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Renegotiation Board (1)
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4520891
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Renegotiation Board (1)
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Philip W. Buchen Files
Philip Buchen's General Subject Files
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The original documents are located in Box 59, folder "Renegotiation Board (1)" of the
Philip Buchen Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald R. Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
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domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Some items in this folder were not digitized because it contains copyrighted
materials. Please contact the Gerald R. Ford Presidential Library for access to
these materials.
Digitized from Box 59 of the Philip Buchen Files at the Gerald R. Ford Presidential Library
THE NEGOTIATION UNITED AMERICA OF STATES BOARD
WASHINGTON, D.C.
OFFICE OF THE CHAIRMAN
July 20, 1976
Dear Mr. Buchen:
I appreciate very much the time you took
yesterday to discuss our situation. I
am trying to get some additional informa-
tion, per our discussion, and will forward
this to you as soon as possible.
Sincerely,
R. C. Holmquis
Chairman
Honorable Philip W. Buchen
The White House
TOROS - LIBRARY 07VU30
The bank we're interested in is the
Washington National Bank of Tacoma or
the Pacific National Bank in Seattle.
Boeing Sold 11 Jets to Pakistan Airlines
Using Agent With Family Tie to Buyer
By HERMERT G. LAWSON
stan Airlines in 1967 in a political upheaval
And A. RICHARD IMMEL
and was rehired In 1973. he says In that pe.
Biell RepartersofTHE Wall STREET JOCRNAL
rind of Mr. Jamall's absence. Borne lost a
SEATTLE Boeng Co. beginning in the
major unles battle to McDonnell Donglas
early 1000s. sold a large fleet of jettiners to
Corp. to supply jumbo jets to Prinstan I
Pakistan International Airlines Boeing's
Aziz Jamall. also reached in Karachl. do.
salesmen were helped by a local representa.
clined to discuss his relationship with
live under contract to the Seattle company.
Boring until he received clearance from the
a Pakistant named Aziz Jamall.
company. Subsequent efforts to interview
was
You may wish to substitute this page in
the book for the one with my name on it.
THE RENEGOTIATION BOARD
REPORT OF:
X
Telephone Conversation
Personal Interview
Conference
X
Headquarters
Regional Board
Wednesday, July 14, 1976 - 8:45 a.m.
(Date and Time)
Lockheed Aircraft Corporation
(Contractor's Name)
(Asgmt. or LPI No.)
FYE December 31, 1972
(Contractor's Address)
(F/Y/E)
(Contractor's Tel. No.)
Frederick Neuman, Deputy Director, DCAA
NAME OF ALL PERSONS CONFERRING:
Goodwin Chase, Board Member
REPORT OF DISCUSSION:
Mr. Frederick Neuman, Deputy Director, DCAA, advised me by
SEAL FORD LIBRARY
telephone this morning that my request for his auditors to return to
Lockheed, should the contractor consent, has been denied.
Mr. Neuman advised the request was taken up with Assistant
Secretary of Defense McClary.
Referring to the Jack Anderson column of July 9th, Neuman said
the decision was based on the desire that the DCAA should "lay low."
Mr. Neuman assured me that in the event any representative of
the Board makes a Lockheed plant visit, their resident auditors will be
pleased to cooperate in any way they can, but such cooperation would
be limited to information already developed.
Mr. Neuman considered my request that DCAA re-enter Lockheed
as "informal" and indicated he would appreciate our not considering it
a formal request.
I hastened to thank Mr. Neuman for the contribution he and DCAA
have made for the Board and assured him that my request was indeed
informal.
Charg.
Interviewer(s) Goodwin Chase
(Use other side or separate blank sheet for additional space if needed)
Board Member
Form RB 68
4-67
(over)
cc: Board Members, Office of Financial Analysis, General Counsel, H. Miller,
J. O'Connor, T. Driscoll, Central Files
This' is the memo from the files at DCAA
which should go along with the memo
written in our office.
DD
16 July 1976
MEMORANDUM FOR RECORD
SUBJECT: Renegotiation Board
On 9 July 1976, Mr. Goodwin Chase spoke to me on two occasions in
reference to our assist audit for them on Lockheed and the article
appearing in the Washington Post by Jack Anderson. During these con-
versations he advised that auditors representing the Board (4 in number)
made some efforts to continue the audit started by DCAA with regard to
the 1972 Renegotiation submissions of Lockheed. Additionally, the
Board requested Lockheed to furnish information on this same subject
within a 30-day timeframe which had ended on 13 June 1976. Lockheed
came in for a 30-day extension which was about to expire on 13 July 1976,
and that only very recently they were asking for an additional 30 days
in which to supply the requested information. Mr. Chase advised that
he planned to recommend to the Board that this latest extension be
granted with the provision that Lockheed make their books and records
fully available for audit. This referred to Lockheed's earlier denial
of access to their records by DCAA. Finally, he informally asked
whether DCAA would resume the audit if Lockheed was amenable to this
arrangement.
On 14 July 1976, Mr. Chase again called me inquiring as to our
willingness to resume audits. At the same time, he made it very clear
that his inquiry was completely informal and was not to be regarded as
a request coming formally from the Board. Having previously discussed
this with Secretary McClary on 12 July 1976, I advised Mr. Chase that
we believed it would be much more appropriate for the Board to continue
the balance of the audit examination with the four auditors already
assigned to this case by the Board. I assured Mr. Chase that if the
Board auditors needed assistance the DCAA personnel staffs at Lockheed
sites would be cooperative in furnishing information from their files.
Mr. Chase accepted this view and advised that he does not plan to make
a formal request on DCAA.
Immediately following my discussion I called the regional manager,
Alex Soll, who through the Lockheed contract audit coordinator will
alert the other audit sites to expect requests for information from
auditors representing the Renegotiation Board.
Daman FREDERICK NEUMAN
Deputy Director
11. FORD VIBRARY
REPUBLIC CORPORATION (1969)
NEWPORT NEWS SHIPBUILDING AND DRYDOCK COMPANY (1969)
On June 29, 1976, the Renegotiation Board voted
unanimously to defer action on the above two cases to permit
comment by the contractors involved.
On July 7, 1976, Mr. Chase moved that the above action
be rescinded, but the motion failed for lack of a second.
On July 13, 1976, Mr. Chase asked that a statement (see
Minutes attached) be made a part of the minutes. This state-
ment drew almost immediate response from all other Board
Members, as well as certain staff members who were present
at the Board Meeting. (See Exhibits attached to the Minutes.)
2. FORD
The Holmgual
REPUBLIC CORPORATION
1900 AVENUE OF THE STARS
3R
SUITE 2700
CENTURY CITY
RECEIVED
CALIFORNIA 90067
TEL: (213) 553-3900
JUL 15 8 11 AM'76
K. EUGENE SHUTLER
Vice President and General Counsel
THE RENEGATION ON BOARD
July 12, 1976
Mr. J. S. Lieberman, Jr.
Acting Director
Office of Financial Analysis
The Renegotiation Board
Washington, D. C. 20446
Re: Renegotiation Proceedings
Republic Corporation
Fiscal Year Ended October 31, 1969
Dear Mr. Lieberman:
Your letter of July 9 addressed to me arrived this morning.
I have consulted by telephone with Harold Gold, Esq., who
represents us in matters before The Renegotiation Board.
He has suggested that both his schedule and the extreme
complexity and age of the facts regarding this matter
make it impossible to meet your deadline of July 23.
I therefore request that we be permitted until August 15
to respond to your letter.
Sincerely yours,
C.Cy-
KES:1b
CC: David Anthony, Esq.
Erv Bolks
Harold Gold, Esq.
BENAU N. FORD LIBRARY
Mr. Holmguse
THE RENEGOTIATION BOARD
REPORT OF:
XX
Telephone Conversation
Personal Interview
Conference
X
Headquarters
Regional Board
7-13-76 and 7-15-76
(Date and Time)
Newport News Shipbuilding & Drydock Company
13589
(Contractor's Name)
(Asgmt. or LPI No.)
(Contractor's Address)
(F/Y/E)
804-380-2700
(Contractor's Tel. No.)
NAME OF ALL PERSONS CONFERRING:
W. H. Smith, Comptroller & Treasurer, Newport News Shipbuilding & Drydock
REPORT OF DISCUSSION:
J. S. Lieberman, Jr., Acting Director, Office of Financial Analysis
On July 13, Mr. Smith called in answer to our letter of July 9
regarding the rescission of the special accounting agreement. He said
that the contractor would like to arrange a meeting to talk about the
proposal to put them on the completed contract method. He said that the
IRS regulations effective last January, pertaining to long term contracts,
now permit inclusion of period costs, including sales and pension expenses,
rather than those costs applicable to the contract. As a result, he
indicated that they would have improperly shown a very large loss on a
contract for two cruisers. These were delivered in 1974 and final settlement
was made in 1976. He suggested that the only equitable method of accounting
was to use final settlement as the basis for accounting.
After Mr. Smith consulted his accountant, Jerry Walker of Arthur
Andersen & Co., on July 15 we firmed up a meeting date of Thursday, July 29,
at 9:00 a.m. This date is convenient for the ERRB, Division of Accounting,
our Accounting Section and the Office of General Counsel.
J.S. Lieberman, Jr.
Interviewer(s)
(Use other side or separate blank sheet for additional space if needed)
FORD JOBARY
Form RB 68
4-67
(over)
NO. 1997
THE RENEGOTIATION BOARD
Minutes of Meeting of
Tuesday, July 13, 1976
2000 M Street, N. W.
Washington, D. C.
10:00 A. M. - 10:30 A. M.
The following members were present:
R. C. Holmquist, Chairman
Rex M. Mattingly
Goodwin Chase
Norman B. Houston
C. U. Sylvester
The following were also present:
Kelvin H. Dickinson, Secretary to the Board
John B. Davis, Special Assistant to Mr. Chase
Henry M. Chick, General Counsel
Donald S. Grenough, Director of Operations
W. H. Harrison, Director, Office of Screening,
Compliance and Exemptions
George Lenches, Director, Office of Planning
and Development
Jerome S. Lieberman, Jr., Acting Director,
Office of Financial Analysis
E. Richard Rhodes, Director, Office of
Administration
1.
Approval of Minutes
The minutes of the meeting held July 7, 1976
were approved.
1
THE RENEGOTIATION BOARD
Tuesday, July 13, 1976
2.
Conco, Inc. (1970)
Class A Clearance - Approved
There was submitted to the Board by the Acting
Director, Office of Financial Analysis, the Review of
Determination, dated July 9, 1976, together with
attachments, including a proposed Final Opinion
(Exhibit A), relative to CONCO, INC., fiscal year ended
December 31, 1970. The Acting Director, Office of
Financial Analysis, recommended that the proposed Final
Opinion be modified by inserting "on the above and"
between the words "Based" and "on" in the last para-
graph.
Upon the motion of Mr. Chase, seconded by Mr.
Houston, the Board approved a clearance in the subject
case for the fiscal year indicated, as recommended by
the Eastern Regional Renegotiation Board and concurred
in by the Acting Director, Office of Financial Analysis,
and the Final Opinion, as modified (Exhibit B). A
Clearance Notice will be issued to the contractor,
together with the Final Opinion.
3.
Pressed Steel Tank Co., Inc. (1971)
Class A Clearance - Approved
There was submitted to the Board by the Acting
Director, Office of Financial Analysis, the Review of
Determination, dated July 9, 1976, together with
attachments, including a proposed Final Opinion
(Exhibit C), relative to PRESSED STEEL TANK CO., INC.,
fiscal year ended December 31, 1971.
Upon the motion of Mr. Sylvester, seconded by
Mr. Houston, the Board approved a clearance in the
subject case for the fiscal year indicated, as recom-
2
THE RENEGOTIATION BOARD
Tuesday, July 13, 1976
mended by the Western Regional Renegotiation Board
and concurred in by the Acting Director, Office of
Financial Analysis, and the Final Opinion. A Clear-
ance Notice will be issued to the contractor, together
with the Final Opinion.
4.
Exemptions - ACE List #2955
The Board approved the recommendations of the
Office of Screening, Compliance and Exemptions, set
forth in ACE List #2955 (Exhibit D).
5.
The Carborundum Company (1975)
Late Application for Commercial Exemption -
Granted
There was submitted to the Board the memorandum,
dated July 8, 1976, of the Director, Office of Screen-
ing, Compliance and Exemptions, subject: "Request for
Permission to Make Untimely Filing of Application for
Commercial Exemption, The Carborundum Company, 12/31/75 -
LPI No. 12197" (Exhibit E).
The Board approved the recommendation of the
Office of Screening, Compliance and Exemptions, that
the Board grant permission to the contractor to make
an untimely filing of an Application for Commercial
Exemption for the fiscal year indicated.
6.
Republic Corporation (1969)
Newport News Shipbuilding and Drydock Company
(1969)
Reference was made to the actions of the Board
on June 29, 1976 (Minutes No. 1995-5 and 8), and on
3
THE RENEGOTIATION BOARD
Tuesday, July 13, 1976
July 7, 1976 (Minutes No. 1996-9), with respect to
the above contractors.
Mr. Chase made the following statement which
he requested be made a part of the minutes:
"The following is a summary of my statements
made at the July 7, 1976 Board Meeting and
submitted to the Secretary, which was deleted
from the Minutes by direction of the Chairman.
I consider the reasons important for they
support the validity and purpose of my motion
which failed for lack of a second.
"On June 29, 1976, moments before the Board
Meeting, Mr. Chick, at that time Director,
Office of Financial Analysis, appeared in my
office to notify me of his intention to recom-
mend to the Board that a 'courtesy' notice
be given to the following contractors before
recommendations are implemented as follows:
1. Agenda Item #5, Republic Corporation,
FYE 10/31/69 - Recommendation: Office
Directors, General Counsel and staff
unanimously recommended that the Board
withdraw for valid and sufficient evi-
dence its Clearance Without Assignment
for the subject year.
2. Agenda Item #8, Newport News Shipbuilding,
FYE 12/31/69 - Recommendation: The Eastern
Regional Renegotiation Board, Office Di-
rectors and staff unanimously recommended
that the Special Accounting Agreement,
dated February 23, 1973, for the 1969 year
and subsequent years for valid and suffi-
cient evidence be rescinded.
4
THE RENEGOTIATION BOARD
Tuesday, July 13, 1976
"My June 29th vote authorizing 'courtesy'
notification to the contractor was on the
presumption that such notice had heretofore
been the practice of the Board. Subsequently,
I found no source where any Clearance With-
out Assignment had been withdrawn or Special
Accounting Agreement rescinded wherein a
prior 'courtesy' notice had been transmitted
as a favor to the contractor.
Note: Subsequently, the so-called 'courtesy'
notice became by Board Motion to be 'comments'
and 'reaction' of the contractors.
"I expressed the opinion that a precedent is
being established not in the interest of the
renegotiation process. I briefly reviewed
with the Board the unanimous and unqualified
recommendations of Office Directors, Region,
General Counsel and professional staff that
the Clearance Without Assignment be with-
drawn (Republic), and that the Special Ac-
counting Agreement (Newport News) be re-
scinded. I stated that the recommendations
were supported by the weight of the evidence.
(See details in formal recommendations.)
"Mr. Chick, at the request of Mr. Burkhalter,
Acting General Counsel, called to my attention
that Roderick Hills, Chairman of the Securities
and Exchange Commission, was formerly attorney
and Chairman of Republic Corporation. I asked
if there was any significance to the reference
of Mr. Hills. I was advised there was none.
5
THE RENEGOTIATION BOARD
Tuesday, July 13, 1976
"Mr. Chick was asked the question if anyone
had exerted influence on him to amend his
recommendation. Mr. Chick responded that Mr.
Sylvester earlier requested that he (Chick)
recommend to the Board that the contractors
be given the opportunity to comment and react
to the unanimous recommendations (of Office
Directors, General Counsel, Regions and staff)
before the Clearance Without Assignment be
withdrawn (Republic) or the Special Account-
ing Agreement be rescinded (Newport News).
Mr. Chick concluded that he would have done
that anyway.
"I pointed out that the notice letters had
not yet been mailed to the contractors, where-
upon I placed my motion before the Board,
which follows:
'In view of the foregoing, I move that
the Board reconsider its actions of
June 29th, directing the Office of
Financial Analysis to obtain the
Republic Corporation's reaction to
the recommendation of the Office of
Financial Analysis and the General
Counsel that the contractor's Fiscal
Year Ended 1969 Clearance Without
Assignment be withdrawn and further,
that the Board notify the contractor
that the Clearance Without Assign-
ment has been withdrawn and the case
is being assigned.
6
THE RENEGOTIATION BOARD
Tuesday, July 13, 1976
'The motion further provides that
the Board reconsider its action of
June 29th, directing the Office of
Financial Analysis to solicit New-
port News Shipbuilding and Drydock
Company, Fiscal Year Ended 1969
response to the recommendation of
the Eastern Regional Board that the
Special Accounting Agreement of Feb-
ruary 23, 1973 be rescinded, and
further, that the Board notify the
contractor that the Special Account-
ing Agreement has been rescinded.'
"After discussion by the Board and staff, the
motion failed for lack of a second."
The Chairman stated that he will submit a mem-
orandum commenting on certain assertions in
Mr. Chase's statement which will be appended to the
minutes (Exhibit F) and noted the right of the
other members of the Board to submit such memoranda.
Attached are memoranda setting forth the views of
Messrs. Mattingly, Houston and Sylvester (Exhibits G,
H and I, respectively).
At the request of Mr. Mattingly, staff members
were invited to prepare statements of their comments
on the aforesaid actions of the Board on June 29 and
July 7, 1976, which statements will be appended to
the minutes. Attached are statements by Messrs.
Chick, Grenough, Harrison and Lieberman (Exhibits J,
K, L and M, respectively).
7.
Adjournment
The meeting adjourned at 10:30 A. M.
7
THE RENEGOTIATION BOARD
Tuesday, July 13, 1976
8.
Final Actions Eliminating Excessive Profits
Final actions taken at this meeting regarding
elimination of excessive profits are as follows:
Agreements
None
Unilateral Orders
None
KliNDich
Kelvin H. Dickinson
Secretary
8
Exhibit
1997-6
EXHIBIT F MINUTES OF BOARD MEETING, JULY 13, 1974
Following are comments regarding Mr. Chase's statement, dated
July 9, 1976, which he submitted for the Minutes as a summary
of his statements at the July 7, 1976 Board Meeting:
1. I did not direct that anything be deleted from the
Minutes as he indicates. So that the record is clear, I was
advised by the Secretary's Office that Mr. Chase wanted to
substitute his own version of the Minutes in place of those
which had been prepared by Mrs. Maxine Morrell who acted as
Secretary for the July 7 Board Meeting. Attached are copies
of both "versions" showing clearly the Secretary's handwritten
notes on each, which read "My version," on her own Minutes,
and, "Mr. Chase's version," on the Minutes Mr. Chase wanted
to substitute. When asked which version to use, I advised Mrs.
Morrell that, in my opinion, no Board Member, including myself,
should tell the Board Secretary how to write the Minutes or try
to influence what goes into them; that when the Minutes are
"green-sheeted" to all Board Members, they then have ample
opportunity to recommend corrections.
2. The use of the term "moments" in the second paragraph
does not seem appropriate. Mr. Chase, at the Board Meeting,
said that the elapsed time before the Board Meeting was about
20 minutes. In any event, Mr. Chase had ample opportunity to
express any objection he may have had to Mr. Chick's proposed
action.
3. With regard to Mr. Chase's vote on June 29, in the
case of Republic Corporation (1969), the motion was to defer
the matter until July 27, 1976, and direct the Office of
Financial Analysis to obtain the contractor's reaction to the
fecommendation by the Offices of Financial Analysis and General
Counsel that the clearance without assignment be withdrawn;
and in the case of Newport (1969), the motion was to defer the
matter until July 27, 1976, and direct the Office of Financial
Analysis to solicit the contractor's response to the recom-
mendation by the Eastern Regional Renegotiation Board that the
special accounting agreement be rescinded. Mr. Chase voted in
favor of both motions. What Mr. Chase voted for is a fact.
What he may have had in mind at the time, such as authorizing
"courtesy" notification, is immaterial, particularly since he
did not ask that the motion be amended. Mr. Chase even asked
that the motion before the Board be repeated so that he might
be sure he understood it.
FORD
STATES
- 2 -
4. Mr. Chase's note which reads "Subsequently, the
so-called 'courtesy' notice became by Board Motion to be
'comments' and 'reaction' of the contractors" implies that
the intent of Mr. Chick's recommendation was altered when
the motion was made. This is not true as evidenced by Mr.
Chick's memorandum dated July 6, 1976 (copy attached).
5. On page 2 of Mr. Chase's memorandum, he refers to
a conversation between Mr. Chick and Mr. Sylvester. It is
my recollection that Mr. Chick was asked why he changed his
mind, not whether there was any influence exerted on him by
Mr. Sylvester. On the other hand, Mr. Chick did say that he
talked to Mr. Moreland, a member of his staff, and that this
conversation had some influence on his taking the action that
he did. Mr. Chick subsequently volunteered that Mr. Sylvester
called him about the same matter, but I recall no mention of
any request being made by Mr. Sylvester,
R. C. Holmquist
Chairman
Attachments
Foan
my versions
THE RENEGOTIATION BOARD
Tuesday, July 7, 1976
Republic Corporation (1969)
Newport News Shipbuilding and Drydock Company
1969
Mr. Chase made a motion that the Board reconsider its
action of June 29, 1976, directing the Office of Financial
Analysis to obtain the reaction of Republic Corporation, fiscal
year ended October 31, 1969, to the recommendation by the Offices
of Financial Analysis and General Counsel that the Clearance
Without Assignment issued to Republic Corporation be withdrawn,
and to solicit the response of Newport News Shipbuilding and
Drydock Company, fiscal year ended December 31, 1969, to the
recommendation by the Eastern Regional Renegotiation Board that
the Special Accounting Agreement dated February 23, 1973, be
rescinded, and that the Board adopt the recommendations of the
staff to withdraw the Clearance Without Assignment and rescind
the Special Accounting Agreement.
After a lengthy discussion by the Board and staff, the
motion failed for lack of a second.
m Chase's version
THE RENEGOTIATION BOARD
Tuesday, July 7, 1976
Republic Corporation (1969)
Newport News Shipbuilding and Drydock Company
1969
Mr. Chase stated that on June 29, 1976, moments before the
Board Meeting, Mr. Chick, Director, Office of Financial Analysis,
appeared in his office to notify him of his intention to recommend to
the Board that a courtesy notice be given to the following contractors
regarding:
1. Agenda Item #5, Republic Corporation, FYE 10/31/69 -
Western Regional Renegotiation Board and Statutory Board staff recom-
mendation that the Board withdraw its Clearance Without Assignment for
the subject year.
2. Agenda Item #8, Newport News Shipbuilding, FYE 12/31/69 -
Eastern Regional Renegotiation Board and Statutory Board staff recom-
mendation that the Special Accounting Agreement, dated February 23, 1973,
for the 1969 year and subsequent years be rescinded.
Mr. Chase stated that his June 29th vote authorizing "courtesy"
notification to the contractor was on the presumption that such notice had
heretofore been the practice of the Board. Subsequently, he found no
source where any Clearance Without Assignment had been withdrawn or
Special Accounting Agreement rescinded wherein a prior courtesy notice
had been transmitted to the contractor. He reviewed the unanimous
recommendations of Office Directors, Regions, General Counsel and
professional staff that the Clearance Without Assignment be withdrawn
in the instance of Republic Corporation, and that the Special Accounting
Agreement in the instance of Newport News Shipbuilding and Drydock
Company be rescinded. He stated that the recommendations were supported
by the weight of the evidence.
Mr. Chick, at the request of Mr. Burkhalter, Acting General
Counsel, called to Mr. Chase's attention that Roderick Hills, Chairman
of the Securities and Exchange Commission, was formerly attorney and
Executive Officer of Republic Corporation. Mr. Chase asked if there was
any significance to the reference of Mr. Hills. He was advised there
was none.
Mr. Chase said, "In view of the foregoing, I move that the Board
reconsider its actions of June 29th, directing the Office of Financial
Analysis to obtain the Republic Corporation's reaction to the recommendation
of the Office of Financial Analysis and the General Counsel that the con-
tractor's Fiscal Year Ended 1969 Clearance Without Assignment be withdrawn
and further, that the Board notify the contractor that the Clearance Without
Assignment has been withdrawn and the case is being assigned.
The motion further provides that the Board reconsider its action of
June 29th, directing the Office of Financial Analysis to solicit Newport
News Shipbuilding and Drydock Company, Fiscal Year Ended 1969 response
to the recommendation of the Eastern Regional Board that the Special
- 2 -
Accounting Agreement of February 23, 1973 be rescinded, and further,
that the Board notify the contractor that the Special Accounting Agreement
has been rescinded."
After a lengthy discussion by the Board and staff, the motion
failed for lack of a second.
TOSE
- 3 -
July 6, 1976
Republic Corporation
FYE 1969
and
Newport News Shipbuilding and
Drydock Company
FYE 1969 and subsequent
I changed the recommendation with respect to these two
companies at the Board meeting on June 29th from that
reflected in each report to the Board to the following:
I recommended that the cases be deferred
for no longer than one month SO that the staff
could get a response from each contractor with
respect to the action contemplated. In both
Republic and Newport News the Board did not yet
have the contractors' response. My action was
motivated out of an abundance of caution and
fair play. The caution was dictated by the
fact that both the reviewer and the accountant
in the Republic case could visualize the
possibilities, remote, of the contractor having
a good explanation.
H. M. Chick
Exhibity
1997-6
July 14, 1976
MEMORANDUM OF REX M. MATTINGLY
SUBJECT: Republic Corporation (1969)
Newport News Shipbuilding and Drydock Company (1969)
At its meeting on June 29, 1976 the Renegotiation Board had
before it the recommendation of H. M. Chick, Director, Office of
Financial Analysis to withdraw the Clearance Without Assignment
which had been issued to Republic Corporation for its fiscal year ended
October 31, 1969.
To withdraw a Clearance Without Assignment the contractor must
have committed "fraud or malfeasance or willful misrepresentation of
a material fact". In reviewing the recommendations of the staff members
in connection with Republic, I found sufficient questions to warrant
further explanation.
For example, in Mr. Burkhalter's memorandum to Mr. Chick
he states that:
"In his interviews with the officers of Republic, Mr. Kincaid
was informed that the R&D costs which were transferred from
ITC to Polan for the sum of $1. 3 million, were the same R&D
costs which were subsequently sold to Wollensak for $1. 3 million
and later charged as an expense against renegotiable sales for
the fiscal year ended October 31, 1969. "
In this connection, Mr. Kincaid's memorandum, only states
that:
"Republic reported a capital gain on the sale of Polan's assets
of approximately $1. 45 million which is essentially the same
amount of R&D (Other Assets) shown on Schedule II."
Also, Mr. Weiss's memorandum indicates that the Western
Region had not been able to determine that the contractor had received
a double tax benefit for the $1.5 million of R&D expenses by examining
the contractor's tax returns.
- 2 -
From the above I concluded that it was far from certain that
the $1. 3 million of R&D costs charged to renegotiable business was
the same R&D as that sold to Wollensak.
At the June 29, 1976 meeting Mr. Chick also recommended
that the Board rescind the Special Accounting Agreement which had
been issued to Newport News Shipbuilding and Drydock Company for
its fiscal year ended December 31, 1969 and subsequent years.
In connection with that recommendation, I noted that the con-
tractor had not been asked for an explanation of the accounting dis-
crepancies. In my experience on the Board it is most unusual to take
unilateral action on accounting matters without having the benefit of
the contractor's explanation.
In connection with each of the above recommendations and any
other similar recommendation, I believe it would be irresponsible for
the Board to take action without giving the contractor an opportunity
to explain the circumstances and rebut the charges made. I know of
no state or Federal regulatory agency which, when a question arises
as to the propriety of information filed with the agency, does not give
the individual or corporation an opportunity to justify and explain the
filing before taking unilateral action. Surely that is the most just and
efficient way for a Governmental agency to operate.
Consequently, had Mr. Chick not orally amended his recommend-
ation to give the contractors an opportunity to explain, I was prepared
to offer a motion to do just that. The Board has nothing to lose by
asking the contractor for an explanation and much to gain if the con-
tractor has a reasonable explanation. I cannot understand how anyone
could object to such a proposal.
Ref M. Mathingly
Rex M. Mattingly
FORD
Exhibit H - Minutes of July 13, 1976
Subject: Republic Corporation, 1969
Newport News Shipbuilding and Drydock Company,
1969 and subsequent years
Reference is made to the Board action of June 29, 1976,
regarding the above renegotiation cases.
The Board acted unanimously to defer action on written
staff recommendations to July 27, 1976, to permit comment
by the companies involved. The final recommendation of
staff was presented orally prior to and during the Board
meeting. It was that the action recommended in writing
be deferred for a period of no longer than one month.
This oral recommendation to the Board was said to be
motivated out of an abundance of caution and fair play.
The unanimous action of the Board accepted the final
staff recommendation as being reasonable and proper.
This action does not establish a precedent, neither
does it affect any of the rights or authorities of the
Board.
Norman B. Houston
Board Member
Exhibit I
1997-6
Exhibit I in Response to Mr. Chase's Comments to Item 6, July 13,
1976 Board Minutes
In its action on agenda items 4 and 8 of the June 29th meeting
of the Renegotiation Board, the Board approved the oral recommendation
of Mr. Henry M. Chick, Director of the Office of Financial Analysis,
to defer until July 27th taking final action on the recommendation that
the Clearance Without Assignment for fiscal year ending 1969 of
Republic Corporation be withdrawn because of fraud and that the Special
Accounting Agreement with Newport News Shipbuilding and Drydock
Company for fiscal year ending December 31, 1969 and subsequent
years, be rescinded. Both deferrals were recommended to enable the
Board to obtain the contractors' response to the contemplated action.
The Board has taken no substantive or positive action with
respect to either contractor, Republic Corporation or Newport News
Shipbuilding and Drydock Company. It has merely acceded to Mr.
Chick's oral recommendation that the contractors be informed of the
actions being considered by the Board in an attempt to obtain explanatory
information from which an informed conclusion can be reached in both
cases.
With respect to Republic Corporation, the Board has no firm
evidence on which to base a revocation of a Clearance Without Assign-
ment approved in 1971. All it has is a suspicion drawn from some
inconclusive evidence. In fact, the agenda item before the Board on
June 29 contained documents indicating that after failing to obtain
clarifying information from the contractor's tax returns our Office of
Accounting was instructed by the General Counsel's office not to con-
tact Republic Corporation, the one source which could shed some light
on this matter. Nonetheless, this is not the issue the Board decided,
i.e., the withdrawal of the CWA. We merely asked for further infor-
mation prior to making a decision on the substantive issue.
The "unanimous and unqualified recommendations, " referred
to by Mr. Chase, submitted to the Board to support the withdrawal of
the CWA for Republic contain the following:
Acting General Counsel's Memorandum
1st paragraph
Mr. Kincaid concluded that Republic may
have improperly charged
(Emphasis supplied)
- 2 00
3rd paragraph
...
Mr. Rice was unable to ascertain the precise
treatment for income tax purposes of this particular
R&D item. (Emphasis supplied)
5th paragraph
In view of the problems experienced in attempting
to obtain accurate information from sources other
than the contractor which would establish the pre-
cise treatment of $1.4 million R&D item and the
contractor's failure to disclose this item properly
on its RB Form 1. (Emphasis supplied)
6th paragraph
Item 3
The Polan Division paid $1, 306, 754 in cash for
this R&D technology. (Emphasis supplied)
Item 4
The audit package prepared by Republic for the
purpose of the Wollensak sale, reflects intangible
assets for 'process and systems development costs'
in the amount of $1,459,384, Exhibit 6. These
assets were transferred to Wollensak as part of the
sale. The total intangible asset figure apparently
consisted of the $1, 306, 754 R&D costs purchased
from ITC and $152, 000 in R&D costs from Polan's
books
(Emphasis supplied)
Item 6
This filing sets forth an expense in the amount of
$1,368,876 for capitalized R&D intangibles written
off the books as worthless (Emphasis supplied)
Mr. Kincaid's Memorandum
5th paragraph
In all probability, Republic at the time of sub-
mission of its RB-1 filing knew that the afore-
mentioned R&D costs were being included in the
assets sold to Wollensak, yet, Republic charged
these R&D costs to renegotiable business.
(Emphasis supplied)
TORO
Mr. Weiss's Comments
1st paragraph
...
there is a likelihood that subject contractor
improperly allocated $1.5 million of Research and
Development Expenses to renegotiable business for
fiscal year 1969. (Emphasis supplied)
- 3 -
Remarks such as: "may have;" "was unable to ascertain;"
"apparently;" "in all probability;" and, "there is a likelihood",
noted above, do not lead to a firm conclusion that the contractor is
guilty of fraud or willful misrepresentation. There are also dis-
crepancies in the amounts of the supposed understated profits of:
$1, 306, 754; $1, 459, 384; $1, 368, 816, and $1. 5 million which further
reflect ambiguity in the material submitted. Thus, the available
information, rather than supporting General Counsel's conclusion
of "fraud or malfeasance or willful misrepresentation of a material
fact, " rather indicates confusion.
Certainly if during the period of deferral it becomes obvious
from discussions with the contractor or other sources that the
suspicion is fact and that the consolidated profits are understated,
then the CWA should be revoked.
The same situation pertains to Newport News Shipbuilding and
Drydock Company; we have taken no affirmative action. We have
merely deferred a decision on whether to rescind a Special Accounting
Agreement to obtain more information. The file does not indicate that
any attempt has been made by the Regional Board, or by the staff of
the Statutory Board, to obtain from the contractor an explanation for
the variations in the numbers reported under the percentage of com-
pletion method of accounting.
In addition, the Board's General Counsel, in his memorandum
to the Eastern Regional Board of January 29, 1976, contains a require-
ment which he advised must be met before a retroactive rescission of
a Special Accounting Agreement can be made. This requirement is
noted by the following:
...
Consistency would appear to dictate that the rescission
should be applicable to all of the contractor's open years
unless a retroactive application would, in the Regional Board's
opinion, cause undue hardship upon the contractor. If the
Regional Board should find that a retroactive rescission would
in fact cause undue hardship to the contractor, then, at the
Regional Board's discretion, it may recommend that the
rescission be prospective only. (Emphasis supplied)
The material accompanying the June 29 agenda item gives no
indication that the Eastern Regional Board made such a finding or
FORD
- 4 -
that it even considered the question. More information is required
before the Board can take action on the proposed recommendation.
Mr. Chase's recollection and recitation of the facts, as recited
in Item 6 of the July 13 minutes, is faulty.
1. Prior to the unanimous approval of Mr. Chick's recommend-
ation on Item 4 of the June 29 agenda, and at Mr. Chase's request, the
Secretary reread the motion and the recommendation of Mr. Chick. As
previously indicated, the motion carried unanimously.
2. At the Board meeting the following week, July 7, in explain-
ing to the Board the events which lead to his recommendation, Mr. Chick
did state that a conversation with me was among those he had on this
subject. He stated, however, that his first discussion was with Mr.
Robert Moreland, Supervisor, Accounting Section, Office of Financial
Analysis, and that subsequently I had also raised the matter with him.
He further indicated that he had already decided to amend his recommend-
ation.
After reviewing the subject agenda item prior to the June 29
Board meeting, I was concerned that the Board did not have sufficient
justification for the actions proposed. Further, that no attempt had
been made to determine whether evidence existed to justify some staff
assumptions or whether there was a logical explanation. Significantly,
in one case (Republic Corporation), an attorney-advisor in the Office
of General Counsel, directed the accounting staff not to explore this
matter with the contractor. In the other case (Newport News Ship-
building and Drydock Company), it appeared that neither the Eastern
Regional Board staff nor the Statutory Board staff had bothered to
obtain from the contractor an explanation, if there is one, for the
variations in the numbers reported under the percentage of completion
method of accounting used by the contractor.
My concern was, and is, to avoid charges against the
Renegotiation Board of bureaucratic harassment and arbitrariness by
being reasonably certain that the Board has in its possession sufficient
evidence to sustain any charges it may make or any action it may take.
In conclusion I want to reiterate that we have reached no
conclusion on the merits of either case. We have merely deferred
- 5 -
action until we have sufficient information to form a basis for
deciding the issues on the merits. Both deferrals were recommended
to enable the Board to obtain the contractors' responses to the con-
templated action.
Christopher U. Sylvester
SEAL
705 T2
SEAL FORD LIBRARY
Exhibit
1997-6
July 15, 1976
Statement concerning Republic Corporation
FYE 1969
and
Newport News Shipbuilding and
Drydock Company
FYE 1969 and subsequent
At the meeting on July 7th when the above-captioned
matters came up for discussion after being approved by the
Board on June 29th, as the former Director of the Office of
Financial Analysis, I repeated the reason for changing the
recommendation which had been given to the Board on June 29th:
I recommended that the cases be deferred
for no longer than one month so that the staff
could get a response from each contractor with
respect to the action contemplated. In both
Republic and Newport News the Board did not yet
have the contractors' response. My action was
motivated out of an abundance of caution and
fair play. The caution was dictated by the
fact that both the reviewer and the accountant
in the Republic case could visualize the
possibilities, remote, of the contractor having
a good explanation.
At another point in the meeting on July 7th, the question
was asked as to the evolution of the change in my recommendation.
My answer was that Robert Moreland, Assistant Director, Accounting,
Office of Financial Analysis, told me that he had been having same
discussions with Mr. Grenough, Director of Operations, concerning
the lack of a response from Newport News Shipbuilding and Drydock
Company in that case. This prompted me to think about the matter,
and I recalled that Republic Corporation had not been accorded an
opportunity to reply either. I decided to change my recommendation
and so advised the Members of the Board on Tuesday morning, the day
GENATE FUR LIBRARY
- 2 -
of the meeting. I also advised Mr. Grenough and Mr. Moreland
and the Members. Subsequent to my conversation with Mr. Moreland,
Mr. Sylvester, Board Member, asked me about the matter of replies
from the contractors in these cases and I told him that I was
going to modify my recommendation SO that we could have time to
get replies.
High Chiel
Henry M. Chick
General Counsel
SEAL FORD LIBRARY
THE RENEGOTIATION BOARD
Exhibit K
DATE : July 14, 1976
1997-6
TO
: The Renegotiation Board
FROM : Donald S. Grenough
Director of Operations
DSA
SUBJECT: Republic Corporation
Fiscal Year Ended October 31, 1969
Proposed Rescission of Clearance Without Assignment
Newport News Shipbuilding and Drydock Company
Fiscal Year Ended December 31, 1969
Proposed Rescission of Special Accounting Agreement
In accordance with the discussion at the Board Meeting on
July 13, 1976, wherein written comments were requested from
staff, I offer the following information.
In my position as Director of Operations, I routinely review
a variety of data, including the Board agenda items. From
time to time, I will discuss technical, administrative and
policy matters with staff and make suggestions where I deem
appropriate.
On Monday, June 28, 1976, late in the afternoon, I was review-
ing the agenda for the Board meeting scheduled for June 29.
During my review, I noted that in connection with the Newport
News case that the data to be presented to the Board did not
include any comments from the contractor relative to the
proposed rescission of the special accounting agreement. I
called Mr. Chick, then Director of Financial Analysis, to dis-
cuss the matter with him. Since he was unavailable at that
time I asked Mr. Moreland, Supervisor Accounting Section,
Office of Financial Analysis whether or not the case file con-
tained any comments furnished by the contractor on the action
being proposed to the Board. Mr. Moreland said that contractor
comments were not obtained either by the Regional office or
by his office during the review of the case. I indicated to
Mr. Moreland that since the contractor had entered into the
special accounting agreement with the Board it seemed appro-
priate to obtain contractor comments for the consideration of
staff and Board prior to the Board taking action. Further,
I indicated that in our dealings with contractors we generally
seek out the contractors comments on proposed actions by staff
that may adversely affect the contractor. This is done as a
normal business practice in order to acquaint staff with any
data a contractor chooses to offer on the subject, and it also
permits the Board the opportunity to be made aware of such data
RBF-37 INTEROFFICE MEMO
4-70
BERALD FORD
Memo to: The Board
Subject: Republic Corp.
Newport News
2.
in their evaluation of the matter. Mr. Moreland agreed that
it would have been more appropriate if contractor comments
were obtained and evaluated by staff, prior to the Board
taking action. I suggested that Mr. Moreland discuss the
matter with Mr. Chick to get the benefit of his thoughts
prior to the Board meeting.
The next morning, June 29, prior to the Board meeting, I
visited with Mr. Chick and made reference to my prior dis-
cussion with Mr. Moreland. Mr. Chick indicated that he had
discussed the matter with Mr. Moreland and that he (Chick)
was going to recommend to the Board that the item be deferred
to permit his staff the opportunity to obtain contractor com-
ments, since he also agreed this was the appropriate thing to
do. Further, Mr. Chick indicated that he intended to propose
to the Board the same type of action on the Republic Corpora-
tion matter, since the contractor comments had not been ob-
tained relative to revoking the clearance without assignment.
I indicated to Mr. Chick that I agreed with both of his pro-
posed actions. I did not discuss the Republic Corporation
matter with Mr. Moreland the previous day simply because I
had not yet reviewed that particular agenda item, but I cer-
tainly shared Mr. Chick's thought as expressed above.
In the Board meeting on July 7, I believe that I indicated
very briefly that I supported Mr. Chick's position for the
reasons described above.
During this Board meeting, as I recall, I made the observation
that in my six years with the Board I could not readily recall
instances where the Board rescinded a special accounting agree-
ment or revoked a clearance without assignment. Even though
we may have had these situations in the past, I expect that
they were limited in number. Further, even if in those few
cases we did not obtain contractor comments prior to Board
action, I would not view this as a substantial precedent to
alter the propriety of seeking contractor comments prior to
Board action for the reasons described above.
The above represents, to the best of my recollection, my
involvement in the subject matter, and at no time during my
consideration of the above matters prior to the Board meeting
on June 29 did I discuss the subjects, nor have any contact
with anyone on the Board or staff other than as described
above.
ell orer \ jul
R. FORD LIBRARY
Exhibit <
Memorandum From: William to: H. The Harrison, Renegotiation Director Board withharmson July 14, 1976
Office of Screening, Compliance & Exemptions
Subject: Agenda Item No. 6, July 13, 1976
At its regular meeting on July 13, 1976, the Board directed
staff to prepare a written statement of the logic used in their
support of Mr. Chick's verbal recommendation to allow both
Republic Corporation and Newport News Shipbuilding and Drydock
Company an opportunity to explain their separate positions prior
to any positive action by the Board.
The recommendation as it appeared on the agenda item for
the June 29, 1976 Board meeting in relation to Republic Corporation
was to withdraw the Clearance Without Assignment because of fraud.
Mr. Chick verbally amended this recommendation.
I fully supported Mr. Chick's oral recommendation to provide
an opportunity to the contractor to answer our charges prior to
positive action since there was, in the eyes of the reviewer and
the accountant, a possibility, however slight, that the contractor
could justify his position. I feel it unfair for the Government
to charge a contractor with a criminal act prior to getting all the
facts.
BERALD $ FORD
- 2 -
Mr. Weiss stated in his memoranda, which was an attachment
to the June 29, 1976 agenda item, "I have been orally advised by
Mr. Crockett, an attorney of the General Counsel's office, not to
make any inquiry of the contractor until the Board considers this
matter and decides what course of action to pursue." This statement
points out clearly that our investigation was not complete.
In addition, I feel that a criminal charge against a public
corporation would have a traumatic effect on the stock, thus, quite
likely injuring innocent investors. A criminal charge based upon
incomplete information could be irresponsible and reckless. Only
through an inquiry of Republic Corporation officials, could we obtain
the information needed to make the responsible decision whether or
not to proceed.
I was not aware, when I made my recommendation, of the names of
any corporate officials of Republic Corporation in the review year
or any subsequent year and, had I known, such knowledge would not
have influenced my recommendation in the slightest.
As to Newport News Shipbuilding and Drydock Company and the
recission of the Special Accounting Agreement, I believe it is proper
in any open case to hear the contractor's objections, if any, to a
Board action which may materially affect the contractor's filings
for that year and the future.
withtumion
William H. Harrison, Director
YORD 1
Office of Screening, Compliance
& Exemptions
Exhibit M
1997-6
Memorandum to the Board
July 15, 1976
Subject: Republic Corporation (1969)
Newport News Shipbuilding and Drydock Company (1969)
At the Board Meeting of July 7, 1976, because Mr. Chase expressed
concern about the fact that the proposal to give notice to the subject
contractors, before rescinding the actions previously taken by the
Board, had been made the morning of the Board meeting, I made essentially
the following statement:
Early in the morning of the meeting, Mr. Chick asked my opinion of
the proposal to notify the contractors before taking action. I asked
him if the contractor could take any legal step which would prevent or
delay the rescinding actions. Since neither he nor I could think of any
reason how this would be the case, I agreed it was proper procedure to
allow the contractor to state any case he might before taking the final
action.
Since I had been reflecting on Mr. Chase's statement that it was
our practice without exception to issue orders to contractors when CWA's
were revoked (and I assumed in similar cases) I made essentially the
following statement at the Board Meeting of July 13, 1976:
I remembered two similar cases in which the contractor had been
advised that he had not submitted the proper information to the Board.
One case concerned a contractor who had asked that he be allowed to
make a refund of the maximum amount of excessive profits to bring his
sales to the million dollar floor. This was arranged and contractor
made the refund. Some months later, it was discovered that there were
other companies under common control with the contractor and that as a
result the refund should have been larger because the margin of profit
was very high. The contractor was called in and a conference with the
then General Counsel was arranged so that he could make the proper filing.
Subsequently, a larger refund was obtained.
The second case concerned Thomaston Special Tool and Manufacturing
Company, Inc. for 1967 on which I was the reviewer. In the course of
my analysis, I found a reference to the acquisition of Thomaston and
another company, Precision Products, Inc., by The Torrington Company.
Since it was not clear that the two companies were related, I went to
the SEC and examined the filing in connection with the acquisition.
I discovered that the two companies were under common ownership. This
matter was brought out at the Division meeting with the contractor rather
than by letter and, subsequently, a filing was obtained for Precision
Products, Inc.
BERAU AL FORD LIBRARY
-2-
In both instances, the evidence was clear that common ownership
existed and, in both instances, this fact had not been included on the
RB-1 of the contractors.
J. S. Lieberman, Jr.
Acting Director
Office of Financial Analysis
INTERNATE STATE
OF TOT S 8.
FORD . LIBRARY WE
CHRONOLOGY OF MAIN EVENTS RELATED TO
THE LOCKHEED CASE
At its meeting of December 12, 1975, the Renegotiation
Board, by a vote of 4 to 1, voted to assign the Lockheed
Aircraft Corporation FYE 1972 case to a Division of the
Board. This was at the motion of the Chairman, ("A" attached).
On December 19, 1975, Mr. Sylvester filed a formal dissent
from the vote of the Board of December 12, 1975 ("B" attached).
Up to that point the case had been processed in a normal fashion,
with a recommendation of clearance by the Western Regional
Renegotiation Board.
The Board meeting was followed by an Executive Session
of the Board at which the Lockheed case was discussed further,
and where the adequacy of the staff examination of the case
was questioned by Mr. Chase.
On January 7, 1976, Board Member Goodwin Chase submitted
a memorandum for inclusion in the Board Minutes ("C" attached).
In discussing the language of the Lockheed minutes of
December 12, 1975, Mr. Chase stated that "from the discussion
of December 12th, clearly the Board was about to grant Lock-
heed a clearance for fiscal year 1972." This assertion later
became controversial and drew objections, in writing, from
other Members of the Board, ("D", "E", and "F" attached).
- 2 -
On February 13, 1976, Mr. Chase, without the knowledge
of the other Division Members or the Chairman, requested the
Defense Contract Audit Agency to develop information to assist
with the Lockheed case, and on February 20, 1976, Mr. Chase
transmitted the Renegotiation Board's RB-1 filing form as
submitted by Lockheed for FY 1972, to Mr. Lynn, Director of
DCAA.
On March 26, 1976, Mr. Chase, in a letter to Mr. Lynn,
requested that the DCAA pursue its study of the Lockheed case
through discussions with the contractor.
On April 13, 1976, the Deputy Director, DCAA, informed
Mr. Chase by letter that Lockheed declined to give access to
DCAA to the information regarding its 1972 case, both on legal
and policy grounds, and that consequently DCAA planned to
finalize an interim report to the Board without benefit of
Lockheed's comments.
On April 26, 1976, Mr. Chase sent a memorandum ("G"
attached), to Ralph Johnson, Chairman, Eastern Regional Rene-
gotiation Board requesting the services of Timothy Driscoll,
of Mr. Johnson's staff, for about 15 days, for the purpose
of assisting with the development of the Lockheed case. This
action, and some of the contents of this memorandum were
objected to in writing by the Chairman on April 29 ("H"
attached).
- 3 -
Meanwhile, On April 28, 1976, Mr. Chase distributed
with a cover memorandum, minutes of a meeting of the Division
handling the Lockheed case. This meeting was called at the
request of Messrs. Mattingly and Houston, the other two mem-
bers of the Division.
On April 29, 1976, Mr. Chase distributed with a cover
memorandum, copies of a letter by DCAA Deputy Director Neuman,
dated April 13, ("I" attached) along with a memorandum by the
General Counsel, dated April 27, 1976, which expresses the
opinion that the Board does have clear authority to obtain
"audit assistance" from DCAA ("J" attached).
On April 30, 1976, Mr. Sylvester filed a 4-page memo-
randum with the Chairman questioning the position of the
General Counsel on the legality of the Board's request to
the DCAA for audit assistance ("K" attached).
On May 4, 1976, Mr. Chase wrote to Messrs. Mattingly
and Houston, taking issue with Mr. Sylvester's position
utilizing the DCAA and asserting that he intends "to continue
to do so." ("L" attached)
On May 5, 1976, Mr. Chase distributed with a cover memo-
randum, a document ("M" attached) Mr. Chase stated represents
"for the most part, a composite of audits developed by the
DCAA of the Lockheed Corporation's subsidiaries and divisions."
- 4 -
(This was a letter dated 28 April 1976, by Milton Levine,
Resident Auditor, Defense Contract Audit Agency, Los Angeles
Region.)
On the same day, the Chairman wrote a 3-page memorandum
to Mr. Chase commenting on the latter's memorandum of May 3,
1976, and pointing out "several statements which appear to be
inaccurate and/or misleading, ("N" attached). On May 6, 1976,
Mr. Chase wrote a rebuttal memorandum to this ("0" attached).
On May 13, 1976, the Director, Office of Financial Analysis
of the Board sent a letter of 11 pages, plus attachments to
Lockheed requesting additional information within 30 days.
On June 9, 1976, Mr. Chase in a memorandum to the Chair-
man, requested the services of Mr. Driscoll "for not less than
an additional fifteen working days from this date." In a note
written on the face of this memorandum, the Chairman informed
Mr. Chase that the decision on his request would be made
following a briefing on the Lockheed case the next day.
On July 7, 1976, H. M. Chick, newly appointed General
Counsel of the Board, in a memorandum ("P" attached) to J. S.
Lieberman, Jr., Acting Director, Office of Financial Analysis,
updated the latter on the status of the Lockheed case, noting
that the next course of action would await a report on a
- 5 -
West-coast trip made by Messrs. Driscoll and O'Connor
to Lockheed Shipbuilding and Construction Co. and Lockheed's
response to our accounting letter of May 13, 1976.
On July 8, 1976, the law firm Miller & Chevalier,
representing Lockheed, asked an extension of time to August 13,
1976 for the filing of the information requested by the Board.
On July 9, 1976, a Jack Anderson column appeared in the
Washington Post entitled "Auditing Lockheed," ("Q" attached).
On the same day, Mr. Chase distributed a telephone memo-
randum reflecting a conversation between him and Mr. Neuman,
Deputy Director, DCAA, requesting that DCAA return to Lockheed
to continue their earlier effort if the contractor would grant
consent, and the Chairman requested that the newly-appointed
General Counsel of the Board again review the legal issues
relating to the obtaining of "audit assistance" by the Board
from the DCAA.
On July 12, 1976, Mr. Chase distributed with a cover
memorandum, a copy of a letter, dated April 1, 1976, which he
said he received anonymously some two weeks earlier, from
Thomas J. O'Hara, a Vice President of Lockheed to J. M.
Turner, Assistant Director, Aerospace Procurement Service,
Aerospace Industries Association of America, Inc., discussing
the Lockheed case, ("R" attached).
- 6 -
On July 14, 1976, Mr. Chase distributed a memorandum
reflecting a telephone conversation between him and Mr.
Neuman, indicating that the request for the return of DCAA
auditors to Lockheed was declined after discussion with
Assistant Secretary of Defense McClary, ("S" attached).
July 19, 1976
in
VOND
OTHER