will that be? Until that time comes, this property belongs to the United States for all intents and purposes. No taxes.

Mr. DONOHUE. What percentage of the counterpart fund is left after using, drawing, on it for these other purposes?

Mr. WOLFE. For the purposes I described, we take 25 percent of the counterpart. Seventy-five percent goes directly back into the German economy in the form of industry rehabilitation, housing, power plants, and so forth.

Mr. DONOHUE. I think that answers the question. Is all 25 percent of it withheld?

Mr. WOLFE. Yes. If there is 30 percent, 5 percent is for administrative expense of ECA and strategic

Mr. CURTIS. What is the total that has amounted to date?

Mr. WOLFE. The total to date has been 3,000,000,000.

Mr. BROWNSON. There has been 3 billion in aid.

Mr. WOLFE. That would be about 12 billion deutschemarks.

Mr. BROWNSON. What does the German newspaper and the America House activity come out of, our 30 percent?

Mr. WOLFE. Out of our 30 percent.

Mr. BROWNSON. How much is going for that?

Mr. WOLFE. Our total operation for all those activities in the fiscal year 1951 was the equivalent of $135 million, of which 27 was in dollars. In 1952 it was the equivalent of $114 million, of which 22 million 250 was in dollars, the rest in counterpart. In 1953, we are requesting $51 million of which 16.7 will be dollars and the rest in counterpart. Now, how that last figure will come out, I don't know. Mr. BROWNSON. What is the population of the United States zone. Mr. WOLFE. Forty-eight million-no, that is Western Germany. It is 16 million.

Mr. BROWNSON. If we could have printed some of those propaganda messages on the back of $10 bills, it would have helped and it wouldn't have been any more expensive on a per capita basis.

Mr. WOLFE. There are all kinds of ways of propaganda and I think we have used them all except that.

Mr. CURTIS. How much, if any, American private capital investment has there been in the American zone in the last couple of years?

Mr. WOLFE. There has been quite a bit, sir, but I wouldn't venture a figure until I check the reference.

Mr. CURTIS. There has been some?

Mr. WOLFE. Yes, sir. Pan American, TWA, General Motors, Opelplant rehabilitation and construction. There is General Electric and AEG, the film industry.

Mr. CURTIS. Is it a HICOG policy to encourage American projects? Mr. WOLFE. Yes. We encourage American investment and then tell them you can't take your dollars out when you get them, but that is to be changed.

Mr. CURTIS. Even that is changed.

Mr. WOLFE. That is changing. Well, the German economy is in a place now where they can do that, encourage dollar investment with dollar profit going out. They are rapidly coming to that point.

Mr. DONOHUE. I think that is all, Mr. Wolfe. On behalf of the subcommittee, I want to express our sincere appreciation for the in

formation that you have given us and your cooperation in making this meeting a success.

Mr. WOLFE. Thank you, sir, and I assure you that all the information you have requested and the survey will be completed at the earliest possible date.

BONN, GERMANY-EXHIBIT 1

AGREEMENT BETWEEN THE UNITED STATES ARMY EUROPEAN COMMAND AND THE BIZONAL ECONOMIC COUNCIL TO REVALUATE THE PURCHASE PRICE OF CERTAIN UNITED STATES ARMY PROPERTY TRANSFERRED PRIOR TO 31 JANUARY 1948 BY THE UNITED STATES ARMY FOR THE GERMAN ECONOMY

I. PREFACE

1. Heretofore certain transfers of United States Army property have been made by the United States Army to the Staatliche Erfassungsgesellschaft fuer Oeffentliches Gut MBH, formerly the Gesellschaft zur Erfassung von Ruestungsgut MBH, as an authorized agency for the receipt of such property for the German economy under the authority of the German Bizonal Economic Council, and prior to the establishment of the Council under the authority of the Military Government for Germany (United States). These transfers of property have been accepted by the representatives of the said Bizonal Economic Council by signature on a so-called “Quantitative Receipt," as a deferred charge against the receipts from future German exports.

2. Some property of the United States Army has in the past been disposed of as outlined above, while other property of the United States Army has been disposed of by sale through the Office of the Foreign Liquidation Commissioner. The Office of the Foreign Liquidation Commissioner is an agency of the United States State Department which handles the sale of surplus property transferred to it by the Department of the Army in overseas areas. Accordingly, inasmuch as disposal of property is handled by these two separate agencies, it is necessary that separate agreements be made by each, depending upon the category of the property sold or transferred.

3. The Foreign Liquidation Commissioner has now offered to sell to the German Bizonal Economic Council substantially all remaining United States Army property in Germany no longer required by the United States Army, effective 1 February 1948. Such a sale will dispose of substantially all United States Army surpluses in Germany, excepting that category of property denied the Germans. by the Allied Control Council, and will eliminate any further transfers of United States Army property to the German Bizonal Economic Council on quantitative receipts except for scrap, salvage and waste after 31 January 1948. The Office of the Foreign Liquidation Commissioner, the United States Army and the German Bizonal Economic Council have mutually agreed that 21% of the cost price, or approximately $236,000,000 would be a proper charge against the German economy for all such property (i. e., That which has been transferred to the German economy by the United States Army or will be transferred by the United States Army prior to 31 January 1948, and that which will be sold to the German economy by Office of the Foreign Liquidation Commissioner). The 21% is, of course, the governing figure since the fluctuation of the total inventory may well result. in a substantial variation in the sum of the over-all price of the two transfers. While it is agreed by the parties mentioned above, namely, the Office of the Foreign Liquidation Commissioner, the United States Army and the German Bizonal Economic Council that these sales will be considered on a single over-all basis embodying both that property transferred directly by the United States Army and that property sold by the Office of the Foreign Liquidation Commissioner, it is essential, however, from the United States standpoint, that these transactions continue to be treated as two separate transactions, one by the United States Army and one by the Office of the Foreign Liquidation Commissioner. Accordingly, it is understood that any amounts heretofore charged against the German economy, by virtue of previous sales, in excess of 21% of the cost price will be offset against purchases made under the parallel contract of the Office of the Foreign Liquidation Commissioner, and it is understood that the United States Army and the Office of the Foreign Liquidation Commissioner have agreed that the over-all sales price of approximately $236,000,000 will be divided so the two separate transactions are each charged at 21% of the cost value of the property trans-

ferred and sold. This will require a revaluation of the purchase price to the German economy of that property transferred to it directly by the United States Army from the values agreed upon at the time of the transfers down to approximately 21% of cost value.

4. It is contemplated that upon the effective date of the said Office of the Foreign Liquidation Commissioner contract, to wit, 1 February 48, transfers directly from the United States Army except for scrap, salvage and waste will terminate and transfers of property subsequent to that date will be made as part of the said Office of the Foreign Liquidation Commissioner sale of surplus property. However, the purchase price of all property except scrap, salvage and waste transferred directly by the United States Army prior to 31 January 1948, will be valued in accordance with paragraph 3 above.

II. AGREEMENT

5. In view of the foregoing circumstances it is hereby agreed between the United States Army and the German Bizonal Economic Council that, in consideration of the purchase by the German Bizonal Economic Council from the Office of the Foreign Liquidation Commissioner of all United States Army property presently surplus or to become surplus to requirements of the United States Army in the United States Area of Control in Germany prior to 30 September 1948 (as in accordance with that certain agreement entered into between the Office of the Foreign Liquidation Commissioner, and the German Bizonal Economic Council for the purchase of said property, dated 23 January 1948), that the purchase price of all sales or transfers of property, except scrap, salvage or waste, made directly by the United States Army to the German Bizonal Economic Council or its duly authorized representatives prior to 31 January 48, will be revalued to 21% of the actual cost value of all such property so sold or transferred. Said property has been and will continue to be recorded on quantitative receipts until 31 January 1948 as a deferred charge against future proceeds of German exports.

6. The German Bizonal Economic Council acknowledges and agrees to accept as a proper charge against the future proceeds of German exports the total amount of indebtedness incurred as a result of all transfers of property by the United States Army on quantitative receipts for the German economy prior to 31 January 1948, revaluated by the United States Army to 21% of cost value in accordance with the terms of this agreement. The cost value of United States Army property transferred prior to 31 October 1947 is approximately $212,000,000 and the revaluated sales price is approximately $44,500,000.

7. The purchase price shall be a deferred charge against, and shall be repaid from, future proceeds of German exports pari passu with obligations for other supplies furnished to the German economy on a deferred payment basis. Interest shall be computed at the same rate and on the same terms as are eventually established for other deferred obligations of the German economy to the United States Government. Payments shall be credited first to interest due and then to unpaid principal. The terms for payment of any balances remaining unpaid at the time of the treaty of peace with Germany shall be such as are prescribed therein. With the consent of the appropriate occupation authorities, the United States Government may require the accelerated payment of any part of the unpaid purchase price in local currency for use by the United States government; credit against the purchase price shall be given of the agreed dollar value of such accelerations.

Executed in triplicate at Frankfurt am Main, Germany, this 23d day of January 1948.

For the Bizonal Economic Council:

For the United States Army, European Command:

/s/ ERIC KOEHLER. /s/ DAHRENDORF.

/s/ CARTER B. MAGRUDER. /s/ G. H. PIERRE.

This contract is entered into by the Bizonal Economic Council with the approval of the Bipartite Board, composed of General Clay, Military Governor of the United States Zone, and General Robertson, Military Governor of the British Zone.

/s/ G. L. C. SCOTT. For WALTER E. MATHER Major, GSC Duty Secretary, Bipartite Secretariat.

BONN, GERMANY-EXHIBIT 2

REPORT FROM ZURICH CONSULATE

March 23, 1951

Consul General Kuykendall telephoned me back and stated as follows: 1. Neither the Continental Motor Trust nor GEFO Trust are registered as companies in Switzerland.

2. Neither is listed in the telephone directory of Zurich or Liechtenstein.

3. The address 32 Bahnhofstrasse is a building housing 26 commercial concerns but neither Continental Motor Trust nor GEFO Trust is listed as having offices there.

4. Neither is registered with the Post Office in Zurich.

5. Both are registered with the Post Office in Vaduz, care of the Bank-inLiechtenstein A. G.

6. The Bank-in-Liechtenstein divulged that GEFO Trust was registered (incorporated) on August 1, 1947, and Continental Motor Trust on May 25, 1946. 7. The Bank-in-Liechtenstein refused to supply names of directors or stockholders of either.

8. There is no "government registry" or corporations in Liechtenstein nor any government prescribed formalities for the public registration (incorporation) of business concerns. This is done by the principals depositing papers with a Bank and obtaining recognition from the same.

9. A memorandum dated November 14, 1950, from Paris states that Mr. Dawson, in applying for a visa there, avers he is the sole owner of the following:

a. The Channel Islands Iron and Steel Co., Ltd., St. Hellyer, Jersey, organized in 1946 and represented London by a Mr. Witway of Philips, Conway & Thomas, Solicitors, 20 Bolton Street, London.

b. GEFO Trust, 32 Bahnhofstrasse, Zurich (also represented by a Dr. Hagenbach of the same address).

c. S. A. Dodge, 32 Bahnhofstrasse Zurich (also represented by Dr. Hagenbach).

d. Sonda Trust, 32 Bahnhofstrasse, Zurich (also represented by Dr. Hagenbach).

e. Trucks and Spars Kraftfahrzeug G. m. b. H., Feldbergstr. 28-30 Frankfurt-Main.

10. Consul General Kuykendall also reports that the Dr. Hagenbach mentioned in 9b, c. and d. above, is reported to be an inhabitant of 32 Bahnhofstrasse, Zurich.

11. The files of this office indicate that the director of the firm mentioned in 9e, above is a Herr Rudolf Bubenberger, of 20 Kirchgasse, Wiesbaden.

B. B. SNYDER, American Consulate General, Frankfurt.

BONN, GERMANY-EXHIBIT 3

REPORT NO. F 1136 OF DEUTSCHE REVISIONS-UND TRUEHAND-AKTIENGESELLSCHAFT FRANKFURT AM MAIN ON THE EXAMINATION WITH GERMAN PUBLIC CORPORATION FOR THE COLLECTION OF US ARMY SURPLUS MATERIALS (BRIEFLY REFERRED TO AS "STEG") MUNICH, OF THE OPENING BALANCE SHEET IN DEUTSCHE Mark as OF JUNE 21, 1948

I. PRELIMINARY REMARKS

1. Pursuant to a resolution taken by the Supervisory Council we have been instructed by the Management in its letter dated November 17, 1949, to make an examination of the Opening Balance Sheet in Deutsche Mark (DMEB) as of June 21, 1948 of German Public Corporation for the Collection of War Surplus Material (hereinafter briefly referred to as "STEG"), Munich.

2. Our Auditing procedures started in April 1949 with the various clearing offices in the British Zone of Occupation; auditing work with STEG Main Office (referred to as "HV") commenced in autumn of 1949 and also with the various affiliates in the US Zone; inasmuch as it proved necessary to examine at the same 94756-52-69

time the annual accounts as of December 31, 1948, audit work took some considerable time and lasted until December 1950. The very problem was to obtain some more secure basic data allowing a proper segregation between the RM and DM periods, while furthermore it proved necessary to get likewise an adequate basis for eventual readjustments in RM, all of which were necessary for drawing up on orderly Opening Balance Sheet in Deutsche Mark.

3. The Partial Opening Balance Sheet in DM of the several STEG Affiliates, i. e., Main Office, Branch Offices Bavaria; Wuerttemberg-Baden, Hesse and Bremen, Subsidiary Office Berlin, Clearing Offices Hamburg, Slesvig-Holstein, Lower Saxony and North Rhine-Westphalia have been duly commented upon in our respective reports on the examination of the Partial Annual Accounts of these offices as of December 31, 1948.

4. The present report deals with the Opening Balance Sheet in Deutsche Mark of the whole STEG-group. We deal at first with the relevant readjustments in RM, and proceed in the ensuing main section to a discussion of the Opening Balance Sheet in Deutsche Mark of STEG, devoting special space to the comments on a few problems which are specific to STEG, on the conversion accounts, on the revaluation of assets and liabilities, and the exact content of the several items, all of which are being dealt with in separate sections. Further chapters are dealing with the definite fixation of STEG's capitalization as well as with the explanatory report of management. Finally in the closing chapter we bring a condensed view of the Opening Balance Sheet in Deutsche Mark and the several most essential results of our audit.

The Opening Balance Sheet of STEG in Deutsche Mark is being shown in Exhibit I while the balance sheet broken down by programs appears from Exhibit II. On the other hand, Exhibit III shows a comparison of the Closing Balance Sheet in RM with the Transition Balance Sheet in Deutsche Mark as well as with the Opening Balance Sheet in Deutsche Mark. Exhibits IV and V, finally, show the results of the new conversion and new valuation broken down by programs.

5. Within the framework of this report we refrain from entering into a description of the economic and legal position of STEG, its tasks as well as its organizational set-up, and finally its accounting system. In this connection we would like to refer the reader to our auditing report on the Closing Balance Sheet in RM (report No. F 171, dated November 1, 1949). The necessary complements relating to the DM period will be given in our report on the Annual Accounts of STEG as of December 31, 1948.

II. FINAL READJUSTMENTS IN RM

6. Owing to a rather deficient stores bookkeeping, rather severe defects and shortfallings were revealed in the Annual Accounts of STEG in RM both from a factual and formal viewpoint, so that the statement of the unrealized trust property, all assets and liabilities arising from trade transactions, as well as of proceeds was incomplete, while on the other hand no warranty as to the correctness of the accounts could be assumed. Inasmuch as an absolutely clear basis for drawing up the opening balance sheet in DM was unavailable, and because the management was requested by the various shareholders on December 5, 1949, to try closing the gaps which had been revealed for the period when RM was still legal tender, a large amount of work was required for making good both factual and formal errors existing in the RM closing balance sheet. In particular, all postings made during the DM-period were scrutinized by STEG with a view to ensuring whether they were based on business transactions carried through during the RM-period. Relevant DM postings were thus taken back in the shape of so-called RM-readjustments in the accounting cycle as of June 20, 1948, while a new internal RM closing balance sheet including all final adjustments was drawn up, out of which the Opening Balance Sheet in DM has been derived and well via the DM transition balance sheet (see Exhibit III).