Government Steel In, Foreign Flag Out

"During the war years, as one of America’s key defense contractors, he had built up considerable influence at the Pentagon. Now it was time to turn some of this to advantage. He approached the Navy with a proposal. Let me build you five new supertankers at Norfolk, he told naval procurement officials, larger, at 30,000 tons, than anything afloat, and the Navy can charter them at a rate several percentage points below what it is paying the Voluntary Tanker Pool (which had been set up collectively by private shippers at war’s end to meet the continuing fuel needs of the military). In return, the Navy will supply much of the steel and mechanical equipment to build the ships and contribute to the cost of construction. On paper it looked balanced enough to pass the scrutiny of most budget-conscious administrators. Over the length of the charters the Navy stood to recoup through lower rates what it laid out initially in construction expenditures. But there was a catch — a factor not apparent in the cost-accounting sheets or the contracts Ludwig would sign with the Navy. It did not exist, in fact, except as an understanding between D.K. and a few top-echelon naval officers that when the new supertankers were completed and ready for ser-"

"vice, the Navy would quietly decline to exercise its option to charter them. Having formally made the offer, and having been formally turned down, Ludwig could then put on a glum face and transfer the new vessels to Panama. The maneuver was so clever, and executed so smoothly, that no¬ body — not Maritime, not congressional investigators, not seafarers’ union officials bemoaning the loss of American jobs — ever seems to have twigged on to what was happening. As each ship was finished — Bulkpetrol in 1948, Bulkoceanic, Bulkoil, and Bulkstar in 1949, and Bulktrader in 1950 — D.K. would tender its services for charter to the Navy. Each time, the answer would be a polite “No, thank you.” If anyone asked why the Navy, after furnishing all that money and material to build the ships, now decided it did not want them, all Pentagon officials had to do was say that they had changed their minds or found there was no present need for the tankers. But no one asked, and D.K. was able to go against clearly stated U.S. rules and policies, and transfer 150,000 tons of new tanker tonnage to a flag of convenience without causing anyone to raise an eyebrow."

"The second of his government-owned ships was one D.K. did plan to use. The Hampton Roads, last and largest of the tankers the WSA had contracted with Ludwig to build at Sewalls Point, was sitting in the yard’s only building way when the war ended, a few months from being completed. Legally, she was still the property of Welding Shipyard, but Ludwig, utilizing a provision of his contract dealing with unfinished vessels, was able to sell her to the government in September 1946 for $3 million and buy her back a few months later under the Ship Sales Act for $1.3 million, turning a quick $1.7 million profit at the expense of U.S. taxpayers."