Government: The Price-Fixing Case

General Electric’s corporate defense in the great electrical conspiracy is that the top executives were totally unaware of the shenanigans; the conspiring was done by middle-rank underlings. But last week, as the Senate Antitrust and Monopoly subcommittee, headed by Tennessee Democrat Estes Kefauver, continued its probe into the conspiracy, former G.E. employees told a different story. The witnesses, who were fired after they were convicted of price fixing, swore that former G.E. President Robert Paxton encouraged the conspiracy and that Chairman Ralph Cordiner at least knew about it. From Paxton and Cordiner came out raged denials. As the testimony unfolded, Michigan’s Democratic Senator Phil Hart, a subcommitteeman, said: “Either somebody is lying, or somebody is crazy.”

Contacting Competitors. The man who implicated Cordiner is George E. Burens, 55, company vice president who was sentenced to 30 days in jail and then lost his job. Burens testified that when he took over the switchgear division in 1951, he was briefed by Henry Van Erben, then G.E. executive vice president. According to Burens, Van Erben told him that the “only way to operate the apparatus business was to meet with competitors and set prices.” When Burens balked—he opposed price fixing primarily on practical, not moral, grounds—and asked about the company’s anticollusion policy, Van Erben gave him to understand, said Burens, that he had cleared the practice with Cordiner. Burens quoted Van Erben as saying, “I assured Mr. Cordiner that if he did not ask me to stop, he would never hear about it.”

Burens. a 4O-year veteran at G.E., also implicated former President Robert Paxton in the conspiracy. Burens testified that in 1954 Paxton suggested to him that he should meet with an official from Milwaukee’s Cutler-Hammer to discuss prices.

Clarence Burke, 55, formerly head of the high-voltage switchgear department in null division (he got a 30-day suspended sentence), testified that in 1957 he got a telephone call from W. V. O’Brien, a top G.E. sales executive, who said that “he had been ordered by Mr. Paxton to bring about price stabilization.” Price stabilization, explained Burke, “meant to contact competitors and get agreements on price.”

Price Instability. The Senate subcommittee bore down hard on another top G.E. executive—Vice President Arthur Vinson, a member on the inner-circle Executive Office who until last year was in charge of nine G.E. apparatus divisions and, as such, was George Burens’ direct superior. All of the 19 price-fixing conspiracies in which G.E. was involved were in his divisions.

Burens testified that Vinson visited him in his office at the Philadelphia plant in 1958. Burens was at odds with other G.E. apparatus division chiefs, who complained that his refusal to fix prices with competitors weakened the price structure in the electrical apparatus market. According to Burens, Vinson told him, “We cannot go on with this price instability. You are affecting other divisions in the group.” Burens says that he replied that he had “tried [price fixing] and found it did not work.” Burens says that Vinson replied: “I have assurance this time that it will work. I have talked with Monteith | Westinghouse vice president∣, and he assures me that we can have stability in the industry.”

Burens asked for six months more time —he thought he could raise and stabilize the prices through better quality and production control—and called in Burke to back up his arguments against price fixing. Burke testified that he told Vinson “it was futile to continue that kind of work -that they [the competition] only made suckers out of us. They used those meetings to find out or to get us committed to quote book prices. Then they could cut below book prices.” But Burke says that Vinson replied: “Westinghouse has admitted that they did those things in the past, but they have learned their lesson. They have promised me that it will work.”

Lunch in Dining Room B. After the exchange, Burens, Burke, and two other G.E. executives had lunch with Vinson in the plant’s Dining Room B. To try to get Vinson on record about price fixing before all four of them, Burke said, “Art, competitors have been after us to meet with them to bring about price stabilization. Do you think we should meet with them?” All four testified that Vinson replied: “Yes, that’s all right to meet with them, but don’t let it go below the general manager’s level.”

When Kefauver invited Vinson to testify last week, Vinson refused. So Kefauver subpoenaed him.

“Did you or did you not attend that luncheon?” asked a committee counsel.

Replied Vinson evenly: “I did not. I know I am under oath, and I make that statement.”

Kefauver pointed out that Vinson’s four accusers had each taken lie-detector tests, which had shown that they were “not falsifying.” Would Vinson take one?

“If they could pass this test on something I know didn’t happen,” said Vinson, “I’d be very reluctant to take one. I have no faith in them now.”

Originally, Vinson had been named in the price-fixing indictment, largely on the testimony about the luncheon. But Vinson produced evidence, composed of luncheon checks, notes of appointments with other G.E. officials and outside business meetings to support his contention that he had not been in Philadelphia during the period that the luncheon supposedly took place. The Government withdrew the indictment. To press Vinson further, Kefauver put on the stand Raymond W. Smith, who was formerly vice president in charge of G.E.’s huge transformer division and was fined $3,000 for his part in the conspiracy.

Smith testified that Vinson told him that President Paxton and he had met Westinghouse President Mark Cresap Jr. and Vice President Monteith in a Boston hotel room in June 1958 “to discuss transformer prices.” Kefauver asked Smith: “Is it your belief that Arthur Vinson knew that you and your colleagues were meeting with competitors?”

Replied Witness Smith: “It is my belief that he knew I was meeting with competitors.”

Recalled to the witness stand, Vinson was asked by Kefauver, “Do you still say you didn’t know about meeting with competitors?”

“For the purpose of discussing prices, yes,” answered Vinson. “Mr. Smith is a very intelligent man, but he completely misunderstood.” The meeting with Westinghouse, explained Vinson, was on a social “get-acquainted basis, and nothing was said about prices.”

At week’s end, as the conflicting testimony piled up, the Justice Department disclosed that it has already called another Federal grand jury in Philadelphia to hear new evidence on price fixing in the electrical industry. Kefauver handed over the week’s testimony.