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148 C. Cls. for 2 months and was out of touch with the details of the tungsten program. He said that Mr. Pulvermann should see Mr. William Freeman, Assistant Commissioner of EPS. General Wilson did not mention to Mr. Pulvermann the contract of GSA with Bensaude & Company.

B. July 1 to September 30, 1951

37. (a) Mr. Pulvermann had his conference with Mr. Freeman on July 3.81 After a brief discussion of the requisite specifications of tungsten ore and some probing of prices, Mr. Freeman said that an armistice was reported to be near in Korea,82 wherefore EPS was not interested in a long-term contract for the purchase of tungsten.

(b) After his conference with Mr. Freeman, Mr. Pulvermann spent the remainder of July 3 in conference with Colonel Westbrook. They were together when a radio news broadcast reported the issuance by the Senate Preparedness Subcommittee of a report on tungsten which was severely critical of the procurement and stockpiling programs.83

(c) Mr. Pulvermann thereupon explained to Colonel Westbrook in full detail (1) his arrangement with Dr. Soares and (2) his discussion with the Assistant Commissioner of EPS a few hours before. Both men considered the report of the Senate subcommittee, as reviewed by the newscast, to be contradictory of the attitude Mr. Pulvermann had encountered at EPS. They decided to seek further clarification through the office of the chairman of the Senate subcommittee.84

38. (a) On July 5, 1951, the office of the chairman of the subcommittee referred Colonel Westbrook to the director of the subcommittee staff, Mr. George Reedy. On July 6, Mr. Reedy met with Colonel Westbrook and Mr. Pulvermann, and referred them to Mr. Laurence P. Sherfy, counsel for the subcommittee. After full discussion Mr. Sherfy made an appointment for them to see GSA's Assistant Administrator for Defense Coordination, Mr. Irving Gumbel, the same day.

"A weekend intervened between June 29 (Friday) and July 3 (Tuesday). * One year had passed since the hostilities in Korea had begun. The forces

of the United Nations had regained the initiative with the recapture of Seoul on March 14, 1951, and had crossed the 38th parallel the following month. This was the report on "Tungsten, 1951" described in finding 23. 84 Senator Lyndon B. Johnson, of Texas.

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(b) Mr. Gumbel suggested that Mr. Pulvermann must have misunderstood Mr. Freeman; that Mr. Freeman might have said only that a long-term contract with Portuguese suppliers was precluded by the arrangement with Bensaude & Company. When Mr. Pulvermann stated that he had never before heard of Bensaude, either in Portugal or the United States, Mr. Gumbel made inquiry of both General Wilson and Mr. Freeman and learned that neither had mentioned Bensaude to Mr. Pulvermann. Thereupon, Mr. Gumbel suggested that Colonel Westbrook and Mr. Pulvermann ascertain whether or not Dr. Soares would be willing to deal through Bensaude.

(c) At a second conference with Mr. Gumbel, on July 12, 1951, Mr. Pulvermann reported that Dr. Soares was reluctant to deal with Bensaude because of Bensaude's lack of experience with mines and minerals.85 Mr. Gumbel then expressed the opinion that a contract could be negotiated in Washington, provided Dr. Soares' company could furnish assurance of its ability to produce and deliver.86 Mr. Pulvermann said that he would return to Portugal immediately to complete the measures preliminary to negotiation.

39. (a) With the way open for the negotiation of a contract, Colonel Westbrook and Mr. Pulvermann analyzed (1) the possibilities that were open to them as participants in Dr. Soares' project and (2) the principles by which they should be guided in dealing with Dr. Soares and his company (or associates).87

(b) From the standpoint of compensation for their participation in the project they considered and rejected the possibilities of (1) a fixed fee for their services; (2) a stock

85 Defendant infers that Mr. Pulvermann was at some pains to induce this reply, since direct dealings between Dr. Soares and the Bensaude firm might have eliminated Mr. Pulvermann and his associate, Colonel Westbrook, from the transaction. In support of the inference, defendant cites two cablegrams in which Mr. Pulvermann urged Dr. Soares not to discuss the situation with others. It may be that the answer given by Dr. Soares was the one desired by Mr. Pulvermann.

66 Mr. Gumbel then introduced Colonel Westbrook and Mr. Pulvermann to members of the staff of GSA (including Mr. Charles Stott, with whom they later had dealings as an official of DMPA); and supplied them with forms sufficient to advise them of the nature and extent of information to be furnished in applying for loans and in other steps in the negotiation.

87 From the outset both men regarded their participation in the project as that of coventurers.

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148 C. Cls.

participation in the company to be formed; and (3) a syndicate to be organized by them to buy the tungsten from the Soares corporation for resale to the United States.88 Their decision centered on a commission on sales. They further decided, on advice of counsel,89 that their contract should describe them as sales agents and should give them exclusive sales rights on all products for a specified period of time.

40. On July 15, 1951, as Mr. Pulvermann was preparing to return to Europe, Colonel Westbrook expressed in writing (addressed to "Dear Heinz") his views of the venture, as follows (in part):

1. Companhia Atlantica ***. In his letter * of June 16, 1951, Dr. *** Soares stated that he was in position to furnish *** full information about the Company and its activities and connections in Portugal. I suggest that you explain that you and I are now in position to enter into serious negotiations for sale of the products of the Company (especially wolframite) in the United States and Western Europe; and that we should like to obtain at this time all information available pertaining to the proposed Company, including:

a. The legal form of the Company. Will it be a holding company with powers and responsibilities delegated by its subsidiaries, or will it be a new company directly owning the assets of the existing affiliated companies to which it would issue its own stock? Or will it be a Central Sales Agency, similar to D. K. B. L.? Purchasers will want to have full assurance of the authority and the responsibility of actual owning and producing companies in connection with any contracts that might be negotiated. Fully confirmed documentary evidence of such authority and responsibility would no doubt be required by purchasers prior to entering into contracts.

b. Individual reports upon the standing and qualifications of the principal officers of the proposed Company. Since the Company will have been newly formed, it is

88 The partners' first consideration was to obtain payment of their compensation in dollars, since changes in Portuguese currency regulations might affect (curtail or stop) the exchange of escudos for dollars, or the exchange rate might fluctuate to their disadvantage. Both the fixed-fee and the stock-participation patterns entailed the exchange problems. The syndicate idea was rejected because of its apparent duplication of the Soares corporation.

89 Counsel responsible for this advice was Colonel Wozencraft, a lawyer who had no connection with Messrs. Barnes and Hill. Their firm was retained a few days later.

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especially important that this information with respect to its responsible officers be supplied to prospective purchasers.

c. The attitude of the Portugese [sic] government toward the Company and toward the proposed method of operations and sales. In view of the fact that the governments of both producing and consuming countries have a vital interest in the products concerned (the U. S. government will be the sole purchaser for this country), and in view of the International Agreement entered into in Washington on July 8, to which the Portugese [sic] government subscribed, it may be assumed that the approval of the Portugese [sic] government would almost certainly be required for any sales contracts entered into by its Nationals. Thorough exploration of this aspect of the situation is a primary essential.

d. The date when the new Company will be formally organized, and able to enter into legal agreements. * * *

e. The date when actual shipments could commence under contracts, including estimated quantities within specified periods of time. * * *

f. Summary. It is indispensable to our program that we deal with a responsible business organization competent to carry out its obligations under any sales contracts that we might negotiate. Any contracts entered into by such organization must probably have the approval and sanction of the Portugese [sic] government.

2. Prices. The stipulation in the prospectus of Companhia Atlantica *** that prices be established on the basis of the "best prices of the London market etc." is neither realistic nor desirable from the standpoint of producers. ***

A much more reasonable and desirable formula would be based upon actual costs of production and merchandising. ***

3. Contract with Companhia Atlantica. Col. Wozencraft recommends that you and I enter into this contract as a partnership. He suggests that we should be designated in the contract as "Sales Agents". If possible the contract should give us exclusive sales rights to all products for a specified period of time-not less than two years.

The only obligation that we should assume under the contract would be to dispose of products at the best prices obtainable by us, but, since our interests would be served by maximum production, we would, without obligation or compensation other than actual expenses

617448-62

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148 C. Cls.

incurred, render the Companhia such services as might be of assistance in increasing production, including such matters as aid in securing equipment etc.

Our compensation should be based upon a flat percentage, say five percent, of an agreed-upon minimum price for each product plus a progressively increasing percentage of all sums received above the stated minimum. The contract should provide that we should be paid by direct assignment to us of the appropriate portion of proceeds received by the Companhia from purchasers. *** 90

*

41. (a) On July 19, 1951, Mr. Pulvermann arrived in Lisbon and began a series of conferences with Dr. Soares to establish bases suitable for formal negotiations with the United States of a contract for the sale of tungsten.

(b) One of the needs upon which they agreed concerned the addition of prestige names to the list of incorporators. Within the next month Dr. Soares enlisted in the endeavor General Jose Filipe de Barros Rodrigues, Chief of Staff of the Portuguese Army, who became chairman of Atlantica's board of auditors, and Major Carlos Augusto d'Arrochella Lobo, Director General of Unemployment in the Portuguese Ministry of Public Works, who became chairman of Atlantica's board of administrators.94

92

42. Shortly after Mr. Pulvermann's return to Portugal from the United States, and before the end of July 1951, Colonel Westbrook, in Washington, retained the law firm

90 Attention is called to the spelling of "Portuguese" in the foregoing text, which is the first of numerous quotations from the writings of Colonel Westbrook. Inasmuch as his typewriter remained constant throughout to its own rendition of "Portuguese," while dropping or scrambling letters in other words here and there, the court has corrected errors of spelling in subsequent quotations as a concession of time to the reader, rather than to preserve such errors with repetitious "sic's."

91 In 1949 General Rodrigues had been Chief of the Portuguese Mission which negotiated the entry of Portugal into the North Atlantic Treaty Organization (NATO). He continued as Chief of Staff of the Army until 1955. * Under corporate practice in Portugal the board of auditors is a supervisory board. General Rodrigues' position was comparable to the American position of chairman of the board.

93 Major Lobo was much interested in Atlantica's program to relieve chronic unemployment in the Portuguese mining industry and to absorb the pilhas into the regular working force.

This position was more akin to the American position of president of the corporation. At a later time Major Lobo became president of Atlantica, while Dr. Soares became director general.