Drew Stands by Charges
Author of Bren Gun article testifies before Public Accounts Committee
Prorogation of Parliament on June 3 ended investigation of the Bren gun contract by the Public Accounts Committee of the House of Commons. No finding was made by the Committee.
The Government, therefore, is still confronted by the charge of Lieut.-Colonel George A. Drew that "there was fraud on the fart of Hahn” (Major James E. Hahn, president of the John Inglis Company, Limited) in the negotiation of the Bren gun contract between the company and the Department of National Defense.
Mr. Justice Davis, in his report to Parliament following the Royal Commission investigation of the contract, made no finding in respect to the conduct referred to in the charge. He said "The facts are all in evidence,” and left the issue to "those charged with the responsibility of dealing with the facts, i.e., the Government and Parliament.”
Following are extracts from Colonel Drew's statements to the Public Accounts Committee. They are taken from the official report. For clarity, the nam es of those speaking are used in place of IheQ. and A. form followed in the official transcript.
Col. Drew: I certainly repeat the question you gave me, that this contract was cloaked in fraud so far as Hahn was concerned.
Mr. McGeer: And that was one of the incidents that you cite?
Col. Drew: No, that was not one of the incidents that I cited. I will cite them if you want them.
Mr. McGeer: Well, cite them now.
Col. Drew: Certainly. Now, the first incident was this;
I am referring now, of course, to Major Hahn. Of course, I say that the whole tiling started upon the misrepresentation that Mr. Hugh Plaxton wrote on August 24, 1936, to the Prime Minister and said that a group of friends of his were fully equipped to manufacture munitions where such was not the fact at the time, they were neither fully equipped to manufacture munitions nor did they have a plant in which they could do it and . . the officer of the department sent up there to examine the plant at a later date said that that was so
Col. Drew: . . . Major Hahn had arrived in London
and was opening up the first phase of the contact with the War Department which ultimately led to the two contracts being signed. When he was there, according to the information that has been given in this enquiry, the War Office asked for some particulars about this man who came so highly recommended from the Minister of National Defense in his letter of introduction, and that request for information was made to Canada House and on the 6th of November, 1936, Col. George P. Vanier, after getting the information from Major Hahn, wrote to Sir Harry Batterbee at the Dominion Office, Downing Street, London S.W.l, giving information that was requested by the War Office, and he wrote to Mr. Batterbee:
1 am attaching herewith some more information concerning Major Hahn.
1 should like to make it clear that Major Hahn has sold out his interests in Rogers-Majestic, DeForest Crosley, Magnavox, and Property Holdings.
(sgd.) George P. Vanier.
And then there was a note attached to that letter:
The attached letter was sent to Sir Harry Batterbee by me in response to an enquiry for information concerning Major Hahn. I presume that the War Office had asked Sir Harry Batterbee to obtain some information.
And then attached to that was information which Mr. Geoffrion, counsel for Major Hahn at the enquiry, said had been prepared on information submitted by Major Hahn in connection with this matter. And the heading on that is "Major J. E. Hahn, D.S.O., M.C.;” then on the next line, "education, military experience, business training;” then the first column is “academic” and the second column is "military,” the third column is "business,” and the fourth column is “approximate business net worth;” and, of course, that is under the heading "Major J. E. Hahn, D.S.O., M.C.;” and then it gives
Business Approximate Business
Rogers-Majestic Radio Refrigerator DeForest Crosley
Radio Refrigerator................... $2,000,000
Magnavox—Electrical, radio parts and
sound equipment.................. 1,500.000
Property Holdings, Ltd., Real Estate . . 450,000
These, of course, were things he evidently had disposed of according to this letter. But then, this is the one that is extremely significant, having regard to the fact that this man had gone to London and himself has sworn that he was there as a prospective contractor, was seeking business; although, of course, the War Office had received word that he was there getting business on behalf of the Canadian Government, and ultimately the Government dealt with this man and had this before them.
Mr. McPhee: That is not right, he was not getting business on behalf of the Canadian Government.
Col. Drew: I am glad you corrected me; he was getting information on behalf of the Canadian Government.
The letter, as I say, indicated that he had disposed of the other, so that left his only holdings at that time the following: Recently acquired plant and equipment, the John Inglis Company steel engineering, heavy-plate engineering, shell equipment, and under the column "Business approximate net worth”—$2,000,000. And at that time Hahn and his associates had put up $500 on the purchase price of that plant, and Hahn’s share of that under the agreement w-as 55/90.
Now-, Mr. McGeer, if that is not fraud, I do not know what fraud means in its legal interpretation. $2,000,000 approximate worth, and they had put up $500 on the purchase of the property under an agreement by which they were going to purchase the property at $250,000 with $100,000 cash and the acceptance of a $150,000 mortgage.
The next point I come to is a letter dated May 6, 1937, exhibit 137. This letter was a letter received by Colonel LaFleche in London. It was dated the 6th of May, 1937, and w'as forwarded to the Hon. Ian Mackenzie who was also in London at the time, to Arlington House, on May 7, 1937. the following day.
The memorandum to the minister w'as as follows:
The Honorable the Minister,
Rlease find herewith the original letter, dated yesterday, from J. E. Hahn—
and might I point out, Mr. McGeer. in relation to this, that others in writing of a man with a distinguished military record occasionally do leave out the decorations.
from J. E. Hahn, which I showed to you this morning. This refers to the question of the manufacture in Canada of the Bren light machine guns, please
(Sgd.) L. R. LaFleche,
Now', this is the letter of J. E. 1 Iahn dated May 6:
Dear Colonel LaFleche:
With reference to our conversation today I have pleasure in confirming your understanding that I represent the John Inglis Company of Toronto having a controlling interest. This company was incorporated in 1860.
My company has been engaged since incorporation in the manufacture and production of steel and engineering equipment. We have acquired further important Canadian rights for new patented sectional steel poles for which there is an important market; it is in this connection that I am presently in England.
It has always been my intention should we be called upon to manufacture the Bren light machine gun in Canada to produce them as a special line in addition to the normal productions of the John Inglis Company.
It may interest you to know that the present plant and equipment of the John Inglis Company represents an investment of $1,800,000.
Now', before commenting further on that I will read another letter which is tied with it, and that letter apparently was not sufficiently complete lor the War Office because, as you will find from the evidence, there was constant contact at that time between General LaFleche and the War Office. So a second letter was written by Major Hahn to General LaFleche on May 27, which is exhibit 143.
Mr. Green: Exhibit 138, is it not?
Col. Drew: Yes, I have it. It is exhibit 138. This is a letter which was also forwarded to the Honorable Ian Mackenzie w’ho w'as still in London at the same time as General LaFleche. and Major Hahn was there at the same time. The memorandum to Mr. Mackenzie is as follow's.
May 22, 1937.
The Honorable the Minister*
Following our discussion earlier in the week, I put a few questions to Major J. E. Hahn and attached hereto is letter of this date concerning the John Inglis Company of Toronto.
May I request instructions, please.
(Signed) L. R. L.
Then that encloses a letter from Major Hahn of the same date to Lieut.-Colonel LaFleche. D.S.O., Deputy Minister of National Defense, Arlington House, W.l:
Dear Colonel LaFleche:
The John Inglis Company was founded in 1860 by the late John Inglis and was carried on by members of the family until some time after the death of the son, the late John Inglis, in February, 1936.
In May, 1936, negotiations were opened by my associates and myself for the acquisition of the assets of this comjjany. In July, 1936, the arrangement w'as consummated whereby my associates and myself acquired the plant, machinery, name and goodwill of the John Inglis Company. An analysis of the company s operations showed during the period 1913-1936:
1. Sales........................ $26,921,349.30
2. Net trading profit.............. 2,751,852.47
Then it goes on:
Our plan of operation consisted of— and I ask you to mark this, Mr. McGeer:
Our plan of operation consisted of—(1) making a complete analysis of the company’s sales and profits and dropjfing non-profitable lines whilst continuing production of all profitable existing lines. A new line has been added, namely . . . the manufacture of patented steel poles—(2) completion of budgets covering the production under the following headings:
1. Boilers high and low pressure tanks.
3. Bridge and structural steel work.
5 Special steel production.
While the preceding was under completion, it was found necessary to give the plant a complete overhauling. In October. 1936, during this period of plant-overhaul, contact was established with the Department of National Defense and an investigation undertaken with regard to the manufacture of the Bren gun. It was by common consent found very promising. In December, 1936, an initial concrete proposal for the manufacture of the Bren gun in my plant was submitted to the Department of National Defense, since when the matter has remained under further study and negotiation. It is clear that my company can manufacture the Bren gun economically and jxrhaps more rapidly than any other except the Lee Enfield plant in England, which, it is known, is now overtaxed and will not be able to produce all the Bren guns required by the government of the United Kingdom.
This particular statement is subject to confirmation by yourself and is offered in confidence.
We have been ready to proceed with the manufacture of the Bren gun since our proposal was submitted in December 1936. I would very much appreciate being advised of the Department’s decision.
Yours very faithfully,
(Sgd.J J. E. Hahn.
Mr. McGeer: The date of the letter? Col. Drew: May 22, 1937. And that just, you will remember, almost coincident with the submission to the War Office of the agreements which you referred to this morning in an exhibit which you read. Now the statements in that letter created an impression of an old-established company founded in I860, continuing right on through. It does not speak about the bankruptcy of the John Inglis Company, it does not speak about the fact that this is a completely new company with no connection with the old company. It talks about “what we have done;’’ it talks about the fact that the plant was closed for overhaul, and then gives a figure as an analysis of the company’s operations that he is discussing here, his company, showing sales of $26,921,000, and a net trading profit of $2,751,000 over the period, and then he goes on right in the next words: “our plan of operation consisted of . . And then it states what they have been doing and then says: “a new line has been added, namely the manufacture of patented steel poles.” Then it comes down to this: “while the preceding was under completion, it was found necessary to give the plant a complete overhauling.” A plant that had been closed down in bankruptcy; a company which had absolutely no corporate relationship of any kind at all with this; and as you know the company which was dealing with this was incorporated in 1936, not 1860, and all it had acquired in addition to buying the assets, just as you and I might if we had been fortunate enough to have the money, the connection that it had with the old company as a corporate structure was that in the summer of 1937 they succeeded in getting the right in the bankruptcy proceedings of the old company to the use of this new company, incorporated incidentally with the name of the British Canadian Engineering Ltd. of Canada, the right to use the name John Inglis Co. Now, Mr. McGeer, I do not need to recall to you the case of Rex versus Kylsant, in which it was clearly indicated what fraud means, and describing the structure of a company, and it was clearly—
Mr. Factor: Prospectus.
Col. Drew: Fraud was described in that case. There was a prospectus issued which set forth substantially the same things as were set forth here and in that case it was perfectly clearly shown that it was fraud to indicate the appearance of a continuing profitable company to somebody when, as a matter of fact, the company had technically been in bankruptcy. That was the Kylsant case and as a result of that Lord Kylsant went to prison, and the definition of fraud in that is directly applicable to these two letters which I have read you.
Mr. McGeer: Is that all your ground for?
Col. Drew: No . . On October 20, 1936, the Deputy Minister of National Defense sent a letter following representations to him by Major Hahn, which letter was seen by the Minister of National Defense on October 22, 1936; and while I have been extremely critical of the Deputy Minister for sending the letter which contained information which he had not adequately verified, and consequently making it difficult to rely on the accuracy of his statements, it is quite clear, I think, that he relied for the statement he made here on the information given to him by Major Hahn, and in fact that is the evidence. Now, that exhibit reads as follows—it was forwarded by the Deputy Minister to the Undersecretary of State for External Affairs for transmission to Canada House, and ultimately was set before the War Officé, or the contents thereof. This is the letter:
I have the honor to refer to previous correspondence pertaining to the Bren light machine gun, following on which the Department of National Defense has been investigating the question of manufacture of this gun in Canada. Major J. E. Hahn, D.S.O., M.C., a former officer of the Canadian Expeditionary Force, and representing a reliable group which controls certain manufacturing plants capable of manufacturing armaments and munitions located in a large industrial centre where the labor and material factor is stable and favorable, has been in communication with the department.
Then it goes on to explain the facilities which have been afforded for study and that Major Hahn is proceeding to England. Paragraph 4 of this letter reads:
With particular reference to the Bren light machine gun the department is desirous of considering as fully as possible the question of commencing its manufacture in Canada at the earliest date, and it would be pleased if the High Commissioner could institute tentative negotiations with the Secretary of State for War in regard thereto pursuant to the terms of the agreement of the 24th May, 1935, between the Secretary of State for War and the patentee.
Col. Drew quoted further paragraphs from this letter bearing on other points raised in previous evidence, and then continued:
The Deputy Minister relies on information given to him by Major Hahn. The information given to him then by Major Hahn was that he and his associates controlled a group of plants capable of manufacturing armaments, munitions, located in a large industrial centre where the labor and material factor is stable, and so on, and also that the whole structure is one which they were likely to consider, as you will see in paragraph 5. In fact, I say this, that from the beginning to the end of the negotiations which took place Major Hahn supplied information which was passed on to the War Office which indicated that this was an old established plant. You will mark the fact that there was complete non-disclosure that this plant was bankrupt to the British Government, absolute non-disclosure of who the reliable associates were, and I say that was fraud.
Mr. McGeer: Anything else? We would like to have them all, Colonel Drew, if you do not mind. You are making charges against a man who has today the confidence of the Government of Canada and apparently the confidence of the British War Office.
Col. Drew: Upon the representations made by Canada, yes.
Mr. McGeer: All right. Are there any more reasons for your charge of fraud?
Col. Drew: That is sufficient.
Mr. McGeer: No doubt the reasons you have outlined to us here this afternoon were the reasons that justified you for describing the contract in these words to Commissioner H. H. Davis: “It was
conceived in sin, born in iniquity and cloaked in fraud.” The reasons you have given us today were the reasons that justified that language, were they?
Col. Drew: Well, I can amplify that in this way, that this company which was represented to the War Office as this reliable company, or rather Major Hahn’s group of associates, as reliable associates, controlling plants capable of making munitions, was a company which had not even been incorporated.
Mr. McGeer: You have said that.
Col. Drew: That company had not even been incorporated when that letter was signed . . . The directors of that company at that time—the only company that has ever been under consideration here, the plant capable of manufacturing munitions under control of Major Hahn and his reliable group of associates, the directors of the company at that time described in such glowing terms by Major Hahn to General LaFleche and in turn referred to the minister for a subsequent reference to the W'ar Office—the directors of that armament company at that time were Major Hahn, three girls and one boy who were employees of the Plaxton office. Major Hahn and four employees of the Plaxton office were directors of that company.
Mr. Golding: You are sure that is true?
Col. Drew: Absolutely . . .
Mr. McGeer: Now, you are aware also that when Major Hahn went to England in 1936 he took with him a full description of the property, photographs of all the buildings, blueprints of all the buildings, and details of all the machinery in the plant, which he turned over to Sir Harold Brown, the then Director of Contracts for the British War Office, and which in turn were turned over by Sir Harold Brown to the head of the Enfield plant, Mr. Robinson?
Col. Drew: That is right.
Mr. McGeer: That is right; so that from November, 1936, the British War Office had in their possession full and detailed and complete information on all the buildings, plants, machinery and equipment that the John Inglis Company had and which Hahn represented he was taking over or had taken over?
Col. Drew: They had a very inaccurate description of the property.
Mr. McGeer: Have you seen the pictures and blueprints and details of the machinery that were given to the British War Office?
Col. Drew: I have. They were produced at the enquiry.
Mr. McGeer: And you say that they were inaccurate?
Col. Drew: They were photographs of the plant without any indication that the plant was closed down, and the valuation of the plant given at that time was the value given to it in 1929 when it was a going concern, and that was the time when, as we all know, industrial values were infinitely higher than they are today.
Mr. McGeer: The Department of National Defense had full information as to
the value of the plant and equipment from their own personal observations?
Col. Drew: There is no evidence of that whatever.
Mr. McGeer: Well, this report indicates that a man went there and went over the plant?
Col. Drew: There is no indication in that report of value or anything of the kind.
Mr. McGeer: Let us assume.
Col. Drew: Let us not assume, let us read that report—it is exhibit 73 . . . This is the report of Alguire (to the Department of National Defense) dated October 21, 1936:
1. In accordance with your request contained in the above noted letter, the writer made arrangements with Mr. J. E. Hahn and was conducted over the plant of Messrs. John Inglis Co. Limited on Strachan Avenue, Toronto. This plant is primarily equipped for the manufacture of boilers, turbines and the working of heavy plate generally. All equipment is in reasonably good condition, considering the length of time it has been in use.
2. The machinery at. present in this factory with few exceptions, is unsuited for the manufacture of aircraft, but it might be used for the manufacture of tanks or shells. There is one building, No. 101, which could be converted into a suitable factory for manufacturing steel fuselages, etc., by removing some of the existing machinery and replacing it with aircraft jigs and machines suitable for the manufacture of aircraft.
3. The writer has been able to obtain blueprints giving a general description of the factories, including the number of buildings, floor space, description and number of machines. These blueprints also show the layout of the factories and their relation to one another and the construction of buildings.
4. This factory is at present inoperative and has not been in operation since April, 1936. There is no design staff at present employed and the total number of workmen now employed consists of three men as factory maintenance staff.
Then it goes on with certain details . . .
Mr. McGeer: You have not any doubt that the Deputy Minister knew of that report before any representations were made to London by him, such as followed in May and June, 1937.
Col. Drew : No, I have no doubt whatever.
Mr. McGeer: He had that information? Col. Drew: But he hadn’t it when the letter was written.
Mr. McGeer: The first letter?
Col. Drew: No.
Mr. McGeer: But long before the contract was entered into by the British War Office he had that information?
Col. Drew: Yes.
Mr. McGeer: And during a substantial period of the time the negotiations for the contract with the Department of National Defense and the contract with the British War Office were under way?
Col. Drew: That is right.
Mr. McGeer: Now, if it was a fraud for Hahn to have failed to disclose that fact to the British War Office it was equally a fraud on the part of the Deputy Minister of National Defense because he was hoping that the British War Office would enter into a contract with the Inglis company out of which the Department of National Defense would secure benefit, so he was under duty to disclose all the pertinent facts.
Col. Drew: I am not aware of any evidence which indicates that the Deputy Minister had any knowledge whatever of the state of this company other than the fact that it was closed down. And you will remember here is a thing to bear in mind —that in the letter which Hahn handed to General LaFleche in London on May 22, 1937, he gave the impression of this being a continuing organization and said that it had been closed down for certain reasons during that period; that was intended to convey the impression that during the period it had been closed down it was for some specific purpose. And do not make any mistake about it, I am not in any way absolving those responsible who gave the impression to the War Office that this was a responsible group of manufacturers controlling plants capable of making munitions. There is a very great difference between fraud and incompetence.
Mr. McGeer: We are dealing with fraud. Col. Drew: But don’t tie the two things together. I do say there was gross incompetence on the part of the Minister of National Defense. I say that there was fraud on the part of Hahn. I say that there is nothing in there to indicate that the Deputy Minister knew of the facts which in any way could suggest that he was in any way guilty of fraud.
Major Hahn’s Replies
Maclean’s is informed that owing to pressure of work in the Government printing department, publication of the official transcript of the re-examination of Major Hahn, on June 3, was delayed. The official report was not received in Toronto until June 19, too late to permit of lengthy extracts being included in this issue.
Questioned by Mr. McGeer, Major Hahn stated that the War Office knew the Inglis plant was not operating because he had shown its officials photographs— “These are photographs of the John Inglis Company closed down just as we purchased it before we opened it, with not a man in it and not a piece of equipment being produced in it.”
Major Hahn stated: “I told the Department of National Defense that I had acquired control of the properties of the John Inglis Company and that it was closed down; that I was going to put it into operation and that I was after business.” He stated that the War Office had been referred to the Bank of Montreal and that the bank knew the plant was closed down, and the price paid for it.
To Mr. Brooks, Major Hahn stated that “I made every disclosure that I thought necessary, that I was asked for.” He described the charges of fraud as “false and ridiculous.”
To Mr. Green’s statement that the plant was not finally bought until after the Bren gun contract was signed. Major Hahn stated that that was not his understanding of it, that he understood he had bought the plant.
Major Hahn claimed that the letter from Hugh Plaxton to the Prime Minister, stating “A group of friends of mine in Toronto are equipped fully to manufacture munitions” was accurate.
Concerning the information Colonel Vanier gave to Sir H. S. Batterbec about him, Major Hahn stated that he considered “the approximate net worth of our entire situation, after it would be set up and the company organized and the working capital put in, would be approximately $2,000,000” and that he discussed it with Colonel Vanier on that basis.
Mr. Green: . . . You gave Colonel Vanier
information that recently acquired plant and equipment of John Inglis Companysteel engineering, heavy-plate engineering, shell equipment, had an approximate net worth of $2 000,000, when actually at that time there had only been paid a few hundred dollars on the total purchase price of $250,000 on the property?
Major Hahn: Actually at that time, Mr. Green, as I say, we had committed ourselves for the purchase. We had committed ourselves, not definitely yet, but we knew we would be paying the necessary working capital to the extent of some hundreds of thousands of dollars, and we had in mind at that time . . . There was no idea of conveying to the War Office that we had a plant for which we paid $2,000,000, or anything else, because all the facts were disclosed to them by me.
Mr. Green: I do not doubt that you were putting your best foot forward when you went to England, but what about your statement that you made full disclosure to the War Office considering your testimony a few minutes ago that you did not tell them anything about the price you paid for the plant?
Major Hahn: I think if I could transfer your mentality to their frame of mind when 1 was there it would perhaps clear up a good many things that you seem to regard so seriously. When I went there, Mr. Green, their only interest—they didn’t care what I paid for that plant, they were not interested in it; all they were interested in was getting guns, getting someone that could make guns for them quickly and at a fair price. They hadn’t the slightest interest in what that plant cost me or what I paid for it.
Mr. Green: Did you tell them anything about having only an option on the property?
Major Hahn: No, because I did not consider it was an option.
Mr. Green: Did you tell them who your associates were?
Major Hahn: I told them that I had associates; that the personnel of the old company, a great many of them, were available, and that I would have with me as my main operating personnel two engineers who had been with me for many years, and whom I considered two of the most competent production engineers in the country, Mr. Ainsworth and Mr. McLachlan.
Mr. Green: Did you tell them about your stockbroker and lawyer associates being the ones who were buying the business?
Major Hahn: No, because why would they be interested, Mr. Green?
Mr. Green: Did you tell the Canadian Department of National Defense about that?
Major Hahn: No, I am the controlling owner of that business. These other people put up their money to help me buy it and they have their interest in it, but I am operating it and running it, and I think the operating personnel of a company is what determines its success or failure.
Answering Hon. Mr. Stewart, Major Hahn stated that he had seen the circular put out by Cameron, Pointon and Merritt, brokers, in connection with the sale of Inglis stock, that he had not objected to the circular, but that he had suggested that they not sell any stock.
Answering Mr. MacNeil concerning information supplied in a letter to General LaFleche, in which Major Hahn wrote that “I represent the John Inglis Company of Toronto having a controlling interest. This company was incorporated in 1860,” the witness said “This letter is very carelessly worded.” He claimed that as the person to whom it was addressed was aware of the situation, the letter could not have been misinterpreted.