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The Militant, 13 July 1946

Ruth Benson

2 Top Washington Officials Linked
to $78,000,000 Arms Firm Fraud

From The Militant, Vol. X No. 28, 13 July 1946, p. 1.
Transcribed & marked up by Einde O’Callaghan for ETOL.


Hearings before the Senate Defense Investigating Committee, headed by Senator Mead, last week revealed that one enterprising arms combine starting during the war with no cash, no plants and no workers, wound up with over $78,000,000 in government contracts. This profitable deal was engineered, it is alleged, with the assistance of two of the highest-placed men in the whole war program – Representative May of Kentucky, head of the House Military Affairs Committee, and Secretary of War Patterson.

In October, 1941, Henry M. Garsson borrowed a letterhead from the Segal Safe and Lock Co. of Brooklyn. Garsson wrote to the Chemical Warfare Procurement Division of the War Department, offering to produce shells, through an imaginary Erie Basin Metal Products Co. which he claimed to be a Segal subsidiary. The War Department promptly sent him a million dollar advance.

Erie Basin Metal Products, Inc., of Illinois, was then set up to “absorb” the fictitious firm. A $3,000,000 contract rolled in, though there was still no factory! Subsequent contracts, totaling $44,879,000, were transferred to the Illinois Watch and Case Co., owned by Garsson’s partners.

In May, 1942, another company, Batavia Metal Products, was formed, which “bought” at a tripled valuation the U.S. Wind and Engine Co., also belonging to Garsson’s partners. Garsson and three associates as officers of all the companies, pulled in salaries totaling over $2,000,000 during the war. Another man was added to the firm, an Army Colonel who as Chemical Procurement Division official had okayed some $44,000,000 in contracts for the outfit.

A year later Garsscn complained to Representative May that he was not being allowed to bid on one contract. May demanded action and got it from General Campbell, who “jumped on” Gen. Thomas S. Hammond, chief of the Chicago Ordnance Division.

“These fellows are good friends of mine,” said May, “and have been very kind to me.”

May himself got control of the Cumberland Lumber Company late in 1943. The Garsson combine advanced a total of $48,634.007 to the May firm for lumber which was never delivered. Garsson kept on getting contracts.

Secretary of War Patterson put the screws on the War Manpower Commission on February 28, 1945, after a call from Garsson, who wanted the “ceiling” for his Batavia plant raised from 793 to 1,000 workers. Patterson agreed. The WMC was not to be “let off the hook,” until it complied, admitted one witness, Col. Brennan.

As a final gift, the combine was handed an overpayment of $1,010,000 in a contract termination settlement!

The Garsson case, is just peanuts, though, compared to the profits of Kaiser and Higgins in shipbuilding, also made without any investment of their own funds. And it can’t be compared to the vast steals made by General Motors, Standard Oil, General Electric, U.S. Steel, and the rest of the powerful monopolists who coined billions in profits, got government-built plants free, and are getting fat rebates on their excess profits taxes.

Then why the fuss over the Garsson case? The whole financing of government war purchases, worked out by Wall Street and administered by its own agents in “dollar a year” posts, reeks with fraud. It can’t be hidden any longer. So the Senate Investigating Committee is turning the spotlight on one smelly deal perpetrated by relatively small-time crooks, who dared to muscle in on the Wall Street racket.

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