Washington cover-up

by Clark R. Mollenhoff

Then suddenly, in June 1955, the White House reinvoked the letter as justification for refusing to make records available to a Senate committee investigating the Dixon-Yates contract.

First, Budget Director Rowland R. Hughes used “executive privilege” to conceal testimony and documents requested by Senator Estes Kefauver, the Tennessee Democrat in charge of the investigation.

Then J. Sinclair Armstrong, the chairman of the Securities and Exchange Commission, used “executive privilege” to justify his refusal to disclose conversations with Presidential Assistant Sherman Adams relative to postponing a hearing on Dixon-Yates financing.

Also, Sherman Adams claimed the “privilege” not to be required to testify about his talks with Armstrong or about other activity in the Dixon-Yates contract development.

At last a few of the Democrats who had been only too glad to see “executive privilege” invoked against Senator McCarthy opened their eyes. The realization of the danger dawned too late, however, for it would take more than a few weeks to upset a precedent that only a year earlier had been generally viewed as praiseworthy.

While the Army-McCarthy hearings and the McCarthy censure affair dominated the news, top-level officials in the Eisenhower administration had been quietly at work arranging for the Mississippi Valley Generating Company to furnish 600,000 kilowatts of electricity to the Tennessee Valley Authority. The Mississippi Valley Generating Company contract ultimately became known as the “Dixon-Yates” contract because of the two men responsible for its creation. They were Edgar H. Dixon, president of Middle South Utilities, Inc., and Eugene A. Yates, chairman of the board of The Southern Company. Both firms act as holding companies for utilities operating in Arkansas, Georgia, Louisiana, Mississippi, and Alabama. Dixon and Yates joined forces to create the Mississippi Valley Generating Company, an operating subsidiary in West Memphis, Ark. The Dixon-Yates contract was reported to be for the purpose of replacing power in the Tennessee Valley Authority area that was used by the Atomic Energy Commission.

Lewis L. Strauss, then chairman of the Atomic Energy Commission (AEC), and Joseph Dodge, then Director of the Budget, were active in pushing this contract. Chairman Strauss pushed it despite the fact that a majority of the Atomic Energy Commissioners were opposed to such a contract on grounds there was no Atomic Energy Commission installation near West Memphis, Ark., and the power was to be used in Memphis, Tenn.

The Eisenhower administration had opposed the Tennessee Valley Authority proposal to build a steam plant at Fulton, Tenn., with a capacity of 500,000 kilowatts to provide for the power needs of Memphis, plus a surplus for industrial expansion. Budget Director Dodge opposed the Fulton steam plant and axed the 90 million dollars requested from the budget in 1953. Gordon Clapp, at that time chairman of the TVA, then asked that to offset the loss of the Fulton steam plant the AEC consumption of TVA power be cut sharply. It was at this point that Budget Director Dodge turned to the AEC in an effort to get that agency to find ways to obtain power from a private company.

The Dixon-Yates contract idea developed over a period of months in 1953 and early 1954. Dozens of conferences were held in which one of the important figures was Adolphe Wenzell, a vice president and director of the First Boston Corporation. Wenzell was an engineer and an expert in the cost of construction of public utility plants. From May 20, 1953, to September 3, 1953, he made studies and issued reports on TVA power plant costs. In January 1954, Rowland R. Hughes, then Deputy Director of the Budget, asked Wenzell to assist the Budget Bureau on the Dixon-Yates contract. Wenzell agreed and, until April 10, 1954, continued to participate in the Dixon-Yates negotiations.

Wenzell continued to draw his salary from First Boston Corporation, and received travel costs and a per diem allowance from the government for his services for the Budget Bureau. Since First Boston Corporation was slated to be underwriter of the Mississippi Valley Generating Company, a question was raised by his associates about the propriety of Wenzell’s services to the Budget Bureau and to First Boston—a firm that had a pecuniary interest in the Dixon-Yates contract agreement.