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AVIATIPN. 337
Mr. Frear. Let me ask you: The Spruce Production Department
or the Spruce Production Corporation is an independent corpora-
tion, is it not?
Gten. Menoheb. Yes, sir.
Mr. Frear. They furnish the spruce for airplane purposes ?
Gen. Menoher. Yes, sir.
Mr. Frear. You have no original record here in regtird to their
contract?
Gen. Menoher. No, sir.
Mr. Frear. They are all in Portland, Oreg., I understand?
Gen. Menoher. The headquarters of the corporation is at Port-
land, Oreg.
Mr. Frear. And if this committee desires to have any explana-
tion of other contracts, or of any expenditures made by the Spruce
Production Division
Gen. Menoher (interposing). By the Spruce Production Corpo-
ration, you mean. There is a distinction getween the Spruce Pro-
duction Division, which it was called originally, and tne Spruce
Production Corporation. When the Spruce Production Corporation
was organized, the Spruce Production Division's activities were
transferred and all its operations transferred to the corporation.
Mr. Frear. And if this committee desires to secure any information
regarding expenditures of the Spruce Production Division, as it was
originally, or of the Spruce Production Corporation, as it has since
been, it will be necessary for us to either visit Portland, Greg., or
have all those original records and some of their people brought on
here?
Gen. Menoher. Yes, sir; exactly.
Mr. Frear. That was the statement made recently in your letter,
and the statement that has been made before the committee on
several occasions ?
Gen. Menoher. Yes, sir.
Mr. Frear. The next statement I desire to offer for the record,
and which I desire marked ''Gen. Menoher, Exhibit No. 105," pur-
ports to give the United States Spruce Production Corporation
cash receipts and disbursements up to June 30, 1919. A part of it
is brief, and I will read that part which relates to receipts:
Sale of debenture bonds reached $21,500,000. Cfapital stock,
$100,000. Commercial lumber sales $579,000, in round numbers.
Aircraft lumber sales $5,000,000, in round numbers. Salvage sales
$1,926,966, or practically $2,000,000.
Have you any data showing what the salvage sales consisted of?
Gen. Menoher. Machinery of various kinds, logging plants, and
so on, but I understand mostly machinery. .^^ -^
Mr. Frear. We will get all of that data there. V
Gen. Menoher. Yes, sir; it should all be complete there. Among
that lumber, although that would not be considered salvage, I be-
lieve, were side cuts.
Mr. Frear. Yes; I have read that — $529,000 commercial lumber
sales.
Gen. Menoher. Yes, sir.
Mr. Frear. Then we have deposits on rejected bids, and so on,
making a total of $31,782,700.
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338 WAB EXPENDITURES.
The next item is, less cash on hand July 30, 1919, $10,517,000, in
round numbers, leaving total expenditures by the corporation to
June 30, 1919, $21,265,217.
Then we have unpaid vouchers in process, $368, and eiroenditures
by B. A. P. and Si^al Corps prior to that corporation. 'Hiat would
be the spruce division ?
Gen. Menoher. Yes, sir.
Mr. Frear. That is $27,497,240. About what time was the
Spruce Corporation organized, or did it take charge, if you can
remember readily?
Gen. Menoher. That was in September, I think.
Mr. Frear. September, 1918?
Gen. Menoher. Yes, sir.
Mr. Frear. And so the expenditures prior to that time, of $27,-
497,240, were made under the Spruce Production Division ?
Gen. Menoher. Yes, sir.
Mr. Frear. The total expenditures for the Spruce Production
Corporation, according to this statement, reached $48,762,826; and,
as you have stated, the contracts and all vouchers and other papers
for these expenditures are in Portland, Greg. ?
Gen. Menoher. Yes, sir.
Mr. Frear. The next pa^e is an abstract of expenditures of the
United States Spruce Promiction Corporation. That does not in-
clude expenditures made before that, and I am not going into these
items very completely but will suggest some things that appear here.
The first item is $740,725, for lands and timber lands. Do you know
what lands that refers to ?
Gen. Menoher. I can not tell you.
Mr. Frear. I assume it is the Blodgett contract, but we will go
into that later.
Gen. Menoher. I really do not know about that.
Mr. Frear. The next item I am inquiring about is an item for
railroad equipment, $1,111^609.83. That was for locomotives, un-
doubtedlv, and general equipment that would go to make up rolling
stock and the general usefulness of the railroad. You have no means
of determining how that was divided among the three railroads !
Gen. Menoher (interposing). I can not answer that definitely. I
have no means of reaching that here at present, and I doubt if there
is any information on that in my office.
Mr. Frear. We will probably have to get that from their office at
Portland, Greg. ?
Gen. Menoher. Yes, sir: I think so.
Mr. Frear. In view of wnat is known of the Seims-Carey-Kerbaueh
road, which was built out from Lake Pleasant, a 38-mile branch — tne
longest road and the most expensive road — and the most complete
road of all the roads, because the other two were short branches, com-
paratively speaking, down in Oregon ?
Gen. Menoher. Yos, sir.
Mr. Frear. The largest part of that expenditure, presumaUy,
would go into that upper road ?
Gen. Menoher. Presumably, but I do not know.
Mr. Frear. I am trying to get at it, generally speaking?
Gen. Menoher. Yes, sir* all things being equal tnat would be true.
Mr. Frear. Yes, sir; all things being equal it would seem to he
about one-half, on account of the way it was built t
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AVUTIOK. 339
Gen. Menoheh. Yes, sir.
Mr. Frear. The next item I call your attention to is, construction
of railroad, $659,015.12. You have no idea, of course, to what roads
that amount would be distributed ?
Gen. Menoher. No, sir.
^Ir. Frear. And the Clallam County operations, that does not
indicate whether railroads or not?
Gen. Menoher. No, sir.
Mr. Frear. The next item is for spruce production down in Oregon
as I understand. Grant Smith-Porter Bros. Co., and the amount
reaches, on their contract, $3,000,000.
The next item I speak of is the Siems-Carey-Kerbaugh Corporation,
which had a spruce contract for 250,000,000 feet of timber, and also
to build a railroad — that 38-miIe branch. This spruce item reaches
$14,341,147.85.
ITie next item is for the Siems-Carey-Kerbaugh Railroad. That
reaches $3,988,511.93.
The Vancouver cut-up plant, following, is $1,975,534.
The Warren Spruce Co., further down on the same page, receives
advances on contract, $600,000.
The next item after that is, $500,000 for the Siems-Carey-Kerbaugh
Corporation. That presumably would be added to the $3,988,000
which previously appears for the Siems-Carey-Kerbaugh railroad
contract, would it not?
Gen. Menoher. Yes; presumably so, but I can not say definitely
on that. You say that is an advance, and it is possible that that
may be charged against that railroad.^
Mr. Frear. Would that be possible in view of the method of total-
ling which you have at the conclusion ?
Gen. Menoher. No; it would not.
Mr. Frear. So that is an extra payment and an extra advance
made, in addition to the other amount?
Gen. Menoher. Yes, sir.
Mr. Frear. The Siems-Carey-Kerbaugh spruce contract received
$750,000 of advances, in addition to the amount previouslv read, of
over $4,000,000?
Gen. Menoher. I do not know.
Mr. Frear. I wish to just get a brief understanding of the character
of these contracts. On the next page there is a small item to the
Siems-Carey-Kerbaugh Corporation of $62,290; that is rather a small
item, comparatively speaking.
As to the abstract of expenditures, there are about, I would say,
maybe 200 items or more on this list, and it totals $48,762,826.
The expenditures credited to the Siems-Carey-Kerbaugh Corpora-
tion directly for railroads would be 84,488,511. 93.
Oen. Menoher. Yes, sir.
Mr. Frear. Then, whatever proportion of the $1,111^609, which
was previously mentioned for equipment, to be credited to the
Siems-Carey-Kerbaugh raih-oad, would necessarily add to this
amount in order to find out the cost of the railroad running from
Lake Crescent to Lake Pleasant?
Gen. Menoher. Yes, sir.
Mr. Frear. Assuming for the sake of argument that it reaches the
sum — ^well, one-third, well of course that railroad must take more than
147155— 19— VOL 1 23
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340 WAB EXPENDITUBES.
that proportion — that would be $3,700,000, in round numbers. I
want to nnd the a^orregate, if I can, at this point here for the Siems-
Carey-Kerbauffh railway.
Mr. Lea. That would be only speculative.
Mr. Frear. Yes; I concede that, and unless it reaches far more
than that amount I shall be greatlv surprised, in view of the different
types of railroads that have oeen built there.
Mr. Lea. The only idea I had in mind was. that it might he better
to have reliable figures, othci-wise we woula have that much more
confusion.
Mr. Frear. I believe we will add to these figures considerably
rather than deduct anything.
Mr. Lea. I think that is very probable, but any figures we would
attempt to get at now would be unreliable.
Mr. Frear. The construction railroad item, $659,000, presumably —
but we have no data on that to show where that went; that is, nothing
to indicate from the item — to provide one-third, well, one-third ot
that went for the same purpose, to the Siems-Carey-Kerbaugh
Corporation, and that would add more than $200,000 to the fignres
alreadv in hand. In other words, added to that $4,585,511.99,
approximately, thQ estimated cost of the railroad going a distance of
38 miles, there is the further item, of which one-third would be over
$200,000. That would make a total of over $5,000,000, as the state-
ment stands, for the Siems-Carey-Kerbaugh railroad, built a distance
of 38 miles. Is that as you xmderstand it, or I will give you this
statement to look at?
Gen. Menoher. Yes; I understand what you ask from the state-
ment.
Mr. Frear. What is the fact about it?
Gen. Nenoher. That is apparently true.
Mr. Frear. And that does not affect the spruce contract of the
Siems-Carey-Kerbaugh Corporation, which reached, in expendi-
tures, over $5,000,000 in addition. This was for $5,000,000, if these
figures are anywhere near correct, $5,000,000 for a railroad for cany-
ing logs a distance of 38 or 40 miles at the extreme terminus. Do von
know anything about the cost of logging railroads or anything of taat
kind, out in that country ?
Gen. Menoher. No, sir.
Mr. Frear. So that we will have to get that information out there I
Gen. Menoher. Yes, sir.
Mr. Frear. But the cost would reach in the neighborhood oi
$125,000 a mile, apparently, from the figures given in your statement,
it this basis of estunate is correct?
Gen. Menoher. Yes, sir.
Mr. Freab. You, like myself, have no exact knowledge, because
until these items can be allocated back to the various raihroads we
have not the data; it is more a surmise, except that we do know that
certain items are directly chargeable to the railroad in the State of
Washington ?
Gen. Menoher. Yes, sir.
Mr. Frear. I will ask that the statement be marked ''Exhibit
No. 105 (Gen. Menoher, Exhibit F)/' and put in the record at this
point.
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AviATioisr. 841
(Accordingly, the statement is copied in full in the record as
follows:)
Exhibit No. 105.
[United States Spruce Production Corporation, Portland, Ore.]
Statement of cash receipts and disbursements ^ June 30^ 1919.
Receipts to June 30, 1919:
Sale of debenture bonds $21, 500, 000. 00
Capital stock 100, 000. 00
Commercial lumber sales 579, 070 36
Aircraft lumber sales 5, 059, 074. 63
Salvage sales 1, 926, 966. 33
Deposits on rejected bids k 651, 621. 04
Miscellaneous receipts 1, 965, 968. 26
Total receipts $31,782,700.62
Less cash on hand, June 30, 1919 10, 517, 482. 66
Total expenditures by corporation to June 30, 1919 21, 265, 217. 96
nnf>aid vouchers in process to June 30, 1919 368. 81
Expenditures by Bureau of Airplane Production and Signal Corps
prior to corporation 27, 497, 240. 12
Total expenditures per statement attached 48, 762, 826. 89-
ABSTBACT OP EXPENDITURES TO JUNE 30, 1019.
Capital expenditures : $4, 500, 674. 70
Lands and timberlands $740, 725. 00
Haulage equipment 80, 617. 91
Donkey ei^rine equipment 1, 352, 979. 09
Raib-oad equipment 1, 111, 609. 83
Marine equipment 75, 499. 38
Tools and appliances 17, 271. 39
Furniture and fixtures 66, 734. 47
Towage and rafting equipment 52, 931. 88
Construction— railroad 659, 015. 12
Construction — general 4, 807. 24
Warehouse material — Vancouver Barracks 344, 483. 39
B. A. P. advances to contractors 22, 592, 532. 39*
Aircraft Lumber Co 60, 605. 41
Airplane Spruce & Lumber Co 1, 657, 389. 97
Clallam Co. operations 18, 21B. 53
Deer Island Logging Co 4,000.00
Enumclaw operations 25, 970. 84
Grant Smith-Porter Bros. Co 3, 306, 266. 65
Monarch Mill 99, 497. 98
Edward Murphy •. . . 249, 564. 89
Oregon Planing Mill Owners Association 126, 581. 26
Port Angeles Cut-Up Plant 282. 99
Portland Lumber Co 270, 908. 16
Siems, Carey-H. S. Kerbaugh Corporation (spruce). 4, 341, 147. 85
Siems, Carey-H. S. Kerbaugh Corporation (railroad) 3, 988, 511. 93
S. P. D. Railroad No. 9 13,647.12
N. F. Titus 6, 363. 93
Toledo Sawmill 821,825.27
Vancouver Cut-Up Plant 1,975,534.04
Warrenton Mill 12, 253. 24
Warren Spruce Co 5, 613, 964. 33
War Credit Board advances to contractors 2,493 735 SO
. Henry A. Brewer 6, 300. 00
J. Canby Morgan 8,920.18
A. P. Stoekwell Lumber Co 20,515.62
Wm. E.Warren 8,000.00
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342 WAR EXPENDITXTRES.
War Credit Board advances to contractors — Continued.
Airplane Spruce & Lumber Co $300, 000. 00
Grant Smith-Porter Bros. Co 300,000. 00
Warren Spruce Co 600, 000. 00
Siems, Carey-H. S. Kerbaugh Corporation (railroad) 500, 000. 00
Siems, Carey-H. S. Kerbaugh Corporation (spruce) . 750, 000. 00
Disbursements ifor quartermaster $90, 4f»l. 22
Construction cantonment 13, 416. 85
Division Military Expense 33>916. 68
Subsistence of enlisted men in field 43, 127. 69
(.•antB and lumber purchased for cut-up plant 8, 667, 585. 37
Lumber purchased for shipment direct 5, 099, 31 1. W
Commercial lumber section 99, 424. 30
Purchase of lumber 35, 270. 19
Milling and other expenses 64, 154. 11
I ntercompany and interledger charges ? 1, 506, 639. 30
Accounts receivable. , 86, 287. 98
Stumpage payable 135, 247. 10
Siems Carey-H. S. Kerbaugh Corporation 63, 290. 09
Warren Spruce Co 50. 00
Grant Smith-Porter Bros 30, 897. 76
Deposits on rejected bids 651, 621. 04
Logger and mill operators' accounts 539, 245. 33
Contract logging operations 30, 822. 12
Division overhead •. . 664, 069. 61
Cruising expense 3, 362. 12
Deposit for fire protection 101, 406. 80
Insurance expense 456. 84
Headquarters expense 272, 359. 31
Information section expense 812. 96
Inspection expense 57, 789. 30
Loading and handling lumber 415. 92
Loyal Le^on expense 47, 255. 02
Military information 877. 50
Plant protection expense 1, 303. 34
Scaling expense 11, 691. 94
Taxes 17,512.50
Towage expense 59, 180. 59
Transportation expense 89, 665. 47
Liquidation of operations 3, Oil, 550. 09
Assembling expense 59, 597. 69
Insurance expense 43, 402. 87
Legal expense 1, 822. 61
Transportation expense 16, 204. 42
Fire-protection expense 497. 10
Appraising and inspecting expense 500. 00
Freight expense 599, 123. 20
Sales board expense 53, 364. 93
Selling expense $13, 078. 87
Allowances 25. 38
Commissions *. 23,362.05
Advertising 16, 843. 23
Repairs to property for sale. 55. 40
Operat ng expenses not included in costs 159, 865. 22
Portland Lumber Co 1, 727. 80
Oregon Planing Mill Owners' Asso-
ciation 282.94
Vancouver Cut-up Plant 43, 060. 51
Airplane Spruce Lumber Co 7, 187. 28
rant Smith-Porter Bros 43, 637. 72
Warren Spruce Co 57, 273. 18
Siems Carey-H. S. Kerbaugh Cor-
poration 1, 641. 35
Edward Murphy 968. 64
N. F.Titus 53.80
S. P. D. R. R. No. 9 4,032.00
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ATIATIOK. 34&
liquidatioii of operationB — Continued.
Liqu dation expenses $103, 611. 73
Airplane Spruce Lumber Co |30, 496. 85
Grant Smith-Porter Bros 33, 160. 03
Warren Spruce Co 39, 743. 72
Enumclaw operations 36. 50
Portland Lumber Co 158. 19
Siems Carey-H. S. Kerbaugh Cor-
poration R. R 16. 44
Release of claims — contract cancellations 1, 973, 560. 32
Total $48,762,826.89
Mr. Fbeab. We will now be glad to hear Maj. Foulois.
TESTIMOmr OF HAJ. B. D. FOULOIS, AVIATION COBPS.
Mr. Frear. Greneral, how long have you been in the service of the
Governihent?
Maj. Foulois. I have been in the service of the United States
Grovemment 26 years.
Mr. Frear. And what is your rank now ?
Maj. FoxjLOis. My present rank is major — captain of Infantry and
major of Aviation.
Mr. Frear. What was it at the beginning of the war in Europe
in August, 1914?
Maj. Foulois. I was captain in the aviation section of the Signal
Corps at that time.
Mr. Frear. Now, at the beginning of our entry into the war what
was it ?
Maj. Foulois. At our entiy into the war I was captain of Infantry
and major of Aviation, and I was commissioned brigadier general on
July 24, 1917.
Mr. Frear. That is when we were entering the war ?
Maj. Foulois. Yes.
Mr. Frear. Will you tell us, major, the preparations that had been
made by this Grovemment, so far as you know, at the time of our
entry into the war for an aviation program — that would be in April,
1917?
Maj. Foulois. The only comprehensive preparation that was made
by our Grovemment prior to the declaration of war on April 6, 1917,
was certain preparations which the Chief Signal Officer charged me
with approximately in March, 1917.
Mr. Frear. Who was the Chief Signal Officer at that time ?
Maj. Foulois. Gen. Squier.
Mr. Frear. That was just a month before our entry into the war ?
Maj. Foulois. Yes, sir.
Mr. Frear. But in August, 1916, eight months in round numbers,
f)rior to our entry into the war. Congress had appropriated $13,000,000
or aviation purposes. What was done during that eight months
after that appropriation, which followed smaller appropriations, if
you know ?
Maj. Foulois. I have no personal knowledge of any preparation
that was made prior to my assignment of duty in Washington.
Mr. Frear. Would you, general, be likely to have any informa-
tion — ^in a general way, I am speaking — ^if any definite policy or pro-
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344 WAB KXPENDrrUEBS.
gram had been entered into by the military service of the Army
aviation activities ?
Maj. FouLOis. It is m^ recollection that there was no definite mili-
tary poUcy as regards aviation prior to the declaration of war.
Mr. Fbear. And what had been done prior to those eight months,
subsequent to the appropriation by Congress of these $13,000,000 for
aviation purposes ?
Maj. FouLOis To the best of my recollection, for aviation pur-
poses certain steps had been taken m connection with the establish-
ment and expansion of the aviation school at North Island, San
Diego, Calif.; the expansion of the aviation school at Fort Omaha;
the establishment and development of an aviation station of the
Kegular Army near San Antonio, Tex. Steps had also been taken,
according to my recollection
Mr. Fbear (interposing). Just indicate what the steps are, just
BS definitely as you can.
Maj. FouLOis. I was trying to clear them up. Steps were taken
hy me as department aeronautical officer of tne Southern Depart-
ment, Fort Sam Houston, Tex., to organize additional squadrons.
Mr. Frear. For what purpose ?
Maj. FouLOis. For assignment to duty in the Regular Army.
Mr. Frear. That is at the time we were having our difficulties on
the Mexican border, was it ?
Maj. FouLOis. That was shortly after that. I had charge of the
first aerial squadron in Mexico myself.
Mr. Frear. How many planes did we have down there when
Gen. Pershing went across the line ?
Maj. FouLOis. We took eight planes into Mexico as the initial
equipment of that sauadron.
Mr. Frear. And tnat was about what time ?
Maj. FouLOis. We crossed the hue on March 19, 1915.
Mr. Frear. What were those — ^just elementary training planes t
Maj. F0UT.01S. Those were elementary training machines?
Mr. Frear. Curtiss?
Maj. FouLOis. Of the Curtiss tvpe, JN 2 or 3, I think they were
at that time designated. These planes lasted, as I recollect, possibly
six weeks.
Mr. Frear. The planes lasted six weeks ?
Maj. FouLOis. Yes, sir; they were all smashed or lost.
Mr. Frear. They were not serviceable for that kind of work i
Maj. FouLOis. With the exception of two, which lasted approxi-
mately that period, and we condemned them as unsafe for lurther
use.
Mr. Frear. And what were the next stejw taken, General, that is,
either in the manufacture of planes or starting on this proCTam ?
Maj. FoiTLOis. The only other steps that were taken, as 1 recoPect,
before the declaration of war, were endeavors on the part of the