator FLETCHER. You mean the Puget Sound people?

The CHAIRMAN. Yes; the Puget Sound people. He just appears for the people of Puget Sound in regard to the Puget Sound lines.

66

STATEMENT OF BENJAMIN S. GROSSCUP, ESQ.

Mr. GROSSCUP. Mr. Chairman and gentlemen of the committee, as stated by Mr. Tennent's protest, I was employed by a group of Puget Sound citizens, of whom Mayor Tennent was one, represented by a committee of so-called underwriters desirous of purchasing the line designated in this advertisement "American Oriental Mail Line," which is a line operated out of Puget Sound to north and south China. This employment was made about the 28th of December.

The CHAIRMAN. Judge Grosscup, it is suggested that the advertisement should be put in at the beginning of your statement. Have you the advertisement?

Mr. GROSSCUP. I have it here.

The CHAIRMAN. If you will hand it to the reporter, he will insert it. Mr. GROSSCUP. The contract, I suppose, is the important thing. The CHAIRMAN. Yes.

Mr. GROSSCUP. Very well.

The CHAIRMAN. Perhaps you had better put the proposed terms of sale in the record. You can hand it to the reporter later, and he will put it in.

Mr. GROSSCUP. I want to use it now for the purposes of my statement.

Senator FLETCHER. How many boats are there in that line, Judge? Mr. GROSSCUP. In the Puget Sound line? Seven.

Senator FLETCHER. Freight boats?

Mr. GROSSCUP. All cargo boats of about 9,000 tons.

This group of proposed purchasers had underwritten a commitment to subscribe for the capital of the proposed corporation to the extent

of $500,000 paid-in capital, that being the amount that it was estimated would be desirable for the purpose of consummating the purchase, paying 25 per cent of their bid down, giving the necessary bond that the contract provides for, and having operating capital. They also porposed that this corporation would then enter into a contract in accordance with the usual form. They were very earnest in their desire to purchase, but did not have before them the specifications.

A day or two later, after my employment, the newspapers of the Puget Sound country and also Oregon published a statement that the Shipping Board had reversed its policy of selling established lines under protection from competition of other purchasers of Shipping Board boats, and that the Shipping Board had ordered specifications which would allow the purchasers of any one of the lines to enter and compete for the potential cargo of other lines. That was the statement in the newspapers. Hence, the telegrams which have been embraced in Mr. Tennent's statement were sent.

It was hoped that the objectionable features of the proposed sale, if there were any objectionable features, on examination of the tentative specifications, might be eliminated so that this group of proposed purchasers would be able to purchase. Therefore, the telegrams were sent, with assurance that one of their representatives would be sent on immediately to confer with the board.

What occurred in the board I have no information and no way of stating. However, on the 4th of January-these telegrams were sent on the 2d-the board met and ratified and approved the existing specifications, which are now the subject of this controversy, without giving any hearing.

I came to Washington under my employment by this underwriting committee. I secured a copy of the so-called specifications, which are in the form of contracts to be entered into by the purchaser to whom the award is made. That is the method that the specifications set up. I examined these specifications or these contracts in the hope and expectation that I might find a way of advising my clients that they could purchase, knowing that that was their desire and intent, and not to find any captious fault with the specifications. I found the specifications were practically all in the same language as far as the general details of the contract go, but vary somewhat in particulars.

Article 8, on page 8 of these specifications, sets forth the service that is to be performed by each of these several lines as a minimum service, and affirmatively gives the right to the purchaser of each of the so-called lines to operate any surplus tonnage into the lines of any other service.

The CHAIRMAN. Judge Grosscup, as I recollect this protest, it indicates that prior to that time specifications had at least tentatively been adopted that were satisfactory to the people of Puget Sound. Will you point out the difference?

Mr. GROSSCUP. Along about, I think, the 28th or 29th of November, a resolution was passed by the Shipping Board authorizing or ordering specifications which would allow the vessels of all of these lines to go into the foreign ports for the purpose of delivering and getting cargo, but forbidding the purchasers of any one of the lines going into the domestic port of the other line purchased. That was satisfactory.

The CHAIRMAN. Did not these specifications authorize the Oregon line to go into Coos Bay and Grays Harbor?

Mr. GROSSCUP. Yes; it did that. They were declared to be independent ports.

The CHAIRMAN. That was my recollection. Our people had no objection to that.

Mr. GROSSCUP. None at all. The objection was that this deviation of the ships into American ports by any one line to get cargo or deliver cargo into that territory would bring about a state of competition so that the longest purse would finally take all of the lines on the Pacific. Senator SACKETT. Does your objection go as much to delivering cargo as it does to originating cargo?

Mr. GROSSCUP. Rather more particularly to incoming cargo. However, it is objectionable in both respects.

In the course of this examination I first went to the board and ascertained what the existing, established services are as carried out by existing operation. Then I came to article 8 of the proposed contract; and I find that in article 8 there is a complete disregard of existing services or existing established lines, but that the specifications are ordered to sell a line which has no reference at all to existing services to sell a line constituted in the manner that follows. So we must always bear in mind, in connection with my opinion in this matter, that the specifications do not offer for sale an established line as now operated, but do offer for sale these ships to be operated on a line which may or may not differ from the present established lines, and that under the contract the purchaser is not required to maintain the present established lines he may do so, but he is not required to do so—and that, such being the language of the contract a purchaser will not be subject to any penalty or obligations if he performs the contract set out in these specifications and is not required to perform the contract as the line is now operated and established. This becomes important because, as you will see as I proceed, the specifications say

A line as a common carrier of freight with said vessels, and/or such substitutions therefor as are in here provided between the United States Coast ports and the ports of New Zealand, Australia, California ports, and the ports of Japan and the Philippines.

A service, or a line. Then follows in detail the line that is proposed. Now coming to the California service, which to us is the most objectionable, it is provided that—

Not less than 12 such voyages per annum shall be by monthly sailings.

Senator COPELAND. Judge, will you excuse me just a minute? Mr. Chairman, will you explain to us in a word what is the controversy between the two groups?

The CHAIRMAN. There are three freight lines across the Pacificone from San Francisco, one from Portland, and one from Puget Sound. Those are maintained separately. It is proposed to sell these three lines--

Senator COPELAND. All three of them?

The CHAIRMAN. All three of them; and, under the contention of Judge Grosscup and the Tacoma people, under the terms of the contract they could all be bought by one organization or one company, and practically the services changed so as to let the vessels run on a