B-134219, FEB. 17, 1960

B-134219, FEB. 17, 1960

TO MR. WESLEY I. DUMM:

REFERENCE IS MADE TO A LETTER DATED DECEMBER 2, 1959, WITH ENCLOSURES, FROM YOUR ATTORNEY, REQUESTING A RECONSIDERATION OF OUR DECISION OF SEPTEMBER 10, 1959, WHICH SUSTAINED GENERAL ACCOUNTING OFFICE SETTLEMENT DATED JANUARY 15, 1959. IN THAT SETTLEMENT YOUR CLAIM (ASSERTED AS A REPRESENTATIVE OF THE PARTIES IN INTEREST, INCLUDING ASSOCIATED BROADCASTERS, INC.) FOR RENT AND FOR A TAX ASSESSMENT WAS ALLOWED IN THE AMOUNT OF $16,847.47 AND WAS SET OFF AGAINST AN AMOUNT OF $30,118.58 FOUND DUE FROM YOU TO THE GOVERNMENT, LEAVING A BALANCE OF $13,271.11 DUE THE UNITED STATES. THE ITEM IN DISPUTE IS THE AMOUNT OF $30,004.58 WHICH REPRESENTS THE DIFFERENCE IN VALUE OF RADIO TRANSMITTER TUBES FURNISHED BY THE GOVERNMENT FOR THE OPERATION OF A BROADCASTING FACILITY SOMETIME PRIOR TO THE EXECUTION OF CONTRACT NO. OEMA-732 ON JUNE 30, 1942, AND THE VALUE OF THE TUBES TURNED OVER TO THE GOVERNMENT ON MARCH 21, 1956, AFTER THE CESSATION OF BROADCASTING OPERATIONS FOR THE GOVERNMENT.

THE ENTIRE MATTER WAS FIRST REPORTED TO OUR OFFICE BY LETTER OF NOVEMBER 20, 1957, FROM THE UNITED STATES INFORMATION AGENCY AND FURTHER DETAILS WERE SUBMITTED LATER WITH A LETTER OF JUNE 17, 1958, FROM THE SAME OFFICE. AFTER THE SETTLEMENT OF JANUARY 15, 1959, THE ENTIRE MATTER WAS FURTHER CONSIDERED IN OUR DECISION OF SEPTEMBER 10, 1959.

PRACTICALLY ALL OF THE PERTINENT FACTS IN THE MATTER ARE SET OUT IN THE REFERRED-TO SETTLEMENT AND THE DECISION OF SEPTEMBER 10, 1959. THE FIRST MATTER REFERRED TO BY YOUR ATTORNEY INVOLVES THE AMOUNT OF $13,242.98 WHICH WAS DEDUCTED FROM A PAYMENT BY THE GOVERNMENT IN 1943. BRIEFLY STATED, THE PERIOD UP TO JUNE 30, 1943, WAS COVERED BY CONTRACT NO. OEMA- 732. OF PARTICULAR SIGNIFICANCE IS THE FACT THAT AN AUDIT OF EXPENSES FOR THE PERIOD FROM JANUARY 1, 1943, TO JUNE 30, 1943, SHOWS AN ENTRY OF $16,542.32, WHICH ORDINARILY WOULD INDICATE THAT THIS AMOUNT WAS ACTUALLY SPENT IN THE PURCHASE OF TUBES. HOWEVER, THE RECORDS INDICATE THAT DURING THE PERIOD FROM JULY 1, 1942, THROUGH JUNE 30, 1943, THERE WAS EXPENDED THE AMOUNT OF $8,297.36 IN THE PURCHASE OF TUBES WITH FACTORY ADJUSTMENTS (CREDITS) IN THE AMOUNT OF $1,429.60 OR A NET CASH EXPENDITURE OF $6,867.76. THERE WAS A TOTAL TUBE EXPENSE OF $20,110.74 THROUGH JUNE 30, 1943, AND THIS MEANT THERE WAS A DEFICIENCY IN THE TUBE INVENTORY OF $13,242.98. AN EXAMINATION OF THE ENTIRE RECORD SATISFACTORILY ESTABLISHES THAT YOU REFUNDED THE AMOUNT OF $13,242.98 BECAUSE YOU WERE CREDITED AS AN EXPENSE WITH THAT AMOUNT WHEN IN FACT YOU DID NOT EXPEND IT FOR PURCHASE OF NEW TUBES BUT USED TUBES FROM THE SPARE TUBE COMPLEMENT, THUS DECREASING THE TUBE INVENTORY. THAT THE TUBE INVENTORY WAS TO BE CONSIDERED AT A LEVEL LOWER THAN THAT ORIGINALLY ESTABLISHED APPEARS FROM A LETTER DATED OCTOBER 16, 1943, FROM THE GENERAL COUNSEL, OFFICE OF WAR INFORMATION, ADDRESSED TO YOU, ENCLOSING A COPY OF A PROPOSED AMENDMENT TO CONTRACT NO. OEMA-732. IN THAT PROPOSED AMENDMENT IT WAS STATED THAT YOU WOULD NOT BE REQUIRED TO TRANSFER TO THE GOVERNMENT RADIO TUBES TO THE VALUE OF $13,242.98 AND IT WAS CONTEMPLATED THAT THE PURCHASE PRICE OF THE TRANSMITTER, IF YOU EXERCISED AN OPTION TO BUY IT FROM THE GOVERNMENT, WOULD BE REDUCED BY AN EQUAL AMOUNT. WHILE THAT PROPOSED AMENDMENT WAS NEVER EXECUTED, FOR REASONS NOT PERTINENT HERE, IT MAY BE ACCEPTED TO SHOW THE INTENTION OF THE PARTIES.

THE QUESTION OF WHAT TRANSPIRED AFTER JUNE 1943 IS NOT CLEAR. YOU HAVE CONTENDED IN YOUR PRIOR COMMUNICATIONS THAT THE OBLIGATION ASSUMED BY YOU IN PARAGRAPH 14 OF THE FIRST CONTRACT WAS ELIMINATED WHEN YOU ENTERED INTO A SECOND CONTRACT ON A COST BASIS. YOU POINT TO THE QUESTION OF TITLE AND CONTEND THAT SINCE THE GOVERNMENT HAD THE TITLE AFTER DECEMBER 31, 1943, YOU WERE NOT OBLIGED TO KEEP THE TUBE INVENTORY AT THE LEVEL IT WAS WHEN YOU RECEIVED THE TRANSMITTER FROM THE GOVERNMENT. THIS FACT IS NOT CONTROLLING SINCE UNDER THE FIRST CONTRACT THE TITLE TO THE TRANSMITTER WAS VESTED IN YOU AND YOU HAD A CONDITIONAL OPTION TO BUY, WITH A PROVISION THAT IN THE MEANTIME YOU WERE TO MAINTAIN THE ORIGINAL LEVEL OF THE TUBE INVENTORY. THE FACT THAT UNDER THE CONTEMPLATED AMENDMENT IN OCTOBER 1943 OF THE FIRST CONTRACT, YOU WERE NOT TO BE REQUIRED TO TRANSFER RADIO TUBES TO THE VALUE OF $13,242.98 TO THE GOVERNMENT UPON THE CESSATION OF BROADCASTING DOES NOT INDICATE ANY INTENTION THAT YOU WERE TO BE RELIEVED OF THE NECESSITY OF TRANSFERRING THE BALANCE OF THE TUBES REFERRED TO IN ARTICLE 14 OF THE FIRST CONTRACT. WHILE IT APPEARS THAT AFTER JANUARY 1, 1944, THE CONTRACT PRICE WAS NEGOTIATED ON A COST BASIS, THERE IS NO CLEAR SHOWING THAT ANY ALLOWANCE WAS MADE IN THE ITEM OF TUBE EXPENSE FOR THE COST OF MAINTAINING THE LEVEL OF THE TUBE INVENTORY AS IT EXISTED AT THE TIME, NOR IS THERE ANY SHOWING THAT SUCH AN ALLOWANCE WAS EXCLUDED AS AN ITEM OF COST. THE ORIGINAL NEGOTIATED RENTAL OF $25,000 PER MONTH FOR THE YEAR ENDED JUNE 30, 1943, APPEARS TO HAVE INCLUDED THE COST OF TUBE REPLACEMENT. AS WAS MENTIONED IN THE SETTLEMENT OF JANUARY 15, 1959, THERE SHOULD NOT BE OVERLOOKED ENTIRELY THE STATEMENT OF MR. A. A. MCCLELLAN, A FORMER COMPTROLLER OF ASSOCIATED BROADCASTERS, INC., BEFORE THE FEDERAL COMMUNICATIONS COMMISSION ON APRIL 27, 1954, TO THE EFFECT THAT YOUR LIABILITY IN THIS MATTER STILL EXISTED, EVEN THOUGH THERE APPEAR SOME DISCREPANCIES IN HIS TESTIMONY. NOR SHOULD THERE BE ENTIRELY OVERLOOKED THE FACT THAT THE ADMINISTRATIVE OFFICE REPORTED THAT THE AMOUNTS INCLUDED IN YOUR ESTIMATED COSTS FOR TUBE EXPENSE SUBSEQUENT TO JANUARY 1, 1944, WERE CONSIDERABLY IN EXCESS OF THE AMOUNTS ACTUALLY EXPENDED FOR THIS PURPOSE.

WHILE A PREPONDERANCE OF THE EVIDENCE OF RECORD SUPPORTS THE VIEW THAT THE TUBE INVENTORY HAD BEEN REDUCED BY THE AMOUNT OF $13,242.98, WE ARE UNABLE TO FIND THAT YOU WERE RELIEVED UNDER PARAGRAPH 14 OF CONTRACT NO. OEMA-732 OF YOUR LIABILITY TO RETURN TO THE GOVERNMENT THE ORIGINAL TUBE COMPLEMENT VALUED AT $39,577.12, EXCEPTING THE AMOUNT OF $13,242.98.

THE AMOUNT OF $13,242.98 ALLOWED HEREIN WILL BE APPLIED AGAINST THE BALANCE OF $13,271.11 FOUND DUE FROM YOU TO THE GOVERNMENT, LEAVING A BALANCE OF $28.13 DUE THE UNITED STATES. IN VIEW OF THE SMALL AMOUNT INVOLVED, THE CASE WILL BE CONSIDERED CLOSED.