Mr. SUTHERLAND. Yes; and there are some claims pending, quite a number of them. Mr. ALVORD. They would have relief under subsection (e) of section 9. Mr. SUTHERLAND. Under the general act. Senator JONES of New Mexico. By what authority does the Alien Property Custodian make the assets of the German Government available for individual claimants through court proceedings? Why has not that property been seized under the trading with the enemy act, and why has not title become vested in the Government of the United States or the Alien Property Custodian? And why should an individual claimant who may have a judgment against the German Government get a priority with respect to his claim? Senator HARRISON. This particular claim, as I understand it, is one where the people entered suit against the Secretary of the Treasury and the Alien Property Custodian, alleging that it was a German corporation and that Germany owned 98 per cent of the stock and a judgment was acquired. The case went to the Supreme Court of the United States, as I understand it, and that court affirmed the judgment, and then they went into Germany and found that the concern was liquidated, that Germany bought up the other two shares of stock. Now, as I understand it, all of the funds of this corporation belong to the German Government and are in the hands of the Alien Property Custodian. What the parties holding the judgment are fearful of is that this act might preclude them from collecting it. Mr. ALVORD. Under subsection (e), section 9, of the trading with the enemy act, any person who has a claim against a person with property in the hands of the Alien Property Custodian, may, if the debt is described in that subsection, get it paid by the Alien Property Custodian. Senator JONES of New Mexico. Oh! Mr. ALVORD. It was under that provision that the Supreme Court held against the contention of the United States and that the individuals had priority over the United States. Senator HARRISON. These people do not want to be precluded by a law that will be passed here that any residue should go to the United States Government instead of paying their judgment. Senator JONES of New Mexico. I am sure that no member of the committee will want to do that if provision has been made for it in the existing law. Mr. SUTHERLAND. I will be glad to make further inquiry about that. The CHAIRMAN. If there is no other business this morning the committee will stand adjourned until Monday morning at 10 o'clock. (Whereupon, at 12 m., the committee was adjourned until Monday, January 17, 1927, at 10 o'clock a. m.) 28623-27- -15 RETURN OF ALIEN PROPERTY MONDAY, JANUARY 17, 1927 UNITED STATES SENATE, The committee met, pusuant to adjournment on Friday, January 14, 1927, at 10 o'clock a. m., in room 312, Senate Office Building, Senator Reed Smoot (chairman) presiding. Present: Senators Smoot (chairman), McLean, Reed of Pennsylvania, Shortridge, Edge, Jones of New Mexico, Gerry, Harrison, Bayard, and George. Present also: Hon. Garrard B. Winston, Undersecretary (in charge of fiscal offices), Department of the Treasury, and Hon. Howard Sutherland, Alien Property Custodian. The CHAIRMAN. If the committee will come to order, we will proceed with the hearings. Senator George, you advised me this morning that there was an attorney that you desired to be heard. Senator GEORGE. Mr. Escher, of New York. The CHAIRMAN. Will you make your statement? STATEMENT OF HENRY ESCHER, ESQ., NEW YORK, REPRESENTING THE INTERNATIONAL FOOD PRODUCTS CO. AND THE SWISS NATIONAL INSURANCE CO. Mr. ESCHER. Mr. Chairman and gentlemen of the committee, I appear before you on behalf of an amendment that will have for its effect to correct what would seem to be an oversight in the treatment of alien property, and that is that the bill as drawn at the present time does not provide for the return of neutral money as such to neutral corporations. There was an amendment in May, 1926, for neutral individuals, but not for neutral corporations. The situation is a comparatively simple one. There are only a few neutral corporations in the position of the ones which I represent and on whose behalf we ask this amendment. The CHAIRMAN. What are the names of the corporations? Mr. ESCHER. The two that I have in mind, sir, are the International Food Products Co. The CHAIRMAN. Located where? Mr. ESCHER. Located in Switzerland, with a branch office in New York; and the Swiss National Insurance Co., located also in Switzerland, with a branch in Zurich, in Switzerland, and a branch, I think, in the United States. Money of those two corporations was seized and sequestered on the theory that they were doing business in enemy territory. If I might digress I shall try to be very short. The situation is, as I say, a comparatively simple one. A neutral corporation under the statute is regarded as an enemy corporation if it did business within enemy territory. These two corporations that I have in mind, and possibly there are others, find themselves in that position. They are incorporated within neutral territory; there is no question about that. And the United States Supreme Court has held on the appeal of the International Food Products Co. that the question as to who are the stockholders is not to be considered. That is to say, a neutral corporation is neutral regardless of the nationality of its stockholders. You gentlemen, those of you who are lawyers, will understand, of course, that that is the only reasonable working rule, and that to go behind the corporate entity and say that this is a Swiss corporation in name but German in fact would lead to infinite complications and would get us nowhere. Senator REED of Pennsylvania. And yet that is what was done. The CHAIRMAN. Yes. Mr. ESCHER. Originally, sir, yes. So I would like to call your attention in the case of the corporation which I represent particularly, this International Food Products Co., that it was incorporated in 1913 in pursuance of an agreement that had been made in 1912, consequently there is no question, of course, of the bona fides of the transaction. The CHAIRMAN. Who owned the stock? Mr. ESCHER. The stock was owned at the time of the seizure 17.15 per cent by neutrals, and the rest by enemies, some 82 per cent by enemies. The CHAIRMAN. And they did business in Germany, I suppose? Mr. ESCHER. That, sir, is a question of law which is at the present time pending. We have contended that we never did business in Germany, but the Attorney General says that because we were a holding company and owned the stock, in some instances all the stock, of German corporations, that that constituted doing business with enemies-in Germany. And that is a point that has never been definitely decided. To-day I say, in answering the Senator's question, that there is no question but that the corporation was incorporated prior to the breaking out of the European war. But the seizure was not made upon that theory. The seizure was made upon the theory that four persons who had originally owned this enterprise were the owners of the stock, and that the corporation was merely a fraud or cloak for their operations. We satisfied the Alien Property Custodian that that view was wholly unjustified, and then later, after the Supreme Court had said that these corporations were not to be treated as enemy corporations, came this question of doing business. Now, I certainly do not purpose asking the committee to go into that question of law. It is a complicated question. It would seem as if, for reasons which I shall touch upon very briefly, the fair thing to do would be to restore to neutral corporations their money regardless of whether they were considered as having done business in enemy territory or not. Senator REED of Pennsylvania. Let me interrupt you so we may get the issue defined. Mr. ESCHER. Surely, sir. Senator REED of Pennsylvania. The amendment that appears on page 27 of the bill that is before us would appear to release to your clients immediately 80 per cent of the amount of its property now in the hands of the Alien Property Custodian; that is correst, is it not? Mr. ESCHER. That is correct. Senator REED of Pennsylvania. Your people are dissastisfied with that and want full 100 per cent? Mr. ESCHER. Yes, sir. And may I add that while this is perhaps an ideal rather than a practical suggestion, that we particularly desire a clean bill of health. That is, we are extremely anxious not to come before Congress and say we will admit that we are enemies and we would like to receive our money back by virtue of the legislation giving it back to former enemies of the United States. We feel that we are neutrals and that we are entitled to take it on the theory that we are neutrals, and that under 9 (a) we had a right to it in the first instance. That is to say, we never were in the position where the property, though I will concede it was properly sequestered, should have been held. We were not in a position where it should have been held. I do not want to take up the questions of law. Senator HARRISON. How much would it amount to now if these neutral corporations got the 100 per cent instead of the 80 per cent now? Mr. ESCHER. I am told-I know that in Swiss hands there is about $1,000,000 involved. That is to say, these two corporations that I know of particularly, one of whom I represent, have had sequestered about $1,000,000. My best information is that Dutch money and possibly some Swedish money and some Spanish money would reach another $1,000,000, so the total amount involved would be twofifths of $2,000,000. There is not a very great sum, but we think there is a very serious principle involved. And in that connection I would like to call the committee's attention to the fact that it would seem to be very desirable to establish a precedent here to the effect that private property will not be held, at least under these circumstances. Adverting very briefly Senator REED of Pennsylvania. I am going to ask you to pardon me again, because I thought I stated your attitude, but I would like to have your answer to this. If you amend section 9 of the trading with the enemy act, as is provided on page 27, we find that section 9 (b) of the trading with the enemy act provides for the absolute return, without retaining any percentage, to certain persons that are mentioned in 11 different subsections. We now would add 5 additional subsections to that, and No. 13 would cover the case of your client. Why does not the bill as it stands amply take care of your corporations? Mr. ESCHER. Because the bill, sir, in line 13 at page 27, provides that the consent provided for in subsection (m) has been filed as an accommodation precedent to receiving back your money, which means that we would get 80 per cent instead of 100 per cent. Senator REED of Pennsylvania. I see. Mr. ESCHER. That is the theory of it. In other words, may I sug gest, these amendments as drawn completely satisfy the ease of the return of German money, but I think that I an reet |