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Washington, D.C. The subcommittee met at 10 a. m., pursuant to notice, in room 212, Senate Office Building, Senator Wayne Morse (chairman of the subcommittee) presiding.

Present: Senators Morse (chairman of the subcommittee) and Baldwin.

Also present: Bernard F. Burdick, Chief of Office and general purchasing officer, the Panama Canal; R. E. Ramsey, Assistant Chief of Office, the Panama Canal; R. M. Lovelady, president and legislative representative, American Federation of Government Employees; Alfred U. Krebs, legislative counsel, American Federation of American Shipping; Harold Morse, Assistant Director, Corporation Auditing Division, General Accounting Office; Walter Jones, Central Labor Union; John G. Adams, clerk.

Senator MORSE. The hearing will come to order.

We are going to proceed first with the hearing on S. 2002. The members of the subcommittee are Senators Baldwin of Connecticut, Kilgore of West Virginia, and Morse of Oregon.

The title of the bill under consideration, S. 2002, is to amend the Canal Zone Code for the purpose of incorporating the Panama Railroad Company. The bill under consideration, S. 2002, will be inserted in the record at this point.

(The bill under consideration, S. 2002, is as follows:)

[S. 2002, 80th Cong., 2d sess.) A BILL To amend the Canal Zone Code for the purpose of incorporating the Panama

Railroad Company

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That chapter 12 of title 2 of the Canal Zone Code, approved June 19, 1934 (48 Stat. 1122), is amended by adding at the end of said chapter a new article numbered 3, embracing new sections 245 to 255 of said title 2, and reading as follows:


“245. CREATION, PURPOSE, OFFICES, AND RESIDENCE OF PANAMA RAILROAD (OMPANY.–For the purpose of conducting business operations necessary for the care, maintenance, sanitation, operation, improvement, government, and protection of the Panama Canal and the Canal Zone, there is hereby created, as an agency and instrumentality of the United States, and as an adjunct of the Panama Canal, a body corporate to be known as the Panama Railroad Company, hereinafter referred to as the 'corporation'. The principal offices of the corporation shall be in the city of New York, New York, and in the Canal Zone, but the


corporation may establish agencies or branch offices in such other place or places as it may deem necessary or appropriate in the conduct of its business. Within the meaning of the laws of the United States relating to venue in civil actions, the corporation shall be deemed to be an inhabitant and resident both of the southern judicial district of New York and of the Canal Zone.

"246. INITIAL CAPITAL STOCK OF CORPORATION.—The initial capital stock of the corporation shall be $25,000,000, all of which is subscribed for by the United States. Such subscription shall be paid by means of the transfer to the corporation of the stock of the corporation, hereinafter referred to as the 'New York corporation', which bears the same name, and which was created by an Act of the Legislature of the State of New York passed on April 7, 1819, as amended by an Act of that legislature passed on April 12, 1885, and which is wholly owned by the United States. A receipt for such stock shall be issued by the corporation to the United States, and delivered to the Secretary of the Treasury, and shall be evidence of the stock ownership of the United States. In its capacity as stockholder of the corporation, the United States shall be represented by the President of the United States or such officer of the United States as may be designated by him, hereinafter referred to as the 'stockholder'. The capital stock of the corporation shall be subject to increase as provided in sections 252 and 253 of this title.

"247. BOARD OF DIRECTORS.—The management of the corporation shall be vested in a board of directors consisting of not less than nine nor more than thirteen persons, who shall be appointed by and hold office at the pleasure of the stockholder, or, if he so elects, consisting of the stockholder and eight to twelve other persons: Provided, That the Governor of the Panama Canal shall be a director and president of the corporation. Before entering upon his duties, each of the directors so appointed shall take an oath faithfully to discharge the duties of his office, The directors shall receive no salary for their services on the board, but under regulations and in amounts prescribed by the board of directors, with the approval of the stockholder, may be paid by the corporation a reasonable per diem allowance in lieu of subsistence expenses in connection with attendance at meetings of the board or in connection with the time spent on special service of the corporation, and their traveling expenses to and from meetings or when upon such special service, without regard to the Subsistence Expense Act of 1926, as amended, or the Standardized Government Travel Regulations. Nothing contained in this article or in any other Act shall be construed to prevent the appointment and service, as a director, officer, or employee of the corporation, of any officer or employee of the United States. The directors, of whom five shall constitute a quorum for the transaction of business, shall meet for organization purposes when and where called by the stockholder.

“248. GENERAL POWERS OF CORPORATION.-The corporation shall have and may exercise the following general powers, in addition to those elsewhere conferred in this article:

“(a) Shall have perpetual succession in its corporate name.

“(b) May adopt a corporate seal, which shall be judicially noticed, and may alter it at pleasure.

"(c) May adopt, amend, and repeal bylaws governing the conduct of its general business, and the performance of the powers and duties granted to or imposed upon it by law.

"(d) May sue and be sued in its corporate name.

“(e) May, without regard to the civil-service laws and regulations or to the Classification Act of 1923, as amended, appoint such officers, agents, and employees as may be necessary for the conduct of the business of the corporation, define their authority and duties, fix their compensation, delegate to them such of the powers of the corporation as may be necessary, require that such of them as it may designate be bonded, and fix the penalties and pay the premiums of such bonds: Provided, That in the appointment of officials and the selection of employees for said corporation, no political test or qualification shall be permitted or given consideration, but all such appointments and promotions shall be given and made on the basis of merit and efficiency. Persons employed by the corporation whose compensation is paid on any basis other than a per annum basis shall not be included in making computations pursuant to the provisions of section 107 of the Federal Employees Pay Act of 1945.

“(f) May make contracts.

“(9) May determine the character of and necessity for its obligations and expenditures and the manner in which they shall be incurred, allowed, and paid, and may ineur, allow, and pay the same, subject to pertinent provisions of law applicable to Government corporations.


"(h) May borrow from the Treasury of the United States, for any of the purposes of the corporation, sums of money not to exceed a total of $10,000,000 outstanding at any time. For this purpose the Secretary of the Treasury is authorized and directed to make loans to the corporation, out of any funds in the Treasury not otherwise appropriated, on such terms and conditions as the Secretary of the Treasury shall determine. Such loans shall bear interest at a rate determined by the Secretary of the Treasury, taking into account the current average rate on outstanding marketable obligations of the United States as of the last day of the month preceding the making of the loan to the corporation.

"(i) May purchase, lease, or otherwise acquire, and hold, own, maintain, work, develop, sell, lease, exchange, convey, mortgage, or otherwise dispose of, and deal in, lands, leaseholds, and any interest, estate, or rights in real property, and any personal or mixed property, and any franchises, concessions, rights, licenses, or privileges necessary or appropriate for any of the purposes expressed in this article.

“(j) May declare dividends on capital stock, which shall be deposited into the Treasury as miscellaneous receipts.

**.249. SPECIFIC POWERS OF CORPORATION.-Subject to the provisions of the Government Corporation Control Act, the corporation shall have and may exercise the following specific powers, in addition to those elsewhere conferred in this article:

“(a) May construct, maintain, and operate a railroad across the Isthmus of Panama.

"(b) May construct or acquire vessels, and operate the same for transportation of passengers or freight and for other purposes.

"(c) May construct or acquire, establish, maintain and operate docks, wharves, piers, drydocks, harbor-terminal facilities, shops, yards, marine railways, salvage and towing facilities, fuel-handling facilities, motor-transportation facilities, power systems, water systems, a telephone system, construction facilities, living quarters and other buildings, warehouses, storehouses, hotels, a printing plant, commissaries and manufacturing or processing plants in connection therewith, laundries, dairy facilities, restaurants, amusement and recreational facilities, and other business enterprises, facilities and appurtenances necessary or appropriate for the accomplishment of the purposes of this article.

"(d) May make or furnish sales, services, equipment, supplies, and materials, as contemplated by this article, to vessels, to agencies of the Government of the United States, to employees of the Government of the United States, and to any other governments, agencies, persons, corporations, or associations eligible to make or receive such purchases, services, supplies, or materials under the laws prevailing at the time and the policies heretofore or hereafter adopted consistently with such laws.

"(e) May use the United States mails in the same manner and under the same conditions as the executive departments of the Federal Government.

"(f) May take such actions as may be necessary or appropriate to carry out the powers in this article or hereafter specifically conferred upon it.

"2.30. SUBJECTION OF CORPORATION TO LAWS APPLICABLE TO NEW YORK ('ORPORATION.—The corporation shall, so far as consistent with the terms of this article, be deemed subject to all provisions in treaties and in Acts of the Congress of the United States, now in force, which relate or apply to the New York corporation ; and shall have the rights, privileges, and exemptions, and be subject to all the obligations, liabilities, and responsibilities, applicable to the New York corporation under or by virtue of such provisions.

*251. TAKING OVER OF ASSETS AND LIABILITIES OF, AND DISSOLUTION OF. NEW YORK CORPORATION ; RELEASE OF UNITED STATES TREATY RIGHTS IN ASSETS.—The corporation is authorized and directed to take over the assets and assume the liabilities of the New York corporation. To accomplish the transfer of such assets to, and the assumption of such liabilities by, the corporation, and to accomplish the dissolution of the New York corporation, the two corporations are authorized and directed to take, under the supervision of the stockholder, whatever action shall be determined to be appropriate and necessary, whether by agreement, transfer, merger, consolidation, dissolution, or otherwise. Effective upon the transfer of such assets and the assumption of such liabilities, there are hereby released and transferred to the corporation all the right, title, and interest in and to such assets, which the United States now has or may hereafter acquire by virtue of the Convention of November 18, 1903, between the United States and the Republic of Panama ; and, specifically, there are hereby released to the corporation any and all reversionary rights of the United States in the lards of the corporation located in the cities of Panama and Colon, Republic of Panama.

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