Senator HUDDLESTON. You made the point that it would be difficult for ships that were being loaded; what do you call it?

Mr. MANGUM. From a floating rig.

Senator HUDDLESTON. So, the percentage of those would be even less, would it not?

Mr. MANGUM. Yes.

Senator HUDDLESTON. Thank you very much, sir.

[The following material was submitted by Mr. Mangum:]

Mr. L. L. FREE,

U.S. SENATE,

COMMITTEE ON AGRICULTURE AND FORESTRY,
Washington, D.C., February 3, 1976.

Assistant Director, Information, Research & Development, Office of Investigation, U.S. Department of Agriculture, Washington, D.C.

DEAR MR. FREE: As we discussed earlier, I am submitting with this letter several questions concerning the Rysy II incident.

As I indicated earlier, members of the Subcommittee on Foreign Agricultural Policy wish to determine the facts of this case and the validity of various allegations made.

Therefore, your assistance in providing answers for these questions will be appreciated. I certainly do not wish to create any imposition on the Office of Investigation that might impede its investigation. However, I believe these questions are, without exception, ones that the Department itself has already formulated and is working on already.

Sincerely,

PHILLIP L. FRAAS,

Special Counsel.

Enclosure.

QUESTIONS CONCERNING THE RYSY II INCIDENT SUBMITTED TO THE DEPARTMENT OF AGRICULTURE AND ANSWERS THERETO

Question: In Mr. Knebel's reply to Senator Humphrey, he did not indicate whether the Department had notified the Federal Bureau of Investigation of this incident, or whether the Bureau has offered to provide assistance to the Department in the investigation of this matter. Would you please advise if a liaison with the Bureau has been established and, if so, in what manner it will be assisting the Department in the investigation.

Answer: The Federal Bureau of Investigation has been coordinated into the continuing grain investigations since the U.S. Attorney in New Orleans assumed direction in April 1974. Coordination and liaison between OI and the FBI have been routine since then.

The FBI was notified of the Rysy II incident on January 10, 1976, by an AMS representative. The Office of Investigation has the primary investigative responsibility insofar as any violation of the U.S. Grain Standards Act is concerned. It is well understood that the FBI would enter the matter at any point where violations falling within their jurisdiction, such as bribery, are indicated.

Question: Mr. Knebel also indicated in his letter that the Department had, in order to resolve the initial problem of the disposition of the at least partially adulterated cargo, approved the issuance of a "qualified" certificate of grade. Please provide a brief explanation of the legal justification, as based on the U.S. Grain Standards Act and the regulations enacted pursuant thereto, for such a disposition. In connection with this, will you also please provide us a copy of the certificate.

Answer: Section 5 of the U.S. Grain Standards Act (7 U.S.C. 77) requires all United States grain that is exported and is sold by grade, to be officially inspected. An official certificate is also required to be issued showing the of ficial designation of the grain. That Section of the Act also provides that inspection of grain may be taken as it is being loaded aboard the carrier, or while it is in the final carrier in which it is to be transported. The purpose of this inspection is to establish the condition and quality of the grain in the carrier. Accordingly, the inspection certificate form provides space for re

marks to indicate any unusual condition of the grain. See Sections 26.59 (a) (18) and 26.44 (7 CFR Parts 26.54 and 26.64), of the regulations issued pursuant to the Act which sets forth the information which should be provided on the inspection certificate.

Question: In his letter, Mr. Knebel did not directly respond to two requests that were made, to wit:

(a) That the Department expend whatever resources are necessary to thoroughly investigate the incident; and

(b) That you will submit to the Subcommittee, at the completion of the Department's investigation, its recommendations for appropriate administrative or legislative action to prevent a recurrence of this incident.

Please advise of the Department's intent in regard to these two matters. Answer: (a) The Department is prepared to commit whatever investigative resources may be required. At this point, an OI Special Agent has just returned from Poland where a team of AMS Grain Inspectors are sampling the off-loading of the Rysy II cargo. Further investigative action will depend largely on this agent's report and the sampling results.

(b) The Department has submitted to Congress a series of recommendations and legislative proposals which we feel will significantly reduce the conflicts of interest that lead to manipulation of the sampling process. We feel that the passage of these recommendations and proposals coupled with increased supervision of the inspection and sampling of grain will avoid incidents such as that concerning the Rysy II.

Question: Mr. Knebel mentioned a recent incident involving Cook Industries and the ship, the Struma. Please submit a report on this incident, detailing the events that occurred and the resolution of any dispute between the Department and Cook Industries.

Answer: The recent incident involving Cook Industries and the ship, the Struma, was investigated by the FBI and they gave a copy of their report to the U.S. Attorney in New Orleans for appropriate legal action. We are not aware of any action as yet.

Question: When you have completed your investigation into allegations made by the captain of the Rysy II concerning a discrepancy in Cook's account of the barges that were loaded into the ship, please provide a detailed report of your findings.

Answer: We have interviewed AMS officials and the Captain of the Rysy II relative to discrepancies between barges reported to have carried grain loaded onto the Rysy II and those actually doing so. The discrepancies referred to involved a misinterpretation of handwritten figures on the pertinent loading logs.

Question: Please prepare a schematic drawing indicating the location of the holds on the Rysy II and the location of the hatches and "butterworths". Please indicate on a copy of this schematic drawing: (1) where the various probe samples of the grain taken by the USDA and the licensed inspection agency, were made; and (2) the locations of the stones, excessive BCFM, sour heating and/or musty spots, and sprouting corn found by USDA personnel. Answer: At the time of the Committee hearings, AMS will provide the schematic drawing requested.1

Question: Please reinterview Messrs. Loncar and Bostey concerning their statements alluded to by Mr. Cook in his testimony. (Tr. pp. 22, 23, 24 & 25.) Also, please determine how long each has worked in New Orleans.

Answer: We have interviewed Mr. Bostey who provided us with substantially the same information as that contained in Mr. Loncar's statement read to the Committee by Mr. Cook. Mr. Bostey told us that he has worked in New Orleans since 1966. Mr. Loncar has been in Poland until recently. We intend to interview him shortly.

Question: In his testimony, Mr. Cook stated that in every hold of the Rysy II, except for center holds 3 and 4, there was barge-loaded grain on top of all the elevator-loaded grain to at least the depth of 12'. (Tr. pp. 19, 26 and 47.) Does the information you have on the pattern of loading the ship confirm this statement?

Answer: The information in our possession tends to support Mr. Cook's statement.

1 See p. 18.

Question: Loading records submitted by Mr. Cook indicate that several bargeloads of corn (AGS 607, ACBL 2634, ACBL 940, WC 621, EU 4, VLX 7361, T 2116, MB 5812, and AGS 8646) were either not loaded aboard the Rysy II or only part-loaded due to bad grain in the barges. Please determine the exact condition of the grain and how Cook Industries disposed of the grain in these barges. Was any of it later loaded aboard the ship, the M/T Arina, or other ship? Also, these same barges had been previously sampled by the Destrehan Board of Trade and given relatively high grades. Please review the circumstances of DBOT's sampling and grading of these barges and determine whether there is any explanation for DBOT's apparent failure to grade these barges properly.

Answer: The following provides the information requested concerning the barges :

AGS-607-38,530 bushels of #2 YC loaded aboard Rysy II. 17,912 bushels of "bad corn" placed in elevator and given a sample grade 14 days later because of sour or musty odor.

ACBL-2634-was turned away as "bad corn" and transferred. As of January 28 the corn was still in the fleeting area.

ACBL-940-8,059 bushels of #3 YC loaded aboard the Rysy II. 41,246 bushels turned away as "bad corn," placed in the elevator, and given a sample grade eight days later because of sour or musty odor.

WC-621-33,637 bushels of #3 YC loaded aboard Rysy II. 13,997 bushels turned away as "bad corn," placed in the elevator, and given a sample grade eleven days later because of sour or musty odor.

EV-4-33,129 bushels of #2 YC loaded aboard Rysy II. 14,953 bushels turned away as "bad corn," placed in the elevator, and given a sample grade eleven days later because of sour or musty odor.

VLX-7361-39,783 bushels of #4 YC loaded aboard Rysy II. 11,404 bushels turned away, loaded into elevator, and given sample grade seven days later because of sour or musty odor.

T-2116-36,083 bushels of #2 YC loaded aboard Rysy II. 17,870 bushels turned away as "bad corn", loaded into the elevator and graded as #2 YC eight days later.

MB-5812-4,358 bushels of #2 YC loaded aboard Rysy II. 42,820 bushels turned away as "bad corn", loaded into the elevator, and graded as #3 YC four days later.

AGS-646-was turned away on January 8, 1976 and loaded aboard M/V Ariana on January 12 as #3 YC.

The sampling procedures of DBOT are currently being reviewed as a part of the ongoing OI investigation.

Question: Mr. Cook stated that his company had loaded approximately 600 ships from its Bayside elevator and that he had received buyer complaints on 5% of these 600 ships. Please contact Cook Industries to confirm the accuracy of this statement and obtain details, if possible, on these complaints. Does Mr. Cook's statement agree with Department records on buyer complaints?

Answer: Our Atlanta office will interview Cook Industries officials in Memphis relative to foreign buyer complaints received by Cook. We are unable to verify from USDA records Mr. Cook's statement before the Committee that Cook Industries received complaints on 5 percent of its shipments from New Orleans.

Question: Two of the last three barge loads of corn loaded into center hold #1 where the rocks were found came from a grain company in Smithshire, Illinois. It is our understanding that the Department has recently appealinspected in New Orleans two other barge loads of corn from the same company and found rocks in these barges. Please investigate the loading procedures used by that company to determine why there is a prevalence of rocks in its grain.

Answer: We have identified the barges involved and have asked our regional representatives to investigate the loading procedures used at their respective points of origin.

Qustion: Please determine whether the destination grades given to the barge lots by the Destrehan Board of Trade inspectors were "blind" grades, given without the inspectors' knowledge of the origin grade. Were the loading grades likewise "blind" grades?

Answer: We have included this question in our investigation but have not interviewed the inspectors yet.

Question: Please determine whether it is possible to blend grain from Cook's "floating rig" loading facility.

Answer: It is not possible to blend grain from Cook's "floating rig" loading facility.

Question: On page 3 of his letter, Mr. Knebel referred to a finding of 6.1% BCFM in the corn aboard the Rysy II. Please clarify whether he was referring to the BCFM level found in the 25,000 bushel lot unloaded from the ship or to the BCFM level of the corn remaining in the ship.

Answer: Mr. Knebel was referring to the BCFM content of the grain in center tank No. 1 after the 25,000 bushels had been removed.

Question: Please comment on the below-listed allegations made by Mr. Cook in his testimony:

(a) That the USDA had, in its handling of the incident, "changed the ground rules on him". (Transcript pp. 45, 46 and 50);

(b) That the probe sampling of the ship after the corn was loaded, by the USDA, violated the Regulations and did not provide a representative sample. (Tr. pp. 45, 49, 50 and 65);

(c) That Cook Industries has always wanted and had continually asked the Department for federal supervision of ship loadings at Bayside (Tr. p. 62);

(d) That after Cook represenatives had agreed to and did unload 7,000 bushels from one hold of the Rysy II in order to obtain a clear certificate of grade, the USDA representatives then, in an unreasonable manner, increased their requirements for the amount that had to be removed several times, until it became apparent to the Cook representatives that they would be required to unload the entire lot (Tr. p. 60);

(e) That the USDA representatives did not inform Cook representatives of the results of their probe sampled inspections (tr. pp. 44 and 45); and

(f) That the USDA representatives who inspected the loaded ship, had had little if any experience with tankers the size of the Rysy II (Tr. p. 50). Answer: (a) USDA did not change any ground rules. We did not know how much grain had to be unloaded before the BCFM level would reach an expected variation.

(b) Probing the corn after loading does not violate the regulations because we were not issuing official certificates. The official certificate, which was based on samples obtained from the diverter sampler, was issued according to the regulations. The qualifying statement was added to the certificate to inform the recipient that the quality and the condition of the corn may not be U.S. No. 3 Yellow Corn.

(c) We have no record of Cook Industries requesting supervision. Supervision is performed on a random selected basis when manpower is available. (d) After the corn was unloaded from Hold No. 1, the BCFM was still high or above what would be expected. Therefore, additional unloadiing was requested.

(e) True. Our probe samples were for our own information, supervision, and investigation. Results are not released to anyone other than official inspection personnel and investigatory personnel.

(f) of the USDA representatives who inspected the Rysy II, only one was not experienced in the inspection of grain aboard tankers. All of the others had experience in inspecting grain in all types of carriers including large tankers. It is true that no one had experience with the Rysy II since it was her maiden voyage, but the design of the Rysy II is the same as other large tankers.

Question: Does the increased presence of BCFM in corn correspondingly diminish its value as livestock feed? Does corn dust have any nutritional value; and, if so, is it used commercially?

Answer: See attachment 1. Comments from Doctor Lowell Hill, Professor, University of Illinois. USDA has no reason to question Dr. Hill's findings. Question: Please determine the zoological classification of the "seashells" found in the sample taken from the corn offloaded from the Rysy II and natural habitat for that species of shell.

Answer: The two seashells found in the corn were analyzed by Tulane University, New Orleans, Louisiana. The laboratory report states the zoological name of the seashells is 'Rangia Cuneata." They are found in waterways from North Chesapeake Bay to Texas. Usually they are found in brackish water, which includes Lake Pontchartrain in New Orleans. The seashells are commonly used to make shell roads.

70-908 - 76-4

Question: Please submit the results of the grading by the Department of the 25,000 bushels of corn removed from the ship. If the results indicated a BCFM level of over 18 percent, is it statistically possible that another inspection of the same lot using a diverter type sampler could have produced a result wherein the BCFM level was measured at 8.8 percent?

Answer: The sample taken from the 25,000 bushels of corn removed from tank No. 1, indicated a BCFM content of 14.7 percent. These results are based on a probe sample taken after the corn was unloaded from the Rysy II and loaded into barge CI 420. It is very unlikely that a diverter sample would show only an 8.8 percent BCFM level. In addition, it should be noted that a large proportion of screenings blew overboard prior to the probe sample being taken.

Question: In his testimony, Mr. Cook referred to the principle of "demixing". Please review this testimony (Tr. pp. 25, 26 and 48) and provide me your comments on the accuracy of Mr. Cook's statements.

Answer: Mr. Cook's account of "demixing" is accurate. It is also the same theory we use.

Question: Was the corn on board the ship sampled from the deck through the hatches and "butterworths", or did the men actually get down in the hold and away from the center of the piles of grain? In sampling the ship, did the USDA personnel use 6' and 8′ probes, or 12' probes?

Answer: The corn aboard Rysy II was sampled by getting into the grain and crawling around the hard-to-get-to places. The 6 foot probe was used in instances where the headroom (the space between grain and the ceiling) was limited. In other places, the 12 foot probe was used.

Question: If it is true as Mr. Cook indicates, that the presence of rocks or stones in grain is immaterial, of no difference to consumers (Tr. pp. 20 and 21), please explain the reasons, if any, that the standards require grain with stones in it to be given a "sample grade" designation.

Answer: Stones are very detrimental in grain. Stones will cause damage to the elevator equipment, and primarily to the grinding equipment when grain is ground into animal feed. Stones can also cause elevator explosions if they cause a spark by hitting metal.

Question: What was the approximate size in bushels of the lot of grain from which the bushel basket of rocks was recovered?

Answer: Rocks were observed lying on the surface of the corn in tank No. 1. However, no one can recall measuring a bushel basket of rocks. Rocks were also observed on the surface of the corn in Barge CI 420, that had been removed from tank No. 1.

Question: What is the probable range of BCFM to be expected in this ship load of 1975 crop corn (as graded-at 3 to 4 percent when loaded aboard) after it is unloaded? Please note that suction-type exacuators will be used to unload the corn. What is the maximum amount of additional breakage to be expected when a suction-type evacuator is used to remove grain from a carrier? Should BCFM be expected to double? How much dust is there to be expected in a ship lot of #3 yellow corn?

Answer: Additional BCFM and dust is expected during loading, and unloading, but we do not know to what extent. There are many variables that cause corn to break, e.g., crop year, harvest conditions, artificial drying, (how fast and what temperature) moisture, stress cracks, methods of loading.

Question: Mr. Cook provided documents indicating the grades given at origin, destination and at loading, for the corn loaded aboard the Rysy II from 35 barges. Are these grades in every instance, consistent with one another, what one would expect, and without significant variance?

Answer: The inspection results on the 35 barges appear all right on an average. The differences between the origin grades and the grades from the Major Ned are wider than normally expected on barges identified as: FM 149, AT 77, and VLX 7361.

Question: Please perform supervision inspection of a random sample of barge loads of grain that have been graded at destination by the Destrehan BOT and advise us of the comparative results.

Answer: The following are the supervision results on 4 barges randomly selected. They were sampled by using the probe after the Destrehan Board of Trade had previously sampled them.