the AMS Statistical Staff on a review of these items. The TD for the completion of the review is December 1974.

7. The stowage of grain will be personally verified by official inspection personnel through periodic spot checks. The Grain Division has alerted its Regional Offices to the need for spot checking the stowage at all locations.

8. The regulations under the U.S. Grain Standards Act provide clear guidelines for the protection of official samples and inspection certificates. Through supervision of official inspection agencies, the Grain Division has generally been able to enforce the security provisions. Enclosed as exhibit 20 are memorandums from the Regional Offices reminding the Field Office Supervisors of their responsibilities in safeguarding samples and properly manning Woodside samplers. The Woodside samplers at the Producers Elevator, Corpus Christi, Texas, have been replaced with two diverter-type mechanical samplers. The diverter-type mechanical samplers have been checktested, and the authorization for their use was approved on June 2, 1973.

9. An amendment of the regulations has been prepared to authorize official inspection agencies to inspect and checktest samplers. An instruction will be prepared to implement the regulations. The TD for the amendment of the regulations and issuance of the instructions is March 1975. Enclosed as exhibit 21 are memorandums from the Regional Offices reminding the Field Offices and licensees of the requirement to checktest inspection equipment.

10. a. The Grain Inspection Branch and the Commodity Inspection Branch are revising the instructions on Field Office reports and will issue it as a joint instruction. The TD for the issuance of the instruction is January 1975.

c(1) Enclosed as exhibit 22 is a copy of the revised pages for GR Instruction 916-6, clarifying the procedure for accounting for excess grain from sampling. c(2) Enclosed as exhibit 23 is a copy of a memorandum from the Grain Inspection Branch to the New Orleans Field Office which precludes loaders from switching from one inspection plan to another.

c(3) The Grain Division is stressing to licensed inspectors the need for them to enter their actual results on the shiploading logs. Spot checks of file samples and other spot-check supervision procedures are being used to assure that licensed inspectors are maintaining accurate logs. This is an ongoing supervision activity. 11. The computer printout has been temporarily suspended, partly as an economy measure, and partly to study ways to make the printout a more useful tool. The Grain Division's Program Analysis Group has been instructed to make improvements in the printout and to revise GR Instruction 929–9. The TD for the revision of the instruction is June 1975.

12. It has been a long standing policy of the Grain Division to prohibit the assessment of discriminatory or unreasonable fees by inspection agencies. When the regulations under the U.S. Grain Standards Act were published in the Federal Register in 1969, it was stated that if the level of the fees is considered by the trade to be discriminatory or unreasonable, AMS would expect the trade to bring such information to its attention for correction. The trade has brought one such instance to the attention of the Grain Division. Prompt action was taken by the Grain Division and the apparent discriminatory fees were discontinued. The Grain Division is now contacting the inspection agencies which appear to have unreasonable or discriminatory fees and requesting that their fees be in accordance with regulation 26.70(a). The TD for correcting the situation is July 1, 1975.

13. Enclosed as exhibit 24 is a copy of a directive which rescinded the earlier incorrect directive which did not limit the mileage to the constructive cost of the common carrier.

Mr. COLLINS. The Cook Industry case, it was pursued to its logical conclusion, sir.

Senator CLARK. What was that conclusion?

Mr. COLLINS. I do not know. I do not have the file here.

Senator CLARK. How do you know it was pursued to the logical conclusion if you do not have the information?

Mr. COLLINS. That is the way we do all of our investigations. We run out of leads and that is

Senator CLARK. You do not know what the outcome of that investigation was?

Mr. COLLINS. No; but I can find out.

Senator CLARK. Would you provide that for the record?

Mr. COLLINS. I will, yes, sir.

[The following information was subsequently received for the record:]

SEPTEMBER 1, 1972.

Subject: Grain inspection problems involving Melvin L. Hibbets and Cook Industries, Inc.

To: Howard Woodworth, Director, Grain Division.

Melvin L. Hibbets, Elevator Manager for Cook Industries, Inc. (CII) at the Bayside Elevator Company, Reserve, Louisiana, has a long history of being involved in apparent irregularities involving grain inspection, as follows:

The enclosed list shows that we received 26 foreign complaints resulting from grain shipped during the period November 30, 1963, through June 25, 1968, from the St. Charles Grain Elevator Company (SCGEC), Destrehan, Louisiana, while Hibbets was the Manager. The list also shows that we received five foreign complaints resulting from grain shipped during the period October 15, 1969, through January 8, 1972, from the Bayside Elevator Company, Reserve, Louisiana, wh le Hibbets was Manager of that facility.

The grain shipped from SCGEC aboard eight of the vessels included in the attachment (MV Siganka, SS Smith Builder, SS Penn Transporter, ST Panther, MV Souvretta, SS Smith Tourister, MV Elizabeth Maersk, and MV Tamise) and aboard eight vessels not involving foreign complaints (SS Smith Conquerer, SS Duval, SS Niobe, SS Smith Adventurer, SS Smith Voyager, MV Atero, SS Ranger, and ST Manhattan) was the subject of an OIG investigation (T-153-9) and sudit (129-10-T). The case was forwarded to the Department of Justice with a recommendation for criminal prosecution against SCGEC for layering grain sorghum and/or off-grade grain on export loading belts in such a manner that the Woodside samplers would not obtain representative samples from the grain on the belts. The Department of Justice declined criminal prosecution, but in a civil action, requested the Commodity Credit Corporation to issue letters demanding payment from Bartlett and Company, and Garnac Grain Company, Inc., who had shipped the grain through SCGEC. Final settlement resulted in payments to the Commodity Credit Corporation of $40,000 from Bartlett and Company, and $65,232 from the Garnac Grain Company, Inc.

The grain shipped aboard the vessel MV Agiogalusena was also the subject of an OIG investigation (T-121-6) to determine why the corn graded No. 2 Yellow Corn when loaded and No. 3 to Sample Grade Yellow Corn based on samples taken by the Superintendence Company in Caracas, Venezuela. However, because the evidence in the case would apparently not support a prosecution, we closed the case with warning notices to the SCGEC and the official inspection personnel involved in the inspection.

On or before June 24, 1969, Hibbets terminated his employment with the SCGEC and was employed by the Cook Industries, Inc. (CII) as their Elevator Manager at the Bayside Elevator Company, Reserve, Louisiana.

The most recent foreign complaint we have received wherein Hibbets was the Manager, involves the grain sorghum shipped aboard MV Zenko Maru by CII, from their Bayside Elevator Company at Reserve, Louisiana. The grain sorghum graded U.S. No. 2 Yellow Grain Sorghum when loaded and U.S. No. 3 Mixed Grain Sorghum based on samples taken at Kobe, Japan, by an independent surveyor. Portions of the origin and destination file samples are enclosed.

NOTE.-In some cases, we receive destination samples that substantiate the complaint. However, the methods of sampling at destination are usually inadequate for obtaining representative samples of the entire lot of grain. Usually we do not know of an inspection problem or complaint on a shipment until after the grain has been unloaded and, therefore, we cannot suggest procedures for obtaining representative samples from such shipments. Apparent violations of the U.S. Grain Standards Act (in addition to the grain sorghum complaint from Japan) by CII and/or Hibbets include:

Hibbets telling an official grain inspector not to "pass" a ship when he performed the stowage examination of the holds and ordering an official grain inspector off the elevator property and telling him never to set foot on it again. (Apparent violations of sections 13(a) (7) and 13(a)(8) of the U.S. Grain Standards Act.)

Reducing inventories of grain by blending poorer quality grain in amounts that apparently should have resulted in the issuance of lower grades than

were issued. (Possible violations of sections 13(a)(7) and 13(b)(2) of the Act, and section 26.116(c)(i) of the regulations thereunder.)

Selling grain by grade in export commerce without official inspection and selling grain by factors in export commerce. (Apparent violation of sections 5 and 6 of the Act.)

We recommend that all of the apparent irregularities by Hibbets and CII be investigated by the Office of the Inspector General to establish the available facts and, if possible, uncover other irregularities. We further recommend that, if the facts warrant, consideration be given to criminal action against Hibbets and CII under section 13 of the Act, and administrative action against CII under section 10 of the Act, to protect our grain export program.

J. L. O'BRATE,

Acting Chief, Grain Inspection Branch, Grain Division.

CHRONOLOGY AND SUMMARY OF INVESTIGATIONS OF COOK INDUSTRIES, INC. (PROVIDED BY THE U.S. DEPARTMENT OF AGRICULTURE, JUNE 28, 1975)

Investigations of allegations against Cook Industries were made by the Office of Investigation (OI) but not on the basis of audit referrals.

The following is a chronology and summary of the results of the investigations of Cook Industries, Inc., referred to on page 21 of the audit report.

June 14, 1973-Investigations of Cook Industries requested by Grain Division, AMS.

June 20, 1973-Investigations scheduled at Memphis, Tenn.; Erie, Pa.; and Reserve, La.

October 25, 1973, and March 29, 1974, interim reports issued and October 22, 1974-final report issued.

Reports of investigations issued and copies referred to AMS and OGC. A copy of the October 22, 1974, report was also referred to the U.S. Attorney, New Orleans, La.

These investigation reports were referred to OGC by AMS with recommendations for prosecution except against the manager, Bayside Grain Elevator.

No action was taken by OGC pending completion of the final investigation report on October 22, 1974. At that time the New Orleans grain export investigations were fully underway and in cooperating with the U.S. Attorney, OGC deferred action. In recent discussions relating to the grain investigations with the U.S. Attorney, New Orleans, it was determined that the above matters would be forwarded by OGC to the U.S. Attorney for his further consideration and appropriate action in light of the current New Orleans grain investigations. Senator CLARK. Likewise, what is the status of the reported fraudulent practices in the loading of ships from the KK Elevator, owned by Continental Grain, that is referred to on page 41 of the audit. You will note that the audit found that no determination was made when the issue was first raised in June of 1973? What has the Department done by way of pursuing that investigation?

Mr. COLLINS. This we will have to check, too.

Senator CLARK. And you are certain that an investigation was pursued in this case?

Mr. COLLINS. I will have to check, sir.

Senator CLARK. You are not certain?
Mr. COLLINS. No, sir.

Senator CLARK. The report goes into great length about the lack of effective supervision over the licensed inspectors at Ama, La. What action has been taken in that case?

Mr. GALLIART. In the last year, in the last year, we have increased our supervision by about 10 percent to the extent that we have man

power. We are working nights and weekends to the extent that we have manpower available to provide supervision in New Orleans.

Senator CLARK. What about the specific question, the Farmer's Export Elevator at Ama, La., that specifically is mentioned in the audit as a problem. What has been done in that case?

Mr. GALLIART. I cannot address the specifics of that.

Senator CLARK. Can anyone in the Department address themselves to that case?

Mr. CAMPBELL. I would like to ask Mr. J. P. Bolduc, Deputy Assistant Secretary for Administration, to elaborate just a little bit on the type of questions you are asking.

STATEMENT OF J. P. BOLDUC, DEPUTY ASSISTANT SECRETARY FOR ADMINISTRATION, U.S. DEPARTMENT OF AGRICULTURE

Mr. BOLDUC. Senator Clark, I would like to elaborate slightly on the procedures followed within the Department on matters disclosed by audit, such as those you are referring to, indicating alleged violations, purported wrongdoings, management weaknesses, and other matters warranting further inquiry. We do have a formalized procedure in the Department that matters of this nature warranting further review are forwarded to the Office of Investigation. The Office of Investigation, in turn, schedules these matters for investigation, conducts a thorough investigation, and furnishes a copy of that investigative report to the responsible agency held accountable for taking corrective action based on the disclosures reported. The Office of Investigation has a responsibility to followup to assure that the needed corrective measures are, in fact, carried out.

Now, with respect to those specific cases cited in the audit report, we would be more than happy to furnish for the record information pertinent to the allegations raised in the audit report, the possible referral of those allegations to the Office of Investigation, the scheduling of those investigations, the reports that resulted therefrom and the corrective actions taken as a result of the facts reported. We do have a formalized procedure, and contrary to what has been implied here, matters warranting investigation do not go unattended. Senator CLARK. In other words, you can give us an assurance that each of the cases we have asked about have been investigated?

Mr. BOLDUC. No, sir. That is not what I am saying. I can give you an assurance that the allegations referred to were reviewed and a decision made as to whether the circumstances involved warranted further investigation or did not.

Senator CLARK. In each case mentioned in the audit?

Mr. BOLDUC. Yes, sir.

Senator CLARK. Fine. If you will provide those for the record, that will be very helpful.

Mr. BOLDUC. Yes, sir.

[The following material was subsequently received for the record:] The audit of the Grain Division, Grain Inspection Branch, AMS, (Audit Report No. 602020-1-Te dated April 22, 1974) included field reviews at AMS Regional Offices, Field Offices, and approximately 44 industry sites where grain inspection is performed. At the above locations, the auditors found conditions for which corrective action by AMS was needed. Specific deficiencies were reported

at the following locations: Corupus Christi, Texas (page 7); New Orleans, La. (page_16-Continental Grain Company); Reserve, La. (page 21-Cook Industries, Inc.); New Orleans, La. (page 21); Milwaukee, Wis. (page 22-Continental KK Elevator); Ama, La. (page 25-Farmers Export Elevator); Houston, Texas (page 26-Goodpaste Elevator); Corpus Christi, Texas (page 27-Corpus Christi Grain Exchange); Various points within the Houston and Fort Worth, Texas areas (page 31); Houston, Texas (page 36); New Orleans, La. and Houston Texas (page 40); Corpus Christi, Texas (page 40-Producers Elevator); Portland, Oregon (page 40-Terminal Four Elevator); Houston, Texas (page 42-Cargill Elevator Truck Laboratory); Ama, La. (page 48-Farmers Export Elevator). Most of the deficiencies found involved noncompliance with AMS instructions and procedures. Although no outright evidence of unlawful or fraudulent practices were noted, the auditors believed the conditions needed to be brought to the attention of AMS management as indications of problems which could, if uncorrected, become serious matters requiring investigation for possible violations of the laws and regulations related to grain inspection and for these reasons, none of these incidents were referred by the audit staff for investigation during the course of the audit. However, it should be noted that the Cook Industries, Inc. case cited on page 21 of the audit report had been considered previously by the Grain Division as requiring investigation.

A review of the report by the Grain Division, AMS failed to disclose evidence of fraudulent practices, but did indicate irregularities concerning which corrective action was taken. No investigation was requested.

The KK Elevator was also the subject of an investigation based upon a citizen complaint to the Regional Inspector General, Chicago, Illinois on August 8, 1973, an investigation was performed at this elevator based on allegations that the company was paying less than the contract price for grain and would not make samples allegedly taken by a licensed grader available to the complainant. OIG issued a report to AMS on September 6, 1973. Subsequently, the Grain Division informed OIG on November 15, 1973 that review of the investigation report did not disclose any evidence of violation of the U.S. Grain Standard Act or regulations or instructions issued thereunder.

Senator CLARK. I think I have gone over my time, although I have some other questions.

Senator HUMPHREY. Thank you, Senator Clark. If you have other questions which you wish to submit in writing, you know, of course, we can do that. And we are under some time constraints in reference to the debate on the New Hampshire Senate situation in the U.S. Senate.

I just wanted to make a note for the record that on June 20, 1967, the Secretary of Agriculture, at that time, Mr. Freeman, presented to me as at the time, President of the Senate, a letter of transmittal for the proposed bill for modernizing the U.S. Grain Standards Act, and that recommendation was made by the Department of Agriculture at that time, which recommendation, which legislation, was subsequently enacted and was signed into public law in August, August 15, 1968. And under that legislation, as I have indicated earlier, there is substantial authority that was granted to the Secretary, particularly on matters of inspection for overseas shipments.

There were two features to the law. As you know, one was the internal inspection service, within the domestic economy and the second was the matter of the regulations and the supervision, and investigation and inspection that related to exports of American agricultural products.

Also, the law does have penalties. "Any person who commits any offense prohibited by section 13," which lists out the prohibited acts:

Shall be guilty of a misdemeanor, and shall, on conviction thereof, be subject to imprisonment for not more than six months, a fine or not more than $3,000, or both such imprisonment and fine.