Senator HUMPHREY. Now, when you say "gratuities," what do you mean? Could you be more specific as to what it was that they wanted? Did they want turkey and a bottle of whisky or did they want cash? Mr. EwEN. No, sir. They asked for cash.

Senator HUMPHREY. How much?

Mr. EwEN. $1.000.

Senator HUMPHREY. Why would you have to give that to them?
Mr. EwEN. I should not have to give it to them.

Senator HUMPHREY. I mean, what was the reason at the time?
What was the rationale?

Mr. EwEN. A ship to go on hire must have the pass at the close of business, which is 4 o'clock. Then she is on hire and starts to make money, so to speak. She starts to make her revenue.

Now, if they do not give you the pass by 4 o'clock, then you lose another day of $10,000.

Senator HUMPHREY. AS Senator Dole just said to me, it is cheaper to pay $1.000 rather than lose another day at $10,000.

Mr. EWEN. Yes, sir.

Senator HUMPHREY. That is why the inspectors who control whether or not you would get your certificate or your pass, so to speak, could demand a bribe or a gratuity?

Mr. EwEN. Yes, sir, that is why.

Senator HUMPHREY. Is that a common practice?

Mr. EwEN. I do not know, Senator.

Senator HUMPHREY. How many times did this happen to you?

Mr. EwEN. It happened to me twice, Senator.

Senator HUMPHREY. Twice in how many years?

Mr. EwEN. It happened in New Orleans to me actually three times, but with the same inspector.

About two or three years.

Senator HUMPHREY. Did you ever report that to anyone?
Mr. EwEN. No, sir.

Senator HUMPHREY. Why not?

I am just asking what was in your mind at the time.

Mr. EwEN. We are under tremendous pressure to get the ships on hire because of the money involved.

Senator HUMPHREY. There was no Federal inspector around to supervise this private inspector?

Mr. EwEN. No, Senator, there was none.

Senator HUMPHREY. Do you have any reason to believe that Federal inspectors might have known this was going on?

Did you offer a gratuity before one was demanded by the ship inspector?

Mr. EwEN. No, sir.

Senator HUMPHREY. You never made an offer of a gratuity?

Mr. EwEN. No, sir.

Senator HUMPHREY. You only responded to a request or a demand for a gratuity?

Mr. EwEN. Yes, sir.

Senator HUMPHREY. What would you suggest we do to protect the shipping industry from pressures?

Mr. EwEN. I do not know.

I just listened to these two men, and I do not know.

Senator HUMPHREY. It must put you in a very difficult situation when you know the cost of having that ship lying there at anchor, so to speak, unchartered, and then, for all practical purposes of loading, it is going to cost $10,000 or $15,000 a day, with somebody having the power of granting or not granting a certificate indicating that you are ready to load. It must be a tremendous temptation with tremendous pressure on you.

Mr. EwEN. Yes, sir.

Senator HUMPHREY. Have you heard anything like this from other companies?

Mr. EwEN. No, sir.

Senator HUMPHREY. You have not?

Mr. EwEN. No, sir.

Senator HUMPHREY. Go ahead, Senator Dole.

Senator DOLE. Where do you get the money, the $1,000?
Mr. EwEN. I got this from the captain, sir, the $1,000.
Senator HUMPHREY. He explained that.

Mr. EwEN. It is in the statement.

Senator DOLE. You say twice in 25 years?

Mr. EwEN. Three times.

Senator DOLE. Same man in each time?

Mr. EwEN. Yes, sir.

Senator DOLE. That was in New Orleans?

Mr. EwEN. Yes, sir.

Senator HUMPHREY. Do you think this happens at other ports? Mr. EwEN. I do not know, Senator.

Senator HUMPHREY. You have not heard anything like that!

Mr. EwEN. No, sir, I do not know.

Senator HUMPHREY. I would imagine that the shipowners would indicate to some of their compatriots in this business what goes on, but you never heard of it?

Mr. EwEN. No, sir.

Senator HUMPHREY. Have you heard, at the Port of New Orleans, that there are a considerable number of criminal elements that run roughshod there, threaten and harass people, demanding extortion? Mr. EwEN. No, sir, I have never heard that.

Senator HUMPHREY. Are you based there?

Mr. EwEN. No, New York City.

Senator HUMPHREY. You are in and out of New Orleans?

Mr. EwEN. Occasionally, just on rare occasions.

Senator HUMPHREY. Any other questions?

Senator DOLE. No. Senator Humphrey has covered it. I have no further questions.

Senator HUMPHREY. Mr. Ewen, we do appreciate your coming here. We know these occasions are somewhat embarrassing at times, but you are being helpful to us in getting at what we think is a very serious problem.

Surely this cannot be very helpful to the ship owner. It cannot be very helpful to the company that wants to export, and it cannot be very helpful to the farmers. The only one that got helped on this one was the inspector.

So we have got a job to see if we can perfect a better law than we have. I do not know whether laws are the answer, but the administration of the law surely has a great deal to do with it.

We thank you for coming.

Senator DOLE. When were those payments made? Are they in your statement?

Mr. EwEN. Made in January of 1974.

Senator DOLE. It sort of fits the pattern of the last 2 or 3 years of getting more active exports because that seems to be the trend of testimony by witnesses, that a lot has happened in the past 2 or 3 years.

Senator HUMPHREY. I think it is the pressure on the market, on the shipping facilities.

Senator DOLE. Right.

Senator HUMPHREY. The fact is that there was a tremendous increase in our exports, starting in 1972 with the Russian grain deal, and now with expanding exports and not many more ships, fewer boxcars, and fewer inspections than there had been before.

When you have got these ships up there, and they are at a premium, and you are paying a ship that is out there, costing $10,000, $12,000, $15,000 a day, the temptation to get that ship on the line and out to sea, carrying that cargo, is tremendous.

We thank you.

Mr. EwEN. Thank you, sir.

[Whereupon, at 3:34 p.m., the subcommittee was adjourned, subject to the call of the Chair.]

ADDITIONAL STATEMENTS FILED FOR THE RECORD

STATEMENT OF J. MASON GUILLORY, CHAIRMAN, EXECUTIVE COMMITTEE, NEW ORLEANS BOARD OF TRADE, LTD., NEW ORLEANS, LA.

The New Orleans Board of Trade, Ltd., is a non-profit private corporation, organized in 1880 to promote commerce and trade through the Port of New Orleans and to develop and furnish services to facilitate its growth.

The Board of Trade started a Grain Inspection Department on April 7, 1899, and its grain grades were first recognized worldwide early in the present century. Since the passage of the Grain Standards Act in 1916, the New Orleans Board of Trade has been an official U.S. Department of Agriculture inspection agency. No officer, board member, or stockholder member of the New Orleans Board of Trade receives a salary, except the full-time Administrative Manager/Secretary-Treasurer. One other board member, a retired executive qualified as a Maritime Commission practitioner, is paid a fee as a special consultant to the Board. Neither is connected with the grain trade. No member of the New Orleans Board of Trade, Ltd., is paid a dividend, and the members' stock in the Board of Trade does not appreciate in value. We have a paid staff of three management personnel, 5 clerical employees, and the 36 grain inspection and weighing supervisory and staff members, who serve at two export grain elevators.

Grain never has been bought and sold as a function of our organization, and our services to the grain industry are limited to operating the inspection service at two grain elevators, Continental and the Public Grain Elevator, both located within the territorial limits of the Port of New Orleans. Six other export elevators, located along a stretch of nearly 175 miles of the Mississippi River, have been erroneously designated in remarks for the record and in many news reports as being part of the "Port of New Orleans," yet not one of these other six elevators is located within the port limits.

We do not favor legislation that would eliminate all presently constituted official inspection agencies. We do favor reforms in the present system to insure integrity and high standards of marketing grain, both domestic and export. A recommended system envisions provision of a revitalized, adequately staffed check-audit type of operation in classifying and weighing of grain which would be superior to a proposed single all-federal or federal-state inspection agency checked only by itself. Several Congressional investigations of federal agencies, at present and in the recent past, indicate that governmental units have no monopoly on either integrity or propriety, or the last thereof.

As a civic oriented, non-profit organization, we entered into a period of intense self-examination during 1973, considerably before there was evidence about the existence of widespread wrongdoing in the grain trade. We did this because we recognized that there existed opportunity for undesirable relations to develop between employees of the New Orleans Board of Trade and organizations for whom services were performed.

Meeting were held with inspectors and samplers from both elevators to discuss operations and to emphasize the absolute necessity of complete objectivity and adherence to proper prescribed procedures in sampling, grading, and weighing. Employees were instructed to "go by the book 100 percent."

Instructions were given and emphasized that no gifts, entertainment, or favors of any kind were to be accepted at any time.

It was felt that stricter supervision by management was essential. Accordingly, the chief administrative officer in charge of the grain operation was instructed to concentrate on adherence to proper practices and to submit a written report on every supervisory visit. The employee responsible did not perform to the satisfaction of the Executive Committee. He was replaced with a new fulltime, well-qualified manager who reports directly to the President.

With the objective of improving operating practices and of learning of shortcomings we met with heads of the New Orleans office of the USDA and solicited their criticisms and suggestions.

Other measures which we adopted in recent months, include:

Rotation of not fewer than 10 men in weekly two-man teams on shiphold inspections. Men in the two-man teams are also rotated so that the same pairs do not work regularly together.

(Grain inspectors have always been rotated between day and night shifts.) We are beginning rotation of inspectors between our two elevators, including our inspectors-in-charge.

Samplers and weighmasters are now rotated between day and night shifts, and regular rotation between elevators is being implemented for samplers and weighmasters.

We have altered the entrances to our two grain laboratories so that only official and USDA personnel have free access. All others must seek permission of the inspector-in-charge to enter and are admitted only for strictly legitimate purposes. This inhibits possible attempts to influence inspection personnel.

We have instituted checking procedures to make certain that all railroad cars and barges are more carefully checked for conditions and are re-sealed after sampling, even though a car, when sampled, may be the next in line at the elevator unloading pit.

We have suspended some of our employees during the past year for breech of discipline or for inadequate performance.

In August 1974, when indictments were returned against official inspection agency personnel assigned to shiphold inspections, two of our sampler-shiphold inspectors were among those accused of accepting bribes from steamship agencies and ship cleaning companies. We immediately suspended them, and they were later discharged.

Later in the investigation, one of our grain inspectors was indicted on a charge that has not yet come to trial. He, too, was suspended.

We are doing everything in our power to maintain the standards of the Grain Act, but the Act itself has some shortcomings. Major changes in the Grain Standards Act and regulations were made in 1968, and there have been revisions since then, but the need exists for more. In 1968, a forward step was taken when the licensing of samplers employed by official inspection agencies was required for the first time by the U.S. Department of Agriculture. However, at that same time, regulations were changed to make the inspection of grain by official inspection agencies optional instead of mandatory in domestic markets. This was a step backward.

Several months after the indictments of the shiphold inspectors in New Orleans and Houston in 1974, the USDA instituted licensing of shiphold inspectors. The testing of official inspection personnel for this purpose has been largely limited to a written examination without practical tests aboard ships, Field tests should be required of all samplers and grain inspectors licensed for this function.

The Transportation and Warehouse Division of the USDA is responsible for the regulation of grain warehouses, including export elevators. It also licenses grain weighers under the U.S. Warehouse Act. The same license is required for weighers employe by elevators as is required for the weighing supervisors of official inspection agencies. The licensing of weighers requires applications, recommendations from warehouse managers, and other personal references. To the best of our knowledge, there is no test, either written or practical, of a man's ability to weigh grain. In justice to the Warehouse Division, it is undermanned. As an example, the Warehouse Division has supervised the eight export elevators on the lower Mississippi River, which load almost 40 percent of the grain leaving this country, without having a local grain office. Supervisors come from the Memphis office, and visits to the elevators have been limited to those required to inspect elevator stocks and receipts.

Our grain inspectors are regarded as management personnel. They have been repeatedly assured that they are backed up by management 100 percent in making grading decisions. They know that they are not, and will not be, subjected to central office pressure to accommodate any elevator or grain merchant. Our nine inspectors average 16 years as licensed grain inspectors and know the business thoroughly. To the best of our knowledge, no New Orleans Board of Trade grain inspector has ever been accused of intentionally misgrading grain going aboard any vessel.

We recognize the necessity of maintaining the reputation of the U.S. grain grade certificate. It is the basis for the immediate payment by the foreign buyer