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TREASURY DEPARTMENT,

OFFICE OF COMMISSIONER OF INTERNAL REVENUE,
Washington, D. C., May 15, 1917.

The SECRETARY OF THE TREASURY.

SIR: I have the honor to request that you will instruct the Director of the Bureau of Engraving and Printing to print and deliver to this office the follow'ng internal revenue stamps, if authorized by an act of Congress, this order to be supplemental to that of 1917:

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Stamps from $30 and higher should be in books, as follows: $30, $60, and 100, forty to a book; $500, eight; and $1,000 four.

Respectfully,

DAVID A. GATES, Acting Commissioner.

Mr. GILLETT. What do you mean by saying that you use your own employees at the factory?

Mr. RALPH. We sent 12 employees up there to supervise the work. The work is done by a modern process. We could not execute them in the Bureau of Engraving and Printing. We entered into an agreement with them that when the law is passed they will be paid the actual cost for their presses, plus 10 per cent.

Mr. GILLETT. Do you mean that it is done in some engraving establishment?

Mr. RALPH. It is done in the largest lithographic plant in America. The CHAIRMAN. Was the contract made with them by private arrangement?

Mr. RALPH. Yes, sir.

The CHAIRMAN. There was no actual competition?

Mr. RALPH. No, sir. They have the most modern process.

The CHAIRMAN. I am asking you now how the arrangement was

made.

Mr. RALPH. There was no competition whatever.

The CHAIRMAN. On what basis is it?

Mr. RALPH. On the basis of actual cost, plus 10 per cent.

The CHAIRMAN. Who estimated 10 per cent as the allowance to be made?

Mr. RALPH. That is what they asked for.

The CHAIRMAN. And no effort was made to ascertain whether any of these other concerns

Mr. RALPH (interposing). We personally inspected their costs.

The CHAIRMAN. I am talking about the 10 per cent plus provision. Mr. RALPH. There is not another factory in America that could do it, Mr. Fitzgerald.

Mr. GILLETT. Is that because of the character of the work or because they could not do so much as this factory?

Mr. RALPH. It is due to the character of the work and their ability to expedite it. No other concern could do it so cheaply.

The CHAIRMAN. Have any other contracts been made?

Mr. RALPH. No, sir; but I expect we will have to let more work out.

The CHAIRMAN. From the bureau?

Mr. RALPH. Yes, sir. We will have to let out some of our work. The CHAIRMAN. You will not let it out without authority, Mr. Ralph ?

Mr. RALPH. I can not have any plate printing done outside of the bureau.

The CHAIRMAN. You can violate the law in that respect as well as in any other.

Mr. RALPH. No, sir.

The CHAIRMAN. Why not?

Mr. RALPH. Because I am assuming that the law will provide for the work being done outside.

The CHAIRMAN. In the interest of good business policy, the most important thing for you to do is not to violate the law.

Mr. RALPH. I am not violating the law.

The CHAIRMAN. You do. You have been violating the law.
Mr. RALPH. No, sir; if Congress does not ratify it, I will pay for

it myself.

The CHAIRMAN. You will not do anything of the kind. You will not do it. That is preposterous.

Mr. CANNON. Under those conditions that you have described you have acted as you have said you acted?

Mr. RALPH. Yes, sit.

Mr. CANNON. And under similar conditions, in one or more cases. without having any law enacted, you have gone to work with the approval of this committee and increased your obligations and expenditures, with the assurance that a law would be passed.

The CHAIRMAN. That is absolutely incorrect. No member of this committee has ever informed Mr. Ralph, or any other official of the Treasury Department, that he could take money appropriated for the Bureau of Engraving and Printing and use it for the payment of contract work done outside of the Government establishment. Do not let us have any misunderstanding about that.

Mr. CANNON. I do not want to have any misunderstanding of it, but I want to have an understanding of the facts.

Mr. RALPH. I may have, where any question has arisen here

Mr. CANNON (interposing). In what fund or item has that been done?

Mr. RALPH. Under the appropriation for miscellaneous expenses it has been understood that the Secretary of the Treasury might expend money for anything which was legitimate work in the bureau. The CHAIRMAN. Understood by whom?

Mr. RALPH. By everybody concerned.

The CHAIRMAN. What do you mean by that?

Mr. RALPH. By those charged with the administration of the bureau and the expenditure of money.

The CHAIRMAN. The law is specific that you can not use money appropriated for work in the Bureau of Engraving and Printing for work done outside of the Bureau of Engraving and Printing, and your own statement is that you made this contract because you assumed that authority would be given to you, not because of any understanding with reference to another appropriation.

Mr. RALPH. That is true; and I should not have stated it otherwise.

Mr. GILLETT. Do you mean that you have done this before?

Mr. RALPH. No, sir; we have not had it done on the outside before.

Mr. GILLETT. You say it is understood

Mr. RALPH (interposing). I said that the appropriation for miscellaneous expenses could be used for work outside of the bureau. The CHAIRMAN. You know that the statute prohibits the use of this money for any purposes except for the purposes for which it is specifically appropriated.

Mr. RALPH. What are miscellaneous expenses?

The CHAIRMAN. You were never permitted or attempted to make a contract to do work outside and pay for it out of the miscellaneous account?

Mr. RALPH. No; and I am sorry we have to do it outside.

The CHAIRMAN. It ought not to be done. I think it is something to be more than sorry about.

Mr. CANNON. Let me ask

The CHAIRMAN (interposing). And I want to say it is an indefensible outrage.

Mr. CANNON. I am not going to discuss that question. The question is the size of the baby and the conditions we are required to meet to feed it in these exceptional times. Now, then, I think I can say that in this matter, to some extent, and in other matters connected with the public service, this committee, in whole or in part, has suggested that the work be done, that the obligation should be incurred, and that the committee would recommend the appropriations. Now, if that is so, and that was proper, it seems to me that under these conditions a similar violation of the law can not be too severely criticized.

The CHAIRMAN. But this is entirely different and the conditions are not similar at all. This committee stated that the things imperatively necessary for the public defense would be taken care of, but this is simply for the printing of these stamps outside of the Government establishment.

Mr. GILLETT. Was this done under the direction of the Secretary? Mr. RALPH. By the approval of the Secretary; yes, sir. I assume full responsibility for it. After conference with the Commissioner of Internal Revenue, and everybody, it was deemed the best thing to do. There has not been any money spent yet.

Mr. GILLETT. You say that only about $10,000 worth is involved so far?

Mr. RALPH. Yes.

Mr. GILLETT. How long would that cover?

Mr. RALPH. A little over two weeks.

Mr. GILLETT. That would be about $20,000 a month at that rate? Mr. RALPH. Yes, sir.

Mr. GILLETT. $20,000 a month will not accomplish a great deal. Mr. RALPH. Well, they are delivering about 50,000,000 stamps a day, which are being shipped out to the post offices.

Mr. CANNON. Ought you not in this statement to be explicit and explain all the circumstances; explain your incapacity, if there was incapacity, to do certain work and the necessity for its being done outside, and the capacity of this Buffalo concern, which I never heard of before and do not care anything about? In other words, make a clean statement, one that is succinct.

Mr. RALPH. I shall make a full statement. I thought as to the documentary stamps there would be embarrassments in the country if the work were not done

The CHAIRMAN (interposing). The misfortune about it is that you are assuming too much responsibility. You are not responsible for those embarrassments. If there is a need there is a way to communicate the facts to Congress and have action taken in an orderly and legitimate manner. The thing to do is not to violate the law but to submit the information to Congress and let it take the responsibility. The head of a department of the Government is not justified, simply because he thinks it necessary, to spend thousands of dollars and do anything he pleases.

Mr. RALPH. I do not do anything I please, Mr. Chairman, and I am sorry you feel that way about it.

STATEMENT RELATIVE TO THE PRINTING OF STAMPS BY PRIVATE CONCERNS.

Relative to the matter of having some of the work of the Bureau of Engraving and Printing executed by an outside printing establishment in Buffalo, N. Y., the facts are that when the revenue bill now pending in Congress was first drafted it provided that it should be effective the day after its approval, and later some modification of this was made, but in its present shape as now being considered by the Senate it provides that it should be effective 10 days after approval. This fact suggested to the officials of the Bureau of Internal Revenue that some measure should be taken to provide stamps called for under the act so that they might be in the hands of those required to use them at the time the law became effective, and the Commissioner of Internal Revenue accordingly placed orders approved by the Secretary of the Treasury with this bureau for these stamps, it being fully understood by the Commissioner of Internal Revenue and all the officials, including myself, that the work was anticipatory of legislation and that while unauthorized by actual law there was so great a certainty of the law being passed that there would be only a technical violation of law in preparing the stamps in advance.

This bureau, being under enormous pressure, due to the necessity of producing the Liberty bonds and interim certificates required in connection therewith, together with greatly increased demands for checks, drafts, commissions, transportation requests, Federal reserve notes, and all sorts of papers needed in connection with the war, it was unable to produce the stamps in question, and the matter of having them printed under the supervision of this bureau at an outside plant was taken up. and the best concern in the United States known to this bureau that could do printing of the kind and by the process required was requested to take the matter under consideration. They found that they could spare the presses and necessary labor, provided the bureau by its own employees participated in the work, and arrangements, with the approval of the department, was made with the Niagara Lithograph Co., of Buffalo, N. Y., to perform the work on the basis of actual cost plus 10 per cent, the proposition made by them being as follows:

"You are to furnish all copy and layouts, which are to be complete and accurate in every detail. You are also to furnish all paper and provide the necessary superintendence and inspection.

"We are to make original plates by the Niagara lithotone process for all certificates, stamps, etc., from copy supplied by you; transfer or steam-press plates are to be made photographically and are to conform to layouts and measurements supplied by you.

"We are to print on stock furnished by you, and in quantities as instructed by

you.

"We are to put up required partitions, screen windows, and provide suitable cupboards in which to store plates, these to be equipped with satisfactory locks. "All of the work we do is to be furnished at cost to us, plus 10 per cent. Our cost records are to be subject to your inspection and weekly statements covering cost incurred are to be rendered.

"We will operate two shifts of eight hours each."

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With regard to the authority for payment for this work, I would state that the appropriation for this bureau for "materials and miscellaneous expenses has always been construed to mean that under that part of the title of this appropriation reading "Miscellaneous expenses," if anything necessary to the work of this bureau which could not be foreseen so that it could be distinctly enumerated, could be paid for therefrom, and aside from this fact it was also assumed that the authority which would have been given when the warrevenue bill became a law to permit the Commissioner of Internal Revenue to have such stamps printed by outside concerns in case this bureau should be unable to produce them was an indication of the intention of Congress to permit such an arrangement if it could be properly done and paid for.

The fact that there was no specific authority to do this work outside of the Bureau of Engraving and Printing was not considered for the reason that there is not known to be any specific prohibition of having it done outside the bureau, and especially as the appropriation for “Materials and miscellaneous expenses seems to include such work.

Due to the question raised, all work on these stamps has been stopped.

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TREASURY DEPARTMENT,

OFFICE OF COMPTROLLER OF THE TREASURY,
Washington, July 11, 1917.

The SECRETARY OF THE TREASURY.

SIR: I have your letter of the 9th instant, as follows:

"I will appreciate it if you will kindly give me a memorandum of any statutes bearing on the rates of pay, particularly for overtime work, of per diem employees of the Bureau of Engraving and Printing, and also covering the hours of labor in that bureau, together with your decision on the construction you place on any such statutes.

"In addition, will you please be good enough to inform me if there are any statutes with respect to the execution in private concerns of work of the character performed at the Bureau of Engraving and Printing? I desire to know if there is any authority of law for having such work executed in private concerns if deemed necessary."

The only express authority of law for the employment of any payment of compensation to per diem employees in the Bureau of Engraving and Printing is found in annual appropriation acts. The provisions for the fiscal year 1918 are as follows:

For salaries of all necessary employees, other than employees required for the administrative work of the bureau of the class provided for and specified in the legislative, executive, and judicial appropriation act for the fiscal year 1918, and plate printers and plate printers' assistants, $1,470,000, to be expended under The direction of the Secretary of the Treasury. * * *

For wags of plate printers, at piece rates to be fixed by the Secretary of the Treasury, not to exceed the rates usually paid for such work, including the Wages of printers' assistants, when employed, $1,815,000, to be expended under The direction of the Secretary of the Treasury." * * (Sundry civil approIriation act of June 12, 1917. Public No. 21, p. 14.)

The provisions in the sundry civil appropriation act of June 23, 1913 (38 Stat., 19), were as follows:

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