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PSF
Tennessee Valley Authority
Subject File
Box 187
Mar. 12, 1938-1941 and Undated
Box 187
CONTINUED
PSF: TVA
Washington, D. C.,
March 18, 1938.
Dear Mr. President:
At the conference held with you last Friday I stated
that I could not participate for the reason that such a procedure
could not bring out the many pertinent facts which must necessar-
ily be considered in order to arrive at an informed and correct
conclusion. I stated that the meeting was not and CO uld not be
a useful, fact-finding occasion. You must know how much I dis-
liked to put myself in a position of even seeming not to comply
with your wishes.
I took this course - hard for me, I assure you - not in
the least in any spirit of defiance, but with & very deep sense of
obligation to you and respect for your high office, and I feel,
with a very deep conviction, that the course I felt compelled to
take was altogether in the best interests of the T.V.A.
During the week I have reconsidered the question of the
right course for me to pursue; and I want you to know that I have
had uppermost in my mind' the welfare of the T.V.A. and my relations
to you, through whose appointment I have had entrusted as one of
three to organize and administer this great undertaking, in such
manner that it would contribute its part to the achievement of
the high social objectives of your Administration.
The reconsideration which I have given to this whole
matter in the light of the record which has been made thus far
has confirmed my opinion that it really is not possible in sessions
of this sort to go deeply and thoroughly enough into the facts
pertinent to the issues to get the truth with respect to these
matters. I do not believe that it 1s either wise or possible to
attempt to arrive at a conclusion by taking unsupported statements
of Board members, including myself.
May I point out by way of illustration one single point
raised in the discussion of the Berry Marble case - one of the
simplest points upon which statements were made at last Friday's
meeting. It was stated that until just shortly before the hearing
December, 1937,
of the case before the Commissioners, nobody had any evidence of
bad faith; that there were only rumors. The record shows that
under date of July 13, 1936, a "Conciliation Agreement" was made
with Major Berry. I had no notice of the meeting at which the
agreement was made and I was not present. I protested against
this agreement on the ground, among others, that it recognized
value in the Berry claims which on the facts then known showed all
the ear-marks of being made in bad faith. I continued to protest.
Nevertheless on February 25, 1937, as shown by the record, the
agreement was again approved. The record shows that I voted
against that resolution. Now the question is, what were the facts
known by all three directors at that time which led me, and should
have led the other two, to the inevitable conclusion that there was
bad faith in the presentation of these claims.
At this meeting on February 25, 1937, when the Concilia-
tion Contract WAS again approved by the Board, I and the other mem-
bers of the Board had before us the following positive facts, which
to me showed clearly - and I assert they would show to any reason-
able and prudent man - that these claims were made in bad faith:
-2-
1. The T.V.A. geologists, independent geologists
of high standing, and a wholly independent committee of
practical marble experts, after thorough investigation
had reported that the marble deposits were of absolutely
no value commercially. Dr. Prouty, Professor of Geology
of the University of North Carolina, had reported, in re-
ferring to these marble deposits, that "none of them were
worth quarrying". Dr. Burchard of the United States Geologic
Survey made a similar report. All the othersagreed with
this finding of no value.
2. Record titles to the leases were not in Major
Berry. He was a stranger to the record
3. Major Berry, in August 1936, had positively de-
clined to state to the Board at my request what his inter-
est was, how he had acquired it, and the amount he had paid.
4. There was then and had been continual improper and
unseemly pressure exerted upon the Board on the part of
Major Berry for payment by way of a private and non-public
settlement outside entirely of the regular procedure for
the acquisition of lands and rights of lands by the T.V.A.
All the foregoing and other facts had been brought to
the attention of the other members of the Board prior to this
meeting of February 25, and on their face they were positive and
direct proofs of bad faith.
I thus challenge the statement that there were only
rumors of bad feith, but the only way possible to make adequate
and regular proof of the facts would be by an orderly hearing,
-3-
the examination of witnesses under oath, and after a full oppor-
tunity for argument.
I have thus stated this single point in the Berry case
only by way of example. There are other very important points
not yet presented to you or to the public concerning the handling
of the Berry case which can be shown only by witnesses who may
have to be subpoenaed and where there must be facilities for exam-
ination, cross-examination and argument, which are not available
here.
May I add here that I think it clear that any public
servant desiring to protect the public interest, and having before
him the facts which I then had, would not possibly have been just-
ified in taking any other position than the one I then took, and
constantly maintained thereafter.
I had asked Major Berry, among other things, to disclose
his documents showing his interest in the claims. Major Berry re-
fused to produce them, and I was not supported by my fellow Board
members in my request and insistence that they be produced. After-
wards and just before the hearing some of them were obtained by
others and presented to the condemnation Commissioners as proof of
bad faith.
With respect to most of the other issues raised last
Friday there 1s even more necessity of hearing witnesses and of
the production of documents. It will also be necessary to call
technical men and experts, to ascertain the facts and their sig-
nificance in order to arrive at an informed and considered judgment.
-4-
I see only one way in which all the relevant facts on
these matters can be brought out: namely, by a full and impartial
inquiry by the Congress (through a Committee), in which the power
of subpoena can be made available, and before which all the wit-
nesses and documents can be produced.
I hope and believe that on consideration you will come
to the conclusion that such an investigation 1s the appropriate
and effective way of dealing with this whole subject.
May I assure you that I have only one wish, namely, that
in the best interest of the T.V.A., every relevant fact be brought
out by the parties who know the facts at first hand, so that the
President and the Congress and the public may be fully informed.
It 18 for the reasons which I have stated that I have
felt impelled to maintain the position which I have taken.
With great respect, I am as always,
Sincerely yours
arthur E. morgan
Arthur E. Morgan.
The President,
The White House,
Washington, D. C.
-5
ASSISTANT SOLICITOR GENERAL
WASHINGTON
March 19,
PSF: 1938 TVA
Hon. M. H. McIntyre,
K.C.
Secretary to the President,
The White House.
Dear Mr. McIntyre:
Just before Solicitor General
Jackson was called out of the city yester-
day he requested me to advise him on the
subject of the enclosed memorandum.
As he left immediately and as the
information may be desired without delay
I am handing you my memorandum to him,
not being able to reach you on the tele-
phone.
Sincerely yours,
Golden W. Bell.
Assistant Solicitor General.
Enc.
GOLDEN W. BELL
ASSISTANT SOLICITOR GENERAL
JTF/ems
19-2-293
Department of Justice
Mashington
March 18, 1938.
MEMORANDUM FOR THE ACTING ATTORNEY GENERAL
Re power of the President to remove the chairman of the Tennessee
Valley Authority from the office of chairman without removing him from
membership on the board.
The Tennessee Valley Authority Act, 48 Stat. 58, 59, provides in
section 2(a) as follows:
"The board of directors of the Corporation (hereinafter
referred to as the "board") shall be composed of three members,
to be appointed by the President, by and with the advice and
consent of the Senate. In appointing the members of the board,
the President shall designate the chairman."
Dr. Arthur E. Morgan was nominated by the President and confirmed
by the Senate as a member, not as chairman. Cong. Rec. vol. 77, p. 4627.
The chief clerk of the State Department has informed us that Dr.
Morgan was commissioned as a member, not as chairman, and that apparently
he was designated by the President as chairman in a letter, independently
of the commission, in accordance with what the chief clerk stated to be the
usual practice. He did not have a copy of the letter.
The President's power to remove is founded upon the principle that
the power to remove is concomitant with the power to appoint, unless
denied or restricted by constitutional or valid statutory provision. By
analogy the power to designate carries with it the power to revoke the
designation.
- 2 -
The statute provides that "In appointing the members of the board,
the President shall designate the chairman." It is apparent that
the underscored words were used somewhat loosely, perhaps in particular
contemplation of the fact that the original designation of a chairman
would be in connection with the appointments of the members. As applied
to events transpiring after the initial appointments and designation of
the first chairman, there is no occasion for construing the words as
contemplating that a chairman may be designated only when a new appoint-
ment is made.
If, for example, the chairman should die, resign or be removed
an appreciable period might well elapse before a new member could be
selected, confirmed and commissioned--and the statute must be construed
as authorizing the designation of a chairman in such a case independently
of the new appointment, or else the functioning of the board might be
seriously handicapped. Similarly, it must be concluded that if the
member designated as chairman should decline after a period to continue
to serve as chairman, but without resigning from the board, there must
be power in the President to designate another chairman without the
necessity of removing the affected individual who might be a very capable
member although an unsatisfactory chairman.
It is my opinion the President has the power to revoke the designation
of Dr. Arthur E. Morgan as chairman and to designate another member as
chairman in lieu of Dr. Morgan.
Respectfully,
GOLDEN W. BELL,
Assistant Solicitor General.
PSF: TVA
tennessee VALLEY AUTHORITY
Washington, D. C.
BOARD OF DIRECTORS
ARTHUR E. MORGAN, CHAIRMAN
HARCOURT A. MORGAN
DAVID E. LILIENTHAL
March 21, 1938
The President
The White House
Washington, D. C.
Dear Mr. President:
Since Friday last I have given the deepest
consideration to the question you put to me at
the end of the session. For reasons which I have
given in the two conferences already held, I feel
impelled to say that I cannot participate further
in these proceedings.
Assuring you of my deep respect, I am
Very truly yours,
arthur E. morgan
Arthur E. Morgan
1
sile
Anti- Anti-Inatability Act Instrbility
CVA
STATEMENT BY DAVID E. LILIENTHAL, DIRECTOR, TENNESSEE VALLEY AUTHORITY
Mr. Willkie's press statement proposes that the Federal Govern-
ment (presumably the TVA) purchase "in their entirety" his "companies
in the Tennessee Valley." He seeks to justify such a proposal
upon the ground that only in this way can investors in these
companies be saved from destruction. The public is told that
this is the "last resort in a desperate situation."
The facts show that there is no such crisis as he describes.
Every one of his southern companies did substantially more business
last year than in 1933 when the TVA was created; every one of
his companies had more net earnings last year than in 1933. The
Tennessee Electric Power Company, in the very heart of the TVA
area, increased its net earnings after charges for the 12 months
ended November 30 in 1937 over the year 1936 by 13%; these net
earnings were 34% greater than in 1933.
For years now, Mr. Willkie has predicted financial catastrophe
for these companies in the TVA area. His forebodings have been
consistently wrong.
Disaster is coming this time, he states, because certain
communities have voted to build and operate their own electric
distribution systems, purchasing the power from TVA at wholesale,
some of them securing their construction funds through loan-and-
grant contracts with PWA unanimously upheld by the Supreme Court
on January 3, 1938.
&
On Friday last the President suggested that in communi-
ties where the citizens had voted to set up their own electric
plants, the utilities and the cities try to agree on the sale
of these distribution systems at a fair price. Right on the heels
of this reasonable suggestion of a means of avoiding duplication,
Mr. Willkie makes the remarkable statement that nothing remains
except for the Federal Government to buy out his entire property
in that area.
No one wants two electric systems in a single town. No
one wants actual and prudent investment in useful property to
be destroyed. And neither uneconomic duplication nor disastrous
loss of useful property need occur in the Tennessee Valley if
the problem is approached, not in the spirit of trying to win
a debate in the newspapers, but by a calm and rational analysis
of the problem, and sincere negotiations. By this method the
whole problem can be worked out without any such radical scheme
as he has suggested.
First, as to electric distribution systems in communities
which have voted to own and operate their own electric systems,
and which lie within feasible distance of TVA sources of power;
virtually every one of these communities has persistently sought
to buy these properties from his companies rather than build
a duplicate and competing system. I know that the people in
the Tennessee Valley do not want avoidable competition and
they do not want to destroy a dollar's worth of actual in-
vestment in useful property. Time and again, with great
patience, they have endeavored to buy, after the voters,
usually by overwhelming vote, have made their decision.
There is every reason to believe that if Mr. Willkie will
confer with officials of these localities, he will find a
genuine desire to reach a fair price and in this way avoid
duplication, competition, and destruction of useful property.
In this effort the good offices of the Federal Government
will be available.
In those communities where Mr. Willkie's companies have
refused even to discuss sale, he must expect to find a cer-
tain amount of skepticism because of the past record of
litigation and obstruction. But this can be overcome by
clear evidence of a genuine desire promptly to reach a fair
conclusion, and evidence of adequate authority for ultimate
consummation of transactions and not merely more litigation.
What of the transmission lines owned by Mr. Willkie's
companies, which now bring power to these communities, lying
within the range of TVA dams, to which he might wish to sell
his distribution systems? Here, too, uneconomic duplication and
destruction of prudent investment in useful property can be avoided
by the conference method. TVA and Mr. Willkie's companies could
negotiate for the sale to TVA of such of these transmission lines
as would serve the purposes of bringing TVA power to the communities'
distribution systems. No detailed study of this matter has been made,
but I am confident that in this way the loss of actual investment
here would be little if any, provided the company wished to sell these
lines to the TVA. In the past, TVA has purchased transmission lines
under these very circumstances from Mr. Willkie's companies, and at
the present time a considerable mileage of transmission lines is
being used jointly by TVA and by Commonwealth & Southern to avoid
excessive investment and duplication. (Where utility properties
have been purchased by TVA, it has been the uniform policy "to take
over the personnel of the company," to use Mr. Willkie's expression,
and such policy would undoubtedly apply to any future purchases.)
This principle of the purchase of transmission lines would merely
have to be extended to other cases, and thus protect the legitimate
investment in Mr. Willkie's companies.
I need hardly say that TVA cannot and will not buy anything but
useful physical assets. It has no authority nor has it any intention
to pay for water or write-ups. Nor would TVA be a party to recommend-
ing that any municipality pay inflated prices. And it is understood,
of course, that TVA would and could not be interested in purchasing
any interest in any holding company; what we are talking about here
are the useful physical facilities of operating properties.
-5-
Now as to generating plants lying within the TVA area.
Mr. Willkie's companies in that area at the present time badly need
additional power supply. In the immediate future these companies
must either purchase power in substantial quantities from TVA or
build large additions to their capacity, or both. This situation is
a complete answer to his statement that "the President's policy" of
the sale of distribution systems to the communities means that sources
of "generation not purchased by the cities will be reduced to the
value of junk." The loss of market when any city begins purchasing
power from TVA will to that extent relieve Commonwealth and Southern
from the necessity of purchasing power from TVA or from some other
source. Furthermore, Commonwealth and Southern owns a number of dams
on navigable streams of the Tennessee River System, producing hydro-
electric power. If there is a desire on Mr. Willkie's part to sell,
TVA has the statutory and constitutional authority to buy such dams
and power plants, and to operate the dams in the interests of navigation,
flood control, and power.
The Federal government is wholly without power to deny to
municipalities the right to set up their own plants, if under state law
the voters so determine. That is for the communities to decide for them-
selves. Nor has the Federal government sought to influence these local
determinations. The courts found that the Federal government, to quote
Mr. Justice Sutherland, made no efforts "to foster municipal ownership
-6-
of utilities". They also made findings that, solely to increase
employment, PWA offered loans and grants to cities for any kind of
public works properties which any city, of its own free will, might
select, and that the Federal government in no manner urged or induced
cities to build power projects rather than sewers, court-houses, jails,
bridges, libraries or schools.
Since 1933 TVA has consistently urged cities which have voted to
acquire distribution systems, to buy existing ones rather than build
duplicate systems. In most instances the companies have refused even
to enter negotiations with the cities; in others they either demanded
excessive prices, or insisted that the cities pay cash, and refused to
take amply secured city revenue bonds which would have been the equiva-
lent of cash. TVA, however, was most reluctant that duplicating systems
be built and therefore in 1934 procured an option from one of Mr. Willkie's
companies to purchase fourteen local distribution systems. TVA then
negotiated with the cities under a plan by which it was to rehabilitate
the distribution systems and then sell them to the cities. Those
negotiations had reached the point of substantial consummation, when TVA
was notified that technical obstructions were to be interposed to the
consummation of the plan and the option was therefore cancelled.
In litigation which subsequently began between one of Mr. Willkie's
companies and PWA, witnesses called by the company's lawyers testified
(and the court so held in findings adopted by the Supreme Court) that TVA
-7-
and PWA had advised the representatives of cities that they desired
to avoid any loss to Alabama Power Company resulting from duplication
and that therefore no PWA loans and grants would be made if the option
plan could be carried out. It was only after the option plan was
obstructed that PWA made most of the loan and grant agreements with
those cities. After several years of litigation, the Supreme Court
refused to hold the PWA loan and grant agreements invalid. Those
agreements are now in effect and the United States is obligated there-
under to make the loans and grants to the cities. Accordingly, unless
negotiations between the companies and the cities themselves are prompt-
ly renewed and are successful there is no way to prevent a duplication
of the distribution systems. If such renewed negotiations were success-
ful, and the cities purchased the companies facilities, then of course
the cities would voluntarily give up these PWA contracts.
These problems can not be worked out through press statements but
only by businesslike discussion and negotiation. Of course, any
arrangement negotiated by the parties must be approved as reasonable
to the utilities and the public after a hearing by appropriate state
and federal agencies. If pursuant to his expressed desire to sell,
Mr. Willkie resumes negotiations with the municipalities in question and
with TVA, I am confident that TVA, and probably every other branch of
the Federal government concerned will be glad to cooperate in working
out this problem on a fair, equitable basis.
TV19
g-v
Johnsmal 2424 Kingston Pike
PSF: TVA
Nov
Knoxville, Tennessee
May 1, 1939
EE HV RECEIVED
3 THE I 21 WHITE HOUSE
My dear Mr. President:
Your expression of confidence in sending
my name to the Senate for reappointment as a
director and chairman of the Tennessee Valley Auth-
ority affects me deeply. Your letter is most
generous.
I hope it is appropriate for me to say
that your inspiration, advice and counsel have been
of great help to me and my associates in carrying out
our work in accordance with the underlying principles
of democracy which your administration has so clearly
emphasized.
In accepting continuation of my obligations
under the Tennessee Valley Authority Act, I do so with
a full realization of the work ahead. The goal of
increased opportunity for the people of the area and
the Nation, through their contribution to the conserva-
tion and utilization of their resources of water, land,
and people, must be attained.
Faithfully yours,
Harcourt A. Morgan
The President
The White House
Washington, D. C.
PSF: TVA
will personal file confidental dental
ANALYSIS OF TENNESSEE ELECTRIC POWER COMPANY ACQUISITION AGREEMENT
1. Purchase Price.
The agreed purchase price for all of the physical electric
properties and business of the Tennessee Electric Power Company and
Southern Tennessee Power Company as of May 1, 1939, is $78,600,000.
(The price is stated as of May 1, 1939, because this is the earliest
probable date of conveyance.) This price, together with current assets
retained by the Company and other adjustments, will yield the Company
approximately $80,000,000 for its electric properties and related current
assets. The precise allocation of the purchase price among local public
agencies for distribution facilities and the Tennessee Valley Authority
for transmission and generation has not been determined, but it is
probable that the TVA portion will be between $42,000,000 and $44,000,000.
Nashville, Chattanooga, and other local agencies will account for the
remainder of the purchase price in the acquisition of the several distri-
bution systems.
2. Relation of Purchase Price to "Rate Base"
The claimed rate base on the properties as of January 1, 1938,
was $94,000,000, according to the analysis prepared by Lybrand, Ross
Brothers and Montgomery, pursuant to the direction of Commonwealth &
Southern Corporation. To this figure should be added approximately
$2,000,000 more for net additions and extensions, in order to bring
this rate base to May 1, 1939. The claimed rate base, according to the
-2-
Jackson and Moreland analysis, also made at the Company's direction,
was $100,600,000, as of January 1, 1938. The purchase price expressed
as a percentage of these rate bases, as of May 1, 1939, is therefore
82 per cent and 76.6 per cent respectively. This compares with 105 per
cent of the claimed rate base represented by the price paid by TVA and
the City of Knoxville to Tennessee Public Service Company for the
electric facilities in Knoxville and vicinity.
3. Relation of Purchase Price to Original Cost and Cost of Reproduction.
The original cost depreciated, according to the Jackson and
Moreland analysis, was $99,500,000, as of January 1, 1938, and the
reproduction cost new less depreciation as of the same date, according
to Jackson and Moreland, was $121,451,000.
The original cost of the physical properties, excluding intangibles,
as of January 1, 1938, according to the Lybrand, Ross Brothers and Mont-
gomery audit made for TVA, was approximately $81,500,000, with new
additions to date of purchase increasing this figure to approximately
$83,500,000. The accrued depreciation for the properties, according
to the study made by TVA engineers on an age life basis, approximates
$24,000,000, leaving $59,500,000 as the original cost depreciated of
the physical properties according to the TVA analysis.
To give consideration to the difficulties of accurately
calculating accrued depreciation, and to take into consideration elements
of value not reflected in the cost of physical properties, such as
organization expenses, unification costs, and cost of service
installations for appliances on customers' premises, the Authority for
3-
its initial offer adjusted this figure to approximately $67,500,000,
as of January 1, 1938, equivalent to approximately$69,500,000 as of
May 1, 1939.
4. Relation of Purchase Price to Early Offers of Commonwealth & Southern
and TVA.
The Company's original offer to sell was premised on $106,000,000,
representing the opinion of the firm of Jackson and Moreland as to the fair
value of the Company's electric properties. Subsequently the Company
offered to sell at $96,000,000, which was claimed to represent the
Knoxville basis. This was later reduced to $94,000,000, which was
represented as the rate base fixed by the Tennessee Railway and Public
Utilities Commission.
The gap between the last TVA bid of $67,500,000 and the Common-
wealth & Southern offer of $94,000,000, both as of January 1, 1938, was
bridged in the final series of conferences when the sale price of
$78,600,000 was agreed on as of May 1, 1939. It should be emphasized
that the $78,600,000 represents properties with a value $2,000,000
greater than the properties included in the prices as of January 1,
1938. That is, the price should be considered as $76,600,000 when
related to the $67,500,000 and the $94,000,000 figures.
From the Authority's point of view, the increase from
$69,500,000 to $78,600,000 represents the value of eliminating compe-
tition in this important market area, and relief from the harassment
and expense attendant upon competitive conditions in the Valley.
5. General Description of Properties.
The proposed agreement provides for the transfer to TVA of
five dams with hydro-electric generating plants having a combined installed
capacity of about 140,000 KW. These dams are Hales Bar on the Tennessee
River at Chattanooga, Blue Ridge and the two Ocoee Dams on the Ocoee River,
and the Great Falls Dam on the Caney Fork of the Cumberland River. The
Hales Bar Dam is the only privately owned dam on the Tennessee River.
It constitutes an integral unit in the Authority's unified development of
the river as a navigable waterway. It provides a pool of approximately
40 miles between the reservoir of Guntersville Dam and the Chickamauga
Dam just above Chattanooga. Hales Bar Dam is a major development embracing
a concrete structure approximately one-half mile long and 67 feet high.
In height it corresponds closely to the Authority's Wheeler Dam.
In addition to the dams and hydro-electric plants, three
major steam plants are included with a combined capacity of 100,000 KW.
The steam plants are located at Hales Bar, Nashville, and Clarksville,
Tennessee.
The Tennessee Electric Power Company's system includes over
1500 miles of high tension transmission lines, serving about 400 communi-
ties.in central and eastern Tennessee. The major cities are Nashville,
Chattanooga, Columbia, Cleveland, Murfreesboro, Athens, Fayetteville,
Shelbyville, Lewisburg, Lafollette, and Maryville.
6. Financing.
The Authority plans to finance its share of the purchase price
through appropriated funds and bond issues, and local public agencies will,
-5-
for the most part, obtain their funds through independent financing by
the sale of revenue bonds, secured only by the revenues of the distribu-
tion systems.
7. Rates.
It is proposed that each of the distribution systems will
place in effect the standard resale rates incorporated in the TVA
wholesale power contracts without surcharges of any kind. These rates
are from 20 to 30 per cent lower than the existing rates in the area.
It is expected that the public receiving service from the Company's
system will save approximately $3,000,000 annually under the new
rates for service.
8. Limitations of Territory.
The agreement for the purchase of Tennessee Electric Power
Company involves no agreement of any kind on the part of TVA concerning
the limitation of its operations. However, the acquisition of the
facilities of the Tennessee Electric Power Company, together with the
facilities in the adjoining areas in Alabama and Mississippi, will
absorb substantially all of the power which the Authority will produce.
9. Relation of Price to Book Value of Securities.
The Company has presently outstanding approximately $49,500,000
in face amount of funded debt, $24,000,000 in preferred stock and
$24,000,000 in common stock. The agreed uponourchase price will permit
redemption of the bonds and preferred stock at face or par value and
leave a margin for common stock of approximately $6,500,000. This,
102
-6-
together with the other assets, with the water, ice, and transportation
properties retained by the Company, variously estimated from $2,000,000
to $4,000,000, will leave a balance for common of some eight and a half
to ten and a half million dollars.
10. Participation of Communities.
The terms of the agreement will protect the right of any
municipality to serve itself with TVA power. However, no municipality
will be forced into public ownership. Most of the major communities
served by the Company have already applied for TVA power, and will
participate in the acquisition. Contracts have been negotiated or are
under negotiation with all of these communities.
Letter also Deut &
COPY
Presedent of the Senate
COMPTROLLER GENERAL OF THE UNITED STATES
Washington
June 2, 1941
The Speaker,
House of Representatives.
My dear Mr. Speaker:
I regret that I have to report to the Congress the existence of
a disagreement between this office and the Tennessee Valley Authority
which for reasons hereinafter stated requires the enactment of clari-
fying legislation satisfactorily to settle the fundamental issue of
whether it is the intent of the Tennessee Valley Authority Act to
exempt the fiscal officers of the Authority from accountability under
the Budget and Accounting Act and other general statutes requiring an
accounting for the disposition of public funds.
Immediately after taking office as Comptroller General a number
of informal discussions were held last November, at the instance of
the Tennessee Valley Authority, with Director James P. Pope and another
representative of the Authority, in an earnest attempt to settle some
then existing differences between the Authority and this office and to
establish satisfactory working procedures for the future settlement of
their fiscal officers' accounts and for making the annual audit of the
Authority's transactions expressly required by section 9 (b) of the
Tennessee Valley Authority Act as amended by section 14 of the act of
August 31, 1935, 49 Stat. 1080. These matters were thought to be
progressing satisfactorily when in response to my suggestion that the
Authority submit a written statement of its proposed changes in the
procedure, there was received from the Authority a memorandum contending
- 2 -
for the flat proposition that by reason of its corporate status and the
provisions of section 9 (b) of the act the Tennessee Valley Authority
is wholly exempt from the provisions of the Budget and Accounting Act
and other statutes requiring an accounting for public funds and that
the duties of this office in relation to the Authority were strictly
limited to the making of the annual special audit of the Authority's
-
transactions expressly required by said section 9 (b) of the Tennessee
Valley Authority Act. (The memorandum went to the length of proposing--
apparently for the purpose of eliminating even that prescribed official
examination, and in disregard of the express requirements of section 9 (b)
that such annual audits be made by the Comptroller General and that the
expenses thereof, with one exception, be borne by appropriations made
for the General Accounting Office-that this office withdraw its repre-
sentatives engaged in such audit and that "The Comptroller General
should appoint a firm of certified accountants of national reputation
to make an annual audit of the accounts of the Authority, the expenses
of the audit to be borne by the Authority.")
These contentions of the Authority that it is exempt from account-
ability under general law were not in accord with the views of my
predecessors, but the whole matter was carefully reexamined with the
result that I had to advise the Authority that while admittedly there
is some room for argument, I could not say that I found the views of
my predecessors in this office on this point without substantial sup-
port or that they went further than appeared to be justified in
resolving the doubt in harmony with the basic legislative policy of
holding public officers to a strict accounting for the use of public
- 3 -
funds entrusted to them. The reasons for my conclusions in this
respect were fully sét forth in decision of December 21, 1940, addressed
to the Chairman, Board of Directors, Tennessee Valley Authority, a copy
of which is enclosed herewith as a part of this report. For the rea-
sons stated in the decision it was, and is, my view that any intent of
the present law to exempt the Authority from accountability under the
Budget and Accounting Act and other general statutes is not sufficiently
clear to justify me in proceeding officially on that basis. The directors
of the Authority remain firm in their contentions to the contrary,
however, and, in effect, now refuse any rendition of accounts under
general law as is shown by letter dated February 12, 1941, as follows:
- 4 -
"TENNESSEE VALLEY AUTHORITY
Knoxville, Tennessee
February 12, 1941
"The Honorable
Lindsay C. Warren
Comptroller General of the United States
Washington, D. C.
"My dear Mr. Warren:
"This will acknowledge receipt of your letter of December 21,
1940, which has been studied with great care.
"That letter rules that the accounts of the Authority are subject
to final settlement and adjustment in the General Accounting Office
under the provisions of the Budget and Accounting Act of 1921 and
that the entirely different audit procedure provided in section 9(b)
of the Tennessee Valley Authority Act is to be considered as in
addition to and not in lieu of such final settlement and adjustment.
"It seems clear that this view is identical with the one taken
by a former Comptroller General, the late Mr. McCarl, and departs
sharply from the basis for relationship developed tentatively in a
series of discussions with your predecessor, Senator Brown. In effect,
therefore, we respectfully suggest that your letter of December 21
puts the legal question of relationship between the Tennessee Valley
Authority and the General Accounting Office back to where it was
when the Authority was created. The only question is the intent of
Congress as expressed in the statutes which govern both agencies.
At that time (1933) there may have been room for difference of legal
opinion as to the intent of Congress as expressed in the Tennessee
Valley Authority Act and its legislative history. Since that time,
however, repeated attempts to amend the Tennessee Valley Authority
Act to bring it under the Budget and Accounting Act have been
defeated in Congress, the last such attempt being through the medium
of an amendment to the Appropriation Bill as recent as two weeks ago.
In each instance, over a period of years, when the issue was brought
before Congress, it has declined to extend the Budget and Accounting
Act procedure to the Authority.
"I am sure you will understand, therefore, why the Board of
Directors of the Authority cannot acquiesce in the position taken
- 5 -
in your letter. We are convinced that the position stated in your
letter is inconsistent both with the express provisions of our
governing statute and the intent of the Congress clearly expressed
in its legislative history and the actions of Congress over a
period of seven years. For us to acquiesce in a requirement of
settlement and adjustment of Tennessee Valley Authority accounts
by the General Accounting Office under these circumstances would
in our judgment constitute an avoidance of our responsibility as a
Board for the administration and management of the project which
Congress and the President have assigned to our charge.
"We feel certain you would agree that the issue is an issue
of law, depending entirely upon the construction of the relevant
statutes. The Board, therefore, would under such circumstances
follow the advice of its General Counsel. The advice that has been
given to the Board both by its present General Counsel and his
predecessor has been that the jurisdiction of the General Accounting
Office over the transactions of the Authority is defined by section
9(b) of the Tennessee Valley Authority Act and that any extension
of that jurisdiction beyond the limits there set out is without
authority of law. These legal opinions are supported by the
independent conclusion of the Joint Congressional Committee
specifically charged by the Joint Resolution creating that body
with the duty of determining this particular issue. We have
concluded that the only way in which this controversy, now stalemated
on opposing opinions of law, can be brought to a conclusion is by
obtaining a ruling on the legal questions by the chief law officer
of the Federal Government. To that end we have forwarded to the
Secretary of the Treasury a letter requesting a revision of
procedure, a copy of which is forwarded herewith for your informa-
tion. We are advised that the Secretary plans to transmit this
request to the Attorney General for his opinion upon the questions
of law that are involved.
"In disagreeing with your position, you will understand, I
am sure, that the Board of Directors is simply trying to discharge
its responsibility under the Act in full conscience and that it is
with the greatest reluctance we find ourselves at issue with you.
"Respectfully yours,
TENNESSEE VALLEY AUTHORITY
(Signed) David E. Lilienthal
David E. Lilienthal
Vice-Chairman
Board of Directors"
- 6 -
I cannot proceed on the suggested basis, heavily relied on by
the Authority, that the subsequent failure of Congress to enact
proposed amendments which, among other matters, would have expressly
required the Authority to render accounts pursuant to the Budget and
Accounting Act, is determinative of the meaning and intent of exist-
ing legislation in this respect. On the other hand, I appreciate
that the rejection of such amendments could be regarded as an
indication of the attitude of Congress at the time. It is under-
stood that the Authority's letter to the Secretary of the Treasury,
referred to in the letter above quoted, is still under consideration
in the Treasury Department. However, the conflicting arguments on
the issue appear to have been fully developed, and as neither the
Treasury Department nor the Attorney General has jurisdiction to
decide or determine the matter so as to relieve me of official
responsibility in the premises, it is not perceived how the
Authority's present course of seeking such collateral administrative
opinions can settle the issue.
The result is that I am faced with the alternatives of
permitting the Authority indefinitely to continue to withdraw large
sums from the Treasury for which no accounting is rendered, which
I believe would be contrary to law and my official duty, or of
holding that the fiscal officers of the Authority are delinquent
- 7 -
in the rendition of their accounts and thereupon to withhold
approval of requisitions for further advances from the Treasury as
required by section 12 of the act of July 31, 1894, 28 Stat. 209,
as amended, 31 U. S. C. 78. I am loath to follow the latter course
in view of the room for doubt as to the legislative purpose and of
the expressed convictions of the Authority's directors that the
rendition of accounts would constitute an avoidance of their legal
responsibility. Moreover, such disapproval of requisitions would
leave the Authority without funds for current activities and would
jeopardize not only normal operations but national defense activities
dependent thereon. I see no other course, however, unless the issue
be settled by clarifying legislation.
In these circumstances, I must suggest the immediate importance
of an amendment to the Tennessee Valley Authority Act to set the
matter at rest. Whether the fiscal officer of the Tennessee Valley
Authority should receive and disburse the funds appropriated for
the activities of the Authority without rendering accounts therefor
for adjustment and settlement under the general law is, of course,
purely a question of legislative policy. If it be the legislative
will that the Authority shall not be required to render an accounting
pursuant to general law, that can be accomplished by amending
section 9 (b) of the Tennessee Valley Authority Act, as amended by
section 14 of the act of August 31, 1935, 49 Stat. 1080, by adding
- 8 -
at the end thereof a new paragraph substantially as follows:
"All amounts appropriated for the purpose of carrying out the
provisions of this Act shall be paid to the Treasurer of the
Corporation upon the request of the Board and, notwithstanding the
provisions of the Budget and Accounting Act or of other provisions
of law, no accounting to, or rendition of accounts for adjustment
and settlement by, the General Accounting Office for amounts hereto-
fore or hereafter received or disbursed by the said Treasurer shall
be required. Provisions in appropriation acts directing that
appropriations for, and receipts of, the Tennessee Valley Authority
shall be covered into and accounted for as one fund shall not be
construed as requiring the rendition of accounts for adjustment and
settlement by the General Accounting Office."
Conversely, if it be the legislative purpose not to exempt the
Authority from accountability under general law, that would be made
clear by the addition to the said section 9 (b) of a paragraph
substantially as follows:
"Nothing in this Act shall be construed to relieve the Treasurer
or other accountable officers or employees of the Corporation from
compliance with the provisions of existing law requiring the
rendition of accounts for adjustment and settlement pursuant to
section 236, Revised Statutes, as amended by section 305 of the Budget
and Accounting Act, 1921, 42 Stat. 24, and accounts for all receipts
and disbursements by or for the Corporation shall be rendered
accordingly."
I hold the view that any governmental agency charged with the
responsibility of conducting operations of the character of those
of the Tennessee Valley Authority should have some latitude of
authority beyond that needed and usually granted by the Congress
to the regular departments and establishments of the Government.
In this connection see page 28 of my decision of December 21, 1940,
herewith. However, I strongly oppose the view, sometimes expressed,
- 9 -
that the only route to such necessary latitude of authority is
through exemption entirely from regular accountability under the
Budget and Accounting Act for the disposition of public moneys.
When an agency of the Government conducts its business under special
grants of authority, permitting greater flexibility of action, the
audit and settlement of its accounts in the regular way is in nowise
inconsistent with the exercise of that flexibility of action,
because in the audit and settlement full consideration must be given
to the same special authority under which the agency's business was
conducted.
During the past few years charges have been made that the
close scrutiny by representatives of the General Accounting Office
over expenditures of the Tennessee Valley Authority has reflected
prejudice of the former against the latter. Such charges have
never seemed to me to merit serious consideration; but even if
justification for them could be found in the past none now exists.
It is perhaps not necessary for me to state in this communica-
tion that I strongly appreciate the importance of the work of the
Tennessee Valley Authority and have always supported legislation
to enable it to be prosecuted successfully. My record in this
regard is known to members of both Houses of the Congress, but I
also strongly favor uniform and complete accountability of all
- 10 -
Government agencies for the disposition of public moneys entrusted
to their use.
While it is inconceivable to me that any agency entrusted with
the expenditure of mammoth amounts of funds collected from the
people of the United States should desire to evade responsible
accounting and scrutiny by an independent office created for that
purpose, I make no further comment at this time with respect to the
situation here presented other than to urge the early enactment of
legislation which will definitely settle the question as, in the
wisdom of the Congress, it should be settled.
Respectfully,
(Signed) LINDSAY C. WARREN
Comptroller General
of the United States.
THE WHITE HOUSE
WASHINGTON
the
June 21, 1941
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TENNESSEE VALLEY AUTHORITY
2-41
BOARD OF DIRECTORS
Knoxville, Tennessee
HARCOURT A. MORGAN. CHAIRMAN
DAVID E. LILIENTHAL VICE CHAIRMAN
June 13, 1941
JAMES P. POPE
JUN 20 RECEIVED // 58 AM 41
THE WHITE HOUSE
The President
The White House
Washington, D. C.
My dear Mr. President
For your information we are forwarding herewith copies of
a letter from the Comptroller General to the Speaker of the
House, and of our letter in reply thereto. In our opinion
the issue discussed in this letter is of great importance
to all administrative agencies.
Faithfully yours
Harcourt A. Morgan
Chairman of the Board
Enclosures
Same letter sect & President
of the Secrete
June 6, 1941
The Honorable
The Speaker of the
House of Representatives
Washington, D.C.
My dear Mr. Speaker:
The letter recently addressed to you by the Comptroller
General suggesting the need for legislation clarifying the relation-
ship between his office and the Authority has been called to our
attention. The difference of opinion between the Comptroller
General and the Authority as to the nature of that relationship
is not the result of recent developments. On the contrary, it has
existed from the Authority's inception and has since been specifi-
cally considered by Congress on a number of occasions.
The Authority's views on the matter may be summarized as
follows:
(1) The question in dispute is whether under existing
law the jurisdiction of the Comptroller General extends only to
auditing the Authority's accounts in accordance with Section 9 (b)
of the Tennessee Valley Authority Act, as the Authority contends,
or whother it is ompowered to "settle and adjust" such accounts
in accordance with the Budget and Accounting Act of 1921, as the
Comptroller General contends.
2
(2) Congress has already spoken on the issue by repeatedly
refusing to extond the Budget and Accounting Act to the Authority;
indeed, the present Section 9 (b) of the Tennessee Valley Authority
Act was enacted in 1935 in place of an alternative provision
suggested by the then Comptroller General for the very purpose of
rehdering the Budget and Accounting Act applicable.
(3) In any event, the difference of opinion between the
Comptroller General and the Authority involves a purely legal
question of statutory interpretation which the Attorney General
should determine and which he is now considering. The Attorney
General's decision will settle the construction to be accorded the
existing law, and Congress will of course be in a position there-
after to decide whether as a matter of policy the law as so con-
strued should be amended.
(4) It should be emphasized that the dispute between the
Comptroller General and the Authority has nothing to do with any
question of whether the Authority's transactions should be subject
to outside audit, or whether it is under obligation to account
fully for funds appropriated to it. The Authority has welcomed
and will continue to welcome audits of its transactions mado by
the General Accounting Office in accordance with Section 9 (b)
of the Tennessee Valley Authority Act. On its own initiativo, it
has also obtained for the past three years independent audits by
the nationally known firm of certified public accountants, Lybrand,
Ross Bros. & Montgomery, as the result of which it has been able
to include certified financial statements in its annual reports to
Congress. While thus fully recognizing its public obligation to
3
subject itself to periodic audits and to account fully for funds en-
trusted to it, the Authority believes that the application to it of
the rigid and cumbersome procedures of the 'settlement and adjustment"
system-which bear little or no relation to auditing as that term is
understood by accountants and businessmen--would mark an immediate
end of its corporate flexibility and unduly hamper its activities.
In view of the importance to the Authority of the basic
issue which has been raised, it has been thought desirable to discuss
in somewhat greater detail each of the points summarized above. Such
discussion follows:
(1) Nature of the question in dispute. The issue is a
simple one. Ever since its organization the Authority has been of
the opinion that the Tennessee Valley Authority Act, by which it was
created, defines and delimits the jurisdiction of the General Account-
ing Office over its transactions. Section 9 (b) of that statute pro-
vides that the Comptroller General "shall audit the transactions of
the Corporation at such times as he shall dotermine, but not less fre-
quently than once each governmental fiscal year, with personnel of his
selection." It is provided that the Comptroller General and his rep-
resentatives "shall have free and open access to all papers, books,
records, files, accounts, plants, warehouses, offices, and all other
things, property, and places belonging to or under the control of or
used or employed by the Corporation." He is to make a report of each
such audit in quadruplicate, one copy for the President of the United
States, one for the chairman of the Board, one for public inspection
at the principal office of the Corporation, and the other for the uses
of the Congress. The statute further directs the Comptroller General
4
to "make special report to the President of the United States and to
the Congress of any transaction or condition found by him to be in
conflict with the powers or duties entrusted to the Corporation by
law." The Authority has not only never resisted the conduct of this
audit provided for in its own statuto but has repeatedly sought to
have it made more effective.
On the other hand the representatives of the General
Accounting Office have contended that the Authority is subject, in
addition to this detailed audit procedure, to all of the procedures
set up in the Budget and Accounting Act of 1921, including monthly
rendition of accounts and vouchers to the General Accounting Office
in Washington, the approval or disapproval of requisitions of funds
by the Comptroller General, and the final settlement of the accounts
of disbursing officers.
Clearly these conflicting points of view raise a purely
legal issue of statutory interpretation.
(2) Prior consideration of the issue by Congress. The
precise issue which the Comptroller General now raises was presented
to Congress in 1935 by one of his predecessors during the considera-
tion of certain proposed amendments to the Tennessee Valley Authority
Act. At that time the then Comptroller General proposed that Congress
adopt an amendment designed for the specific purpose of subjecting
the Authority to the procedures prescribed in the Budget and Account-
ing Act. After full consideration in committee and debate on the
floor of both houses this proposal was rejected.
The same question was presented to the Joint Committee
Investigating the Tennessee Valley Authority in 1938. After full
5
public hearings during which representatives of the Authority and the
General Accounting Office appeared before the committee, the final
report sustained the Authority's position on every point (Report of
Joint Committee Investigating the Tennessee Valley Authority, pp. 109-
133).
It was our hope that this carefully considered conclusion
of a joint committee of Congress specifically charged with the duty of
determining this issue would be accepted as conclusive.
(3) Since the question in dispute is one of statutory in-
terpretation, it should be finally determined by the Attorney General.
When the present Comptroller General assumed office we reviewed the
history of this controversy with him in an effort to convince him of
the soundness of our legal position which had been sustained by the
Congress in 1935, and again by the Joint Investigating Committee in
its report issued in 1939. It was after the conclusion of these
conferences that we received the Comptroller General's letter of
December 21, 1940, reiterating the original view of his office on the
question of law involved. Upon receipt of that letter we were of the
opinion that the only proper way in which to settle a difference of
opinion between two agencies of the Federal Government upon a question
of the proper construction of a federal statute was to submit the
issue to the Attorney General of the United States for his opinion.
Accordingly, on January 31, 1941, we wrote to the Secretary of the
Treasury suggosting a change in procedure, knowing that before deter-
mining the question the Secretary would in turn submit the entire
issue to the Attorney General. A copy of that letter is enclosed
herewith. On February 12, 1941, we wrote to the Comptroller General
6
stating that since all that was involved was an issue of law depend-
ing upon the construction of the relevent federal statutes the Board
had concluded that the only way in which the question could be re-
solved would be by obtaining a ruling from the chief law officer of
the Federal Government. A copy of that letter is also enclosed here-
with. Our request to the Secretary was submitted to the General
Counsel of the Treasury, who has ruled that the Authority's position
is correct. The opinion of its General Counsel has in turn been sub-
mitted by the Treasury to the Attorney General for his opinion.
In his letter to you the Comptroller General states that
the Attorney General does not have jurisdiction to determine this
matter so as to relieve him of official responsibility. It is im-
possible for us to understand this position. It means in substance
that the Comptroller General refuses to bo bound by the opinion of
the Attorney General upon a question of statutory construction and
insists upon roserving to himself final judgment on his own juris-
diction. Were it not for this attitude there would be no reason for
requesting legislation at this time. Logislation is neither needed
nor appropriate in order to determine the proper construction of
existing law. This same question was considered by the Joint Con-
grossional Committee Investigating the Tennessee Valley Authority,
which stated:
The committee doubts whether any useful purpose will
be served by legislation clarifying the relations be-
tween the Authority and the General Accounting Office.
The Authority should be placod on the same basis as
other Government corporations, in the affairs of
which the General Accounting Office is not pormitted
to intervene. Congress has already recognized this
need in the case of the Roconstruction Finance Corpora-
tion, the Inland Waterways Corporation, and the Panama
7
Railroad. The accounts of these corporations are
audited by private auditing firms, selected by their
respective boards of directors. If, however, it is
determined that relations between the General Account-
ing Office and the Authority shall continue, the
General Accounting Office's activities should consist
in the making of periodic commercial audits. Such
audits should be made in the field and not in Wash-
ington. Disputes concerning interpretation of statutes
and other legal questions should be referred promptly
to the Attorney General for final determination /Com-
mittee report, pp. 132-133/.
(4) The procedures of the Budget and Accounting Act are
not suited and have not generally been applied to governmental cor-
porate enterprises such as the Authority. While the present Comp-
troller General and certain of his predecessors have clung in theory
to the position that the procedures of the Budget and Accounting Act
are applicable to the Authority, they have not--possibly because of
obviously reasonable doubts as to the validity of that position--
actually sought in practice fully to apply them. It thus becomes
apparent that what the Comptroller General now proposes is that the
Congress abandon the procedures under which the Authority has success-
fully operated for eight years and substitute therefor a new law
subjecting, in practice as well as in General Accounting Office theory,
all of the transactions of the Authority to the final administrative
control of the General Accounting Office. Viewed in this light the
proposal raises the broad question as to the effectiveness of pub-
licly owned corporations as instrumentalities of government.
One unfamiliar with the facts would infer from the Comp-
troller General's letter that the Authority stands alone in its
attempt to maintain its corporate independence. The exact opposite
is the truth. The General Accounting Office has not been permitted
to extend the "settlement and adjustment" procedure to such corporate
8
enterprises as the Reconstruction Finance Corporation, the Federal
Deposit Insurance Corporation, the Inland Waterways Corporation, the
Panama Railroad Company, the Home Owners' Loan Corporation, the
Federal Savings and Loan Insurance Corporation, and the War Finance
Corporation.
The very nature of the Government corporation is incon-
sistent with the type of control inherent in the procedures of the
Budget and Accounting Act. This has been recognized by all commen-
tators on the subject. The Supreme Court itself in holding that the
United States Emergency Fleet Corporation and other government cor-
porations created during the first World War should not be subjected
to this type of jurisdiction stated:
Indeed, an important if not the chief reason for
employing these incorporated agencies was to enable
them to employ commercial methods and to conduct
their operations with a freedom supposed to be in-
consistent with accountability to the Treasury under
its established procedure of audit and control over
the financial transactions of the United States
Skinner & Eddy Corp. V. McCarl, 275 U.S. 1, 8 (1927)7
In his letter the Comptroller General concedes that
... any governmental agency charged with the re-
sponsibility of conducting operations of the charac-
ter of those of the Tennessee Valley Authority should
have some latitude of authority beyond that needed and
usually granted by the Congress to the regular depart-
ments and establishments of the Government.
He then expresses the opinion that there is no inconsistency between
this view and his insistence upon accountability under the Budget and
Accounting Act. With this conclusion we most emphatically disagree.
In order to determine the extent of the inconsistency it is necessary
to compare the relationship between the Authority and the General
Accounting Office under existing law, and the relationship that would
9
be brought about by the change proposed by the Comptroller General.
As proviously pointed out, under existing law the Comp-
troller General is given the broadest possible auditing powers. He
has the right to examine every record, every voucher, and every item
of income and expenditure; he is under a duty to make his annual
audit report available to the Presidont and the Congress; he is under
the additional duty of reporting especially to the Congress any im-
proprieties or violations of law that he may discover. If the ulti-
mate objective is to assure proper accounting and to protect against
dishonesty and extravagance it is difficult to see why those powers
are not sufficient.
In fact the Comptroller General does not suggest that the
proposed change in the law is required because of any deficiencies
in the Authority's accounting or internal audit procedures. The
Authority's system of accounts is in accord with standard practices
in accounting and its power accounts conform to the uniform system
prescribed by the Federal Power Commission, with such adaptations to
meet the particular problems of the Authority as are approved by the
commission. In addition, the Authority has always maintained an
elaborate system of internal audit controls, and its accounts have
been subjected to audits by two outside organizations, the General
Accounting Office and Lybrand, Ross Bros. & Montgomery, a nationally
recognized firm of certified public accountants. In the eight years
of its existence the Authority has handled more than 300 million
dollars of federal funds without the faintest suspicion of fraud or
misappropriation. The inevitable effect of superimposing the pro-
cedures of the Budget and Accounting Act upon existing auditing
10
procedures would be not to protect the Government against improper
expenditures but to subject the administrative discretion of the
Authority's Board to a final veto power exercised by the Comptroller
General.
There is widespread misunderstanding concerning the actual
operation of the so-called "settlement and adjustment" procedure of
the Budget and Accounting Act. Under this procoss the disbursing
officers of the departments and establishments subject to the act
are required to submit monthly or quarterly lists of receipts and
disbursements to the General Accounting Office, accompanied by vouch-
ers and other documentary support. The General Accounting Office
then determines whether in its opinion expenditures made were legally
authorized. At this step in the process it is clear that the Comp-
troller General reserves to himself the final authority to pass upon
the interpretation of all statutes with no possibility of appeal.
In this way he is permitted to substitute his judgment, or that of
his counsel, for the judgmont of the agency charged with the responsi-
bility for administering the statute in question.
The detailed internal control exercised by the Comptroller
General over administration is enforced in two ways. By means of
his statutory power to disallow a payment already made, and to
charge the payment against the account of the disbursing officer he
is in a position to force the disbursing officer to follow his in-
terpretations blindly without consideration of their soundness. In
case of any attempt at resistance to the Comptroller General's view
as to law or as to policy, he possesses the ultimate veto power
through the threat of disapproving a requisition for funds. In our
11'
prior dealings the General Accounting Office has not limited this
asserted veto over administration, at least in theory, to questions
of statutory interpretation. Its investigators have repeatedly noted
exceptions to transactions solely because in their judgment the ex-
penditures involved were not wise or necessary or desirable. In this
way, if the Budget and Accounting Act were to be fully applied in
practice and the exceptions followed by disallowances, the investi-
gators of the General Accounting Office would be placed in the posi-
tion of overruling the discretionary decisions of the Board of
Directors of the Authority, even though they were in no way responsi-
ble for successful performance of the duties which the Authority is
expressly directed by statute to carry out. In our opinion such a
situation would constitute the antithesis of responsible administra-
tion.
It should be emphasized that what has been said is in no
way a reflection upon the present incumbent of the office of Comp-
troller General. The objections to the extension of General Account-
ing Office control are based upon principles of administration and
have no relation to the person occupying the office at any particular
time.
In considering the validity of the contention that the pro-
posed extension of jurisdiction would in no way jeopardize the effi-
ciency of the Authority's operations, it is significant that all of
the avowed opponents of this program have welcomed the proposal with
enthusiasm. They understand that they have been presented with a
final opportunity to cripple this enterprise by dopriving it of
those attributes of initiative, Mexibility, and independence that
have contributed so much to its success.
12
In the closing paragraph of his letter the Comptroller
General states that it is inconceivable
that any agency entrusted with the expenditure of
mammoth amounts of funds collected from the people
of the United States should desire to evade responsible
accounting and scrutiny by an independent office
created for that purpose.
This statement is based upon the misconception that there
can be no true public accounting except that particular type of de-
tailed administrative supervision exercised by the General Accounting
Office. The Authority has never sought to evade accountability to
the public. All of its transactions are carried on in the light of
continued publicity. In its annual reports to the Congress it
accounts for every penny that it has expended and for every move
that it has made, and its financial statements are certified to each
year by a recognized firm of certified public accountants. Again
in its annual appearances before the Appropriation Committees of the
two Houses it gives a detailed accounting. This is accounting to
Congress and to the public in the truest sense.
In conclusion, it must again be emphasized that the legal
issue in dispute between, the Comptroller General and the Authority
has nothing to do with any question as to whether the Authority's
transactions shall be regularly subject to audit, nor whether it
shall account fully to Congress and the public. The Authority has
always welcomed the fullest auditing investigations--as distinguished
from application of the "settlement and adjustment" procedures--both
by the General Accounting Office and by other accounting agencies,
and on the basis of these investigations it has sought to include
in its reports to Congress the fullest possible accounting and
13
statistical information concerning its activities. Its books are
open to the inspection and review of any interested person. This
policy it will continue to pursue.
Respectfully,
Harcourt A. Morgan
Chairman of the Board
David E. Lilienthal
Vice Chairman
James P. Pope
Director
Mr President
PSF
TVA
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PSF'S
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PSF
MEMORANDUM
TVA
SUBJECT: CHAIRMAN MORGAN'S COMPLAINTS AGAINST THE INTERNAL RE-
ORGANIZATION OF THE AUTHORITY
Chairman Morgan repeatedly condemns action of the Authority
on the ground that it is being carried out by the other two directors
through a "general manager of their choice" and without consideration
of him. He repeatedly implies that there were irregularities in
setting up the general manager form of organization and in selecting
the present general manager. For example, he charged in his letter
to Congressman Maverick that he had been deliberately stripped of his
power and jurisdiction.
The careful and thorough study which preceded the reorgan-
ization, the deliberate and wholly regular adoption of the new form
of organization by the Board, insofar as internal rearrangement is
concerned, can be adequately developed by the directors.
Additional evidence of the regularity and appropriateness
of the general action taken might also be brought out by questions
from the President based upon his own familiarity with certain aspects
of the matter. The President in his letter of February 25, 1937,
addressed to the Board requested a copy of Mr. Blandford's tentative
report on reorganization for his personal perusal (Blandford had been
directed to prepare such a report at a Board meeting at the end of
May 1936). In this letter the President also indicated his desire
to invite persons of his own choosing to make a special study of the
organization problems of the Authority and report to him.
This committee was appointed. Mr. Blandford's report was
made available to the committee. The committee spent considerable
-2-
time both in Washington and in the Valley interviewing members of
the Board and the staff of the Authority. They submitted a report
and recommendations bearing upon desirable administrative reorganiza-
tion in the Authority. This report, upon instructions from the
President, was made available by the committee to the Board of
Directors. It concurred with the Blandford report in proposing
the general manager form of organization and in all other major
respects supported the Blandford report. The Blandford report was
then submitted to the Board and some ten days later, in June 1937,
the Board adopted the general manager form of organization. From
this action the Chairman dissented.
The general manager form of organization is undoubtedly
what the Chairman refers to when he says that he has been stripped of
his authority and jurisdiction. Much of what the Chairman imputes
to the effects of the general manager plan arises from his special
conception of his peculiar responsibility as Chairman of the Board
despite the fact that there is no statutory or administrative theory
upon which this special conception can rest.
PSF: TVA
SPECIAL NOTE
In his attacks upon the attorneys and engineers handling the 19
company case in Chattanooga, the Chairman referred in his memorandum
to Mr. Fly of December 20, 1937 to three cases where pressure had been
put upon engineers to testify contrary to their opinions. He has only
named one of the three men despite repeated requests from the attorneys
and the Board for specification. It would be exceedingly helpful if,
as soon as this incident is mentioned, his memorandum of December 20
could be called to his attention and he could be asked to specify the
other two cases so that this incident could be fully explored.
PSF: TVA
subject File Box 187
Mr. President:
Would it not be well to ask Arthur Morgan to remain a few
moments when the others leave. Then to tell him how sorry you are
that he has refused to participate and has given the impression that
he cannot receive from you a fair hearing. That you had honestly
hoped he would help you to lay the basis for a review of TVA policies
on their merits. Such 8. review can never be obtained when the op-
ponents of the Administration are ready to seize the opportunity to
condemn TVA and all its works simply because Arthur Morgan things
David Lilienthal is a scoundrel and David Lilienthal thinks Arthur
Morgan won't play ball if he can't call the plays. Maybe you can
make the poor old fellow feel that he has not only let you down, but
has let down the sort of TVA he really wants.
I frunthy from hi muchl misgnots
it into Ligarst fain me to
fit hymes for Againe, by
froil they r Thy an - + make / K
N had hw ince - & abo
that would
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varifil to thing Fir
in my - only the tongress
PSF
TVA
MEMORANDUM
SUBJECT: CHAIRMAN MORGAN' CHARGE OF CONSPIRACY AND COALITION
AGAINST HIM BY OTHER TWO DIRECTORS STRIPPING HIM OF
HIS POWERS AND JURISDICTION
Chairman Morgan charges coalition, sharp strategy against
him, etc. The real explanation is that he has made it appear that
the other two directors are always against him because after Mr.
Lilienthal's re-appointment in May 1936, the Chairman abandoned his
former practice of cooperating with the Board and instead opposed
its actions generally by irrational dissenting votes, etc.
A letter which the Chairman wrote the President at the
time of the re-appointment of Mr. Lilienthal outlined the conditions
under which he would withhold his resignation. This letter is
significant evidence that his actions since the appointment spring
from a pre-determined plan of obstruction.
Questioning him upon the basis of the material contained
in that letter should do much to reveal the obstructive and irrational
attitude that he then held and has ever since manifested in the con-
duct of his office.
For example, one of the conditions stated in that letter
was that in the future no action must be taken by the Board except
by unanimous vote. In other words, he there disavowed the principle
of majority rule written into the statute. Practically all of his
obstructive tactics since that time have been in an effort to kill
or prevent execution of policies with which he was not wholly in
accord as though he in fact enjoyed the veto power requested in his
1936 letter to the President.
PSF: TVA
POINTS TO REMEMBER
1. If Delay is Requested by AEM.
Chairman Morgan will probably ask for delay on the ground that he
has been 111 in Florida and that Dr. H. A. Morgan and Mr. Lilienthal
have had an advantage over him with respect to time for preparation.
The facts are:
A. All three directors were notified of the inquiry at the
same time.
B. During the period of his absence in Florida, Dr. A. E.
Morgan has released the most violent of his attacks on
the other two directors. Whatever material he has to
support those attacks must have been available to him
Florida. If he does not now have the material to
support the accusations, he could not have had the material
to support them at the time he made them.
C. In any event, whether he is ready or not, Dr. H. A. Morgan
and Mr. Lilienthal are ready to respond.
D. When he can not postpone the inquiry, Chairman Morgan is
likely to request the privilege of filing a statement.
Under no circumstances should he be permitted to file a
statement later as such a statement would undoubtedly be
a fresh attack. If he is willing to describe his support-
ing data and identify the exhibits, he might be accorded
the privilege of filing such acceptable exhibits as he
has not brought.
-2-
2. If AEM denies that attacks include accusation of dishonesty.
Chairman Morgan has used every possible way of charging dishonesty
and official impropriety by insimuation and innuendo. He may on this
occasion, as he did last autumn, deny that he intended to attack the
honesty or integrity of the other board members and may contend that
his differences relate to questions of policy and administrative
procedure. This is not the fact. His plain intention has been to dis-
credit the motives and integrity of his associates, and cast suspicion
upon their honesty as public officials.
In any case, and whatever might have been his defense as to intent
in the earlier days of his disaffection, it is no longer valid in view
of the fact that he has been complacent in the face of the almost universal
interpretation of his loose and unsupported statements as charges of dis-
honesty. Since last August when, by formal action, the matter was called
to his attention, his attacks have increased in violence and frequency.
He has permitted his statements to be interpreted as revelations of
scandals, as the basis for charges that the TVA is a "New Deal Teapot
Dome" and similar sensational accusations. In the face of this record
he can not deny that he has charged the majority Members of the Board
with improprieties involving moral turpitude.
3. Concerning the Complaint that AEM 18 Denied Information of TVA Activities.
In his attacks (particularly his letter of February 14 to Congressman
Maverick) Chairman Morgan complains that he is prevented from securing
-3-
adequate information to form an independent judgment of certain aspects
of the TVA program. Yet he considers his information adequate to make
grave charges and scandalous insimuations. Either his charge that
information is denied is false, or his charges of official improprieties
are unsupported. They are contradictory.
4. The Persecution Complex.
The persecution complex which appears to dominate him is particularly
evident in this letter to Congressman Maverick of February 14 (written
from Clermont, Florida). In it he interprets the ordinary administrative
procedures through which all members of the board carry on their work as
devices specifically invented as a part of a conspiracy to frustrate his
independent inquiries.
5. The Attack on Land Gran& Colleges.
As an illustration of the Chairman's reckless broadcasting of unsupported
charges against persons and agencies, note how he describes the land grant
college: and county agent system in his letter to Mr. Maverick - "The land
grant college organization, with the county agent system, is a powerful
political bureaucracy." Compare this with the thoughtful commendation of
the President's Advisory Committee on Education after its long and careful
study of the program of the land grant colleges and the extension services
and the record of 75 years as an agency facilitating cooperation between
-4-
the Federal Government and the states in matters relating to
agriculture.
6. Confusion of Thinking Shown in his Concept of Dishonesty.
In the course of the hearing it will be interesting to note that,
to the Chairman, disagreement with him is frequently considered evidence
of dishonesty. Experience has shown that unless he is compelled by
specific demand to use the word dishonesty in its customary meaning,
he will use it in the special AEM sense meaning departure from his
judgment and the record will unintelligible. AEM typically turns a
disagreement into evidence per se of improper motive or personal attack.
CONFIDENTIAL DRAFT WITH EXPLANATORY NOTES
PSF
TUA
OPENING STATEMENT
This conference is for the purpose of giving a hearing on the
grave charges which the members of the Board of the Tennessee
Valley Authority have directed at each other. As Chief Executive
I can not ignore charges of this character concerning an executive
agency of the Government. Indual that I have a responsibility to
determine whether or not the facts bear them out, and thereupon
to take such action as may seem appropriate.
Chairman Morgan has publicly charged that Dr. H. A. Morgan
and Mr. Lilienthal have been guilty of dishonesty and impropriety
in the conduct of their respective offices. Dr. H. A. Morgan and
Mr. Lilienthal, in turn, have advised me that Chairman Morgan has
been guilty of actions which are not permissible in the conduct
of his office. I shall give each of you gentlemen an opportunity
to present the facts, if any, upon which the charges are predicated.
This hearing is for the purpose of securing facts and only
facts. There are two points which I should like to emphasize be-
fore I call upon you gentlemen to speak. First, I am not now
interested in any charges relating to mere disagreements or personal
differences over details of administration. At this time I -
interested only in the grave charges of dishonesty, impropriety
and impermissible conduct which have been made and I shall ask you
gentlemen to confine yourselves to the facts supporting these
charges. s second caution which is necessary is that I am not
- 2 -
interested in opinions, rumors, suspicions, or speculations. Charges
as serious as these, unless made recklessly and irresponsibly, must
have been made with the supporting facts clearly in mind. It is
those facts and only those facts which I want. st this time I want
7
your oral statements of the facts. If there are supporting doou-
ments, you may also submit them and they will be made a part of the
record, but again I must insist that in submitting any you confine
yourself to the documents containing the basic facts on which the
charges were predicated.
Now Chairman Morgan, I shall first give you an opportunity as
Chairman to state the facts supporting the charges which you have
made. As you finish each charge, I shall give the other directors
)
3
an opportunity to reply. When Chairman Morgan has finished with
all his charges, I shall then follow the same procedure with Dr.
Harcourt A. Morgan and Mr. Lilienthal with respect to the charges
they have made, giving Chairman Morgan an opportunity in the same
way to answer as to each of them.
Chairman Morgan, in September of last year, Dr. Harcourt A.
Morgan submitted to me a copy of a resolution adopted by the majority
of the Board of Directors stating that your article on "Public
Ownership of Power," in the September 1937, Atlantic Monthly, had
impugned the integrity of the Tennessee Valley Authority and the
honesty and motives of its Board of Directors and disavowed such
methods in a discussion of the Authority's problems as injurious to
the project and to the public interest. I immediately wrote you
- 3 -
informing you of my concern. In my letter I said that the matter
could not properly rest and that there was a very definite obligation
on you either to withdraw what your solleagues believed to be an
impeachment of their integrity or that you present whatever specific
facts you had, if any, to justify your statement. I shall ask the
stenographer to copy these two documents into the record at this
point.
You did noither. Instead you came to the personally a few
weeks later and told me that your article was not intended as an
attack on the integrity of your colleagues, but that this interpre- Thourmen
tation had been read into your statements. Since that time, Specifi- specifi-
cally in the last week, you made charges of dishonesty and impropriety
Manjan
in unmistakable terms. I refer in particular to three releases which
you have recently given to the press. Two were released on March 3,
1938. The first was entitled "A Statement by Arthur E. Morgan,
Chairman of the Tennessee Valley Authority in Reply to Public State-
14
ments by Dr. H. A. Morgan and Mr. D. E. Lilienthal and by Senator
George L. Berry concerning the Chairman's testimony in the Berry
Marble Case." The second was a summary of that statement differing
somewhat in form but not in substance. Although the heading of each
of these statements related to the Berry marble claim, the statements
themselves cover a broader range. The third statement, released
March 7, 1938, made public the text of a letter addressed to Repre-
sentative Maverick on February 14, 1938, giving your general views
upon the situation in the TVA Board. Since these documents are lengthy,
I am asking the stenographer to attach them to the transcript as
exhibits.
- 4
I
SO-CALLED BERRY MARBLE CLAIMS
QUESTION: Now, Chairman Morgan, since a large part of your recent state-
ments have been devoted to the handling of the so-called Berry
marble claims, I shall ask you first of all to give me the facts
upon the basis of which you make your statements.
In your letter to Congressman Maverick which you made public,
you said:
"The Berry marble claims, in my opinion, are an effort
at a deliberate, bare-faced steal. The other two directors
had the same evidence of this that I did. For a year and
a half I tried to work it out in confidence in the Board,
and without publicity, and only spoke out at the last
minute. The public and the Congress do not yet know the
extent to which that was improperly handled."
The gist of your complaint also sppears to be contained in your
Berry claims statement that:
"The real difficulty has been in the effort to secure
honesty, openness, decency, and fairness in Government,
15
The Berry marble case, as I have said,is an instance of
this difficulty."
(115A)
You say that the difficulty is in securing "honesty," and you
charge your colleagues with dishonesty and malfeasance. What facts
of dishonesty on the part of your colleagues have you in regard to
the so-called Berry marble case?
QUESTION: (If Chairman Morgan answers that he did not intend to charge
dishonesty but merely to disagree with the way the claim was handled,
he should be asked why he allowed the press to interpret his statements
as attacking his colleagues' integrity and in general to make scandalous
charges when he knew that there was no question of the personal honesty
- 5 -
of his fellow Directors involved. In this connection it would be
well to point out that the press construed his testimony in the Berry
marble case in December 1937 as charging his colleagues with im-
propriety, that Chairman Morgan not only failed to correct this
impression but intensified it by his three later statements last
week and by his unprecedented demand for a Congressional investiga-
tion.)
If you did not intend to charge dishonesty but merely to dis-
agree with the way the claim was handled, why did you acquiesce in
the press interpretation of your charges as a serious reflection on
your colleagues' integrity? Why did you not correct that widespread
misunderstanding of your views, if in fact it was a misunderstanding,
instead of repeating the charges several times, at the trial in
December and again in your recent statements?
QUESTION: Dr. Harcourt Morgan and Mr. Lilienthal, do you have any facts
in answer to the charges relating to the so-called Berry case?
-6-
II
"JOKER" IN ARKANSAS POWER & LIGHT COMPANY CONTRACT
QUESTION: In your letter to Mr. Maverick you made the following statement:
"The Arkansas Power and Light Company contract as presented
to me for approval contained a 'joker' which would have
allowed the company to buy prime power at secondary power
rates. I protested stremiously and got that point eliminated.
The TVA engineer who helped me to analyze this Arkansas con-
tract and who disclosed this 'joker' is a very able man. He
has helped me outside his regular field in analyzing problems
I have presented to him. After this and other services he is,
I believe, being pünished by insecurity of employment, though
I am perfectly aware that a plausible explanation would be
16
given for keeping him in a state of insecurity."
The word "joker" in the context of your letter and in common under-
standing is a serious reflection on your Board, and that interpreta-
tion is borne out by your reference to the punishment of the engineer
who exposed this so-called "joker." What were the facts supporting
your charge regarding the insertion of a joker in the Arkansas Power
and Light Company contract.
(If Chairman disavows his intention of charging dishonesty
or impropriety he should be made to state that his serious reflection
was based merely on the fact that a contract failed to contain a
provision which was adopted promptly when suggested.)
QUESTION: Now Dr. Harcourt Morgan and Mr. Lilienthal, do you have any
facts that you want to give on this matter?
-7-
III
FALSE REPORTS TO CONGRESS, ETC.
QUESTION: In your letter to Congressman Maverick you say:
"Some of the reasons for my concern are the explicitly
misleading and evasive reports, and in my opinion, explicitly
false reports, which have been made to the President, to
Congress and to the public concerning conditions in the
TVA, by a TVA director or by the two directors acting in
unison."
In view of the high trust which public officers hold in respect
to the public, the Congress, and the Chief Executive, there could
be no more serious breach of their fiduciary duty than making wil-
fully false reports. What, if any, such reports did you refer to,
17
and specifically what do you charge was false about them?
(In this connection, if Chairman Morgan refers to specific
documents such as the last annual report and to specific aspects
of them, it will be well to inquire whether at the time such re-
ports were made he pointed out to the other directors specifically
Jir
wherein they were false and wherein they should be corrected. In
the case of the last annual report which he did not concur in, he
Mh
refused to give his specific objections thereto despite repeated
requests for them from the other directors.)
QUESTION: Dr. Harcourt Morgan and Mr. Lilienthal, have you anything to
say regarding these matters?
8
IV
SINISTER MALPRACTICE - "EVASION, INTRIGUE AND SHARP STRATEGY"
QUESTION: In your letter to Congressman Maverick, speaking of your colleagues,
you say:
"There is a practice of evasion, intrigue and sharp strategy,
with remarkable skill in alibi and the habit of avoiding direct
responsibility, which makes Machiavelli seem open and candid.
It took me a year or more of close association to be convinced
that the attitude of boyish open candor and man-to-man direct-
ness was a mask for hard boiled, selfish intrigue."
Elsewhere in the letter you refer to "misrepresentation,
intrigue and arbitrary action."
These words ascribe sinister malpractices to your colleagues.
I want you to give the facts upon which this was based.
(Chairman Morgan will probably list some or all of the following:
(1) that the other members of the Board met secretly and adopted poli-
18
cies; (2) that the policies so adopted were railroaded through Board
meetings without adequate notice and ignoring his repeated requests for
further time to consider them; (3) that the other directors failed to
give consideration to his views or show the respect due his office;
(4) that they stripped him of his administrative powers and juris-
Jr.
diction; (5) that they appointed a general manager and other key staff
18a
members of their own choosing over his dissent and dismissed or other-
wise intimidated men loyal to the Chairman.
(As to the "secret" meetings and alleged "railroading," fair
analysis of any of these alleged incidents will develop that what
actually occurred was clearly consistent with the proper administra-
tion of the project; that the informal meetings went no further than
-9-
proper collaboration between executives; that the Chairman's
voluntary and extended absences frequently made action in his
absence imperative; that the so-called two-to-one voting con-
spiracy or coalition against him was nothing more than the contin-
uance by other directors of policies which he suddenly departed from
and dissented on after Mr. Lilienthal's reappointment; that staff
changes were pursuant to a general plan of reorganization adopted
upon recommendation of experts in Government procedure and after
ample opportunity for study and discussion by all directors, for
the purpose of relieving Board members of administrative responsi-
bilities so that they might devote themselves more fully to policy
problems.
(It should be observed that probably no amount of pressing
for details will bring out any facts which, even as interpreted by
Chairman Morgan, will support the impression of sinister malconduct
which his statements in the Maverick letter clearly convey.)
QUESTION: Dr. Harcourt Morgan and Mr. Lilienthal, will you state any
facts you have bearing on these charges?
-10-
V
CONSPIRACY
QUESTION: In your statement on the Berry claims, you said this of your
situation:
"To a steadily increasing degree, however, I
have contended with an attitude of conspiracy,
secretiveness and bureaucratic manipulation."
19
What are your facts on that?
(Chairman Morgan will probably give the same type of incidents
on this as on previous question.)
QUESTION: Dr. Harcourt Morgan and Mr. Lilienthal, are there any facts
which you have to bring out on this?
-11-
VI
ALUMINUM COMPANY CONTRACT
QUESTION: In your letter to Congressman Maverick you said:
"With reference to the Aluminum Company contract I
feel that the relations of the TVA and the Aluminum
Company have failed to protect the public interest.
I have protested to the Board repeatedly on this
matter."
In the context of your letter which generally charges serious
wrongdoing to the other members of the Board, this statement lends
2
itself to the interpretation of a sinister relation between them
and the Aluminum Company. I will ask you now if that was your inten-
tion, and if so, to support the charge with the facts.
(Chairman Morgan will almost certainly say that his real difference,
his only one, has to do with integrating the Aluminum Company develop-
ment on the Little Tennessee River with the projects of the Authority
and that he disagrees with the majority of the Board which refused to
enter into a contract providing for such integration in 1936 on the
ground that the contract was unfavorable to the Authority, and which
decided in 1937 to contract for power sale alone without integration.
QUESTION: Have you, Dr. Harcourt Morgan or Mr. Lilienthal, facts which
you desire to adduce on this?
-12-
VII
GENERAL CHARGE OF DISHONESTY AND IMPROPRIETY
QUESTION: In your statements on the so-called Berry claims you said that
the situation in the TVA Board was not due primarily to differences
in power policy or to just another family querrel, but that the real
difficulty was to secure "honesty" in Government. You stated that
"The Berry marble case, as I have said, is an instance
of this difficulty."
You thus charge that there are other instances of dishonesty. In your
letter to Congressman Maverick, speaking of the present TVA situation
you say
"In my opinion good government and the welfare of the
TVA demand that the situation be cleaned up, and that
m
standards of openness, fairness and honesty shall prevail."
Now I want to ask you, Chairman Morgan, what instances of dis-
honesty had you in mind when you made those statements.
QUESTION: Commencing over 8 year ago, Chairman Morgen, you have made a series
of statements which seemed to attack the propriety of your colleagues'
conduct and which they have regarded as impugning their personal
integrity. Your public utterances have culminated in the last few
weeks with statements which unmistakably and unequivocably attack the
motives and personal honor and integrity of your colleagues in dis-
charging their public trust. Generally speaking, and I think it is
only fair to say that your statements must be interpreted as a whole,
their net effect is to place a heavy cloud not only upon the other
members of the Board, but also upon importent operations of the
Tennessee Valley Authority. The press has been practically unanimous
in so interpreting your attitude as reflected in your public
-13-
utterances. You have never publicly retracted or corrected the
impression you have given. I think you have a heavy responsibility,
therefore, to support the position that you have taken and that has
been so universally ascribed to you. I therefore must ask you to
say whether you have any other facts whatever which you had in mind
3
in making these serious charges of dishonesty and lack of integrity
and in broadcasting them so widely in the manner in which you have
done and in acquiescing in the interpretation which has universally
been placed upon them.
Insert + 24
-14-
We now come to the charges which Dr. Harcourt A. Morgan and
Mr. Lilienthal have made against Chairman Morgan. These charges
are contained in a document which they submitted directly to me
on January 18, 1938. Last week I authorized its release. The
charges of Dr. Harcourt A. Morgan and Mr. Lilienthal appear to
relate to certain specific matters set forth in this document.
I will now ask Dr. Harcourt Morgan and Mr. Lilienthal to give
me the facts upon which these charges were based. I want to remind
you gentlemen again that I am interested only in the facts on the
fundamental issues. For convenience, I suggest that we take up
these charges in the order in which they are listed in the
memorandum of January 18.
-15-
I
PUBLIC ATTACKS ON BOARD
QUESTION: The first is:
"It is not permissible, as Arthur E. Morgan has done
repeatedly in published statements, to attack the personal
motives and good faith and impugn the integrity of his
associates on the Board, not upon the basis of direct
charges but by innuendo, indirection, and aspersion."
What are the facts upon which this general charge was based?
QUESTION: Chairman Morgan, have you any reply?
-16-
II
ATTACKS UPON AND HARASSING AND INTERFERING WITH STAFF
QUESTION: The next charge in the memorandum of January 18 reads as
follows:
"It is not permissible for Arthur E. Morgan, as an
expression of disagreement, to engage in unsupported attacks
2
upon the integrity, professional ethics, and competence of
key members of the staff, and to harass and interfere with
them while they are carrying out duties resulting from de-
cisions duly arrived at by a majority of the Board of
Directors."
Dr. Harcourt Morgan, and Mr. Lilienthal, upon what facts was
this charge made?
Q UESTION: Chairman Morgan, I should like to hear your reply to the facts
on this matter which Dr. Harcourt Morgan and Mr. Lilienthal have just
stated.
-17-
III
FAILING TO CARRY OUT BOARD DECISIONS
QUESTION: Dr. Harcourt Morgan and Mr. Lilionthal, your next charge is
that
"It is not permissible for the Chairman of the Board,
after Board action has been duly taken, to fail and re-
fuse to carry out explicit action taken by the Board."
Please give me the facts on the specific instances, if any, that
you had in mind in making this charge.
QUESTION: Chairman Morgen, are there any facts that you desire to bring
'out on these matters?
-18-
IV
COLLABORATION WITH PRIVATE UTILITIES
QUESTION: The next two charges of Dr. Harcourt A. Morgan and Mr.
Lilienthal are apparently related. The first of these reads as
follows:
"It was not permissible for Dr. Arthur E. Morgan to
cooperate with a utility executive in the preparation
of a memorandum, the express purpose of which was to
28
show that a particular decision of the Board was wrong
and activated by improper motives."
I take it you gentlemen meant "actuated." The second states:
"It was not permissible for Arthur E. Morgan to collabor-
ate with the former chief engineer of the Insull utility
system, in the preparation of a detailed recommendation
on a power pooling policy, which report proposed evasions
and violations of the TVA Act; nor was it permissible,
during negotiations, for him to permit such report to be
made available to the utilities."
Q UESTION: Chairman Morgan, what is your reply?
-19-
V
"RULE OR RUIN"
QUESTION: Finally, I interpret this document of January 18 to make
certain other less specific but nonetheless fairly clear charges on
which I want whatever other facts you had in mind. You imply that
29
Chairman Morgan is actuated by "the doctrine of 'rule or ruin'"
and "personal considerations."
What are the facts on these points?
QUESTION: Chairman Morgan, do you wish to say anything as to this?
Filiburater
VA
PSF:T
Under the Constitution the Chief Executive is directly
changed to "tablare that the fanto be Lithfully examel
and primarily responsible for the administrative officiency of the
executive agencios of the Government.
I have been confronted for some time with a threat to the
continued Incessiful functioning of the Tennessee Valley Authority, a great execu-
1
tive agency.
In January, 1937, in a public speech and articles in the public
the
and Chrism
press,
Arthur E. Morgan, Chairman and one of three members of the
n
/
Board of Directors of the Authority, seemed to intimate - but without
specifications or supporting evidence - that he doubted the integrity
of his fellow members. Insert A.
In August, 1937, again in the public press - but again without
E.
used
specifications or supporting evidence - Arthur Morgan cound to
Emginage interenting
A
that he doubted the integrity of his fellow members. At this
time I wrote him as follows:
"That there is a very definite obligation on you
either to withdraw what your colleagues believe to be
an impugning of their integrity or that you present
whatever specific facts you may have, if any, to justify
your statements."
In reply Dr. Arthur Morgan informed me that while he was highly
critical of the work of his colleagues, he had no intention of impugning
-2-
their good faith or integrity. He complained about the internal organ-
isation of T.V.A. and requested me to intervene on his behalf. I urged
him to return and to endoster to complete The all internal reorganization in
Try
nurmung of the work along with the lines his recommended Hillurs in directions the report of a special m my
Culting Their attimition whis statement that Nid
committee of experts on administration which I had sent to the Termessee
nut, hims access n they Armad this Las t
Valley in the spring of 1988 that all reads sad ban
and mustil in aprn in the chinsmin
In December, 1957, the constitutionality of the T.V.A. Act
was at stake in a law suit brought by eighteen utility companies. During
this
within E. Morgin
such litigation the minority member of the Board widely disseminated
within the Authority's organization charges of unethical professional
sconduct against the T.V.A. counsel in charge of the litigation -
again without specification or evidence.
On January 18, 1938, the majority members submitted to me,
without publicity, an official memorandum complaining of certain specific
kinds of unpermissible conduct on the part of the minerity member, in-
cluding the making of reckless and unsupported charges, including an
in care/ing writ
unwillingness to cooperate withhelds decisions of a majority of the Board
r
and including serious interference with the work of key members of the
Authority's staff in the performance of their duties. In contrast to
411
Arthur Morgan's charges against them, the complaint of the majority
-8-
against him did not charge him with dishonesty or lack of integrity. That is
a fact that directly 15Am m The dues and ima Solf this makery, Ehargin
- On March 3rd and on March 5th, 1958, [the missality member
made extensive and unequivocal charges of dishonesty and lack of integrity
in public office on the part of the majority members - again in the
public press - and again without specifications or evidence.
Despite my long personal friendship for Arthur E Morgan and
^
my him appreciation of his many public services in the past, this action by
his compelled action by me.
As Chief Executive constitutionally responsible for the faithful
execution of the T.V.A. Act I could not ignore charges of dishomesty,
iTs
bad faith and conspiracy in - administration, of on excoutive agency.
In fairness to Dr. Harcourt Morgan and Mr. David Lilienthal as
public officials American intion had. To make
and as human beings, I could not withhold from the
their exabitraction
E.
brenner without natice
public 1 accusations against - Arthur Morgan which they had made only
To ms 741 he made
to mey at the same time he mc making public his accusations against them.
of disbonesty
that atonma later data thing mas In investigated by another hund in (nouch: The
Nor I could like Pontiue Pilate, not wash my hands of with these
1
grave and libelous charges against men whose alleged guilt had not
been proved, any mere than I can Today mush my hands
of These The charges bromer rt
concurrent power of the Congress to investigate the adminás
tration of executive agencier doos not relieve no of my responsibilities.
I therefore summoned the three members of the Board of the
+
T.V.A. to appear before me on March 11th, face to face with each other, to
present such facts as they might have to support the serious charges which
they had made, other. It was not a formal court proceeding
a
but un simple and fairbith my drive to get the truth - to let each
confront the other and tell his story in m straight-forward non-technical mords me.
I informed the members that I was concerned at this particular
inquiry not with the pros and cons of T.V.A. policies, but with their
on th on hand
charges of dishonesty and official misconduct The other.
X
Dorther E
I first called upon Rindsman Morgan to substantiate with facts the
several charges of dishonesty and want of integrity which he had made against
his fellow directors. I called his attention to the fact that the gist of
his complaint in regard to the handling of the Berry marble claims appeared
in his own words to be that "the real difficulty has been in the effort to
secure honesty, openness, decency, and fairness in Government. # timel Jumpet met
-10 utter him That his follow dianters onthel tn
At the hearing on March 11th - Arthur, < Morgan flatly refused to
q
submit to me any evidence in support of his charges. He read a prepared
statement to the effect that the "meeting is not, and in the nature of the
case cannot be, an effective or useful fact finding occasion. To properly
ed
substantiate the charges is not the work of a morning." When ask whether
>
he had any reason to believe that the hearing would be confined to & morning
and whether he would be prepared to submit facts if given one week or two
-5-
weeks to do so, he failed to reply.
The majority members explained the action which they had taken in
the Berry marble claims case, as well as their action on the Arkansas Power
& Light Company contract, and on the Aluminum Company contract to which
E
D. Arthur Morgan had referred in his published statements. I could not
specially
expect a more adequate explanation than that which they made, in view of
1
E
the failure and refusal of Arthur Morgan to submit the facts upon which
he relied to support his charges.
I then asked the majority members to present the facts in support
his
of their charges against
Arthur Morgan.
The majority members first referred to a number of his published
articles and speeches during 1937 which they contended contain unsupported
and unsupportable statements impugning their honesty and integrity. Whether
these articles or speeches were intended on could fairly be construed to
impugn the motives of the majority of the directors, it is clear that the
E
more recent public statements of Arthur Morgan to which the majority
do
members also referred,
assail the personal honesty and integrity of the
majority members in unmistakable terms.
E
I pleaded with him med gair L.
But
#. Arthur Morgan refused, although given repeated opportunity,
to present any facts in justification of his attacks upon the integrity:qf
-10-
pendent expert under a conciliation agreement made a report on the value
limding rither
of the marble deposits without projudées to the rights of the Authority
orthe claimants/n in my may.
When this procedure was proposed at a Board meeting Arthur E.
the
Morgan objected to it. As a member of board he had a right so to do. He
apparently believed that, despite the express terms of the
it
agreement, would in some way adversely affect the rights of
the Authority to contest the claims. The majority members, conscious of the
hasards of any litigation and not having as yet decorrered any
unearthad disease legal evidence ordnect
neverthels
of the bad faith which they 1 suspected, were equally within their rights in
Advat
voting to the procedure suggested by the Auth-
E
ority's counsel. There is not the slightest basis for
Arthur Morgan's
imputing bad faith to the majority members because they and the Authority's
counsel differed with him on technical points of legal procedure. It is
E
wholly unwarranted for
Arthur Morgan, on the one hand, to complain that
as a layman he cannot adequately explain to me why his colleagues acted
improperly and on the other hand as a layman to take it upon himself to
accuse his colleagues of gross misconduct in the handling of a law suit.
14
in
Arthur Morgan's whole attitude toward this inquiry
itself
gives credence to the charge that he has been unwilling to cooperate with
that hs
his fellow directors in the administration of the Act and is temperamentally
^
-11-
unfitted to exercise divided authority. With the exception of a few frag-
E
mentary questions and answers on the Berry marble claims, m Arthur Morgan
202m
has stood aloof and refused to cooperate in this proceeding or to supply the
simplet
asked
^
open 1 facts moquired of him by his own administrative superior, the Chief
Executive. His fellow directors have responded as a matter of course, and have
given Specification to effect
documentos their grievances. Dy contrast has been willing to
specify the Sects upon which to based Mr changes against them to sing
them opportunity to to Judger
A The contrastion whisians and dishrartming
I have tried to be mindful of the debt the public owes - Morgan
Pritting
for past services, of his sense of the righteousness of his own convictions,
and of the patience with which the public interest demands that a situation
of this kind be worked out if possible. I have therefore struggled with this
over A year
problem for and in its present acute form for six months.
hope 1+ may be fairly aski - I have been patient.
There is 10 a trinit Knowner
And to I have said before, I must consider the position in which Dr.
19reatly
Harcourt Morgan and David Lilienthal find themselves. Some decision on this
14
record is due them. If there should be no decision after
Arthur Morgan
has refused to substantiate his grave and libelous charges against them
And personally
they
would
be
definitely
seriously injured in their rights and standing
as citizens and public officials.
Furthermore I must consider the continuing operations of a great
-12-
Government agency. It would violate my constitutional duty to Take
Obsignal
care that the laws are faithfully executed if I should leave
tranging uver The heads at
unsupported charges two officials who have
cooperate ^ in the difficult task of divided authority and Therelogy to
kimit
further
a recalcitrant non-cooperative official freedom to sabotage
government operations at a crucial time.
Finally I must also consider the consequence of permitting the
constitution
establishment of a precedent whereby any subordinate in the Executive Branch
were
of the Government can refuse to give ^ the Chief Executive himself et his
to his superior orto,
facts sunght in order
n/io
to straighten out difficulties which he charges exist in his own
work; can refuse accountability to the Chief Executive for I his actions
whomely
he In charged with
as a member of the Executive Branch, even though that action constitutes
misconduct in office; and can insist that orderly executive responsibility
frinctiving mak
cliserfation be maintained only through the legislative - committees.
prociss of
IT.. withwhite LE -ransider what would neform Ath of
Under such circumstances indulgence of my personal wish to
its
continue my patience with Arthur X Morgan would be unfairming to
everybody and everything else involved. I therefore feel obliged to
act upon the evidence now before me.
On that evidence I an obliged to find that:
her
111
(a)
Arthur Morgan has failed to sustain the grave and
>
libelous charges of dishonesty and want of integrity which he has made
lmfared
Preside the
-18-
against his fellow directors; his conduct in this respect is legally and
morally unjustified;
(b) On the face of the record the charges of the other directors
E
injured The morals of
that
Arthur Morgan has obstructed the work and demonalized the organ-
isation of T.V.A., must be accepted as true; he has refused to
offer testimony in denial of the charges;
ILI
(c)
me Arthur Morgan is guilty of insubordination and contumacy
Named for
in refusing to submit to the Chief Executive any facts upon which he
1
Leased
relied
at
the
time
of
king charges of dishonesty and want of integrity
1
an through
against his fellow directors.
Under these circumstances, I tist myself under the painful
duty to of request Arthur Morgan at once publicly to withdraw the
mg
MI
/
charges which he has made impugning the honesty, good faith, integrity
and motives of his fellow directors and to give them and the country
the
assurances that he will in/future loyally cooperate with his fellow
directors in carrying out the provisions of the T.V.A. Act.
I issue made this request of him.
If he cannot accede, it is his duty to resign.
I hope that Dr. Arthur Morgan will not make it necessary for me
to take further action.
Under the Constitution the Chief Executive is directly
charged to "take eare that the laws be faith fully
and primarily responsible for the administrative efficiency of the executed."
executive agencies of the Government.
I have been confronted for some time with a threat to the
continued successful functioning of the Temnessee Valley Authority, a great execu-
tive agency.
In January, 1937, in a public speech and articles in the public
and Chairman
press, Dr. Arthur B. Morgan, Chairsun and one of three members n°s the
Board of Directors of the Authority, seemed to intimate - but without
specifications or supporting evidence - that he doubted the integrity
direct A In aprel 1997
of his fellow members. A
In August, 1937, again in the public press - but again without
E.
specifications or supporting evidence - Dr. Arthur 1 Morgan seemed to
used language
intimate is that he doubted the integrity of his fellow members. At this
time I wrote him as follows:
"That there is a very definite obligation on you
either to withdraw what your colleagues believe to be
an impugning of their integrity or that you present
whatever specific facts you may have, 1f any, to justify
your statements."
In reply Dr. Arthur Morgan informed де that while he was highly
critical of the work of his colleagues, he had no intention of impugning
Insurt B - - dz 2
; and me my callug then
allention to his
that be ded not laws
access to records,
they demied this fact
categre cally and
stated the all
records lead been
and would be
open M the Clearinan
-2-
their good faith or integrity. He complained about the internal organ-
isation of T.V.A. and requested me to intervene on his behalf. I urged
his to return und to endervor they to complete AM internal reorgamization
the
m harmony with his fillow directors;
slet
of the work along the lines recommended in the report of a special
committee of experts on administration which I had went to the Tennessee
7
Valley in the spring of 1939.
In December, 1937, the constitutionality of the T.V.A. Act
was at stake in a law suit brought by eighteen utility companies. During
this
such litigation the minority member of the Board widely disseminated
within the Authority's organization charges of unethical professional
misconduct against the T.V.A. contection charge of the litigation -
again without specification or evidence.
On January 18, 1938, the majority members submitted to me,
without publicity, an official memorandum complaining of certain specific
as
kinds of unpermissible conduct on the part of the ainority member, in-
cluding the making of reckless and unsupported charges, including an
w carryong met
unwillingness to cooperate with the decisions of a majority of the Board
and including serious interference with the work of key members of the
Authority's staff in the performance of their duties. In contrast to
E.
Dr. Arthur Morgan's charges against them, the complaint of the majority
C -p - 3
that is a fact that derestly
bears on the pros
and cons of this
mqury
-8-
of
against him did not charge him with dishomesty or lack of integrity.,
On March 3rd and on March 5th, 1938, the alassity member
or secher morgan
made extensive and unequivocal charges of dishonesty and lack of integrity
in public office on the part of the majority members - again in the
public press - and again without specifications or evidence.
E
Despite ay long personal friendship for Dr. Arthur Morgan and
4 him
my appreciation of his many public services in the past, this action -
hispart compelled action by me.
As Chief Executive constitutionally responsible for the faithful
execution of the T.V.A. Act I could not ignore charges of dishomesty,
to
bad faith and conspiracy in the administration, of anyonocutive agency.
In fairness to Dr. Harcourt Morgan and Mr. David Lilienthal as
American sitezing had to make
public officials and as human beings, I could not withhold Loan the
cheer prostruction
E
because without man G
public accusations against Dr. Arthur Morgan which they had aede only
to me, at the same time he mee made making public his accusations diskonistay against they.
n
Nor could not like Pontiue Pilate] wash my hands of communication these
6
made
grave and libelous charges against nen whose alleged guilt had not
my hands these tharmother charan bauch on the fountable
been proved, any mere than I can today wash
The concurrent power of the Congress to investigate the adminis-
947
tration of executive agencies does not relieve ne of my responsibilities.
not doce the uru Ha n
I therefore sussomed the three members of the Board of the
min
T.V.A. to appear before me on March 11th, face to face with each other, to
present such facts as they might have to support the serious charges which
they
had
made
against It was not a formal court proceeding
a sum the fair way
but the risplent and Informations 2 - to get the truth - to let each
words
confront the other and tell his story in n straight forward, non-technical way.
I informed the members that I was concerned at this particular
inquiry not with the pros and cons of T.V.A. policies, but with their
one the me hand
charges of dishonesty n and official misconduct.com the other.
arthur E
I first Called upon Chairman Morgan to substantiate with facts the
^
several charges of dishonesty and want of integrity which he had made against
his fellow directors. I called his attention to the fact that the gist of
his complaint in regard to the handling of the Berry marble claims appeared
in his own words to be that "the real difficulty has been in the effort to
secure honesty, openness, decency, and fairness in Government." and Inted
here that common decing towards his his fellow wreatme called
for ulter frankness At the hearing and on candol March 11th Dr. Arthur hart Morgan flatly refused to
P
submit to me any evidence in support of his charges. He read a prepared
statement to the effect that the "meeting is not, and in the nature of the
case cannot be, an effective or useful fact finding occasion. To properly
substantiate the charges is not the work of a morning." When ask whether
he had any reason to believe that the hearing would be confined to a morning
and whether he would be prepared to submit facts if given one week or two
-5-
weeks to do so, he failed to reply.
The majority be bers explained the action which they had taken in
the Berry marble claims case, as well as their action on the Arkansas Power
& Light Company contract, and on the Aluminum Company contract to which
E
Dr. Arthur Morgan had referred in his published statements. I could not
expect a more adequate explanation than that which they made; poperally in view 67
E
the failure and refusal of Dr. Arthur Morgan to submit the facts upon which
he relied to support his charges.
I then asked the majority members to present the facts in support
E.
of their charges against Dak Arthur Morgan.
The majority members first referred to a number of his published
articles and speeches during 1937 which they contended contain asupported
and unsupportable statements impugning their honesty and integrity. Whether
these articles or speeches were intended on could fairly be construed to
impugn the motives of the majority of the directors, it is clear that the
more recent public statements of Dr. Arthur Morgan to which the majority
members also referred, d so assail the personal honesty and integrity of the
majority members in unmistakable terms.
But Des: Arthur E A Morgan refused, although I juaded given repeated with opportunity, him andgese
to present any facts in justification of his attacks upon the integrity of
+
the majority of the Board.
The majority members also proffered facts tending to show that
in the course of delicate and important conversations between the Authority
interests
E
and private 4. Arthur Morgan bad private conferences and commin-
ications with one or more executives of such utilities, with a large prospeo-
tive power purchaser, with an electrical equipment manufacturer, which con-
versations and conferences might
well have extermenced hampered the Beard in carrying
out the decisions of the its cajority of the Board
When there is dissension within a multiple-headed executive, it is
difficult to draw the line where dissent becomes obstruction. I have serious
E.
doubt as to the propriety of a number of the things which * Arthur Morgan
he could firce
did in an effort to create a situation in which his own ideas should win
acceptance So long as we have multiple-headed administrative boards, how-
of his own dear
ever, we should allow considerable latitude for human discretion and not
have
frighten a minority into acquiescence. Therefore, in such matters I think
timesibe
every doubt should be received in favor of DR. Arthur Morgan. Nevertheless,
significance does attach to the multiplying number of these instances in which he trespassed
into doubtful territory.
The majority members also proffered facts tending to show that
is
- Arthur Morgan did not send a telegram to me requesting a conference on
a vital matter of policy, as directed by the Board. Although here again
ArthurE
buly
Dr. Morgan may have committed a ^ technical wrong - although explanation
he having his
-7-
askified a that he had changed his aind not be technically sufficient standing
alone A an few instances n two ^ of this sort standergalone would not appear topic significant, but
the chain is synificant
Taken in the light of his other acts, - they are not whelly lacking
in significance.
The majority members also presenued offered facts tending to show - I think
I should say fairly showing - that Dr. Arthur Morgan interfered with and
TVA connact me the
obstructed the conduct of visally important constitutional litigation affect-
of which
ing the very life of the Authorityn I have earlier referred, to his difficul-
ties with T.V.A. counsel during recent constitutional litigation. To the
demands of counsel accused that Morgan give evidence and specifica-
177-VA gunethecal Doe Arthur conduct
tions, the latter refused to make reply. The interference reached the point
that special counsel for the T.V.A., the Hon'emable John Lord O'Brian, formerly
The Assistant to the Attorney General of the United States under & Republican
the previous
Administration, an independent lawyer of great experience and wide reputation,
felt impelled to write the Chairman as follows:
"Dear Dr. Morgan:
"I have your letter of December 50, 1937.
"Prior to the trial and during the trial I have actively
participated in and have closely observed the preparation and
presentation of the testimony. Since receiving your recent
letter, I have again gone over the file of material concerning
the preparation and presentation of the engineers' testimony
in the case now on trial, and have talked with the attorneys
and also with a number of the witnesses. As # result, I as
more than ever confirmed in the opinion which I previously
expressed to you that the case has been handled with unusual
ability and in accordance with the highest standards of integrity.
"Your charges, coming while the case was actively on trial,
have had a disrupting and demoralizing effect upon all the
attorneys and upon the conduct of the Authority's case. After
-8-
cereful review of the matter I as convinced that the charges
must have originated in some misunderstanding and have no
real foundation in fact. The matter ought to be definitely
cleared up in justice to the lawyers and also in justice to
the Authority's case which needs the best efforts of all of
the attorneys. As all the attorneys are now under great
strain in the stages of this trial I as writing to ask
whether you will not clear the record and set the ae bers of
the legal staff free from a very heavy and, I think, unwar-
ranted burden of anxiety at this critical time."
The T.V.A. had entrusted the conduct of this important litigation
to competent counsel. Its unusually capable General Counsel had the assist-
ance of an able, outside, independent special counsel. Whatever differences
there may have been with the Poard as to the conduct of this litigation,
no evidence has been submitted to ae which would have justified the minority
member at a most critical stage of the proceeding in openly charging reputable
counsel with unethical professional conduct, thereby, consciously or un-
E
consciously prejudicing the case of the Government.
Dr.
Arthur Morgan,
when given the opportunity by no, offered no explanation for this reckless
and astounding conduct.
I concluded the first hearing, on March 11th, as follows:
"If there is nothing further I want to make one very short final
statement. -I have now heard the charges and countercharges of the
T.V.A. Board. I have endeavored to give each side the opportunity
of answering the complaints of the other side. Frankly, I as dis-
appointed that Chairman Morgan has not answered by giving any factual
answers to the questions which I have put, but I hope that in the
course of the next week Chairman Morgan will realize that it is of
the utmost importance to the continuation of the work that he should
reply to very simple factual questions.
-9-
# Be should have every opportunity so to do. And, therefore,
if it is agreeable to his and to the other two members, who also
may want to present additional facts, I will set a resumption of
this hearing for a week from today, Friday morning, at eleven
o'clock, and if you care to appear in person at that time it will
be entirely agreeable to me. If you prefer to submit any factual
report in writing d thout appearing, use your own judgest."
A second hearing was accordingly held, on March 18th.
At that second hearing Dr. Arthur Morgan persisted in his refusal
to participate in any inquiry to ascertain the facts regarding his charges
of dishonesty and want of integrity, although in a prepared statement he
referred "by way of iblustration" to certain facts and circumstances tending
to show that the Berry marble claims were worthless and that there was reason
absolutely
to suspect the bona fides of the claims. But there is no evidence before are
that the majority member of the Doard over contended either that these
marble deposits had any commercial value or that they themselves had no
reason to suspect the bona fides of the claims.
an the contrary,
The evidence shows that claims aggregating millions had been filed
n
against the Government; that the majority of the Board were as deeply con-
E
cerned about them as was by. Arthur Morgen; and that the Board's counsel
was endeavoring to obtain all available evidence to oppose the claims both
on the ground that the marble was commercially valueless and that the claims
were not advanced in good faith.
T.VA
The majority members, acting on the advice of counsel, believed that
it would tend to protect rather than hurt the Government's case if an inde-
-10-
pendent expert under & conciliation agreement made a report on the value
of the marble deposits without
bending
of the Authority
orthe claimantach any way.
When this procedure was proposed at a Board meeting Arthur
Morgan objected to it. As a member of a board he had a right so to do. He
apparently believed that, despite the express terms of the conciliation
it
agreement, the would in some way adversely affect the rights of
the Authority to contest the claims. The majority members, conscious of the
hasards of any litigation and not having as yet diseasened any direct evidence
unearthed legal
nevertheless
of the bad faith which they ^ suspected, were equally within their rights in
adopt the
voting to pressed with the con procedure suggested by the Auth-
ority's counsel. There is not the slightest basis for Dr. Arthur Morgan's
imputing bad faith to the majority members because they and the Authority's
counsel differed with him on technical points of legal procedure. It is
E
wholly unwarranted for Dr. Arthur Morgan, on the one hand, to complain that
as a layman he cannot adequately explain to me why his colleagues acted
improperly and on the other hand as a layman to take it upon himself to
accuse his colleagues of gross misconduct in the handling of & law suit.
Dr. Arthur Morgan's whole attitude toward this inquiry m by itself
gives credence to the charge that he has been unwilling to cooperate with
that he
his fellow directors in the administration of the Act and is temperamentally
-11-
service result
unfitted to exercise divided authority. With the exception of a few frag-
mentary questions and answers on the Berry marble claims, Dr. Arthur Morgan
has stood aloof and refused to cooperate in this proceeding or even to supply the
smilest asked
estain facts of him by his own administrative superior, the Chief
responded
Executive. His fellow directors as 6. matter of course, and
han grown superfecations to suffort
declaremed their grievances.
By contrast, be has not even been willing to
arthur
specify the facts upon which he based his charges against them to give
she
contrast
them an opportunity to answer and me an opportunity to judge.
sporae
wither =
I have tried to be mindfules the debt the public owes Dr. Morgan
for past services, of his sense of the righteousness of his own convictions,
and of the patience with which the public interest demands that & situation
of this kind be worked out if possible. I have therefore struggled with this
over argear
problem for nearly two years and in its present acute form for six months.
I have been patient
I hope it may be fairly said that I have been patient.
^ There in w I have 1 said before, a Resert I must consider the position to follence. in which *. And,
qually
Harcourt Morgan and David Lilienthal find themselves. Some decision on this
E
record is due them. If there should be no decision after Dr. Arthur Morgan
has refused to substantiate his grave and libelous charges against them
and fermanently
they would be definitely and seriously injured in their rights and standing
as citizens and public officials.
Furthermore I must consider the continuing operations of a great
-12-
the
Government agency. It would violate my constitutional duty to keep
care that the laws are faithfully executed if I should leave under
hangury the heads 8
unsupported charges for an indefinite partod two officials who have
have
cherity
tried to cooperate in the difficult task of divided authority and to
persuit alsow a reculcitrant non-cooperative official further freedom to sabotage
governmental operations at a crucial time.
Finally I must also consider the consequences of permitting the
establishment of a precedent whereby any subordinate in the Executive Branch
to his superior tr to
of the Government can refuse to give the Chief Executive the benefit of ins
facts smight in rder
herealf
knowledge to straighten out difficulties which he charges exist in his own
work; can refuse accountability to the Chief Executive for - his actions
he be charged with
as a member of the Executive Branch, even though that action constitutes
misconduct in office, and can insist that ordiner orderly executive responsibility functioning
and descipline
a
be maintained only through the legislative process?S I legislation
wrumultees. It is worthwhele to consedes muld
happene to
Under such circumstances indulgence of my personal wish to
the freeing
E.
Ment this mich of were
continue my patience with Dr. Arthur Morgan would be unfairness to
whit
made
the
everybody and everything else involved. I therefore feel obliged to
queral
act upon the evidence now before me.
abroads well.
the causen
On that evidence I an obliged to find that:
des full
(a) Dr. Arthur Morgan has failed to sustain the grave and
proce most Not
with
libelous charges of dishonesty and want of integrity which he has made
declares that
pro
paper
Counte
Presedent mated the
I
-15-
against his fellow directors; his conduct in this respect is legally and
>
morally unjustified;
(b) On the face of the record the charges of the other directors
E.
that BY. Arthur Morgan has obstructed the work and descredized the organ-
mysre the mirale B
ization of T.V.A., must be accepted as true; he has refused to
offer testimony in denial of the charges;
(c) Dr. Arthur Morgan is guilty of insubordination and contumacy
in refusing to submit to the Chief Executive any facts upon which he eight
demand for
/ basid 1
have relied at the time of making charges of dishonesty and want of integrity
on
against his fellow directors.
but
Under these circumstances, I myself under the painful
duty 30 request Dr. Arthur Morgan at once publicly to withdraw the
my
E
n
charges which he has made impugning the honesty, good feith, integrity
and motives of his fellow directors and to give them and the country
the
assurances that he will in/future loyally cooperate with his fellow
directors in carrying out the provisions of the T.V.A. Act.
make
I have made this request upon him.
If he cannot accede, it is his duty to resign.
I hope that Dr. Arthur Morgan will not make it necessary for me
to take further action.
PSF
TVA
(last paragraph)
He has had ample time and opportunity to make his
decision. If he determines to follow neither of these courses,
I give him until 11:00 tomorrow morning, Tuesday, March 22nd, to
present to me, in person or in writing, any reason why as Chief
Executive I should not take further action in the case as a necessary
result of the findings which I have just stated. For your information,
Chairman Morgan, I must tell you frankly, in the light of the record,
only two courses appear open -- your removal or your suspension as a
member of the Board of Directors of the Tennessee Valley Authority.
PSF F
TVA
(To go on page 1 -- end of third paragraph)
In April, 1937, a special committee of experts on administration
organization recommended certain administrative changes in the
internal organization. The recommendation for a general manager
followed the suggestion of Arthur E. Morgan, but when the recommenda-
tions were put into effect by the Board he could not agree on the
selection of a general manager.
PSF
THE T.V.A. INVESTIGATION
The T. V. A. Act requires that "all members of the Board shall
be persons who profess a belief in the feasibility and wisdom of the
Act." I have a right to assume therefore that every member of the Board
in accordance with The act
^
believes in the feasibility and wisdom of that Act? I have a right to
interedum has Nutive
2 assume that every member of the Board - prepared to do his part to
cooperate with his fellow members to make the Act work. a I have a right
to assume that every member of the Board is prepared to recognize that
a certain amount of teamwork is necessary to make the Act succeed.
,
But there are persons and powerful interests that
dis
profess a belief in the feasibility and wisdom of the Act. There are
persons and powerful interests that are quick to seize upon the simplest
acts or slightest word of members of the Board to discredit the administra-
3
tion of the Act. The open dissension and personal recrimination among
members of the T.V.A. has reached a point where the successful adminis-
tration of the Act is imperilled. No one who professes a belief in the
feasibility and wisdom of the Act can view such situation without the
gravest concern.
L2t mi art forth
Effective administration requires action. Administration The action of a Again
Board must be determined by a majority of its members. A minority has
4
the right to record its dissent, publicly if it desires, after action
is taken; it has a right by fair persuasion to seek to obtain the
- 2 -
adoption of a different course of action. But, neither a majority nor
a minority has a right to make public display of personal internal
differences to the point where effective administration of the Act is
jeopardized.
I have reluctantly become convinced that the work of the
T.V.A. Board is now being impeded, and that the real issues of public
policy which may exist among its members are now being obscured by
4
personal recriminations. It is intolerable that issues of fundamental
public policy should be confused with issues of personal integrity or
misconduct. It is intolerable that either majority or minority members
of an administrative board should cast doubt upon the honesty, good
faith or personal integrity of their colleagues or should charge any of
their colleagues with improperly obstructing the carrying out of the
Board's decisions unless they are prepared to support such charges by
good and sufficient evidence. If there be no such evidence then there
sither definity and 15 mash
should be a surcesse of personal attacks and aspersions(r) resignation
A
mom The Board.
I have called this hearing to investigate charges of dishonesty,
5
bad faith and misconduct. I am not concerned at this hearing with the
pros and cons of any particular policy that the T.V.A. Board has or has
not adopted. This is not an inquiry to determine a national power policy,
- 3 -
it is an inquiry into charges of personal and official misconduct.
I
1
feel that I/as President A have especial concern in the charges
that have been made which reflect not simply upon the judgment but upon
a
the personal integrity and official conduct of members of the Board in
the management of government property. Under section 17 of the T.V.A.
Act the President is expressly authorized to seleet attorneys and accist-
ants for the purpose of making any investigation he may deem proper to
ascertain whether, in the management of any property owned by the Govern-
ment in the Tennessee Valley Basin, there has been any undue or unfair
adventage given to private persons on corporations by any officials of
the Government or thether to - matters the Government has been injured,
or unjustly deprived of any of its ri ights
I had hoped that the bitter personal feeling among the members
of the T.V.A. would prove to be only the temporary result of honest
differences of opinion or policy and that with the passage of time the
members of the Board, even when they could not agree, would come to
respect each other's opinions and cooperate, as is their duty, in the
administration of the Act. I did not act when complaints were made to
me as early as January, 1937, one of them by a responsible government
official not connected with T.V.A., that the Chairman of the Board had
- 4 -
made & speech at Chicago and had published an article in the New York
Times which could be taken as personal attack upon his fellow board
members. I repeated my counsel to all the members of the Board individ-
ually to make every effort to compose their differences and not to permit
the enemies of T.V.A. to make capital of them. But I censured no one,
In September of last year complaint was made to me by Harcourt
A. Morgan and David E. Lilienthal that an article by Dr. Arthur E. Morgan
published in the September issue of the Atlantic Monthly directly and
by implication was an attack upon the honesty and integrity of the Board
9
of the Tennessee Valley Authority. I at once wrote to Dr. Morgan inform-
ing him of the complaint and suggested to him "that there is a very
definite obligation on you either to withdraw what your colleagues be-
lieve to be an impugning of their integrity or that you present whatever
specific facts you have, if any, to justify your statements." Dr. Morgan
orally,
advised mer if I correctly understood him, that it had not been his
intention to impugn the motives or good faith of his fellow directors.
Although I thought that the Atlantic Monthly article might
fairly be taken as an attack upon the personal integrity of Dr. Morgan's
10
fellow board members,* I accepted his statement that no such attack was
*
The following statements, among others from the article, go far to
suggest to the ordinary reader that Dr. Morgan suspects the motives of
(Footnote continued on following page)
- 5 -
intended. much to last year
But recently Dr. Morgan has issued statements which in un-
11
mistakable terms assail the honor, integrity and motives of his fellow-
his colleagues:
"The writer is a minority member of the Board of Directors of
the Tennessee Valley Authority, of which he is the Chairman. In
important respects he differs from what he judges to be the actual
power policy of his associates. This statement therefore reflects
his personal views, and not the working policy of the power issue.
Neither does it. undertake to criticize in detail what the writer
believes to be the improprieties of that policy.
[September Atlantic Monthly, p. 346.7
*******
"Third, having invited the investment of private capital to
supply the public with electric power, the public is under obli-
gation to respect actual honest and useful investment, and not
to jeopardize or destroy it by capricious and arbitrary coercion.
The abuses of the private power industry have bred in some men an
attitude of bitter hatred, and a conviction that the only course
to take is a war without quarter against the private companies.
This attitude may be exploited by other men who have no such con-
victions, but who will endeavor to ride to political power on the
issue. A fair settlement of the question might leave such men without
a place in the limelight. In my opinion, for public men to retaliate
with arbitrary coercion, to use false or misleading propaganda, and
to use other methods than open and impartial processes of government,
not only is unfair to legitimate private investors, but tends to sub-
stitute private dictation for democratic process of government. I have
no confidence in the supposed liberalism of people who use such methods.
Whoever will use unfair methods for the public probably will use unfair
methods against the public for his own advantage. The public can have
no greater security than the habit in its public officials of fair and
open treatment of every issue, no matter who is affected /ib.pp. 344-3457.
*******
"Under any method there are certain proprieties and decencies of
government which should be observed. Where the public has invited
private capital to supply an essential public service, there should
be no capricious arbitrariness in destruction or duplication of
facilities to the loss of honest, necessary, and useful investment
.... In case public power is used as a 'yardstick,' or as a measure
of what the private power industry should charge for its services,
then it is imperative that records and accounts be honest and fair
and open, and that there be no hidden element of subsidy. The very
fundamental element of such comparison is honesty, fairness, and
openness in measurement Lib. P. 3427."
See, also, more detailed analysis of the Atlantic Monthly article
by Harcourt Morgan and Lilienthal, which is attached to Harcourt
Morgan's letter of September 13, 1937.
-6-
directors. Now, Dr. Morgan, I do not want you to misunderstand me.
You are a man of deep conviction and intense feeling.
that in EXECUTION positions work with have to
I know how difficult Made under pressures and strains not A test
or stanting un The
to suspect the motives of those who resolve upon a course of action with
12
which one profoundly disagrees. Even insofar as you have made charges
of dishonesty and bad faith against your fellow-directors, I do not want
to silence you; on the contrary I want now to investigate those charges.
Differences of opinion may be composed, but charges reflecting upon the
personal integrity of your fellow-directors cannot be compounded. Such
charges cannot be allowed to rest upon innuendo, but must be made
is called
specific. I now want to ask you to produce what we call a
bill of particulars.
In the statement you issued last Wednesday, March 2 you state:
"I have felt compelled to fight for certain decencies and proprieties in
public life which are more important to good government than any particu-
lar government program. Rhe Berry marble case presents an instance of
this difficulty." The suggestion On is that you had to fight against
your colleagues for such decencies and proprieties. The suggestion is
that your colleagues were prepared to recognize a claim without fully
-7-
investigating its merits. You charge that they "entered & friendly
agreement with Major Berry to determine the value of the marble which
by that time was mostly under water and inaccessible, without any in-
quiry as to whether there was evidence of bad faith." The suggestion
is that this "friendly agreement" was an improper agreement and that
there was reason at the time of the agreement not simply of questioning
the validity but the good faith of Major Berry's claim. These are very
serious charges, charges of ma Lfeasance in office. Your statement
suggests that calling upon Dr. John Finch, Chief of the Bureau of Mines,
to act as conciliator was calculated to put in jeopardy the government's
interests. You do not question merely the wisdom or expediency of the
steps taken by your colleagues, you question their integrity. You
state that "the real difficulty has been in efforts to secure honesty,
openness, decency, and fairness in government," and you repeat that
"the Berry marble case is an instance of this difficulty."
As a responsible official you could not have made these serious
15a
charges against your colleagues publicly without being prepared to prove
them. I now ask you, not for a specification of the acts of your
colleagues with which you disagree, but for a specification of their acts
which prove their want of honesty, openness, decency and fairness. As
you refer to the Barry case as an instance of this difficulty, I desire
-8-
you to specify such other instances as in your opinion have occurred.
The broad charges made by you certainly suggest that there are other
instances. In your letter to Congressman Maverick, released to the
press on March 6, you state that "the public and the Gongress do not
yet know the extent to which that (the Berry claim was improperly
handled," and you charge your colleagues with failure to protect the
public interest in the Aluminum Company contract and with permitting"a
joker" to be inserted in the Arbansas Power and Light Company contract
which would have enabled the company to buy prime power at secondary
power rates. As I have previously pointed out, it is my duty under sec-
tion 17 of the Act to make an investigation if there has been any undue
or unfair advantage given to any private corporation or if in the manage-
ment of government property in the Tennessee River Basin the government
has been injured or unjustly deprived of any of its rights.
In your letter to Congressman Maverick, released March 6,
Dr. Morgan, you also state that some of the reasons for your concern
"are the explicitly misleading and evasive reports" and "explicitly
17a
false reports which have been made to the President, to Congress, and
to the public concerning conditions in the T.V.A. by a T.V.A. director
or by the two directors acting in unison." This is an accusation
against your colleagues of making to me and to the Congress deliberately
-9-
false and misleading reports, and I ask you to cite to me specifically
the reports and the statements therein to which you refer.
Finally you charge in your letter to Congressman Maverick
that "there is a practice of evasion, intrigue and sharp strategy, with
remarkable skill in alibi and avoiding direct responsibility, which
makes Machiavelli seem open and candid," and that you have discovered
"hard-boiled, selfish intrigue" masking under "the attitude of boyish-
open candor and man-to-man directness." Such charges can only be
18
made by one who has despaired of the possibility of cooperative team-
work with his colleagues in a great public endeavor. I must ask you
for proof that your colleagues have not simply differed with you on
issues of policy and organization, but have intrigued and conspired
against you.
It is not my desire that this inquiry should be a unilateral
affair. Harcourt Morgan and David Lilienthal, you also have made
charges against Dr. Arthur Morgan of obstructing the carrying out of the
14
decisions of the Board. You made your charges not publicly, but to me
in my official capacity. It is true that I, not you, chose to make
those charges public after Dr. Morgan had made repeated public charges
against you. Your charges do not necessarily reflect upon the personal
integrity of Dr. Morgan but upon his willingness to cooperate in the
-10-
decisions reached by the Board in the manner prescribed by law. Your
charges are equally serious, particularly as they suggest that Dr. Morgan
in obstructing the work of the Board has cooperated with interests
which may be adverse to those of the T.V.A. Your charges necessarily
impute misconduct in office to your colleague. You go BO far as to
4
assert that his "opposition and obstruction have occupied virtually his
entire time, to the exclusion of his attendance upon Board meetings."
I am obliged therefore to take note of your charges also by virtue of
the investigatory powers conferred upon me by section 17 of the Act.
I would remind you also that I am not concerned at this inquiry
with matters of policy or of organization but with your charges that Dr.
Morgan has improperly obstructed the work of the Board. As your charges
24
are couched in general terms, I must now ask you also to give me specific
evidence to support each of the several charges enumerated in Part III
of your memorandum to me, which reads as follows:
"The present situation in the board of directors of the
Tennessee Valley Authority presents a clear-cut issue respecting
this democratic principle. That issue may be stated in this
way: When a board of public trustees, after weighing differing
points of view, and after the fullest board discussion, has
reached a conclusion by a majority vote, how far may the dis-
senting public trustee, while still continuing to hold office,
properly carry his opposition to these board decisions.
"We believe the following methods of opposition, which are
among those employed by our associate since the Spring of 1936,
fall outside permissible limits.
- 11 -
"It is not permissible, as Arthur E. Morgan has done re-
peatedly in published statements, to attack the personal motives
and good faith and impugn the integrity of his associates on the
board, not upon the basis of direct charges but by innuendo, in-
direction and aspersion.
"It is not permissible for Arthur E. Morgan, as an expression
of disagreement, to engage in unsupported attacks upon the integ-
rity, professional ethics and competence of key members of the
staff, and to harass and interfere with them while they are carry-
ing out duties resulting from decisions duly arrived at by a
majority of the board of directors.
"It is not permissible for the chairman of the board, after
board action has been duly taken, to fail and refuse to carry
out explicit action taken by the board.
"It was not permissible for Arthur E. Morgan to cooperate
with a utility executive in the preparation of a memorandum,
the express purpose of which was to show that a particular decision
of the board was wrong and activated by improper motives.
"It was not permissible for Arthur E. Morgan to collaborate
with the former chief engineer of the Insull utility system in
the preparation of a detailed recommendation on power pooling
policy, which report proposed evasions and violations of the
TVA Act; nor was it permissible, during negotiations, for him
to permit such report to be made available to the utilities.
"Such methods of expressing disagreement with the act and
with majority decisions of the board, as have been employed by
Arthur E. Morgan, are not permissible. Such methods are wrong
because they violate the democratic principle of majority rule.
They violate a spirit of good spor smanship in public affairs:
One should be a good loser in matters of opinion as well as in
sports.
"We believe these methods to be wrong because they are not
designed to persuade but to obstruct and discredit the carrying
out of the law and of decisions duly reached after fair consid-
eration.
"And, finally, we believe Mr. Morgan methods are wrong
because the doctrine of 'rule or ruin' cannot exist alongside
the doctrine of majority rule and minority responsibility."
I have now heard the charges and counter-charges of the mem-
bers of the T.V.A. board. I have endeavored to give each side the
5
opportunity of answering the other's complaints. I shall allow ten-
days for the members to submit to me such other or further evidence
- Suidence notuf apmion but of foot and trat anky no
they deem pertinent to the inquiry. I shall then determine what further
- 12 -
action is necessary in the public interest. Now I can only reiterate
15
that Leonsider it n the duty of every member of the board, believing as
all of you do in the feasibility and wisdom of the Act, to put aside
all personal feelings, to consider at your board meetings, impersonally
and objectively, the important problems of T.V.A. and not to obstruct
the carrying out of the decisions of the Board. It 18 not fair to T.V.A,
not
that any of you who cannot do that, should n remain on the Board. The
Board is about to resume important negotiations with private utility
interests. Those negotiations will be difficult and delicate. The
can further
public interest should not A be jeopardized by unnessecery internal dis-
sension.
PSF
Chmeriction
TUA
I cannot,
Morgan, emphasize too strongly that I think in
the public interest you should be willing to participate in this inquiry
to ascertain the truth of the personal charges here involved. Until
these charges of want of honest and personal integrity and of personal
misconduct in office are definitely removed from the realm of controversy,
there can be no constructive inquiry into the power policies, navigation
policies, fertilizer policies or other policies of T. V. Ao All of us
reviewed
who want those policies considered and renewed on their merits should
cooperate to dispose of these personal issues which only obscure and
Verse
confuse the fundamental issues of policy.
711
Man 8 - a.m. Nacioin... have
"
nain - word 29..
Ma-3-5 by him.
PSF
TVA
He has had ample time and opportunity to make his decision. If
he determines to follow neither of these courses I give him until
11:00 tomorrow morning, Tuesday, March 22nd to present to me in
person or in writing any reason why as Chief Executive I should not
take further action in the case as a necessary result of the findings
which I have just stated. For your information, Chairman Morgan,
I must tell you frankly in the light of the record only two courses
appear open -- your removal or your suspension as a member of the
Board of Directors of the Tennessee Valley Authority.
Once More a President Will Be Entertained at Old
Roosevelt's Visit in Nove
At Shrine for More
Monroe in 1819 to T.
Up Avenue of
the official host, with members of
niscence of General Jackson. "We
the Ladies' Hermitage Associa-
had many big men, sir, In Nash-
tion arranging the details. But
ville at that time, but General
whatever the plans, members of
Jackson was the biggest man of
the association express them-
them all. I knew the General, air,
solves as hoping that the Presi-
but he always had no many people
dont will "enjoy himself in Ton-
around him when he came to town
Dessee's most famous home."
that It was not often I could get
a chance to say anything to him.
AMES MONROE was the first
He didn't used to put up at our
President to come to Nash-
house. The old Nashville Inn was
:ville and to the Hermitage,
General Jackson's house."
where he was entertained for sev-
And a few years later, Henry A.
eral days, Parton in his blogra-
Wise the young Virginian who
phy of General Jackson writes:
took his bride, n Nashville girl,
"Mr. Monroe visited Nashville
to the Hermitage, was to describe
during his presidency, when Gen-
the courtliness and hospitality of
eral Jackson figured conspleu-
the household and Its master. and
ously Among those who welcomed
mistress thus:
and escorted the President.
At
the grand ball given him at Nash-
"Had we not seen General,
ville, General Jackson and Mr.
Jackson before, we would have
Monroe entered the ballroom, arm
taken him for, A visitor: not the
In arm. the General in his newest
host of the mansion. He greeted
uniform, towering above the IIt-
us cordially and bade us feel at
tle President. On the other side
home, but gave us distinctly to
of the President walked General
understand that he took no trou-
Carroll, who was also a man of
ble to look after any but his lady
lofty stature.
guests: as for the gentlemen there
"Ah," whispered one of the la-
were the parlors, the dining room,
dies present, 'how; our General
the library, the aldoboard and Its
refreshments there were the serv-
does surpase everyone-how he
does throw everyone Into the
ants and If anything was wanting
The Hermitage as It appears today evidently greatly resembles the home where in 1845 Old Hickory
shade'.
all that was necessary was to
entertained his last guest, death. Before that time the historic homestead had been the mecca of distinguish-
ring. He did not nit at the head
President Monroe, who a short
of the table but mingled with his
ed men of his time. Only the cedars have grown older to change the appearance of the front entrance.
time before had + completed a
guests # wrote the Virginian,
lengthy correspondence with Gen-
who was later to be governor of
By HELEN DAHNKE
eral Jackson on his conduct of the
dared more than a century ago to
collection of Jackson papers and
his native state.
Indian ware and his stay in Flori-
In the dining room, In those
I
N the halls of the historic
break party precedents and po-
letters preserved there by Ten-
da. as well as on-bis own foreign
Hermitage next month the
nesseans-he will be close again
Intical Idols In the cause of the
policy In the new nation, arrived
years when General and Mrs.
to the birth of-tho party which
Jackson were host and hoateda,
voice of 1934 Democracy's
here June 6. 1819. General and
common people. Between them
today he leads.
Mrs. Jackson were at home for
there was plenty of hearly food,
New Deal will mingle with the
lies a century of years during
Eight Presidents have dined at
A good Idea of the times and what
orie of those (dyllic stays at the
echoes of n. Democracy which was
which many other dislinguished
the Hermitage, according to rec-
beloved country homestead, about
was served at the Hermliage may
given a new interpretation in
men, Including many Presidents,
ords kept by the Ladies' Hermi-
be secured from culsine at other
which their married life centered.
1828.
have visited the Hermitage.
tage Association, in addition to
houses of the time. At the home
The general's career as a United
For President Franklin D. Roose-
When President Roosevelt
is
many others who, ofther while In
of Jacob MeGavock, clerk the
States venator and as President
the office of the chief executive
Middle Tennessee district court in
velt, thirty-first President of the
served a meal in the dining room
was still in the future. for the
of the Hermitage: when he walks
or afterwards have visited there.
the later years "Jackson's life,
United States, is coming to Nash-
time he was resting on his care.
ville In November to pause at the
Into the garden to ace the tomb
According to these records. Presi-
Old Hickory frequently dined on
as the nation's first military man.
of that 'now Democrat" of 100
dents who have dined there were:
Saturdays, when he was in town
homestead shrine of President
Parton's account of President
Andrew Jackson, who. like him,
years ago: when he noes the great
James Monroe, Andrew Jackson,
for business or court sessions,
Monroe's visit continues:
Martin Van Buren, James K. Polk,
There a descendant or
the following Wednesday
Millard Fillmore, Franklin Pierce,
Name
Gavock, says. the mid-day
Joines nechanah HIM Theodoro
ville, accompanied by General
always included a baked nam, a
LA
Hoosevelt.
ronst of fresh ment, number of
Jackson, staff and General E. P.
vegetables. sweet peach and cu-
Gaines. A few miles out they were
N addition there have visited
number pickles and many other
by
James
Gavdok
Roosevelt.
Jackson, staff. and General General
ville, accompanied
always included a baked nam,
roast or fresh meat, number
I
N addition there have visited
Galnes. A few miles out they were
of
vegetables, sweet peach and ou
In Nashville, with brief side
met by a committee. composed of
sumber pickles and many other
trips to the Hermitage. during
Ephralm H, Foster, Gen. John H.
things In-good amounts.
some time of their careers: Zach-
Eaton, John McNatry. Felix
ary Taylor, Andrew Johnson,
Grundy, Major William B, Lewis
The McGayock home in those
Rutherford B. Hayes, Grover
and others. The party was 08-
days had the same kind
Cleveland, William McKinley,
corted Into town by volunteers and
allver which was used at the Her-
Woodrow Wilson and William
at College Hill was met by & dele-
mitage every day-heavy and
Howard Taft.
gation of Masons for whom Wil-
plain But at the Hermitage, one
Johnson, as governor of Tennes-
kins Tannehill acted as spokes-
of the distinguishing features of
man. They proceeded to the Fos-
the table service was a set of
800, signed the bill which pur-
ter home, where General Eaton
heavy serving dishes of allver,
chased the Hermitage for the
extended the formal welcome. At
which General Jackson had pur-
state. Though during the years he
4 p. m., dinner was served to the
chased for Mrs. Jackson from the
was military governor the house-
President and his party at the
widow of Commodore Decatur aft-
hold was Confederate In sympa-
thies. so convinced was he of the
Nashville Inn and on Thursday
er the naval hero's death. There
evening there was a great ball.
are still at the Hermitage and are
sacredhess of the spot that be
The next day President Monroe
unique in the manner In which
placed soldiers at the Hermitage
journeyed on to Kentucky."
the tops may be unscrewed so as
war. to protect the property during the
It was at the great ball that
dish. to form & second dish within the
In addition, the President of the
Genoral Jackson wore his newest
United States of the Confederacy,
uniform mentioned and out BO fine
Jefferson Davis, spent months at
about, a figure that the ladies whispered
T
HE arrival here of former
President Martin Van Bu-
the Hermitage as a boy, And
ren. April 27. 1842, was the
Sam Houston, who became presi-
occasion for amusingly partisan
dent of the Republic of Texas,
visited his political mentor there
I
N these years of his prime, the
host of the Hermitage was the
editorials in the Nashville Whig,
perfect great squire of the
anti-Jackson organ, and the Nash-
many times In his young manhood
countryside, whenever he and his
ville Union and American, The
in Tennessee and during his ma-
Rachel were home. Young people
editor of the Whig. C. C. Norvell,
turity as a Texas leader.
from all the countryaide made the
was trying to be gracious in print
Bo It 10, that between President
Hormitage their second home.
to the city's distinguished visitor,
Jackson's time and the coming of
There was big cooking In the
but he could not resist a few par-
President Franklin Roosevelt, fa-
mous feet have trod the beautiful
kitchen, lavish hospitality In the
tlean digs at the too-enthusiastic
Union editor.
avenue of cedars leading to its
diningroom and when on special
days General Jackson rode to
Under the caption, "Arrival of
white walls, famous hands have
garden. Inid flowers on the graves in the
Nashville in the carriage. It was
the Ex-President." the Whig edi-
drawn by four big tron-grey
tor wrote. April 28. 1842:
horses and the servants who drove
"The steamer Nashville, Cap-
Plans for the entertainment of
the President when he arrives
and served as footmen were
tain Miller, reached the whart
dressed In blue livery with brass
last night, a few minutes after
next month have not been com-
pleted. They await word on his
buttons with glazed hats adorned
dark, from New Orleans, having
with silver bands.
on board the ex-President of the
wishes from the President him-
self. Congressman Jo Byrns from
"A very big man, str," an aged
for the reception for Van Buren
the Hermitage district is to be
waiter of the old City Hotel of
there were present, unfortunately,
Nashville is quoted by Parton as
"some of the light-fingered gen-
saying some years later In remi-
THEODORE ROOSEVELT
FRANKLIN PIERCE
JAMES BUCHANAN
The dramatic walk of the first President Roosevelt down the avenue
Records of the Ladies' Hermltage
MILLARD FILLMORE
The seventh president to be em-
of the cedars with head bared in 1907 is distinctly remembered by
association say that President Pierce
number of the board members of the Ladies Her associations
home, likewise WM dined M the Wetche
Great plans were made by Nash-
tertained at the Hermitage was
ville's leading citizens for the visit
President Buchanan whom Jackson
President Filimore in 1854,
named minister to Russia in his
first administration.
FRANKLIN D. ROOSEVELT
When President Roosevelt comes to Nashville next month he will be entertained at the Hermitage, being
the ninth president to be served in the state dining room there.
continued to libe him on his "fan-
dently for political effect,
the
counte today, but those of the
cy sketch" for weeks to come. The
Whig editor aarcastically
ex-
other three named are not 80 easy.
Union reported that Mr. Van Bu-
plained. The paper further stated
During the years after General
ren was met "by spontaneous
that its readers would be kept
Jackson's death, the household of
demonstration of welcome by
Informed of Van Buren's where-
the Hermitage was more with-
thousands at the landing." and
abouts since they were evidently
drawn from the world than it had
PRESIDENT ANDREW JACKSON
that "broad neres of people made
of political importance.
ever been and Its privacy was not
the welkin ring as he passed from
often disturbed by public person-
Host of many distinguished men In his lifetime at the Hermitage,
the boat to the shore and pressed
J
AMES K. POLK, another pro-
ages. However, It Is easy to un-
the spirit of the immortal Tennessean will walk as host again next month
through the crowd. to the carriage
take and political follower,
derstand that Fillmore. Pierce and
through the halls of his home as President Roosevelt comes for a visit
of General Jackson.
whom Jackson, In his few
Buchanan would have Journeyed
The Whig, opposition paper to
months of life was to nee succeed
to the tomb of President Jackson,
the Jackson democracy of the
him in the White House, undoubt-
for in their younger days In na-
try, who relieved two or three
Buren and Mr. Paulding, at the
time. spent Its editorial columns
edly was the overnight guest at
tional affairs they had been un-
persons of their pocketbooks."
Invitation of the managers, visited
of May 5, 1842, while Van Buren
the Hermitage many, many times
der the Influence of Old Hickory.
During this visit of the protege
the theater to witness the repre-
was still in this section, to show
during his life, for there were al-
In fact, their names are listed
whom he chose to succeed him.
sentation of London Assurance,"
that the polished little bachelor
ways many houseguests there
among his supporters In Congress
General Jackson suffered n. se-
The house was full to overflowing
was in this section for political
when the master and mistress
during his second administration.
fore hemorrhage, such as he was
and that fine comedy was per-
reasons.
were at home.
to endure In increasing severity
formed with great spirit.
During his visit former Presi-
However, newspaper editors of
that day did not record many or
B
UCHANAN was not a mas
in the years between then and his
"Mr, Van Buren, we understand.
dent Van Buren declined a public
personally to his liking,
I
death. However, his indisposition
will leave today for the Hormitage
dinner, which a group of leading
the most interesting details of the
he wrote during the last
did not prevent him from making
and after remaining a short time
Democrata would have tendered
goings and comings which would
months of his life to President
one of the colorful cavalcade which
with General Jackson will visit
him and Issued n. statement to the
please renders today and there are
Polk who was about to name him
greeted President Van Buren
Kentucky and pass & fow days
Democratic committee of David-
lacking details of most of these
as his secretary of state. Parton,
when he arrived, according to the
at Ashland on the express invita-
son county in which he eulogized
visits. Parton In his history tella
in his biography of Jackson, writes
Whig Issue of April 30:
tion of Mr. Clay."
General Jackson; pointed out that
of the renewed political fire which
that General Jackson described
"On Thursday Inst, about 2
he had followed as closely as he
the aging General Jackson stirred
Purhanan as a man "not overbur-
o'clock p. m., Mr. Van Buren, ex-
T
HE editor of the Union was
could in his footatepa while he
up during the summer before Polk
dened with scruples of honor." to
President of the United States,
much more wordy in his re-
had been President and said that
was elected President and of how,
which President Polk replied with
and we were pleased to remark
marks on the arrival and
while he was In Nashville he
on many of his visits to Nashville,
the question as to why then had
stay of Mr. Van Buren: no wordy
"deemed It wise to abstain from
that a large number of his politi-
he would stop to see Mrs. Polk.
Jackson sent him as minister to
Indeed that the editor of the Whig
all discussion of political sub-
nat her hand and assure her that
ett opponents waited upon him
Russia during his presidency. And
jects.'
and were received with equal po-
he would bend every effort to put
to this General Jackson's adroit
On May 7, the ex-President left
her husband in the White House-
nnswer had been that he wanted
liteness. In the evening Mr.
for Columbia for a short visit with
Polk did win and when he left
to send 'him out of my sight M
ex-Governor James K. Polk, "evi-
his home in Columbia, January 28,
far as nossible." However, Buch<
1845, on his journey to Washing-
anan was probably hospitably -
ton to be inaugurated, he stopped
celved at the Hermltage whenever
In Nushville, spending the night of
he came, despite such personal
January 30 with General Jackson
feeling for nospitality was a broad,
at the Hermitage and the night of
all-embracing matter -in those
January 11 at the old Nashville
days and LO one was turned away.
Inn. On February 1, he left Nash-
As an ex-President, Fillmore
ville on the Steamboat China, ac-
came to Nashville May 3. 1854. and
companied by many friends, bound
the arrangements for his enters
for Washington,
talument, AS published in the Un-
The master and host 'at the
Ion and American of the time, are
Hermitage, one of his staunchest
so imposing as to be Interesting for
friends and his political mentor,
these Informal times when Presi-
was left behind to entertain his
dent Franklin Roosevelt and Mrm.
last guest, Death, in early June of
Roosevelt dash about the country
that year.
in quick trips that will allow
Although the records of the La-
little pompous preparetion
dies' Hermitage Association state
On May 5. 1854. Mr. Fillmore
that four other Presidents have
concluded his visit with a trip
dined in the Hermitage dining-
the Hermitage, where doubtless he
room since Polk's time, It in diffi-
was entertained at luncheon by the
JAMES K. POLK
cult to substahtiate this by the
then aging Andrew Jackson, Jr.
newepaper records available. The
and his wife, Sarah Yorke Jack-
MARTIN VAN BUREN
The last of Jackson's presidential
entalogue of the association state
son. The next day he left for his
selections, President Polk of Ten-
JAMES MONROE
that these others are Millard VIII-
home via Charleston.
As "Matty," President Van Bu-
nessee spent the night of January
more, Franklin Pierce, James
The program for Mr. Fillmore's
ren was very close to General
28, 1845, at the Hermitage as be
First of the presidential visitors
Buchanan and Theodore Roose-
entertainment, while not explies
Jackson. He visited the Hermitage
journeyed to Washington for lake
to the Hermitage was Monroe who
velt. The story of Theodore Roos-
on what occurred at the Hermbe
evelt's visit to the Herinitage is a
in 1842.
inauguration
-
1819.
familiar one from first-hand ac-
(Continued on Page 14)
PSF : TVA
THE T.V.A. INVESTIGATION
The T. V. A. Act requires that "all members of the Board shall
be persons who profess a belief in the feasibility and wisdom of the
Act." I have a right to assume therefore that every sember of the Board
believes in the feasibility and wisdom of that Act. 1 have a right to
assume that every member of the Board is prepared to do his part to
cooperate with his fellow members to make the Act work. I have a right
to assume that every member of the Board is prepared to recognize that
a certain amount of teamwork is necessary to make the Act succeed.
But there are persons and powerful interests that do not
profess a belief in the feasibility and misdom of the Act. There are
persons and powerful interests that are quick to seize upon the si plest
acts or slightest word of members of the Board to discredit the administra-
tion of the Act. The open dissension and personal recrimination among
members of the T.V.A. has reached & point whore the successful adminis-
tration of the Act is imperilled. No one who professes a belief in the
feasibility and windor of the Act can view such situation without the
gravest concern.
Effective administration requires action. The action or &
Board must be determined by & majority of its members. A minority has
the right to record its dissent, publicly If it desires, after action
is taken; it has a right by fair persuasion to seek to obtain the
- 2 -
adoption of & different course of action. But, neither a majority now
a minority has a right to cake public display of personal internal
differences to the point where effective administration of the Act is
jeopardised.
I have reluctantly become convinced that the work of the
T.V.A. Board is now being impeded, and that the real issues of public
policy which say exist among its members are now being obscured by
personal recriminations. It is intolerable that issues of fundamental
public policy should be confused with issues of personal integrity or
misconduct. It 18 intolerable that either majority or minority members
of an administrative bon d should cast doubt upon the honesty, good
faith or personal integrity of their colleagues or should char e any of
their colleagues with i properly obstructing the carrying out of the
Board's decisions unless they are prepared to support such charges by
good and sufficient evidence. If there be no such evidence then there
should be a surcease of personal attacks and aspersions.
I have called this hearing to investigate charges of dishonesty,
bad faith and misconduct. I as not concerned at this houring with the
pros and cone of any particular policy that the T.V.A. Board has or has
not adopted. This is not an inquiry to determine a national power policy,
- 3 -
it is an inquiry into charges of personal and official misconduct.
I feel that I as President have especial concern in the charges
that have been made which reflect not ai ply upon the judgment but upon
the personal integrity and official conduct of members of the Board in
the management of government property. Under section 17 of the T.V.A.
Act the President is expressly authorized to select attorneys and assist-
ants for the irpose of making any investigation he may deem proper to
ascertain whether, in the management of any property owned by the Govern-
mont in the Tennessee Valley Basin, there has been any undue or unfair
advantage given to private persons or corporations b any officials of
the Government or whether in such matters the Government has been injured
or unjustly deprived of any of its rights.
I had hoped that the bitter personal feeling among the members
of the T.V.A. would prove to be only the temporary result of honest
differences of opinion or policy and that with the passage of time the
members of the Board, even when they could not agree, mould come to
respect each other's opinions and cooperate, as is their duty, in the
administration of the Act. I did not act when complaints were made to
ne as early as January, 1937, one of the by a responsible government
official not connected with T.V.A., that the Chairman of the Board had
- 4 -
made a speech at Chicago and had published an article in the New York
Times which could be taken as personal attack upon his fellow board
members. I repeated my counsel to all the members of the Board individ-
ually to make every effort to compose their differences and not to permit
the enemies of T.V.A. to make capital of them. But I cansured no one,
In September of last year complaint was made to me by Harcourt
A. Morgan and David B. Lilienthal that an article by Dr. Arthur E. Morgan
published in the September issue of the Atlantic Monthly directly and
by implication was an attack upon the honesty and integrity of the Board
of the Tennessee Valley Authority. I at once wrote to Dr. Morgan inform-
ing hi of the complaint and suggested to him "that there is a very
definite obligation on you either to withdraw what your colleagues be-
lieve to be an impugning of their integrity or that you present whatever
specific facts you have, if any, to justify your statements." Dr. Morgan
advised me, if I correctly understood him, that it had not been his
intention to impugn the motives or good faith of his fellow directors.
Although 1 thought that the Atlantic Monthly article might
fairly be taken as an attack upon the personal integrity of Dr. Morgan's
fellow board members," I accepted his statement that no such attach was
4 The following statements, among others from the article, go far to
suggest to the ordinary reader that Dr. Morgan suspects the motives of
(Footnote continued on following page)
- 5 -
intended.
But recently Dr. Morgan has issued statements which in un-
mistakable terms assail the honor, integrity and motives of his follow-
his colleagues:
"The writer is a minority member of the Board of Directors of
the Tennessee Valley Authority, of which he is the Chairman. In
important respects he differs from what he judges to be the actual
power policy of his associates. This statement therefore reflects
his personal views, and not the working policy of the power issue.
Neither does it undertake to criticize in detail what the writer
believes to be the improprieties of that policy.
/September Atlantic Monthly, P. 346.7
"Third, having invited the investment of private capital to
supply the public with electric power, the public is under obli-
gation to respect actual honest and useful investment, and not
to jeopardize or destroy it by capricious and arbitrary coercion.
The abuses of the private power industry have bred in some zen on
attitude of bitter hatred, and a conviction that the only course
to take is a war without quarter against the private companies.
This attitude may be exploited by other men who have no such con-
victions, but who will endeavor to ride to political power on the
issue. A fair settlement of the question might lenvo such sean yithout
a place in the limolight. In my opinion, for public son to retaliate
with arbitrary coercion, to use false or misleading propaganda, and
to use other methods than open and impartial processes of government,
not only às unfair to legitimate private investors, but tends to sub-
stitute private dictation for democratic process of government. I have
no confidence in the supposed liberalism of people who use such nethods.
Whoever will use unfair methods for the public probably will use unfair
mothods against the public for his own advantage. The public can have
no greater security than the habit in its public officials of fair and
open treatment of every issue, no matter who is affected 16.pp. 344-3457.
"Under any method there are certain proprieties and decencies of
government which should be observed. Where the public has invited
private capital to supply an essential public service, there should
be no capricious arbitrariness in destruction or duplication of
facilities to the loss of honest, necessary, and useful investment
In case public power is used as a 'yardstick,' or as & measure
of what the private power industry should charge for its services,
then it in imperative that records and accounts be honest and fair
and open, and that there be no hidden element of subsidy. The very
fundamental element of such comparison is honesty, fairness, and
openness in measurement Lib. P. 5427."
See, also, more detailed analysis of the Atlantic Monthly article
by Harcourt Morgan and Lilienthal, which is attoched to Harcourt
Morgan's letter of September 13, 1937.
-6-
directors. Now, Dr. Morgan, I do not want you to misunderstand no.
You are a man of deep conviction and intense feeling. I know how hard
it is to work with men whose minds somehow do not work in harness with
one's own. I know how difficult it is under pressures and strains not
to suspect the motives of those who resolve upon a course of action with
which one profoundly disagrees. Even insofar as you have made charges
of dishonesty and bad faith against your fellow-directors, I do not want
to silence you; on the contrary I want now to investigate those charges.
Differences of opinion may be composed, but charges reflecting upon the
personal integrity of your fellow-directors cannot be compounded. Such
charges cannot be allowed to rest upon innuendo, but must be made
specific. I now want to sak you to produce what we lawyers call a
bill of particulars.
In the statement. you issued last Mednesday, March 2, you states
"I have felt compalled to fight for certain decencies and proprieties in
public life which are more important to good government than any patticu-
lar government program. The Berry marble case presents an instance of
this difficulty." The suggestion is that you had to fight against
your colleagues for such decencies and proprieties. The suggestion is
that your colleagues were prepared to recognise a claim without fully
-7-
investigating its merits. You charge that they "entered a friendly
agreement with Major Berry to determine the value of the marble which
by that time WEB mostly under water and inaccessible, without any in-
quiry CB to whether there was evidence of bad faith." The suggestion
is that this "friendly agreement" was an improper agreement and that
there was reason at the time of the agreement not simply of questioning
the validity but the good faith of Major Berry's claim. These are very
serious charges, charges of malfessance in office. Your statement
suggests that calling upon Dr. John Finch, Chief of the Bureau of Mines,
to act as conciliator was calculated to put in jeopardy the government's
interests. You do not question merely the wisdom or expediency of the
steps taken by your colleagues, you question their integrity. You
state that "the real difficulty has been in efforts to secure honesty,
openness, decency, and fairness in government," and you repeat that
"the Berry marble case is an instance of this difficulty."
AB & responsible official you could not have made these serious
charges against your colleagues publicly without being prepared to prove
them. I now ask you, not for a specification of the acts of your
colleagues with which you disagree, but for a specification of their acts
which prove their want of honesty, openness, decency and fairness. As
you refer to the Berry case as an instance of this difficulty, I desire
-8-
you to specify such other instances as in your opinion have occurred.
The broad charges made by you certainly suggest that there are other
instances. In your letter to Congressman Maverick, released to the
press on March 6, you state that "the public and the Congress do not
yet know the extent to which that [the Berry claim] was improperly
handled," and you charge your colleagues with failure to protect the
public interest in the Aluminum Company contract and with permitting"s
joker" to be inserted in the Arkansas Power and Light Company contract
which would have enabled the company to buy prime power at secondary
power rates. As I have previously pointed out, it is my duty under sec-
tion 17 of the Act to make an investigation if there has been any undue
or unfair advantage given to any private corporation or if in the manage-
ment of government property in the Tennessee River Basin the government
has been injured or unjustly deprived of any of its rights.
In your letter to Congressman Maverick, released March 6,
Dr. Morgan, you also state that some of the reasons for your concern
"are the explicitly misleading and evasive reports" and "explicitly
false reports which have been made to the President, to Congress, and
to the public concerning conditions in the T.V.A. by a T.V.A. director
or by the two directors acting in unison." This is an accusation
against your colleagues of making to me and to the Congress deliberately
-9-
false and misleading reports, and I ask you to cite to me specifically
the reports end the statements therein to which you refer.
Finally you charge in your letter to Congressman Maverick
that "there is & practice of evasion, intrigue and sharp strategy, with
remarkable skill in alibi and avoiding direct responsibility, which
makes Machiavelli seem open and candid," and that you have discovered
"hard-boiled, selfish intrigue" masking under "the attitude of boyish-
open candor and man-to-man directness." Such charges can only be
made by one who has despaired of the possibility of cooperative team-
work with his colleagues in a great public endeavor. I must ask you
for proof that your colleagues have not simply differed with you on
issues of policy and organization, but have intrigued and conspired
against you.
It is not my desire that this inquiry should be a unilateral
affair. Harcourt Morgan and David Lilienthal, you also have mode
charges against Dr. Arthur Morgan of obstructing the carrying out of the
decisions of the Board. You made your charges not publicly, but to me
in my official capacity. It is true that I, not you, chose to make
those charges public after Dr. Morgan had made repeated public charges
against you. Your charges do not necessarily reflect upon the personal
integrity of Dr. Morgan but upon his willingness to cooperate in the
-10-
decisions reached by the Board in the manner prescribed by law. Your
charges are equally serious, particularly as they suggest that Dr. Morgan
in obstructing the work of the Board has cooperated with interests
which may be adverse to those of the T.V.A. Your charges necessarily
impute misconduct in office to your colleague. You go so far as to
assert that his "opposition and obstruction have occupied virtually his
entire time, to the exclusion of his attendance upon Board meetings."
I am obliged therefore to take note of your charges also by virtue of
the investigatory powers conferred upon ne by section 17 of the Act.
I would remind you also that I am not concerned at this inquiry
with matters of policy or of organisation but with your charges that Dr.
Morgan has improperly obstructed the work of the Board. As your charges
are couched in general terms, I must now ask you also to give no specific
evidence to support each of the several charges enumerated in Part III
of your memorandum to me, which reads as follows:
"The present situation in the board of directors of the
Tennessee Valley Authority presents & clear-cut issue respecting
this democratic principle. That issue may be stated in this
way: When a board of public trustees, after weighing differing
points of view, and after the fullest board discussion, has
reached a conclusion by & majority vote, how far may the dis-
senting public trustee, while still continuing to hold office,
properly carry his opposition to these board decisions.
"Re believe the following methods of opposition, which are
among those employed by our associate since the Spring of 1958,
fall outside permissible limits.
- 11 -
"It 10 not permissible, as Arthur B. Morgan has done ro-
peatedly in published statements, to attack the personal notives
and good faith and impugn the integrity of his associates on the
board, not upon the basis of direct charges but by innuendo, in-
direction and aspersion.
"It is not permissible for Arthur E. Morgan, as an expression
of disagreement, to engage in unsupported attacks upon the integ-
rity, professional ethics and competence of key members of the
staff, and to haress and interfere with then while they are carry-
ing out duties resulting from decisions duly arrived at by a
majority of the board of directors.
"It is not permissible for the chairman of the Board, after
board action has been duly taken, to fail end refuse to carry
out explicit action taken by the board.
"It tras not permissible for Arthur E. Morgan to cooperate
with a utility executive in the preparation of a memorandum,
the express purpose of which ms to show that B particular decision
of the board was wrong and activated b. improper motives.
"It was not permissible for Arthur E. Horgan to collaborate
with the former chief engineer of the Insull utility system in
the preparation of a detailed recommendation on power pooling
policy, which report proposed evasions and violations of the
TVA Act; nor mas it permissible, during negotiations, for him
to permit such report to be made available to the utilities.
"Such methods of expressing disagreement with the net and
with majority decisions of the board, as have born employed by
Arthur E. Morgan, are not permissible. Such methods are wrong
because they violate the desocratic principle of majority rule.
They violate & spirit of good sportsmanship in ublic af"aire:
One should be a good loser in autters of opinion as well ns in
sports.
"Te believe these methods to :e wron, because they are not
designed to persuade but to obstruct and discredit the carrying
out of the law and of decisions duly reached after fair consid-
eration.
"And, finally, we believe Mr. Norgan's methods are grong
because the doctrine of 'rule or ruin' cannot exist along=ide
the doctrine of majority rule and minority responsibility."
I have not heard the charges and counter-charges of the nem-
bers of the T.V.A. hoard. 1 have endeavored to give each side the
opportunity of answering the other's complaints. I shall allow ten
days for the members to submit to ae such other or further evidence as
they dees pertinent to the inquiry. I shall then determine what further
- 12 -
action is necessary in the public interest. NoT I can only reiterate
that I consider it the duty of every member of the board, believing as
all of you do in the feasibility and wisdom of the Act, to put maide
all personal feelings, to consider at your board meetings, impersonally
and objectively, the 1 portant problems of T.V.A. and not to obstruct
the carrying out of the decision: of the Board. It in not fair to T.V.A.,
that any or you who cannot do that, shoul remain on the Board. The
Board is about to resume 1 portant negotiations with private utility
interests. Those negotiations will be difficult and delicate. The
public interest should not be jeopardized by unnecessary internal dis-
sension.
PSF: TVA
Dr. Morgario Prepared Statement
During a long period I have repeatedly but unsuccessfully endeavored
to secure the President's adequate consideration of grave conditions within
the T. V. A.
,at the muting mentions by the Persident concerning the attants article, monthly
The most recent occasion was last Fall when I personally presented to
the President a draft of a letter which I asked him to send to the T. V. A.
Board. This letter requested the Board to make available to me the data
and assistance necessary for me to make a report to the President concern-
ing the conditions I had criticized. The President did not grant that re-
quest, and made no alternative suggestions.
I am of the opinion that this meeting is not, and in the nature of the
case cannot be, an effective or useful fact finding occasion. To properly
substantiate the charges is not the work of a morning.
Since the Congress has now taken up the matter, I believe that any re-
port by me should, in the terms of the T. V. A. act, be filed "with the
President and with the Congress".
It is my studied judgment that the President, the Congress, and the
people of this country, are entitled to accurate information and
appraisal of the program, policies, administration, and activities of the
Authority. Such information and appraisal can best be obtained and made
available to the people and to Congress and to the President by a Congres-
sional committee which will make an impartial, comprehensive, and complete
investigation of the Authority's affairs.
PSF
TVA
Under the Constitution
[directly and primarily]
The Chief Executive is constitutionally responsible for the
administrative efficiency of the executive agencies of the Government.
That responsibility is inescapable. It cannot be flinched no matter
what the responsibilities of Congress and no matter how painful the per-
sonal relations involved.
That responsibility has required action by me in connection with
the internal management of the Tennessee Valley Authority. I take such
action with regret while the Authority is engaged with private power
companies both in important constitutional litigation and in important
netotiations, and while there is sentiment in Congress for investigation
by Congress. Immediate action seems necessary, however, to protect the
best interests of the Authority in such litigation and in such negotiations
and to clarify the issues for any investigation such as Congress may wish
to make pursuant to its own powers and responsibilities.
Prior to the summer of 1936, the individual members of the Board
of Directors found it possible to compose differences and to function to-
gether as an operating Board. Since that time there has been increasing
inability to work together between Chairman Arthur E. Morgan, on the one
hand, and the majority of the Board on the other.
In the spring of 1937 an attempt was made to settle difficulties
between the majority and minority over administrative affairs by the
-2-
appointment of a General Manager, and the adoption of an understanding
that the Board of Directors as such should confine themselves to questions
of policy in which the decision of a majority should bind all. This solution
was attempted after representations to me by the Chairman of the need for
administrative reorganization and upon the recommendations of a special
committee of experts on administrative organization (Assistant Secretary
of Commerce, Ernest G. Draper, Rear Admiral A. L. Parsons and Mr. Herbert
Emmerich) which I appointed to investigate the matter. The solution was
only partially successful because the minority member of the Board did not
agree with the majority in the selection of the General Manager.
In January, 1937, in a public speech and articles in the public
press, the minority member clearly intimated-but without specifications
or supporting evidence-that he doubted the integrity of his fellow members.
In August, 1937, again in the public press-but again without
specifications or supporting evidence--the minority member seemed to
imply lack of integrity on the part of his fellow members. At this time
I wrote him as follows:
"That there is & very definite obligation on you either to
withdraw what your colleagues believe to be an impugning of their
integrity or that you present whatever specific facts you may have,
if any, to justify your statements."
In reply Dr. Morgan informed me that while he was highly critical of
the work of his colleagues, he had no intention of impugning their good
faith or integrity. The Chairman complained about the internal organization
-8-
of T.V.A. and requested me to intervene on his behalf. I urged him to
return and to endeavor to complete the internal reorganization of the work
along the lines recommended in the report of the special committee.
In December, 1937, the constitutionality of the Act was at
stake in litigation in Chattanooga in suits brought by eighteen utility
companies. During such litigation the minority member of the Board made
charges of dishonesty in the conduct of the litigation against the General
Counsel of the Authority in charge of the litigation-again without speci-
fication or evidence. Such charges were widely disseminated within
the Authority's organization.
On January 18, 1938, the majority members submitted to me
privately an official memorandum complaining of certain specific lines
of unpermissible conduct on the part of the minority member, including
the making of reckless and unsupported charges and including an un-
willingness to cooperate with the decisions of a majority of the Board.
On March 3rd and on March 5th, 1938, the minority member made
extensive charges, again in the public press-and again without speci-
fications or evidence--of dishonesty and lack of integrity in public
office on the part of the majority of the directors. Immediately the
majority members required of me that the minority member be required
to produce specifications and facts to support the charges, that
either they be adjudged guilty in accordance with the allegations or
exonerated and cleared of such charges. They required such action
both for the sake of the morale of the administrative organization of
the Authority and as amatter of personal honor.
Despite my long personal friendship for Chairman Morgan and
my appreciation of his many public services of the past, his action
forced my hand. I summoned the three members of the Board of the
T.V.A. to appear before me on March 11 to present such facts as they
might have to support the grave charges which they had made against
each other. I informed them that I was not concerned at this particular
inquiry with the pros and cons of T.V.A. policies, but with their
charges of personal and official misconduct. I stated that it was
intolerable that issues of fundamental public policy should continue
to be confused with issues of personal integrity or misconduct.
-5-
I first called upon Chairman Morgan to substantiate with facts the
several charges of dishonesty and want of integrity which he had made against
his fellow directors. I called his attention to the fact that the gist of
his complaint in regard to the handling of the Berry marble claims appeared
in his own words to be that "the real difficulty has been in the effort to
secure honesty, openness, decency, and fairness in Government."
Chairman Morgan flatly refused to submit to me any evidence in
support of his charges. He read a prepared statement to the effect that the
"meeting is not and in the nature of the case cannot be, an effective or
useful fact finding occasion. To properly substantiate the charges is not
the work of a morning." When asked whether he had any reason to believe that
the hearing would be confined to a morning and whether he would be prepared to
submit facts if given one week or two weeks to do so, he failed to reply.
The majority members explained the action which they had taken in
the Berry marble claims case, as well as their action on the Arkansas Power
& Light Company contract, and the Aluminum Company contract to which Doctor
Morgan had referred in his published statements. In view of the failure and
refusal of Doctor Morgan to submit the facts upon which he relied to support
his charges, I could not expect a more adequate explanation than that which
they made.
-6-
After I had requested Chairman Morgan to present the facts to sub-
stantiate his charges, which he failed to do, and after I had given the
majority members the opportunity to answer the Chairman's charges, which they
did, I asked the majority members to present the facts in support of their
charges against the Chairman.
The majority members took up their several charges against the
Chairman and presented specific facts tending to support them. The majority
members referred to a number of special articles and speeches of the Chairman
during 1937 which they contended contain unsupported and unsupportable state-
ments impugning their honesty and integrity.
Whether these articles or speeches were intended or could fairly be
construed to impugn the motives of the majority of the directors, it is clear
that the more recent public statements of the Chairman to which the majority
members also referred, do assail the personal honesty and integrity of the
majority members in unmistakable terms. And Chairman Morgan refused, although
given repeated opportunity, to present any facts in justification of his
attacks upon the integrity of the majority of the Board.
The majority members further adduced facts tending to show that in
the course of delicate and important conversations with private utilities
one
the Chairman had conferences and communications with more private utility
executives, with a large prospective power purchaser, with an electrical
-7-
equipment manufacturer which might have embarrassed the Board in carrying out
the decisions of its majority.
When there is dissension within a multiple-headed executive, it is
difficult to draw the line where dissent becomes obstruction. I have serious
doubt as to the propriety of a number of the things which Chairman Morgan did
in an effort to create a situation in which his own ideas should win accept-
ance. So long as we have administrative boards, however, we should allow con-
siderable latitude for human discretion and not frighten a minority into
acquiescence. Therefore, in such matters I think every doubt should be re-
solved in favor of the Chairman. Nevertheless significance does attach to the
number of these instances in which the Chairman trespassed into doubtful territory.
The majority members also adduced facts tending to show that the
Chairman did not send a telegram to me requesting a conference, as directed
by the Board. Here again the Chairman may have committed a technical wrong.
His explanation that he had changed his mind might not be technically sufficient.
And #S, Standing in isolation, however, a few instances of this sort would not appear
to be significant. taken in the Mght of his other acts - they are
not wholly lacking in significance.
The majority members also adduced facts tending to show - I think
I should say fairly showing that the Chairman interferred with and obstructed
the conduct of vitally important constitutional litigation affecting the very
-8-
life of the Authority. I have earlier referred to his difficulties with
the General Counsel during the recent trial in Chattanooga. The interference
reached the point that special counsel for the T.V.A., the Honorable John
Lord O'Brian, formerly Assistant to the Attorney General of the United States
under a Republican Administration, an independent lawyer of great experience
and wide reputation, felt impelled to write the Chairman as follows:
"Dear Dr. Morgan:
I have your letter of December 30, 1937. [This is a
memorandum containing unsupported charges/
Prior to the trial and during the trial I have actively
participated in and have closely observed the preparation and
presentation of the testimony. Since receiving your recent
letter, I have again gone over the file of material concerning
the preparation and presentation of the engineer's testimony
in the case now on trial, and have talked with the attorneys
and also with a number of the witnesses. As a result, I am
more than ever confirmed in the opinion which I previously
expressed to you that the case has been handled with unusual
ability and in accordance with the highest standards of integ-
rity.
To this I desire to especially call your attention.
Your charges, coming while the case was actively on trial,
have had a disrupting and demoralizing effect upon all the
attorneys and upon the conduct of the Authority's case.
After careful review of the matter I am convinced that
charges must have originated in some misunderstanding that
have no real founcation in fact. The matter ought to be
definitely cleared up in justice to the lawyers and also in
justice to the Authority's case which needs the best efforts
of all of the attorneys. As all the attorneys are now under
great strain in the stages of this trial I am writing to ask
whether you will not clear the record and set the members of
the legal staff free from a very heavy and, I think, unwar-
ranted burden of anxiety at this critical time.
The T.V.A. had entrusted the conduct of this important litigation to
competent counsel. its General Counsel had the assistance of an able, outside,
independent special counsel. Whatever differences there may have been within
the Board as to the conduct of this litigation, no minority member could be
-9-
justified at a most critical stage of the proceeding in loosely charging
reputable counsel with tampering with witnesses and thereby, consciously or
unconsciously, recklessly diverting counsel's attention from the most urgent
and pressing preparation of the trial. Such charges widely disseminated through-
out the organization of the Authority were calculated to embarrass counsel and
to intimidate the Authority's witnesses. The Chairman, when given the oppor-
tunity by me, offered no explanation for this astounding conduct.
This very hearing gives credence to the charge that the Chairman
has been unwilling to cooperate with his fellow directors in the administra-
tion of the Act. His fellow directors have come here and explained their
grievances and attempted to answer the Chairman's charges. The Chairman on
cooperate in this proceeding and to
the other hand has stood aloof and refused to/supply facts as required of him
by his own administrative superior, the Chief "xecutive.
On the evidence before me, I therefore am obliged to make the
findings that Doctor Arthur Morgan--
(a) has failed to sustain the charges of dishonesty and want
of integrity which he has unjustifiably made against his
fellow directors;
(b) is guilty of obstructing the work and demoralizing the
organization of T.V.A.;
-10-
(c) is guilty of insubordination and contumacy in refusing to
submit to the Chief Executive any facts upon which he might
have relied in making charges of dishonesty and want of
integrity against his fellow directors.
Under these circumstances, I am under the painful duty to request
Chairman Morgan at once publicly to withdraw the charges which he has made
impugning the honesty, good faith, integrity and motives of his fellow-
directors and to give them and the country assurances that he will in future
loyally cooperate with his fellow directors in carrying out the provisions of
the T.V.A. Act. If he cannot do this, it is his duty to resign. I venture
to express the hope that Chairman Morgan will not make it necessary for me
to take further action.
PSF
TVA
Dr. Arthur Morgan's attitude toward this very hearing gives
credence to the charge that he has been unwilling to cooperate with his
fellow directors in the administration of the Act and is temperamentally
unfitted to exercise divided authority. Dr. Arthur Morgan has stood
aloof and refused to cooperate in this proceeding or to supply even
facts as required of him by his own administrative superior, the Chief
Executive. His fellow directors have come here and explained their
grievances. He has not even attempted to specify the facts upon which
he based his charges against them so that they might have an opportunity
to make answer.
I cannot be unmindful of the position in which Dr. Harcourt
Morgan and David Lilienthal find themselves. Some decision on this
record is due to them. If there should be no decision after Dr. Arthur
Morgan has refused to substantiate his grave and libelous charges
against them they would be definitely and seriously injured in their
rights and standing as citizens and public officials.
Finally I must consider the continuing operations of a great
government agency. To leave under unsupported charges for an in-
definite period those two officials who have tried to cooperate in the
difficult task of divided authority and to allow the other member to
block governmental operations, would violate my constitutional duty
to keep care that the laws are faithfully executed.
I E 1 2
i I is
-2-
The present indication of what it will be necessary for me to
find, whether I like it or not, is that,
(a) Dr. Arthur Morgan has failed to sustain the charges of
dishonesty and want of integrity which he has made against his fellow
directors and that his conduct in this respect is legally and morally
unjustified;
(b) On the face of the record the charges of the other
directors that Dr. Arthur Morgan has obstructed the work and demoral-
ized the organization of T.V.A., must be accepted as true; Dr. Morgan
has refused to offer testimony in denial of the charges;
(c) Dr. Arthur Morgan is guilty of insubordination and con-
tumacy in refusing to submit to the Chief Executive any facts upon
which he might have relied at the time of making charges of dishonesty
and want of integrity against his fellow directors.
As the case stands today,
(a) no further evidence can be brought out because of the at-
titude of theChairman;
(b) on the evidence presented and on the refusal to submit
evidence action must be taken.
I want to read the record again and consider the situation
overnight. I therefore request that all three members of the T.V.A.
appear in my office at 11:00 o'clock tomorrow morning.