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statements that he had been forced to make public the names of persons with communist affiliations in the State Department; (5) that Senator McCarthy engaged in fraud and deceit in the Maryland senatorial election of 1950; (6) that Senator McCarthy allegedly stated that he would not claim senatorial immunity; (7) dealt with an alleged FBI chart referred to by Senator McCarthy and described as a "hoax" by Senator Benton; (8) that Senator McCarthy repeatedly stated that he would name the names of communists in the State Department, when subsequent statements by him disclosed that he had no names; (9) dealt with Senator McCarthy's intervention on behalf of the defendants in the Malmedy Massacre case; and (10) dealt with persons Senator McCarthy employed-particularly Don Surine's false statements concerning the circumstances under which he had left the employment of the FBI, and the employment of an alleged Communist, Charles Davis, for investigation work in Europe.

By letter of October 5, Senator Benton requested that the investigation of Senator McCarthy be extended to include acts of Senator McCarthy prior to his election as a United States Senator, particularly his involvement in the Quaker Dairy case, State vs. McCarthy in 1941; in Senator McCarthy's violation of the State Constitution in 1946 in running for the Senate while holding the position of Judge, and in charges that Senator McCarthy, as a Judge, specialized in divorce mill actions (Exhibit 46).

Upon Senator McCarthy's refusal to appear before the Subcommittee, the staff was directed to proceed with an investigation, the report of which was completed and submitted to the Subcommittee in January of 1952.

Information from this unreleased report appeared in the press. There were unconfirmed reports and accusations that these leaks were inspired to "smear" Senator McCarthy. There were like reports that Senator McCarthy had obtained a copy of the confidential staff report and leaked it to the press to embarrass the Subcommittee. Unfortunate and irresponsible as this event proved to be, it is a matter which this Subcommittee could not and does not propose to resolve.

After the vote of the Senate confirming the jurisdiction and integrity of the Subcommittee, public hearings were ordered and held from May 12 through May 16, 1952, inclusive, on the Lustron fee phases of Senator Benton's charges. Under all the circumstances and particularly without some explanation from Senator McCarthy, who refused to testify, the acceptance of this $10,000 fee would appear to have been highly improper, to say the least. The facts adduced by investigation and hearings with respect to this matter will be summarized later in this report.

The information developed in connection with Senator McCarthy's obtaining, disposition of and reporting of his taxable income on the Lustron $10,000 fee, as well as reports and rumor that he had collected funds for his anti-communist fight which he had possibly diverted to his own use and received money for aiding special interest groups while a United States Senator, brought about an extension of the investigation into his financial and other activities, and it is the information in this connection which will be treated with primarily in this report.

In Senator Benton's charges against Senator McCarthy and also in Senator McCarthy's charges against Senator Benton, there were

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contained matters so controversial in nature that it would not be feasible for this Subcommittee, or perhaps any other agency, regardless of its resources, to resolve.

This Subcommittee is reluctant to become involved in matters concerning speeches and statements. It has already made a report on its investigation into the 1950 Maryland senatorial campaign, including Senator McCarthy's participation therein, and feels this report speaks for itself. It should not be necessary to state that the Subcommittee in its effort to in no way give aid to communism or detract from anything which has been done to prevent communist infiltration in Government or elsewhere, has scrupulously attempted to avoid any issues wherein its position might be misinterpreted. It does not intend to go into matters relating to Senator McCarthy's activities prior to the time he was a candidate for the United States Senate, except insofar as such information may be necessary to a better understanding of later financial matters treated with.

Press releases of two former Subcommittee staff members

The Subcommittee does not intend to go into the circumstances surrounding adverse press releases which were made by two of its staff members during the course of this investigation, except to give the information on hand with respect to the circumstances surrounding the making of such statements to the press.

On December 8, 1951, the services of Daniel R. Buckley, a staff investigator, were terminated, together with those of two other investigators, for the reason that their services were no longer necessary. Approximately three weeks later, on December 27, 1951, at 5:00 p.m., Mr. Buckley issued a long prepared press release which was highly critical of the Subcommittee and stated that it was being used to smear Senator McCarthy (Exhibit 47).

Records of the telephone company, apparently obtained at the time, reflect that at 3:06 p. m. of that date (December 27, 1951), Miss Jean Kerr, Senator McCarthy's secretary, made a call from the Senate Office Building to Mr. Buckley, and that at 4:41 p. m., Mr. Buckley called the office of Fulton Lewis, Jr., in Washington, D. C. Two other calls were made on December 27, 1951, by Mr. Buckley in New York to Miss Jean Kerr in Washington at 7:40 and 10:33 p. m. There were also a number of other calls to Miss Kerr subsequent to that date, all of which are listed on Exhibit 47a attached.

On September 8, 1952, Jack Poorbaugh, a Subcommittee investigator, resigned from the staff by telegram from Cleveland, Ohio, his home, which wire he simultaneously released to the press. In the telegram, Mr. Poorbaugh stated that the Subcommittee was being unfair to the prejudice of Senator McCarthy. (This wire is attached as Exhibit 35.) It will be noted that September 8th was the day before the Wisconsin primary in which Senator McCarthy was a candidate. Information from a reliable source reported that Mr. Poorbaugh had conferred with associates of Senator McCarthy, including Fulton Lewis, Jr., just prior to his resignation in order to assist Senator McCarthy in the primary election. In conflict with this action was a letter (a photostatic copy of which is attached as Exhibit 48), written in long-hand by M:. Poorbaugh to Subcommittee Counsel, in which he requested two weeks' leave without pay to proceed to Cleveland to attend to personal matters. This letter was written in the office of the

Subcommittee on Saturday, September 6, and left on the Committee Counsel's desk, in his absence.

*

When the Subcommittee received the letter dated November 10, 1952, from Senator McCarthy's Administrative Assistant, Mr. Kiermas, advising that if the Subcommittee would let Senator McCarthy know just what information was desired, he would be glad to try to help (Exhibit 40), it was hoped that, at last, possibly Senator McCarthy would come before the Subcommittee and give his explanations of the many transactions in which he engaged, which, at least without some explanation, looked highly irregular.

It was in furtherance of this first offer of cooperation received from Senator McCarthy which caused the Subcommittee to send him the letter of November 21, 1952 (Exhibit 41), which set forth the six general questions previously stated in this report and about which the Subcommittee desired information. The Subcommittee believed that Senator McCarthy, from his intimate knowledge of his own activities, would and did obtain from these questions a good impression of the explanations desired.

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Senator McCarthy's curt reply (Exhibit 45) that the answer to the "six insulting questions is 'No'", left the Subcommittee with no alternative but to make its report with the information which it had, leaving to the members of the Senate to draw such conclusions from it as they would. It is under the headings of these six general questions that the body of this report is being written.

The exhibits and other facts appearing in this report were presented to the Subcommittee by witnesses under oath.

Whether Under the Circumstances it was Proper for Senator McCarthy to Receive $10,000 from the Lustron Corporation

On September 28, 1951, Senator Benton, in his testimony before the Privileges and Elections Subcommittee in support of S. Res. 187, raised the question as to the propriety of Senator McCarthy's receiving a $10,000 fee from the Lustron Corporation of Columbus, Ohio, which was being financed by the Reconstruction Finance Corporation. (See Hearings, pp. 23-28.)

During the 80th Congress, Senator McCarthy was a member of the Banking and Currency Committee, which Committee had jurisdiction over both the RFC and the Housing Agencies, as well as the Committee on Expenditures in the Executive Departments, which Committee was also interested in some of the Lustron operations.

The Lustron prefabricated steel house, endorsed by various veteran and other organizations and sponsored by the Housing Agencies in accordance with the Veterans' Emergency Housing Act of 1946, was ultimately financed by the RFC, over its initial objection due to the fact that the private risk capital involved was negligible. A series of 7 loans totalling $37,500,000 were made between June 30, 1947, and August 29, 1949.

The venture was a failure; RFC instituted foreclosure on February 14, 1950, and the loss to the Government will reportedly exceed $30,000,000. Incident to a subsequent inquiry by the Senate Subcommittee on RFC, it was developed that Lustron had been mismanaged; that frauds had been practiced upon it; and that excessive salaries were paid officials, such as E. Merl Young, because of alleged influence.

The payment of the $10,000 Lustron fee to Senator McCarthy was also referred to.

During the pertinent period of the Lustron operations, both Lustron and the RFC were particularly sensitive to the will of the Congress; Lustron because, aside from an initial relatively negligible investment, it was entirely financed by public funds; the RFC because its authority expired as of June 30, 1947, and the Congress was obliged to temporarily extend it for one year until further inquiry was completed, when the life of the RFC was extended, on June 30, 1948.

On January 14-15, 1948, the Senate Banking and Currency Committee, at Washington hearings pursuant to its investigation of RFC operations under S. Res. 132, and its inquiry regarding Lustron, developed through Lustron president, Carl Strandlund, that he had been advised of his need for Congressional support of his venture (p. 351), and that he accordingly did see many Senators and Congressmen to present the merits of his project (p. 363).

Senator McCarthy, a sponsor of the resolution of July 1947 which created the Joint Committee on Housing, consisting of members of the Banking and Currency Committees of both the House and the Senate, took an active part, as Vice Chairman, in its nation-wide hearings on housing conditions. Upon the completion of the housing inquiry on March 15, 1948, Senator McCarthy filed his own report reflecting his views on housing and related proposed legislation, and favored encouragement of mass produced homes. He particularly commended the Housing and Home Finance Administration and recommended that Administrator Foley's salary be increased.

Various amendments and additions to the Housing Act, after numerous proposals, substitutions, etc., some of which were sponsored by Senator McCarthy, were ultimately approved by the Senate and were incorporated into the related housing laws. Section 102 of Public Law 901 (August 10, 1948) authorized the RFC to make loans to pre-fab manufacturers, aggregating no more than fifty million dollars. This provision gave the RFC additional funds and authority to make its third Lustron loan of $7,000,000 on February 14, 1949, as well as the subsequent loans. The Act also provided for an increase in the salary of the HHFA Administrator.

A few days subsequent to the enactment of the new Housing Act, Senator McCarthy contacted Administrator Foley to request his assistance for Miss Jean Kerr, of his office, who was working on a housing manuscript. The HHFA cooperated and assisted her in the compilation of data, etc., through December, 1948. (See testimony of Walter Moore Royal, Jr., Special Assistant to the HHFA Director of Information, before the Privileges and Elections Subcommittee on May 16, 1952, pp. 293-320.) HHFA Administrator Foley, in a letter dated February 23, 1951, to Senator Maybank, Chairman of the Senate Committee on Banking and Currency, outlined in detail the part played by his agency in the preparation of Senator McCarthy's housing booklet, their review and corrections of three separate drafts.

These Subcommittee's hearings of May 1952 developed that Senator McCarthy approached Strandlund during October of 1948, setting a price of $10,000 for his housing manuscript, which was "not in publishable form", and that Strandlund agreed to it without any prior consultation with his public relations or executive staff, or notification to the RFC, and at a time when Lustron had not completed its machinery

and tooling installation, had a huge backlog of orders and had completed only a few sample houses for demonstration purposes. (See testimony of Carl Strandlund, Lorenzo Semple, Thomas J. O'Sullivan, Maron J. Simon, and George E. McConley; pp. 76-86, 109, 141; 188193; 194-5; 198-9; 205-6; 217-222; 273, 276-8, 280-1.)

Lustron's purchase of the housing article which Senator McCarthy unsuccessfully attempted to sell to other publishers the previous March and April, was attributed by him to the fact that Lustron gave him "the most favorable contract". (See Congressional Record, June 19, 1950, vol. 96, No. 120, pp. A4764-4771, wherein Senator McCarthy inserted the housing article, his correspondence with several publishers, and his version of the Lustron phase.)

To appreciate the urgency of the hasty negotiations with Lustron to obtain a $10,000 fee on November 12, 1948, it is essential that we consider Senator McCarthy's over-extended debt position at the Appleton State Bank, which became quite desperate during September through November of 1948. Although the Bank had notified him that it was essential that his total bank debt of $72,943.96 be reduced, or his collateral liquidated (see supporting letters, Exhibits 49–54), Senator McCarthy did not use the Lustron fee for this purpose but bought stock with it which he pledged as additional collateral for the loan. The Lustron check for $10,000, dated November 12, 1948, issued to "Joseph R. McCarthy," was endorsed in blank over to Wayne, Hummer & Co., the Senator's broker (Exhibit 55) to purchase additional stock of the Seaboard Airlines Railroad.

It may or may not be significant that the Seaboard Airlines Railroad was also financed by the RFC and at the time indebted to RFC in excess of $15,000,000. Our inquiry developed that during October of 1948, Senator McCarthy purchased 1,500 shares of Seaboard common stock at an average price of $22 per share; that this railroad had been in receivership since 1930, came out of reorganization in 1946 to be operated under a voting trust arrangement through April 1, 1951, and that the Lustron $10,000 fee was used to increase his Seaboard holdings to 1,950 shares. These holdings were pledged by Senator McCarthy to support his Appleton bank loans. While it is not known whether Senator McCarthy's information with respect to this stock had anything to do with his position as a United States Senator, it is interesting to note that Senator McCarthy suggested speculation in Seaboard stocks to others. (See letters dated December 16, 1948, and January 5, March 2, and March 10, 1949, annexed hereto as Exhibits 56-59.)

Our inquiry developed information which reflected that at the time of Senator McCarthy's purchases of Seaboard stock, it did not appear to an "outsider," or to the uninformed, to be either a good investment or speculation, particularly since no dividends had been declared since long prior to receivership in 1930, and, further, because the common stock was encumbered by the voting trust agreement.

Although the depreciation of the stock market had its consequent effect upon his pledged collateral, and Senator McCarthy was obliged to sell 250 shares of Seaboard in 1949 and 1950 at a loss, he resisted the bank's suggestion that the balance be liquidated, and on August 25, 1950 (Exhibit 60), advised the Appleton State Bank that he had checked with some of the Directors (not otherwise identified), who advised against the sale. Senator McCarthy held 1,700 shares until

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