TAX-EXEMPT FOUNDATIONS TUESDAY, MAY 11, 1954 HOUSE OF REPRESENTATIVES, TAX-EXEMPT FOUNDATIONS, Washington, D. C. The special subcommittee met at 10 a. m., pursuant to recess, in room 1301 of the House Office Building, Hon. Carroll Reece (chairman of the special committee) presiding. Present: Representatives Reece, Wolcott, Hays, and Pfost. Also present: Rene A. Wormser, general counsel; Arnold T. Koch, associate counsel; Norman Dodd, research director; Kathryn Casey, legal analyst; and John Marshall, Jr., chief clerk of the special committee. The CHAIRMAN. The committee will come to order. Mr. Wormser, as I understand, Mr. Dodd will resume this morning. Mr. WORMSER. Yes, Mr. Chairman. Will you take the stand, Mr. Dodd, please. TESTIMONY OF NORMAN DODD, RESEARCH DIRECTOR, SPECIAL The CHAIRMAN. You may proceed, Mr. Dodd. Mr. HAYS. Mr. Chairman, before Mr. Dodd goes on with his statement of which we have a copy today, there are 2 or 3 questions about his statement yesterday which have occurred to me since I have had a chance to look at the record. I wonder if it might be well to get those in the record now? The CHAIRMAN. Yes; I think so. Mr. HAYS. I think it is mainly to clarify some of the things that were said. Mr. Dodd, one of the things you said yesterday was that only a few foundations were investigated by the Cox committee. Could you give us a figure on that? Mr. DODD. Offhand in any accurate terms, I do not think so, Mr. Hays, but compared to the number of foundations that are involved, the committee had very little time and relatively very few were studied. I should say probably 10. Mr. HAYS. You think about 10? Mr. DODD. I think about 10. Yes, sir. They had questionnaires on almost 900 of them, Mr. Hays. Mr. HAYS. This might be a pertinent question. In view of the fact this committee has had more time, perhaps 3 or 4 times more, how many do you think we will investigate? Mr. DODD. We have gone about it a little differently. As I tried to outline in the statement yesterday, we took up the general concepts that fit all foundations, rather than attempt either by sampling or tabulation to arrive at conclusions from a specific number of foundations. We knew we could never cover the field and there is no pattern that runs through foundations in general. For example, we investigated, rather, we communicated with probably 60 or 70 of the largest ones, just to see whether or not any pattern was discernible and discovered that they vary so much, one from the other, that we could not go at it from that standpoint. There was no basis for sampling which would, in my judgment, end in any fair treatment of them. Mr. HAYS. To get back to my question, how many will we be able to cover, I do not expect you to be definite. Mr. DODD. In the ordinary sense that a deep investigation of a single foundation is concerned, I would say not more than 1 or 2. Mr. HAYS. Another thing you said yesterday in response to a question of mine was that you had received replies from 700 colleges. That is replies to a questionnaire that you had sent out. Can you tell me offhand how many of those colleges replying received any grants? Mr. DODD. No, sir, I cannot yet, because the tabulations have not been completed. Mr. HAYS. But they will be available later? Mr. DODD. They will be available in very complete form. Mr. HAYS. I have one more question. We discussed a little bit yesterday this matter of your statement that the foundations have not been asked why they did not support projects of a pro-American type. Mr. DODD. That was one of the criticisms. Mr. HAYS. Yes. I objected to that because I do not like that kind of question, but it might well be, since it is in the record, and since it is a statement that you attribute to the chairman of the committee, if we could have along with your other definitions the definitions of what you mean by pro-American. The CHAIRMAN. Will the gentleman yield? Mr. HAYS. Yes. The CHAIRMAN. Since that question came up, I have taken occasion to review the speech of mine to which it referred, and this is the language preceding the quotation of the 12 criticisms that were listed, and I am quoting: The committee (referring to the previous so-called Cox committee) in its report to the House, House Report 2554, listed 12 complaints and criticisms of foundations in the form of the following questions. And I simply quoted from what was contained in the report of the House committee. So that they were not original criticisms of mine. By what I say now, however, I am not disavowing the fact that I might accept the criticisms. I just want to get the record straight with reference to what was the basis for the so-called 12 criticisms, which were raised yesterday. They were taken from the report to the House by the previous committee. Mr. HAYS. In looking this over rather hurriedly I do not see anything in there in exactly that same specific language. Why do we not include this paragraph or two in the hearing record? The CHAIRMAN. That is entirely satisfactory to me, if it is satisfactory to Mr. Dodd. Mr. DODD. Yes, indeed. Mr. HAYS. Let us go back far enough to pick up the thought of it. In fact, I would say the beginning of the paragraph there, so we understand what it is. The CHAIRMAN. Yes. It is so-called part 1, stating that the time and facilities were inadequate and goes down to part 2, I presume. Mr. HAYS. Yes. The CHAIRMAN. So far as I am concerned, I would be glad to have the whole speech put in the record. Mr. HAYS. I have no objection. The CHAIRMAN. Without objection, it will be so ordered. (The speech referred to is as follows:) Mr. REECE of Tennessee. Mr. Speaker, I do not say this lightly but in my opinion, the subject embraced in House Resolution 217, now before us, is one of the very important matters pending in Washington. No one seems to know the number of tax-exempt foundations. There are probably 300,000 foundations and organizations which have great tax exemptions. These exemptions cover inheritances, income, and capital-gains taxes. The majority of these organizations are honestly and efficiently conducted. In the past, they have made a magnificent contribution to our national life. the past, the majority have justified these tax exemptions, even though the probable cost to the taxpayers runs into the billions. In Certainly, the Congress has a right and a duty to inquire into the purposes and conduct of institutions to which the taxpayers have made such great sacrifices. In any event, the Congress should concern itself with certain weaknesses and dangers which have arisen in a minority of these. Some of these activities and some of these institutions support efforts to overthrow our Government and to undermine our American way of life. These activities urgently require investigation. Here lies the story of how communism and socialism are financed in the United States, where they get their money. It is the story of who pays the bill. There is evidence to show there is a diabolical conspiracy back of all this. Its aim is the furtherance of socialism in the United States. Communism is only a brand name for socialism, and the Communist state represents itself to be only the true form of socialism. The facts will show that, as usual, it is the ordinary taxpaying citizen who foots most of the bill, not the Communists and Socialists, who know only how to spend money, not how to earn it. The method by which this is done seems fantastic to reasonable men, for these Communists and Socialists seize control of fortunes left behind by capitalists when they die, and turn these fortunes around to finance the destruction of capitalism. The Members of this House were amazed when they read just recently that the Ford Foundation, largest and newest of the tax-free trust funds, had just appropriated $15 million to be used to "investigate" the investigating powers of Congress, from the critical point of view. The Members of the House Committee on Un-American Activities, of which Judge Velde is chairman, have a great deal of personal knowledge, gained by hours spent in listening to sworn testimony from Communists and ex-Communists, and those who seek refuge in the fifth amendment, as to the extent of the treasonous conspiracy in our Nation. No Congressman, who has gone through such experiences, could fail to be alarmed at the fact that $15 million from the fortune of the late Henry Ford, who probably hated communism more than any other American of his day, was to be expended to attack the Congress for inquiring into the nature and extent of the Communist conspiracy, on grounds that Congress was "abridging civil liberties" of individuals by requiring them to answer whether or not they were Communists. After all, no committee of Congress ever had a fund of $15 million to finance its inquiries, hire a staff, conduct its research, and print and circulate its findings. The House Committee on Un-American Activities has a budget of only $300,000 for this biennium-one-fiftieth of the sum the Ford Foundation proposed to expend for a refutation of its findings and those of other committees of the Congress engaged in similar pursuits. The Communists have their own agency to smear the committees of the United States Congress and to defend Communists hailed before them. It is called the Civil Rights Congress and has been listed by the Attorney General as Communist and subversive. To give it liberal respectability, Mr. Paul Hoffman, former president of the Ford Foundation, was made chairman of this kingsized Civil Rights Congress endowed by the Ford Foundation. The fund for the Republic, as this Ford Foundation agency is named, has announced that it will make grants for an immediate and thorough investigation of Congress. During the last few weeks of the 82d Congress, a select committee of seven Members of the House conducted-pursuant to House Resolution 561-a somewhat hasty, limited, and abbreviated inquiry into the administration of certain tax-exempt foundations, including the huge Ford Foundation. The House passed the resolution to create this select committee on April 4, 1952, and on July 2, 1952, by a vote of 247 to 99, voted $75,000 for the investigation. But actually, the counsel and the staff only started its work early in September, and thus, had only 4 months to carry out the task entrusted to it it by Congress. Hearings were started late in November and only 17 days were devoted to hearing witnesses. The select committee's work was further handicapped by the fact that its chairman, Hon. Eugene E. Cox, who was primarily responsible for the creation of the select committee, fell ill during the hearings and died before the committee submitted its final report to Congress. I was prevented from attending these hearings, as a minority member of the select committee, by serious illness in my family. The select committee of the 82d Congress filed its report on January 1, 1953. In signing the report, I inserted a notation at its end with the distinct intention of introducing a resolution to continue the investigation of foundations and their subversive activities in this Congress. Pursuant to this notation, I introduced on April 23, 1953, a House Resolution 217, to create a committee by this Congress to conduct a full and complete investigation and study of tax-exempt foundations. In introducing this resolution, I made some remarks on the work of the select committee of the 82d Congress. So that my colleagues may be acquainted with what was revealed by this select committee without reading nearly 800 pages of testimony and documents of the hearings, which has no index, I presented the following summary of what was disclosed: First. The evidence presented at the hearings in this case by sworn testimony, indicated that at least in one case, even some of the trustees of a supposedly legitimate foundation, with over $10 million in assets, were Communists. Second. The hearings disclosed that some officers of large and supposedly legitimate foundations were Communists. Third. Numerous Communists have received grants from foundations chartered by the Congress of the United States, and in some instances these Communists received grants from more than one foundation. Fourth. Foundation grants have been given to many organizations designated by the Attorney General of the United States as Communists, or exposed by the investigations of committees of the Senate and House as subversive organizations subject to Communist Party discipline and control. A primary example of this is the Institute of Pacific Relations, exposed by the Senate Internal Security Subcommittee as subject to Communist discipline, which has received more than $2 million from various foundations. When introducing House Resolution 217, I listed some of the omissions and faults of the work of the select committee of the 82d Congress which must be remedied by this Congress. I feel that these omissions and faults should again be brought to the attention of the House, and that I should not only elaborate these faults and omissions, but should point out what the proposed new select committee of this Congress intends to do to remedy them. I. TIME AND FACILITIES WERE INADEQUATE The Committee To Investigate Foundations in the 82d Congress had completely inadequate time and facilities to do the job Congress entrusted to it. The committee, in its report to the House-House Report 2554-listed 12 complaints and criticisms of foundations in the form of the following questions: 1. Have foundation funds been diverted from the purposes established by the founders? 2. To what extent have foundations been infiltrated by Communists and Communist sympathizers? 3. Have foundation funds been channeled into the hands of subversive individuals and organizations; and if so, to what extent? 4. Have foundations supported or assisted persons, organizations, and projects which, if not subversive in the extreme sense of that word, tend to weaken or discredit the capitalistic system as it exists in the United States and to favor Marxist socialism? 5. Are trustees of foundations absentee landlords who have delegated their duties and responsibilities to paid employees of the foundations? 6. Do foundations tend to be controlled by interlocking directorates composed primarily of individuals residing in the North and Middle Atlantic States? 7. Through their power to grant and withhold funds, have foundations tended to shift the center of gravity of colleges and other institutions to a point outside the institutions themselves? 8. Have foundations favored internationalism? 9. To what extent are foundations spending American money in foreign countries? 10. Do foundations recognize that they are in the nature of public trusts and are, therefore, accountable to the public, or do they clothe their activities in secrecy and resent and repulse efforts to learn about them and their activities? 11. Are foundations being used as a device by which the control of great corporations are kept within the family of the foundation's founder or creator? 12. To what extent are foundations being used as a device for tax avoidance and tax evasion? Before attempting to answer any of these questions, the report of the committee of the 82d Congress immediately points out: In dealing with these questions, the committee recognizes all too clearly that which must be apparent to any intelligent observer, namely, that it was "allotted insufficient" time for the magnitude of its task. [Quoted matter added.] Obviously, the select committee had insufficient time to investigate fully these matters and make seasoned and timely recommendations to the House for legislative corrections of those evils which may exist and require serious consideration. A special committee of this Congress, in accordance with House Resolution 217, would have sufficient time to undertake extensive research and investigation, for holding public hearings, and to report its findings and recommendations to Congress. It should be noted that despite its serious limitations, the select committee of the 82d Congress disclosed, as indicated by my previous fourpoint summary, substantial evidence regarding support given to Communists by foundations. If considerable evidence can be revealed by an incomplete investigation, which had so little time, it can be reasonably expected that a new committee, which has the time to explore the various ramifications of support given to Communists by foundations, will produce startling evidence. II. EXCUSES CONCERNING GRANTS TO COMMUNISTS TOO READILY ACCEPTED The select committee in the 82d Congress permitted the officers and trustees. of foundations, exercising control over the disbursement of hundreds of millions of dollars in tax-exempt funds, to give the excuse, without being challenged for their veracity or the reasonableness of their statements, that foundation grants were made to Communist organizations and individuals unwittingly and through ignorance. A new special committee of the 83d Congress should ask these officers and trustees who testified to give evidence under oath that grants to Communists were, in fact, given unwittingly and if precautions are being taken so that the practice of making grants to subversives would be stopped. |