MCCONE-KAISER RELATIONS RECALLED

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP64B00346R000400030023-4
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 1
• Document Creation Date: December 15, 2016
• Document Release Date: April 15, 2004
• Sequence Number: 23
• Publication Date: January 10, 1962
• Content Type: NSPR

Approved For Release 2004/05/05: CIA-RDP64B0034"N( MA0249462
The Washington Merry-.Go-Round THE WASHINGTON POST Wednesday, on. 10,1962 F 11,
McCone-Kaiser Relations Recalled.
By Drew Pearson
One of the first problems
facing the Senate Armed Serv-
ices, Committee will be to re-
view the record laid down by
loved senior
Republican,
of New Hamp-'' Q `_
shire, regard-
i n g President
Kennedy's new
chief of Cen-
tral Intelli-
gence.
The new CIA
chief, John A. Pearson
McCone, was appointed by Mr.
Kennedy just a few days after
Congress adjourned last Sep-
tember and it is now up to
the Senate Armed Services
Committee to confirm him.
If Sen. Bridges' colleagues
turn to their own subcommit-
tee hearings of June 2, 1953,
and thereafter, they will find
some amazing testimony by
and about the. new CIA chief.
Amazing as it is, the testi-
mony is not quite complete,
because later testimony by Me-
Cone before the Joint Atomic
Energy Committee, July - 2,
1958, shows that he may have
been guilty of a conflict of in-
terest when as Under Secre-
tary of the Air Force he award-
ed a. Flying Boxcar contract to
the Kaiser-Frazer Company
for three times the price the
Government was paying to the
Fairchild Corporation. k a . ,
One Republican, Rep. Alvin
O'Konski of Wisconsin,
charged his fellow Republican,'
McCone, with being "merely
on leave of absence from, his
position as president of the
Bechtel-McCone Corp. . . , be-
comes Under Secretary of the
Air Force and arranges a nice
fat gift for Kaiser, and that is
how Kaiser manages to con-
tinue to suck defense dollars
while our boys in Korea die
for lack of planes."
McCone denied the state-
ment. However, he did not
deny that the Bechtel family
owned 4200 shares of Kaiser-
Frazer Common stock. He also
had a hard time putting a good
light on the highly unusual
chain of facts which Sen.
Bridges placed before the Sen-
ate Armed Services Subcom-
mittee . as - to how Kaiser got
the Flying Boxcar contract.
At that time, 1950, Henry J.
Kaiser's attempt to rival other
auto manufacturers with the
"Henry J" small-sized car and
other Kaiser-Frazer makes had
been a flop. He had a heavy
Overhead; a factory at Willow
Run, Mich., which was closing
down, and a large supply of
machinery on hand.
According to the testimony
unearthed by Sen. Bridges,
Kaiser's close associate with
whom he had been engaged in
West Coast shipbuilding, John
A. McCone, got him off the
hook. McCone ' produced a
quickie contract to manufac-
ture the C-119 or Flying Box-
car.
The cost per plane as built
l4 y Kaiser was to be $688,365,
as compared with $260,000 per
plane as built by Fairchild in
Hagerstown, Md. The Air
Force, under McCone, how-
ever, took part,of the contract
away from Fairchild, despite
the higher cost. McCone, try-
ing to explain this to -Sen.
Bridges, said that the Defense
Department wanted tQ develop
secondary suppliers. He had
to!admit under cross-examina-
tion, however, that Secretary
of.. Defense Magshall had is-
sued the directive on "second
suppliers" only after the
Kaiser' contract had been ne-
gotiated.
In the end Kaiser charged
the Air Force not $688,365 as
estimated, but $1,339,140 'per
boxcar. It even charged up to
the Air Force $78,000 for
liquor, food, and the cost of
a dedication party for its first
C-119-though this was caught
and disallowed by Air Force
auditors.
Faster Than Fast
The amazing, high-speed ne-
gotiations began on Dec. S.
1950, when Kaiser, hard-
pressed from his unsuccessful
auto venture, applied to the
Reconstruction Finance Cor-
poration for a $25 million loan.
He was told he could get it
if he had a Government con-
tract. . '
Later that same day, thanks
to his old shipbuilding partner-
ship, he had lunch with Mc-
Cone, then Under Secretary of
the Air Force in charge of pro-
curement. Son Edgar Kaiser
also was present, together with
IA. Gen. K. B. Wolfe, deputy
chief of staff' for materiel. At
this luncheon, Senate hearings
showed that the plan to build
C-119s. in the Kaiser Willow'
Run plant was discussed.
On Dec. 6, one day later, the
Kaisers appeared at the Fair-
child plant in Hagerstown and
demanded engineering data on
the C-119 which Fairchild had
developed and was then pro-
ducing. Under an Air Force
contract Fairchild was re-
quired to give the data to a
competitor.
Nine days later, Dec. 15, the
decision was reached to award
the Flying Boxcar contract to
Kaiser. No facilities or cost
studies had been made, and
the Air Force had no idea
what Kaiser was going to
charge Uncle Sam for being
bailed out at Willow Run.
All this caused Sen. Bridges
to ask McCone:
"If the Air Force's records
should indicate that the deci-
sion to award the contract for
the d-119 to Kaiser-Frazer was
reached on Dec. 15 and that
the proposals were delivered
by Kaiser-Frazer to the Air
Materiel Command on Dec. 19,
four days later, what would
you say?"
"I would say that the action,
though apparently fast, was
proper under the sense of
emergency that we were op-
erating," replied McCone.
"It is even faster than fast,
is it not?" asked Bridges.
"It is pretty fast, you bet,"
agreed McCone.
In all the testimony, how-
ever, McCone would not admix
that he had any continuing
financial relationship witl,i
Kaiser. 1 --.-:..s
Copyrisht, 1962, Bell &yndioat8, Inc,
Approved For Release 2004/05/05 : CIA-RDP64B00346R000400030023-4