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and, two, of enabling them in consequence to take steps to avoid such errors in the future; and, three, permitting Congress to consider whether any remedial steps may be necessary or desirable.
There are, I believe, something like 7,000 organizations of the kind we refer to as foundations, and I believe they control some $71/2 billion of capital, of which a handful of these foundations control about onethird. The size of the financial power which they wield measures the gravity of the problem involved. Moreover, stimulated by our high tax rates, more and more foundations are being created, and it is probable that the aggregate foundation control in the country will increase enormously in the ensuing years.
If we shall not spend much time in exposition of what great amount of good the foundations have admittedly done, it is because we deem it our principal duty fairly to seek out error. It is only through this process that good can come out of our work. It will be for Congress, the people, and the foundations themselves to judge the seriousness of such error, and to judge also what corrective means, if any, should be taken. Our intention has been, and I wish to make this doubly clear, to conduct an investigation which may have constructive results, and which may make foundations even more useful institutions than they have been.
In that statement, I have undertaken to set out the general purposes of the work of the committee.
The counsel has submitted some suggested rules of procedure, which have been sent to the members of the committee. Do the members of the committee feel that those rules are acceptable, or are there others you wish to prefer? If not, we can say they are adopted. What is your position?
Mr. Hays. I do not see anything objectionable, but there might be something we might want to add to them. We can consider them adopted with the privilege of amending.
The CHAIRMAN. Without objection, then, the rules of procedure suggested by the committee will be adopted.
Mr. Goodwin. The only suggestion I have, Mr. Chairman, is No. 1, with reference to a quorum, "one member of each political party.". I assumed that there would be no politics in this investigation, and I would be satisfied if that said, "one member of both the majority and minority,” just to leave the word “political" out. The CHAIRMAN. I think that that suggestion is a good one. Mr. Hays. I have no objection. The CHAIRMAN. With that modification, the rules, without objection, will stand as adopted, and if there are copies of these available for the press, of course the press will be entitled to have them, and they will be embodied in the proceedings.
(The rules of procedure are as follows:)
RULES OF PROCEDURE The following rules have been adopted by the committee: 1. Executive and public hearings
A. General provisions : No hearing, either executive or public, shall be held unless all members of the committee have been notified thereof and either a majority of the members, or one member of both majority and minority membership is present.
B. Executive hearings:
i. If a majority of the committee believes that the interrogation of a witness in a public hearing might unjustly injure his reputation or the reputation of other individuals, the committee shall interrogate such witness in a closed or executive session.
ii. Attendance at executive sessions shall be limited to members of the committee, its staff, and other persons whose presence is requested, or consented to, by the committce.
iii. All testimony taken in executive sessions shall be kept secret and shall not be released or used in public sessions without the approval of a
majority of the committee. C. Public hearings: All other hearings shall be public. 2. Subpenaing of witnesses
A. Issuance of subpenas: Subpenas shall be signed and issued by the chairman of the committee, or any member of the committee designated by said chairman,
B. Service of subpenas: Every witness shall be subpenaed in a reasonably sufficient time in advance of any hearing in order to give the witness an opportunity to prepare for the hearing and employ counsel, should he so desire. 3. Testimony under oath
All witnesses at public or executive hearings who testify as to matters of fact shall give all testimony under oath or affirmation. Only the chairman or a member of the committee shall be empowered to administer said oath or affirmation. 4. Advice of counsel
A. At every hearing, public or executive, every witness shall be accorded the privilege of having counsel of his own choosing.
B. The participation of counsel during the course of any hearing and while the witness is testifying shall be limited to advising said witness as to his legal rights. Counsel shall not be permitted to engage in oral argument with the committee, but shall confine his activity to the area of legal advice to bis client. 5. Statement of witness
A. Any witness desiring to make a prepared or written statement for the record of the proceedings in executive or public sessions shall file a copy of such statement with the counsel of the committee within a reasonable period of time in advance of the hearing at which the statement is to be presented.
B. All such statements so received which are relevant and germane to the subject of the investigation and of reasonable brevity may, upon approval, at the conclusion of the testimony of the witness, by a majority vote of the committee mei ers present, be inserted in the official transcript of the proceedings. 6. Witness fees and travel allowance
Each witness who has been subpenaed, upon the completion of his testimony before the committee, may report to the office of the clerk of the committee, room 103, 131 Indiana Avenue NW., Washington, D. C., and there sign appropriate vouchers for travel allowances and attendance fees upon the committee. 7. Transcript of testimony
A. A complete and accurate record shall be kept of all testimony and proceedings at hearings, both in public and in executive session.
B. Stenographic transcripts of the testimony, when completed by the public reporter, will be available for purchase by all those who may be interested in procuring same.
The CHAIRMAN. The general counsel of the committee is Mr. Rene Wormser, and associate counsel is Mr. Arnold Koch. The director of research is Mr. Norman Dodd.
Mr. Wormser, what do you suggest this morning?
Mr. WORMSER. Mr. Chairman, by informal agreement with the committee, we have suggested that Mr. Dodd take the stand first, in order to give the committee a sort of full report of the direction which our research has taken, and the reasoning behind the various steps
in research, and also to give those interested, the public and the foundations themselves, some idea of what our main lines of inquiry in this investigation will be.
There are many what you might call collateral lines of investigation, and comparatively minor matters into which we may probably go, depending upon time. But I have asked Mr. Dodd to take the stand to give you what I think can safely be called our main lines of inquiry. With your permission I would like to put Mr. Dodd on the stand. The CHAIRMAN. Mr. Dodd, will you take the stand. Do we have copies of his statement ?
Mr. WORMSER. It has been physically impossible to get them out in final form at this moment. If you desire them, we can in the course of the afternoon prepare them for you.
The CHAIRMAN. I understood they would be available this morning.
Mr. WORMSER. Counsel did not have time to read them. It has been quite an effort to get this done so fast. We can have the necessury corrections made, and have it ready tomorrow morning, anyway. Miss Casey thinks we can have it ready this afternoon.
Mr. Hays. Mr. Chairman, is there an agenda available at what witnesses will be called during the balance of the week and next week?
The CHAIRMAN. As I understand, Mr. Wormser expects Mr. Dodd to consume, in the scope of his portion of the committee's operation, this morning's session, and tomorrow morning's session, and possibly Wednesday morning's session, and that when Mr. Dodd completes his statement, then we will go over until, if agreeable with the committee, next Monday, so that Mr. Dodd will be the only witness for this period. All right, Mr. Dodd.
Without objection, I think it is the understanding of the committee that all of the witnesses will be sworn. Will you raise your hand?
I do solemnly swear.
TESTIMONY OF NORMAN DODD, RESEARCH DIRECTOR, SPECIAL
COMMITTEE TO INVESTIGATE TAX EXEMPT FOUNDATIONS
Mr. WORMSER. Mr. Dodd, will you state your full name for the record ?
Mr. DODD. Norman Dodd.
Mr. WORMSER. I think that you are sufficiently identified as the director of research for this committee. Will you then tell the committee the story of the direction of research, your approach to the problem, and the various steps which you took in conducting your research, please?
Mr. Dodd. I will be very glad to, Mr. Wormser. May I read a brief statement beforehand?
Mr. WORMSER. By all means.
Mr. Dodd. As the report which follows may appear to have stressed one aspect of foundation giving to the exclusion of others, I take this opportunity to call attention to the fact that innumerable public benefits are traceable to the philanthropy in which foundations have been engaged. Both in volume and kind, these benefits must appear to
any student of this subject to have been without parallel, and in the vast majority of instances, they must be regarded as beyond question either from the standpoint of their conformity to the intentions of their donors, or from the standpoint of the truly American quality of their consequences.
I also wish to acknowledge the cooperation which without exception has been extended by foundations to the staff whenever it was found necessary to solicit information from them, either directly or in writing
And finally, I take this opportunity to state that in the degree the following report appears to be critical, I sincerely hope it will be deemed by the committee, foundations, and the public alike, to be constructively so.
It was in this spirit that the work of which this report is a description was undertaken and completed.
Immediately the staff was assembled, studies were initiated to secure a full understanding of the ground which had been covered by the Cox committee, as disclosed in the hearings which it held, the files which it maintained, and the report it rendered.
To determine the dimensions of the subject to be investigated and studied, and to satisfy myself as to the contents and its probable ramification, to define the words "foundation," "un-American," "subversive," "political," and "propaganda," in the sense in which they were used in House Resolution 217, and if possible to dispose of their controversial connotations; to familiarize myself with the expressions of purpose customarily used in foundation charters.
I would like for a moment to go back to the first item which had to do with our effort to understand what the Cox committee had covered, in the way of this subject, and also what its files contained, and mention that one of the first situations or conditions with which we were confronted was the incompletion of the Cox committee files. That was so marked that we had occasion to report the nature of that incompletion to Mr. Snader, the Clerk of the House of Representatives.
Mr. Wormser, with your permission, I would like to read the letter which we sent to Mr. Snader as a matter of record.
Mr. WORMSER. Please do, sir. What is the date of that letter?
Mr. Dopp. This letter is dated January 26, 1954, and it was forwarded to Mr. Snader by Mr. McNiece, our assistant research director, who devoted a portion of his time to an intense study of these files. This letter is to Mr. Snader, and from Mr. McNiece:
On December 1, 1953, Mr. John Marshall and I visited you in your office to discuss the condition of the files of the Cox committee, as they were turned over to us. At this time we advised you that in our opinion the files were not complete, and it was understood that we would write you at a later date. are now in a position to give some definite, but not necessarily complete, information on this subject.
A cumulative list of tax-exemption organizations, published by Internal Revenue Bureau: We have been advised that the foregoing publication of 1950 and the 1952 supplement were used as a check list in making up the mailing list for questionnaires submitted by the Cox committee. These publications are definitely missing from the files.
Large questionnaires : The Cox committee designed three sets of questionnaires, namely, “large” form A and form B. The large questionnaires were sent to a specially selected list of foundations, with large endowments. This list comprised about 50 of the large foundations, and questionnaires in duplicate were received from them. One complete set of these 50 duplicate questionnaires is missing from the files.
Hearing files: An index in one of the filing drawers is labeled "Hearing Aile," and we have no way of knowing positively what was in this section, but we have reason to believe that considerable material should have been in there. As received it contained very little, and some of the indexed folders were completely empty.
Statistical summaries: We know that considerable statistical work was done over a period of about 4 months, but we have found no statistical material whatever in the files.
Reports of interviews : In its final report, the Cox committee states that it "interviewed personally more than 200 persons deemed to possess pertinent information."
We would assume that a record of these interviews covering pertinent information should be found in the files. We have found very little material that would conform to this description.
Prepared statements : The Cox committee in its final report says that it had received the prepared statements of approximately 50 other persons deemed to have had some knowledge of the subject. We find relatively little material of this nature in the files. As outlined to you in our conversation, we are calling this to your attentiion, because we wish to have it understood that we cannot assume responsibility for such material as may be missing from the files as loaned to us.
The CHAIRMAN. I think that that is very pertinent, especially in view of the fact that this committee now has the responsibility for those files, and it is well for it to become part of the record, that all of the files were not in the custody of the Clerk of the House of Representatives when this committee was formed, and the committee took over only such files as were in his custody at the time.
Does the committee have any other comment ?
Mr. Hays. Does the witness intend to attach some special significance to this, or is it just merely a report of what this committee obtained?
Mr. DODD. May I answer, sir?
Mr. Dopp. No significance; merely a matter of record and for purposes of protection on the basis we assumed we were responsible for them, Mr. Hays.
Mr. Hays. I notice in the opening paragraph, and perhaps the second paragraph, it says, “In our opinion the files were incomplete.” It seems to me an inventory of what we received would be about as much authority as we have over these files, one way or the other.
Mr. Dodd. We were concerned with identifying, as best we could, the nature of the material that was missing, rather than just taking an inventory of what was there.
The CHAIRMAN. You may proceed.
Mr. Dopp. Simultaneously, I undertook additional studies, one to determine the validity of the criticism which had been leveled against the work done by the Cox committee, and two, to substantiate or disprove the prevalent charge that foundations were guilty of favoritism in the making of educational grants, and three, to examine the