companies which practice reciprocity are duPont, Humble Oil,
Enjay Chemical Company, Monsanto, Pittsburgh Plate Glass Company
and Texaco. In addition, it indicates that Container Corporation
of America practices reciprocity with Mobil, American Oil,
Monsanto, Shell and Tenneco. All of these companies are either
customers or suppliers or both of Goodrich and Northwest. In each
case they appear to sell more to the Goodrich-Northwest
combination than they buy. In most of these cases, there appear
to be substantial numbers of products which these companies could
purchase from Goodrich and Northwest.
The Government contends that Velsicol Chemical Corporation, a
wholly-owned subsidiary of defendant Northwest, Inc., is now and
has been engaged in a full scale and vigorous reciprocity
program. The Government notes that a February 16, 1967 memorandum
from W.C. Goodwine to Howard F. Reeves, presently Vice President
— manufacturing and engineering of Velsicol, indicates that
Velsicol was interested in pursuing "trade relations" with FMC
Corporation. The Government has submitted evidence to support the
contention that William T. Rossiter, Vice President — marketing
of Velsicol, has directed an important part of Velsicol's
reciprocity program and that his reciprocity activities had been
conducted with the knowledge of and implied concurrence of N.E.
Hathaway, President of Velsicol until January of 1969 when Mr.
Hathaway died. Mr. Heineman, President and Chief Executive
Officer of Northwest, in August of 1966 made the appointment of
Hathaway as President of Velsicol, effective December 31, 1966.
On August 15, 1968, William T. Rossiter, on the recommendation of
Mr. Heineman as a "key executive" was granted by the Board of
Directors of Northwest a stock option for 1,100 shares of
The Government has also submitted evidence in support of the
contention that Howard F. Reeves, Jr., Vice President —
manufacturing and engineering of Velsicol, has also been actively
engaged in Velsicol's reciprocity activities. On August 15, 1968,
Howard F. Reeves, Jr., on the recommendation of Mr. Heineman, was
also as a "key executive" granted by the Board of Directors of
Northwest a stock option, in this instance, for 1,250 shares of
The Government has submitted evidence that William T. Rossiter,
Vice President — marketing of Velsicol, as recently as September
24, 1968, sent to Velsicol sales personnel "a list of Velsicol's
top 50 suppliers, and the sales we (Velsicol) made to them." Mr.
Rossiter's memorandum in regard to this list, which is under the
heading "CUSTOMER SUPPLIER RELATIONS," states, in pertinent part,
I recognize that just because we are purchasing
significant amounts from a company is no reason they
should automatically have need for a corresponding
amount of our products. However, if some of these
accounts have the potential to buy more, I am sure a
well organized sales approach could produce
additional sales and profits.
Please review this list and drop me a note on those
customers where a plan might help. I would be pleased
to work with you on them.
The Government has submitted evidence that the aforementioned
list of Velsicol's raw material purchases and sales for 1967 was
passed on by at least one of the sales personnel, Mr. R.M.
Hasterlik, to Messrs. M.W. Donahue, W.C. Goodwine and E.B. Lukas,
who are also Velsicol sales personnel. The Government notes that
Mr. Hasterlik inferred that Velsicol could achieve increased
sales to suppliers based on Velsicol's purchases from these
suppliers but that this information "is to be used with careful
discretion" because "trade relations is a double edge sword,"
that is, Velsicol's customers could use this information to sell
their products to Velsicol through reciprocity efforts.
The Government has also submitted evidence to support the
following contentions. (1) That in 1967, after Velsicol acquired
Retzlaff Chemical, W.C. Goodwine of Velsicol and Dr. C.A. Lynch,
Jr., of Velsicol's development staff suggested that Retzlaff
Chemical's purchases could be used as a vehicle for improving
Velsicol's trade relations position with FMC Corp., as FMC Corp.
"is the major supplier" of a chemical sold to Retzlaff Chemical.
(2) That from at least April 7, 1965 to at least as recently as
March 31, 1969, Velsicol sales personnel have vigorously
attempted to obtain increased Velsicol sales to the Dow Chemical
Co. on the basis of reciprocity and that these reciprocity
efforts have directly involved Howard F. Reeves, Jr., Vice
President — manufacturing and engineering of Velsicol, and the
following other Velsicol personnel: M.W. Donahue, Edward B.
Lukas, Elton Dornbusch, Stuart A. Johnson, Ralph J. Mott, R.M.
Hasterlik, and Art Conor. According to the Dun & Bradstreet
Million Dollar Directory, 1969, at page 1757, Stuart Johnson is
the Velsicol Officer in Charge of Purchasing and Robert Hasterlik
is the Officer in Charge of Sales of Velsicol's Industrial
Chemicals Division. (3) That Stuart Johnson, Officer in Charge of
Purchasing at Velsicol, and Robert Hasterlik, Officer in Charge
of Sales of Velsicol's Industrial Chemicals Division, have worked
together to increase Velsicol's sales of muriatic acid through
reciprocity from at least March 28, 1967, to at least as recently
as January 10, 1968. (4) That Reichhold Chemicals Co. sold
methanol to Velsicol and, on a reciprocity sales basis, tried to
sell Velsicol a portion of Velsicol's maleic anhydride
requirements. (5) That in a memorandum to M.W. Donahue, dated
February 7, 1966, S.A. Johnson, Officer in Charge of Purchasing
at Velsicol, stated, in pertinent part, that "we are not able, at
this time, to give Reichhold any encouragement in supplying a
portion of our Maleic Anhydride requirements" because
"historically" Velsicol has "been working closely with Petro Tex"
Chemical Corp. but that "Allied Chemical has indicated that they
approve our product in their application" and "should Allied
become a customer of our Chlorendic Anhydride, we shall have to
purchase from them at least, the amount of Maleic Anhydride which
would be used in making the quantity of Chlorendic Anhydride that
they purchase." That, however, Mr. Johnson told Mr. Donahue that
"we might have some room to work with Reichhold this year" and
that "we (Velsicol's purchasing department) will keep your
relationship with Reichhold in mind, and when we see our way
clear, we will seriously consider favoring Reichhold with a
portion of our Maleic Anhydride business."
In 1967, Tenneco was Velsicol's fifth largest supplier. In
1967, Velsicol's purchases from Tenneco totaled $782,206 and
Velsicol's sales to Tenneco totaled $420,450. In 1967, Allied
Chemical was Velsicol's twenty-ninth largest supplier, and
Velsicol's purchases from Allied Chemicals totaled $92,728 while
Velsicol's sales to Allied Chemical totaled $572,853. In 1967,
Reichhold Chemicals was Velsicol's thirty-seventh largest
supplier, and Velsicol's purchases from Reichhold totaled $58,658
while Velsicol's sales to Reichhold totaled $201,341.00.
The Government has also submitted evidence to substantiate the
following. That in 1965, contrary to alleged instructions of Ben
W. Heineman, now President and Chief Executive Officer of
Northwest and in 1965 Chairman of North Western, the North
Western purchased paper grain doors on the basis of reciprocity.
That by memorandum dated January 14, 1965, R.C. Stubbs, Acting
Vice President — Traffic of the North Western, was informed of
the North Western's 1965 purchases of grain doors from
International Stanley and Signode and the "traffic values of
the(se) two firms involved for 11 months of 1964." That by letter
dated February 10, 1965, R.C. Stubbs, Acting Vice President —
Traffic of the North
Western wrote to H.G. Whitman, Traffic Manager of Thilmany Pulp
& Paper Co., Kaukauna, Wisconsin, "concerning our use of paper
grain doors" stating that:
Pursuant to our promise, we have not lost sight of
this matter, and I am pleased to advise that
effective immediately Signode doors will be stocked
for use on our M&SL (Minneapolis and St. Louis)
Division. The result will be a significant increase
in our purchases from Signode which will, of course,
in turn benefit your good company.
That an almost identical letter was sent on this same date by Mr.
Stubbs to O.H. Miller, Vice President — Traffic & Distribution,
Scott Paper Co., Philadelphia. That a copy of this letter was
sent to Mr. S.B. Boardman, who Mr. Heineman referred to in his
testimony as "a traffic officer with supervisory responsibility"
at the North Western. That by letter dated February 15, 1965,
H.G. Whitman of Thilmany Pulp & Paper Co. wrote Mr. R.C. Stubbs,
Acting Vice President — Traffic of the North Western, stating:
Thanks much for your February 10 letter advising that
the C&NW will stock Signode doors on the M&SL
division. Your cooperation in continuing to keep our
interests in mind is much appreciated.
Thilmany's total tonnage in 1964 increased 6% over
1963, but perhaps what is of more interest to you is
that we are continually reaching further away from
the mill to lay our finished product down with the
resultant greater rail earnings. The year 1965 seems
to be holding this same pace with probable still
We will continue our efforts to provide the C&NW with
their longest haul in all possible circumstances.
Finally, the Government contends that Lone Star Steel Co.
entered into a contract to purchase coal from the Kerr-McGee Oil
Corp. on the implied condition that Kerr-McGee purchase tubular
products from Lone Star. The Government refers to the deposition
of Max R. Dodson, Executive Vice President of Lone Star Steel, as
its evidence that this reciprocity arrangement was negotiated for
Lone Star by Mr. Dodson, Mr. Love, President of Kerr-McGee, Mr.
Gossard, head of Kerr-McGee's coal mining department, and one
other man from Kerr-McGee, that the Lone Star conversation with
Kerr-McGee in regard to coal and tubular products took place
"approximately three years ago," but that although Kerr-McGee has
already started up a mine to produce this coal, and Lone Star's
purchases of the coal subject to this contract have not yet
begun, Northwest has not cancelled the contract.