Mr. GRAHAM. I have been advised there were persons who represented them by contract made with the German Government.

Mr. LAFFERTY. This bill limits attorney fees to a maximum of 10 per cent, and so far as I am concerned, that is entirely satisfactory, and Congress has the power to provide that no attorney fees at all shall be paid on these claims. When I was a member of Congress, we passed a bill to pay some old Indian claims that were 60 years old, and we provided that the attorney fees should be 5 per cent, and in some of those old Indian claims Congress provided that no fee should be paid. In the case I have in mind Congress provided that all fees should be approved by the Commissioner of Indian Affairs, and I would be willing in this case to have a provision inserted that all fees must be approved by the Alien Property Custodian before they would be paid at all. Mr. HOCH. I want to revert for just one question about the matter of bank balances, which you referred to. Are you prepared to say that the Alien Property Custodian made demand upon the Guaranty Trust Co. for the delivery of certain balances which it held belonging to German financial institutions and that that company refused to deliver them?

Mr. LAFFERTY. There was a demand, so I was informed by Mr. Frank Patterson, counsel for the Guaranty Trust Co., in New York, served on the Guaranty Trust Co., and in the answer to that demand which they were required to make within a certain length of time, they made a showing that the funds covered by that demand were subject to a banker's lien, and my recollection is that Mr. Patterson said they were still held by the trust company and were not turned over at all, or the demand was possibly withdrawn on the showing made by the bank. That was done in several instances. Demands were made and afterwards withdrawn or held in abeyance.

Mr. HOCH. You say, "possibly," do you have any definite knowledge about it. Mr. LAFFERTY. I have not seen the records.

Mr. HOCH. Were there any further negotiations other than a demand or refusal to comply with the demands or a withdrawal of the demand? Was there any litigation? Mr. LAFFERTY. There has been no litigation in the case of the Guaranty Trust Co. There has been litigation in the case of other companies and in practically every decision, so far as I know, the courts have held that the demand of the custodian, if insisted upon, was imperative, and that property had to be turned over, but the person so turning it over could the next day file a claim under section 9 to get back any interest he had in it or any debt against it.

Mr. HOCH. Do I understand you to say that the Guaranty Trust Co. refused to turn over these balances on the ground that they might not be able at the end of the war to make proper adjustments with reference to balances which they had in German institutions.

Mr. LAFFERTY. That is the situation exactly. It was on the ground that there were obligation due the Guaranty Trust Co. I think in the case of the Deutsche Bank, to make it specific, there were funds belonging to the Deutsche Bank held by the Guaranty Trust Co. in New York, which were demanded by the Alien Property Custodian, and whether parts of those funds were turned over or not, I do not know, but I think they were, and part were held on the ground that the Guaranty Trust Co. had a banker's lien on them for obligations due the Guaranty Trust Co. from the Deutsche Bank in Germany.

Mr. HoсH. Have you any information as to the amount of those balances?
Mr. LAFFERTY. No; I have not.

The CHAIRMAN. Is it your purpose to say that they set off a part of their balances on deposit against possible claims which they said were theirs against certain German agencies?

Mr. LAFFERTY. Exactly.

The CHAIRMAN. And refused to turn those over?

Mr. LAFFERTY. Whether they refuse outright or merely made an explanation of it to the custodian, and the demand was held in abeyance, or withdrawn, I am not prepared to say, but the funds upon which they claimed a banker's lien were not turned over. The CHAIRMAN. And you do not know whether they have ever been finally turned

over or not.

Mr. LAFFERTY. I am not positive about that. They may have later been turned It was two or three years or so ago that this matter was up.

over.

Mr. HAWES. Mr. Lafferty, of the total American claims, what proportion, according to your information, are insurance company claims.

Mr. LAFFERTY. I just stated approximately 90 per cent are cargo claims and insurance company claims.

Mr. HAWES. What percentage would be claims of the banks that had commercial connections with Germany.

Mr. LAFFERTY. I understood that the claims outside of the bankers' claims are trivial; that is, they are very small outside of the bank balances, and I have suggested

in our printed brief as to these banks that they should come here. They are always looking after their interests very sharply. They have been put upon their notice that this bill is up for consideration, and if they have any objection to it they certainly will be here with their attorneys.

Mr. HAWES. You say that 90 per cent are insurance claims; would you say that 5 per cent would be a safe approximation of the bank claims?

Mr. LAFFERTY. Oh, I think possibly less than 5 per cent. I think possibly 2 per cent would cover all the claims due from Germans to Americans in marks or from Austrians to Americans in crowns, which are in dispute. I think 24 per cent of the total would cover that.

Mr. HAWES. So your opinion is that all but approximately 2 per cent of these claims are claims of the insurance companies and banks?

Mr. LAFFERTY. Yes.

Mr. HAWES. And that only 2 per cent of this great sum is covered by these people who are suffering abroad?

Mr. LAFFERTY. Yes; and the loss of life claims would not amount to over 2 per cent of the amount of property held here, when boiled down to what they are expecting really to receive.

Mr. HAWES. Then your suggestion about returning 50 per cent of all property could really be enlarged to a return of 75 per cent?

Mr. LAFFERTY. Absolutely; except out of an abundance of precaution. I say that under no view of the situation is it necessary to hold more than 50 per cent of this private property to enforce these guaranties provided for under the treaty of Berlin of 1921.

Mr. HAWES. In your communication with the Alien Property Custodian, and I presume you have had commuication with him, he has always shown a disposition to return all of this property, has he not?

Mr. LAFFERTY. Oh, no; only when he was permitted by law. He is circumscribed by law.

Mr. HAWES. But he has not any reasons that are inherent in his own office for retaining any of this property?

Mr. LAFFERTY. Oh, no. The Alien Property Custodian's office has been very efficient, I think, and very businesslike, and very courteous to all citizens of the country.

Mr. HAWES. And has manifested a disposition at all times to return this property as quickly as possible.

Mr. LAFFERTY. To administer the office as fairly as possible under existing law. Mr. HAWES. Having watched this case as well as you have, and studied it with such thoroughness, do you find any objection from anybody to the return of all this property, unless there is some objection by the State Department.

Mr. LAFFERTY. No, sir; what you say is true, and I find that the man on the street when you mention the subject to him expresses surprise and says, "I thought that property was returned years ago. The ordinary citizen does not even know that the property is still held in this way.

Mr. LAFFERTY. Oh, yes.

Mr. HAWES. You evidently have devoted considerable time to a study of this whole subject. Mr. Beale was kind enough to give me employment when I first went to New York. He is connected with a very able firm, and I have devoted practically all my time to this matter for three years.

Mr. HAWES. When these claims are presented to the Alien Property Custodian, it is apparently his desire to have them released as rapidly as possible, is it not? Mr. LAFFERTY. Oh, yes. The Alien Property Custodian has been very fair and courteous to all claimants, and I know has expressed sympathy for a good many cases where he was unable to make a return.

Mr. HAWES. So that if there is any objection that you know of from any branch of the Government to the return of all this property, it must come from the State Department.

Mr. LAFFERTY. The State Department, of course, is responsible for the securing of these guaranties by future arrangements with the German and Austrian Governments, and of course the State Department would necessarily be the department to expect the holding back of a reasonable amount of the property until those guaranties were executed. It could not come from any other department.

The CHAIRMAN. Mr. Lafferty, would you feel that in justice to his responsibility, the Alien Property Custodian would, for a moment, if he could, proceed to the liquidation of his accounts without cooperating fully with the other departments of our Government?

Mr. LAFFERTY. Well, I think in the matter of legislation he would be bound to cooperate with the other departments. In the matter of recommending legislation necessarily all departments must work harmoniously. After a law is passed putting duties on the Alien Property Custodian he would be charged with those responsibilities as a separate bureau.

The CHAIRMAN. Yes; but would you feel it was rather an obligation on him, whether in the law or otherwise, to work in harmony with other departments of the Government which were themselves mixed up with those foreign matters?

Mr. LAFFERTY. Oh, I think he has done so.

The CHAIRMAN. Would you think he was right in doing that?

Mr. LAFFERTY. Absolutely.

The CHAIRMAN. So he might be in sympathy with many of these things and still feel that outside of his own bureau the Government still had interests that would preclude a settlement at this time?

Mr. LAFFERTY. That is correct.

Mr. HAWES. Mr. Chairman, I do not want you or the witness to be under any misapprehension as to my point of view. I think the Alien Property Custodian proceeded properly in discussing the matter and in securing the views of the War Department and the State Department and the other departments, but I am trying to find out where the objection comes from about all this property being returned, and so far as I can find out it all leads to an objection from the State Department, and I would like that matter clear so that when the State Department comes before us if it has valid reasons to offer I would like to hear them.

Mr. LAFFERTY. As I understand that question, any objection to the total return of private seized property at this time comes primarily from American damage claimants who want to be paid. Now, they present their claims to the State Department, and the State Department has the responsibility of seeing that all American citizens are protected in their foreign interests and in their just rights. The Americans whose relatives died from the sinking of the Lusitania, the Sussex, and the Essex have filed their claims, and the Germans concede the practicability, at least, of paying those claims out of private property in order to settle that controversy. They say that those claims stand out as being separate from the other class of claims, the insurance company claims, etc.

Mr. HAWES. There is no intention upon your part, or the part of anybody, to criticize the State Department for making those objections.

Mr. LAFFERTY. No, sir.

Mr. HAWES. Or the Alien Property Custodian for conferring with the State Department. What I am trying to find out is where the objection comes from and what it really is, and apparently we can only find that out from the State Department.

Mr. LAFFERTY. I think the surmounting obstacle goes back to the amount of the American damage claims and a proper analysis of the character of those claims. They must be separated as to their character. The first class, the loss of life claims, probably ought to be secured out of this fund held here by the Alien Property Custodian, if that would hurry a release of the remainder. The second class, insurance company claims, are claims where the claimant already has made a profit and is merely asking for "velvet." He might properly be relegated to his claim against the German Government and let the German Government give a written guaranty to the State Department that it will pay those claims in accordance with whatever amount may be fixed by the Mixed Claims Commission or give some kind of a bond or debenture. The German Government would do that willingly, I have no doubt, like almost any creditor is willing to give a bond as an evidence of the debt, although I say that in all fairness these insurance company claimants have no right to this fund if their books do show a profit, and I challenge them to come here and show their books or submit a balance sheet. As to the banks, the banks are making no complaint. I am as friendly to the banks as anybody, and I do not want the banks to be injured in any way because they are American financial institutions, but those banks in New York, I want to say to this committee, are going to be able to take care of themselves and whenever they need the help of Congress they will be here asking for it.

Mr. NEWTON. Mr. Chairman, there is one question I would like to ask Mr. Whitman before he leaves.

The CHAIRMAN. Just a moment. Let us see if there are any further questi ns to ask Mr. Lafferty.

Mr. HUDDLESTON. There is one question I would like to ask Mr. Lafferty. In recounting the various classes of claims, you have not referred to the claims of creditors of the Imperial German Government by contract with bondholders and other security holders who are our citizens. Do you consider those claims legitimate claims to be considered in regard to this property?

Mr. LAFFERTY. That is a matter, of course, for the Mixed Claims Commission to settle, as to how the German Government shall settle those bonds. They were mostly purchased before we entered the war, of course.

Mr. HUDDLESTON. Yes.

Mr. LAFFERTY. And were purchased by Americans when those bonds were sold, just like French and English bonds were sold here. We were neutral. The German Government probably should be required to pay the Americans who advanced good money and pay them back in good money, but at the same time, a man who was willing to risk his money with a foreign government when the paper itself was payable on its face in marks and carried on its face the hazard of war, I say that such a creditor as that ought to be relegated to his right against that government and not be paid out of private funds. I say that probably he should be paid. I think he should be paid in funds worth something and not in worthless funds, but I do not think he should be paid out of this trust fund.

Mr. HUDDLESTON. You do not think a contract claim such as that should take equal rank with a damage claim which lies very largely in speculation?

Mr. LAFFERTY. A loss of life claim?

Mr. HUDDLESTON (continuing). The fundamental theory of which is that it is a sort of punitive measure.

Mr. LAFFERTY. Yes; it is a claim for wrong done. It is a positive wrong based upon the theory

Mr. HUDDLESTON. It is on a sort of punitive basis?

Mr. LAFFERTY. Yes.

Mr. HUDDLESTON. I am wondering whether you consider a claim of that kind against a government no longer in existence of a higher quality than a contract claim specifying a certain definite amount.

Mr. LAFFERTY. Well, I rather think it is of a little higher quality, for the reason that the man who took passage on the Lusitania or the Sussex or the Essex did not voluntarily expose himself to any hazard. The damage was visited upon him without any act on his part, whereas the man who entered into a contract with a company which was at war and at death's grip with the rest of Europe, knew or should have known that he was taking a hazard and a risk, and therefore, while he should collect his money, I say that the Mixed Claims Commission could properly say to the German Government, You must pay these American bondholders at the rate of 18 cents per mark or at the rate of 23.8 cents', or whatever they may in their wisdom see fit, but they should say to the German Government that they must pay these bondholders and Congress should not say that they should come over here and take it out of this trust fund.

Mr. HUDDLESTON. What higher standing or class do these death claims take than claims for reparation on account of the death of our soldiers in battle?

Mr. LAFFERTY. Well, I do not think they take any, except that under the practices of warfare claims of that kind have never been presented.

Mr. HUDDLESTON. In some countries the practice seems to prevail of collecting all from an enemy you can.

Mr. LAFFERTY. If we were going in for indemnities we should enforce those indemnities against the German Government or the people now within that territory by taxation in the future, and not in any instance against private property; but we have not gone in for indemnities, and we are only asking that the American private damage claims be paid by the German Government.

Mr. HUDDLESTON. But the death claim stands upon the basis of indemnity.
Mr. LAFFERTY. On the grounds I have already stated.

Mr. HUDDLESTON. And the public purpose of sustaining them is punishment to prevent such things being done in the future. That is the fundamental idea and not the idea that you can compensate for loss of life.

Mr. LAFFERTY. To a certain extent that is true, but if you will go into the history of these 33,000 trusts you will find that in nearly every case the German or Austrian who had property in this country had a relative or friend, a close business friend here, and that is why he had his money here. You will find there is that relationship or business connection in every one of these 33,000 trusts; if a man did not have any friends or relatives in this country he did not have any money here.

That is why, if you will go into the history of the matter, you will find some special reasons for protecting their equities, and as Alexander Hamilton said in his discussion of the Jay treaty with England, which is still in forece, no words at his command were sufficient to express his condemnation of the idea of taking private property to pay claims against a political entity or government on account of differences between nation and nation in time of war.

It was in times of peace that these private citizens in legitimate commerce established financial relations and trusted their money to our laws and it was truly a trust fund.

I think that that law should be applied, as it has been applied, by all countries for centuries past, in this instance, except that sufficient may be held to guarantee the payment of the claims that we have mentioned.

Mr. LEA. As a practical proposition, Mr. Lafferty, do you think it is better to pass this bill on the theory under which it is written, which postpones the final solution of this problem, or do you think it better to embody in the bill a plan under which final return of all property is to be made.

Mr. LAFFERTY. I think it would be better to pass the bill as it stands than to embody the final disposition of the property, because it will be debated in the Senate. I understand it will be fought in the Senate by a very able man, the Democratic leader, Mr. Underwood. This bill, I understand, will be opposed in the Senate by Mr. Underwood and will be favored by other Democrats. This is not a political bill in any sense, but to get the bill through the Senate at this session and give this much relief to the poor people in Germany would be better than to try to settle too much now and not have anything go to the relief of these poor people.

Mr. LEA. So your main suggestion is simply to give the larger degree of relief later and pass the bill as it is now.

Mr. LAFFERTY. I say that if in the wisdom of the committee they feel like giving 50 per cent back now, I feel there would be no danger whatever to legitimate American damage claimants in doing so.

ADDITIONAL STATEMENT OF MR. EDMUND A. WHITMAN, OF BOSTON, MASS..

Mr. NEWTON. Mr. Whitman, what attitude have the Austrians taken in reference to indebtedness owing to Americans in the way of bank balances or anything of that character at the time we entered the war. Are they willing to pay back in the value of the crown at that time or do they want to pay back with a depreciated crown.

Mr. WHITMAN. So far as that international indebtedness existed they want to pay it back. The merchants want to pay it back but the international relations from a business point of view between the old Empire and the United States were not large. Mr. NEWTON. They would be nothing like the balances existing in Germany in favor of American banks.

Mr. WHITMAN. Not at all.

Mr. NEWTON. So if the committee should feel that all this property should be turned back, there is really very little in the way of indebtedness to American citizens in reference to bank balances.

Mr. WHITMAN. Yes, sir; that is true.

Mr. HAWES. Mr. Chairman, in this connection, may I ask that this map of the old Empire of Austria-Hungary be inserted in the record.

The CHAIRMAN. Subject to making an arrangement with the Printing Office, that will be done, if there is no objection.

(The map referred to is held in committee files.)

The CHAIRMAN. If the committee is prepared to hear him, we have one other witness who might come on for a reasonable time.

STATEMENT OF MR. CHARLES HENRY BUTLER, OF BUTLER & KRATZ, ATTORNEYS, WASHINGTON, D. C.

Mr. BUTLER. Mr. Chairman and gentlemen of the committee, I am here because I am an attorney and because I have clients who are interested in this matter. In that respect, so far as the Mixed Claims Commission and the Alien Property Custodian are concerned, I am very much like the man who was told he ought to give some attention to where he would go in the hereafter, and he said it did not make much difference as he had friends in both places. I have filed claims before the Mixed Claims Commission and I have claims pending before the Alien Property Custodian.

My position in regard to releasing this property has really been stated by Mr. Lafferty. I think a much larger amount than that proposed can be safely released. There should be a definite limit, but the proportion should not be a straight up and down $10,000 as the basis of the manner in which the accounts should be closed up for bookkeeping purposes; $10,000 may be somewhat too high. I think there should be a percentage and not a mere straight $10,000 paid to the larger claimants. I represent claimants who are interested in very large amounts. One of them has over $800,000, and there is not anything that $10,000 will do to help him. The amount