Mr. BAKER. A ship hold inspection means before a ship can be loaded with grain it has to be inspected by the board of trade. An official USDA trade certificate and inspection certificate has to be given to the captain and the agent stating that the ship is clean and free of any live infestation before it can be loaded with grain for a foreign buyer.

Senator CLARK. Would you pull the microphone a little closer? Now, do you personally know of other inspectors that committed the same crime?

Mr. BAKER. Yes, sir. I do. There were about four or five other inspectors that I worked with that have been indicted that did the same thing that I did.

Senator CLARK. How many inspectors are there in the Destrehan Inspection Agency?

Mr. BAKER. Right now, I do not know.

Senator CLARK. Well, at that time, about how many?

Mr. BAKER. At that time there were about 10.

Senator CLARK. So you know of at least 3 or 4 of that 10 that committed that crime?

Mr. BAKER. Yes.

Senator CLARK. And you have no evidence as to the others, one way or the other?

Mr. BAKER. No, sir. I do not.

Senator CLARK. Now, you talked about the facts, as I understand your explanation, and let me try to briefly restate it and ask you a question: The reason that it is beneficial for a ship, a ship's captain, to bribe an inspector to certify that the ship's hold is, in fact, clean when it is not, is that they can save the demurrage charges; that is, they do not have to sit out a period while they are getting cleaned and pay those charges?

Mr. BAKER. Yes.

Senator CLARK. Now, how much does that demurrage charge amount to? What do they save by being able to bribe somebody to certify a clean ship that is indeed dirty?

Mr. BAKER. My understanding is that the amounts would range probably from $2,000 a day up to $20,000 or $25,000 depending on the size of the ship.

Senator CLARK. So, the reason for wanting to bribe someone to certify the cleanliness is not the cost of cleaning the ship, but rather the enormous cost of sitting out there waiting?

Mr. BAKER. Yes. Once the ship is filed with the elevator, then the elevator has to pay the demurrage charges.

Senator CLARK. How can an elevator apply pressure to a person, to an inspector, to do the job incorrectly, to certify that a ship is clean when, in fact, it is not?

Mr. BAKER. Well, in some instances I have been approached to turn ships down because the elevator did not have the grain available to load the ship that I was inspecting, or, like I said in my statement, they have another ship that they have the grain in the elevator to load; therefore, they do not want the ship that I am going to inspect passed. They want it to be turned down so they can load the other ship without paying the demurrage.

Now, as far as the pressure goes, we were always told that we would have to cooperate with the elevator personnel and help in any way possible to get things done that would speed up the operation or save the elevator money because the board of trade derived their income by services rendered for the elevator.

Senator CLARK. Is it fair to say that the system itself of private grain inspection, of this relationship between the elevator, the grain company and the inspection agency is such that since the pay comes from there that it inherently lends itself to corruption?

Mr. BAKER. Indirectly, our salary is paid by the elevator. The money comes through the board of trade. But it is only for services rendered. If we could not perform the service, there would be no board of trade.

Senator CLARK. So you are constantly advised to cooperate and go along and misgrade, misweigh, certify ships that are not clean; sometimes they are clean and you certify they are not clean because you were not ready for them to be pulled in yet?

Mr. BAKER. Yes, sir.

In some instances, when I started with Destrehan Board of Trade, these measures were brought to bear and in an instance or two men that did not cooperate were let go for reasons, let us say, overstaffed, which is what they said, but in actuality we were understaffed.

Senator CLARK. In other words, if inspectors, in fact, refused to misgrade or misweigh or certify ships, to your knowledge, some of them were let go?

Mr. BAKER. Yes. That is correct.

Senator CLARK. Now, have you ever seen any sampler obtain unrepresented samples?

Mr. BAKER. Yes, sir. I have seen samplers take samples that did not represent the quality of grain that was going onboard the ship and have a sample already made up to substitute for the sample that was actually going on the ship.

Senator CLARK. So you have actually seen licensed inspectors who have prepared substitute samples in advance?

Mr. BAKER. Yes, I have.

Senator CLARK. Now, how widespread is all of this misgrading, misweighing? This is the question that Senator Young raised earlier. Is this a very pervasive, widespread practice in the two elevators that we have under discussion here, at Cook and Bunge, or is it an exception?

Mr. BAKER. No, sir. In my experience over the 14 or 15 years that I was a grain inspector this was always a common practice that if the elevator had an amount of off-grade grain that they wanted to get rid of you were asked to help the elevator get rid of this off-grade grain.

Now, it may be daily or it may be every other day or it may be only 2 or 3 days a week, but it was done periodically every week.

Senator CLARK. Well, is it too much to say that, in your judgment, the grain that you saw, that you were involved in, that you had direct contact with, that more than half of all the grain that went through that elevator was misgraded or misweighed?

Mr. BAKER. Speaking of the grading end of it, I would say 50 percent or more in the weight section of what we were talking about, you would have to say that the elevator on a weekly basis would make up

the invisible losses. Maybe it would amount to only 4,000 or 5,000 bushels, or as much as 7,000 or 8,000 bushels. So at the end of each week they would add up their invisible losses and then they would short-weigh incoming barges or incoming grain to make up the losses. Senator CLARK. So they would short-weigh incoming barges as well as outgoing ships?

Mr. BAKER. Yes.

Senator CLARK. Who gets cheated in that operation? It is the interior markets? Is it the people that have shipped that grain to the elevators?

Mr. BAKER. Yes, sir.

Senator CLARK. I might say, at a hearing we had in Iowa, we had testimony provided to us from the Iowa Feed and Grain Association that they had been consistently short-weighed as they sent their barges down to New Orleans. Is this the way in which it can happen; the grain company simply short-weighs the incoming barges?

Mr. BAKER. Yes, sir. It is not as big a thing as on outgoing grain, but it is enough over a period of time where you are accumulating a lot of grain.

Senator CLARK. So that, if we were to go to some kind of new inspection system that applied only to export grain, that would not really solve this problem, would it?

Senator CLARK. Well now, who actually benefited from all these illegalities? You are talking about misgrading of grain, misweighing of grain, certifying ships that are clean, or inaccurately certifying them. Who benefited from what?

You are talking about interior grain.

Mr. BAKER. I think you would have to have more stringent regulations over weighing also, not only inspection.

Senator CLARK. I am speaking of weighing and grading, both.
Mr. BAKER. Right.

Senator CLARK. Let us talk about weighing because I went down to look at some of the elevators in New Orleans and talked with people there. I remember particularly going to the St. Charles Elevator. I looked at the scales and they all seemed to be automatic and electrical, and so forth, and I was told over and over there is just no way you could conceivably misweigh with all this modern equipment.

Now, is that true? How do you misweigh? How can you misweigh with that kind of equipment?

Mr. BAKER. There are a number of ways that it can be done. The scales are electronic and the device that prints a weight is similar to a calculator. Now, when a draft of grain is weighed, it is discharged and put aboard the ship.

Now, they can put a scale calculator on hold and hold the grain above the scale. Normally, what the procedure is is the top of the calculator is covered and either locked or sealed by the inspection agency. This seal or lock can be removed and I think it has been done in the past by elevator employees to add to outgoing grain ships, but not actually weighing the grain.

By doing so, they take the top off of the calculator, add a figure in, and put a plus on the tape, then add a minus figure and punch that in right behind the grain that was just previously weighed. So there is no way of telling that this tape has been tampered with.

So when you add a weight and the grain is not actually weighed, then you can go back to automatic and reweigh the grain again and pick up where you left off.

Senator CLARK. Well, how often did you actually see this done?

Mr. BAKER. I was not actually standing, involved with the elevator employees when it was done because you knew that these things were going on and when they did happen you turned your head or you excused yourself and you went to the men's room, or something like that. It was never a practice to really stand and watch because you did not really want to know what was going on. You knew it was going on, but it was a case, if you did not see it, then if someone asked you what was going on, you did not have to say, "Yes, I saw it actually happen." Senator CLARK. Well, now, who actually benefited from all these illegalities? You are talking about misgrading of grain, misweighing of grain, certifying ships that are clean, or inaccurately certifying them. Who benefited from that?

In your experience at the Cook and Bunge Elevators, who benefited? Mr. BAKER. Well, it certainly was not the grain inspector taking the small bribe of a number of dollars, when you consider if a man misgraded, let us say, a million-bushel grain shipment, they loaded six or seven hundred thousand bushels of offgrade grain and the other would be good grain, and you received a case of whisky or $100 or an air conditioner, the company iteslf might realize $300,000 or $100,000.

So I would have to say that the grain company would be the beneficiaries.

Senator CLARK. Now, would you describe for the committee the relationship between the people who run the agencies, that is, these private inspection agencies, the Destrehan agency, their relationship to the elevators that they were assigned to inspect?

What was the relationship of the Destrehan agency to the Cook and Bunge Elevators?

Mr. BAKER. The Destrehan Board of Trade, I would have to say, was part of a working relationship with the elevator. Naturally, they were not part of the elevator itself, but they did what had to be done to help the elevator get rid of any offgrade grain and advise our inspectors and weighers to help in any way that they could to speed up the operation of the grain elevator, thereby the board of trade deriving more revenue from the more grain that the elevator could load out.

Senator CLARK. I am going to ask you to pull the microphone a little closer. I can hear most of what you are saying, but not all.

To what extent did the grain company officials themselves, the people who own the elevator, operate the elevator? To what extent did they play a role in encouraging or soliciting illegal activities from the grain inspectors?

Mr. BAKER. In my recollection of my stay with the Destrehan Trade, it started back in 1961 when I started with the Destrehan Board of Trade. At first it was only elevator managers and superintendents that were involved inasmuch as they would go to my superiors and tell them, or ask them to ask me to give help in any way that I could. Then I found out that it went a little higher. There was some officials from Kansas City that came down and told the manager and the superintendent what the schemes would be in short-weighing inbound and outbound grain and loading offgrade grain.

Senator CLARK. Well, have you had occasion to learn of the involvement of grain companies or elevator personnel outside of New Orleans in these improper activities, or is your knowledge limited to New Orleans?

Mr. BAKER. No, sir. I was contacted by an elevator manager from Texas when I was working in Destrehan. He had worked in the Destrehan area and he knew that I was a good inspector. By that I was also cooperative with the elevator. So he offered me a job in Texas to work for a board of trade in Texas at his grain elevator with a substantial raise in salary.

Senator CLARK. And he was a grain company official?

Mr. BAKER. Yes, sir.

Senator CLARK. Do you think he would have expected you to be cooperative or do you have any reason to believe that?

Mr. BAKER. Yes, sir. I know he would have because he offered me a very substantial raise in salary. I am sure that he was not only offering it to me because I was a good inspector.

Senator CLARK. Now, is it your assumption or belief, or do you have any evidence for thinking that the U.S. Department of Agriculture personnel in the Grain Division knew of any of these improper activities that you are familiar with?

Mr. BAKER. I would have to say there were a few that knew about what was going on, but they did not want to get involved. But they were at the lower level, at the inspector level.

What I mean by that is when they would come around to supervise the inspectors, if they thought that we were doing something that was not exactly up to the standards, they might turn their head or go the other way.

Let me say this, though: That was before Mr. Ryan took over.
Senator CLARK. Would you repeat that?

Mr. BAKER. That was before Mr. Ryan took over with the USDA. Senator CLARK. Before Mr. Ryan became the supervisor of the New Orleans area for the grain division?

Mr. BAKER. Yes.

Senator CLARK. Have you seen a difference after that?

Mr. BAKER. Yes. I have seen a very, very drastic change in the attitude of the USDA.

Senator CLARK. Mr. Ryan is going to be a witness before this committee tomorrow, so we will save other questions there.

When the elevator did not have the appropriate grain that the contract calls for, then, as I understand your testimony, they simply shipped what they had and graded it whatever the contract called for. Is that what you are saying?

Mr. BAKER. Yes. Prior to starting a vessel, before loading a vessel, the elevator employees would come to us and say, well, we have a number of bushels to load on this ship, 75 percent of which is going to be offgrade and only 25 percent will be ingrade.

So on a number of occasions there was very little grain in the elevator that would meet contract grade.

Senator CLARK. Did you find any particular difference between the two elevators that you inspected, Bunge and Cook, or is this just one system that seemed to work the same in your limited experience?

Mr. BAKER. I do not think there is any real difference between any of the board of trades.