June 24, 1926

LIB

William Lyon Mackenzie King (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Liberal

Mr. MACKENZIE KING:

This resolution was passed at a meeting of the Canadian Association of Garment Manufacturers held at the Chateau Laurier, Ottawa, on March 11 and 12, 1925.

I just want to interject a word here, which I will amplify later. Up to that time Hon. Mr. Bureau was actively administering the affairs of the department. His health broke down in the early part of last year, thereafter

he was largely absent from the department on the advice of his medical adviser, and the department was administered by an acting minister. I just interject that point at the moment to make clear the relationship, as it. was understood by the government, that existed at that time between the Commercial Protective Association and the then Minister of Customs and Excise. A resolution of thanks was passed by the association of which Mr. Sparks was the head, for the co-operation that its officers and members were getting from the department and from the minister.

I will not read at the moment but will quote one passage from a letter of April 8r 1925. In this letter Mr. Sparks says:

I beg to enclose herewith a memorandum covering proposed amendments to the Customs Act, as recently discussed with you-

Showing that while these letters were not answered he was coming to me as Prime Minister. I had suggested to him to get his amendments drafted and that I would see that the government would put through the legislation that was requested and I was expediting and facilitating the move in every possible way. In the same letter Mr. Sparks goes on to say:

These suggested amendments have been submitted to the officers of the department, and, while they do not feci it their duty to express an opinion as to their desirability, they do state that they present no administrative difficulties. The object of nearly all of these amendments is to increase the penalities against those proven guilty of infractions of the Customs Act.

Hon. gentlemen may ask why these amendments were discussed with me? I have just given the reason. The minister of the department was away, and I took the responsibility as Prime Minister to see that the evils complained of were as far as might be possible effectively remedied. I was determined that this parliament should go just as far as it could possibly go in the matter of prosecuting those guilty of smuggling and infractions of the customs law. The letter says elsewhere: While these suggested amendments may appear drastic, I would like to point ouit that legislators have never before been called upon to deal with such a situation. The condition exhibited by the United States, a nation with about sixteen thousand miles of border or coastline, along practically all of which smugglers (commonly called bootleggers) by the hundreds of thousands are endeavouring to evade the laws of the country, creates a situation entirely unprecedented in the history of the world.

That is the view Mr. Sparks took of the problem the government had in hand-"a situation entirely unprecedented in the history of the world."

Smuggling on this continent has become a huge industry. Along the international border between Canada

Customs Inquiry-Mr. Mackenzie King

and the United Slates thousands of men are making their living by illicit trade. The step between smuggling from Canada into ithie United States and from the United States into Canada .is a short one, and a large part of the smuggling of commodities into Canada is directly due to the fact that smuggling has become a profession dn which there are many adepts.

After months oif investigaition by trained investigators we have no hesitation in saying that this traffic constitutes a rtational problem of the very first importance. Our investigations have proved to our complete satisfaction that the only successful way in which this traffic can be discouraged is by the imposition of the most severe .penalties. Along a border of neardy four thousand miles the physical act of bringing goods from the United States into Canada will never be difficult. To-day it is neither difficult nor dangerous, owing to the insufficiency of the penalties. We believe that no legislation will add much to the difficulties, but the legislation which we propose certainly will make it dangerous for those who are caught.

We believe there are certain matters of administration in the matter of enforcement which could be greatly improved. However, until the act is amended along the lines suggested the departmental officials, no matter how efficient, will be unable to cope with the situation.

Now there is the note which the Commercial Protective Association, as I said before, was sounding continually. It was impossible for the officials of the government to deal with the matter until the legislation itself was changed, and the legislation, as I have said, was changed in accordance with the methods which this association thought were most advisable. The correspondence goes on to show that the draft bill was submitted first of all to the Department of Customs and Excise for their approval or rather for their comment. I had undertaken to see that the bill would be put through but there were some technical considerations of administration and drafting that had to be met. After a reference to the Department of Justice the bill was drafted and full approval was given to it by Mr. Sparks on behalf of the Commercial Protective Association before it was brought into the House.

Now may I quote in support of this statement a letter, dated April 17, which was addressed to Mr. Farrow and signed by Mr. Lemaire, Clerk of the Privy Council:

Dear Mr. Farrow,

I am directed by the Right Hon. the Prime Minister to forward you the enclosed communication which he has received from Mr. R. P. Sparks, chairman of the executive committee of the Commercial Protective Association, and to which is attached a memorandum covering certain proposed amendments to the Customs Act.

It is the desire of the Prime Minister that you should go carefully into this matter at the earliest moment and forward it with any comment which you may deem necessary to the Honourable the Minister of Justice by whose department as agreed by council the necessary legislation will be drafted.

Yours sincerely,

E. J. Lemaire,

Clerk of the Privy Council.

That course was taken and the bill was brought into the House. I desire to read one other communication which will indicate how Mr. Sparks felt with respect to my own attitude towards the association. This is a letter which was written to the Premier of Quebec, in which Mr. Sparks sets out his view of the manner in which the government at Ottawa was co-operating with him. This letter is dated March 5, 1925 and reads as follows:

Hon. L. A. Taschereau,

Prime Minister and Attorney General of Quebec* Quebec, P.Q.

Dear Sir,-I am taking the liberty of writing you on behalf of the executive committee of this association in reference to the prosecution of smugglers in the courts of the province of Quebec and with special reference to the case of Abraham and Israel Lenetsky* arrested on March 2nd.

I shall omit the next paragraph but the following is pertinent:

You expressed the view that the most satisfactory solution of the difficulty would be an amendment to the Customs Act making a jail sentence compulsory in cases in which wholesale smuggling had been proven. This recommendation has been put before the federal government, and the whole matter of amendments to the Customs Act is being dealt with by a committee of the cabinet, of which the Prime Minister is a member. Mr. King is taking an active interest in this matter, and I am taking the liberty of suggesting that, if you felt disposed to write him expressing the opinions which you expressed to the delegation in reference to this matter, he would appreciate it. I can assure you it would be greatly appreciated by the whole business community.

I was taking an interest in the matter because in the first place the minister was absent much of the time, but primarily because I regarded this as probably the greatest problem which the country has . before it at the present time.

In his speech the other day the member for West Hamilton (Mr. Bell) said that the Commercial Protective Association, together with the boards of trade of Montreal and Toronto, had appealed to this government but had appealed in vain. The hon. member was speaking in support of the amendment of my hon. friend (Mr. Stevens) which says that the Prime Minister and his colleagues have been indifferent in this matter. Well, I happen to have a communication from the Toronto Board of Trade. It is not dated April or May but bears the much later date of July 13, 1925.

I will read this communication, which is signed by the president of the Toronto Board of Trade.

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CON

Henry Herbert Stevens

Conservative (1867-1942)

Mr. STEVENS:

Who is a Liberal.

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LIB

William Lyon Mackenzie King (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Liberal

Mr. MACKENZIE KING:

May I say that the delegation that waited on the government was composed in large part of representative

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Customs Inquiry-Mr. Mackenzie King

business men of the city of Toronto, members of the board of trade and other bodies, who were watching the actions of this government in every detail in dealing with this matter. So convinced were they of the splendid manner -I use the term advisedly,-in which the government had sought to meet them and carry through their desires that the expression I am about to read came unsolicited from the Board of Trade's president. The communication reads as follows:

On behalf of the executive and council of the Toronto Board of Trade, I desire to express appreciation of the action of the government in introducing legislation at the recent session increasing the penalties for the smuggling of goods into Canada and including in the estimates a substantial sum to enable the preventive service to be so strengthened and improved as to be able to cope with this illegitimate traffic. We are also gratified that the House of Commons and Senate have accepted the government's recommendations and that the new law is now in force.

You will remember that a deputation from this board waited upon you and your colleagues in the cabinet last fall and discussed the seriousness of the smuggling situation with you. You then expressed the desire of the government to do everything in its power to combat the inroads which the smugglers were making into the legitimate trade and revenues of the country and you welcomed the co-operation to this end of an organization of business interests which at was then proposed to form. Acting on this assurance, the members of this board comprising the delegation organized the Toronto branch of the Commercial Protective Association. We were very pleased to note from your remarks in the House with respect to the proposed new legislation that you appreciated the vast proportions of this traffic and the need for drastic action. We have been in close touch with the association's work and it has been a great pleasure for this board to learn that the government has co-operated to the fullest extent with the result that adequate machinery to deal with the smuggling menace will, we understand, shortly be in operation. We are informed of the fact that the new penalties are already . in force has 'had a very deterrent effect upon the traffic and we sincerely hope that in connection with the reorganization of the preventive service 'Which is now under way, the dominant note will be the strict enforcement of the law in the interests of the lawful commerce of the Dominion and an increased national revenue which in turn will be reflected in an improvement in economic conditions generally.

We congratulate and thank you for your efforts in the solution of this problem and assure you of the continued co-operation and support of this board in curtailing the smuggling traffic with the aid of the new powers now available, I am,

Yours very truly,

S. B. Gundy,

President.

That letter is dated July 13, of last year. I have other communications here, but I will not take up time reading them.

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CON

Charles Hazlitt Cahan

Conservative (1867-1942)

Mr. CAHAN:

Is that the Toronto Board of Trade?

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LIB

William Lyon Mackenzie King (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Liberal

Mr. MACKENZIE KING:

Yes. I say

that if in July of that year the Commercial

Protective Association, composed largely of members of the Toronto Board of Trade, had any doubt as to the genuineness of what the government were doing and seeking to do, they never would have permitted a communication of that kind to be sent, but they realized, as I believe the public is prepared to realize, that where a government attempts to cope with a great problem of this kind, if the national interest is to be served, it is better to strengthen the arm of the government than to seek to impair it and destroy it, as hon. members opposite are trying to do by the amendment they have proposed.

I think I have covered all that I need to say with regard to the major effort of the association, namely that of procuring the enactment of laws that would effectively cope with the situation. As I have said, another matter came up in the course of my interviews with Mr. Sparks and members of the association, and that was the advisability of dismissing the preventive officer at Montreal, Mr. Bisaillon. Mr. Sparks mentioned to me that in his opinion this officer was not doing his duty as it should be done and that he should be dismissed. I said to Mr. Sparks, "This is a departmental matter. Have you spoken to the minister about it?" He intimated to me that he had, and that the minister took the position that the officer was performing his duties, that there was no charge made against him of any kind, and if there was a charge he would have it investigated. In regard to that I asked Mr. Sparks if he did not feel that the position the minister was taking with respect to discharging the man was a reasonable position. I have forgotten the answer he gave, but it was to the effect, at any rate, that this one officer should be dismissed, and that if he were dismissed, as far as he, Mr. Sparks, was concerned he would be perfectly satisfied with all the rest. Now I pause here for a moment to ask the House to consider the position of a minister of the crown and the Prime Minister in dealing with officials of the public service. May I say-and I do it without fear of contradiction-that with respect to the different departments of the public service, there is not a department where a man is holding a public position in which sooner or later he does not come in conflict with certain parties. There is scarcely a man holding an important position in the civil service of the country from the Atlantic to the Pacific who does not sooner or later come .to have his personal enemies. Hardly a week passes that someone does not come to me personally with

Customs Inquiry-Mr. Mackenzie King

respect to some individual in some department and say, "That man should be dismissed." Let us forget for a moment this particular case. Take the position of my hon. friend the Minister of Finance who is sitting near me. He has in his department officials who are doing their duties I believe honestly and well, but against whom men are levelling charges day in and day out.

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LIB

James Alexander Robb (Minister of Trade and Commerce; Minister of Finance and Receiver General)

Liberal

Mr. ROBB:

Hear, hear.

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LIB

William Lyon Mackenzie King (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Liberal

Mr. MACKENIZE KING:

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Customs Inquiry-Mr. Mackenzie King

before making an arrest. He painted out that it was impossible to prevent criminals from escaping unless power were given to the detective to make the arrest on the spot without waiting for any report to the government or any word in return.

What attitude did I take towards him? What attitude did the Minister of Finance take? We said to him: This business that you are on is a serious one for the oountry; we give you full latitude to do anything and everything you want to do or think ought to be done; in the matter of making arrests or landing criminals, we will stand behind you and we will take consequences of your action whether it conforms or not with what is the custom or regulations of the department.

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UFA

William Thomas Lucas

United Farmers of Alberta

Mr. LUCAS:

At what date did that interview take place?

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LIB

William Lyon Mackenzie King (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Liberal

Mr. MACKENZIE KING:

Fortunately I have under my hand Detective Duncan's evidence and I believe he gives the date himself. 1 Inspector Duncan was lent by the Department of Finance to the Commercial Protective Association on the 3rd November, 1924; he acted with them until the 30th June, 1925, making his reports to them. It was during that period that he had this interview with me and he gives the date himself. This is the evidence of Detective Duncan before the committee as it will be found on page 496 of the proceedings. The examination was by Mr. Bell:

Mr. Duncan, what was the first time that you had anything to do with the matters now under investigation before this committee?

A. The 27th of November was the first interview with the Hon. the Minister of Customs.

Q. What year?

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A. 1925.


Q. Whait minister, would you say, this was? A. The Hon. Mr. Boivin. Q. What instructions or first suggestion did you receive from tlhe minister at that time? A. I received instructions from the minister to proceed to Montreal, ,for the purpose of conducting an investigation into the conduct of J. E. Bisa.ilIon. Q. Now, let me. stop you there just for one moment. I do not know that I have made myself entirely clear. Did you not have some investigating to do on behalf of the Protective Association before ithat? A. Oh. yes. Q. The Commercial? A. Oh, yes. Q. And when did that take place and under what circumstances ? . A. On the 3rd of November, 1924, I commenced discussing matters with Mr. Sparks, re smuggling. Q. What position did you hold in November, 1924? A. I was the special investigating officer for the Department of Finance. Q. In Ottawa, here? A. In Ottawa. Q. Yes. And under what circumstances did you begin to discuss any of these matters with Mr. Sparks? A. Well, I was loaned by the Department of Finance, to assist Mr. Sparks, and the organization which he represented, in getting a look in as ,to smuggling operations in Canada. Q. In what way did the information come to you that you were 'being loaned to .that association? Who told you about it? A. The Minister of Finance. Q. The Minister of Finance? A. The Hon. Mr. Rolbb. Q. Mr. Robb, himself? A. Yes, also his deputy, Mr. Saunders. Q. He told you that you were being loaned to the Commercial Protective Association to undertake an investigation for them? A. Yes. Q. Did you proceed immediately ito enter on that investigation ? A. Yes. I took the matter up with M,r. Sparks; I attended some meetings; I think one in the Montreal Board of Trade, when the matter was discussed, as to the best methods to find out what was going on in connection with smuggling. Q. Yes. And did you adopt any partdcullar method thereafter in investigating? A. Yes. Q. What was that? A. On the 17,th of November I selected James Knox and George Sloan, engaged them at a salary of $2,500 a year. I got Knox from the C.P.R.; -they loaned Mr. Knox, and I got Sloan in Montreal, and on the 15th of December I selected Alexander as another officer. Q. And then the investigation was pursued where? Any -particular place, or did you go from place ^o place? A. It was principally Montreal and Toronto. Q. And you reported to them, did you? A. Oh, yes. Q. Those reports were made how? A. May I say, after we received -powers as customs officers, I had some discussion with the Prime Minister and also with Mr. Robb, in connection with a memorandum -that was sent along with our appointments, and I drew their attention to -the fact that we might as well not try to go into anything with the instructions given us. We were so tied up at the time that we coulld not operate. I want to draw the attention of the House to the significance of that statement: After we received powers as customs officers. Not only did the government lend these detectives to the Commercial Protective Association, but the association came to us and said: Wil-l you make these detectives preventive officers so that they can go right into the preventive service and sit down alongside of the other members? We gave them that power; we made them preventive officers, and we gave them the power of arrest that preventive officers have. Then Mr. Duncan discovered that there was a certain ruling with regard to preventive officers that had to be observed, a regulation existing in the department evidently in accordance with some general rule there: Q. What instructions did you tell the minister you wanted? A. I think that memorandum is darted 1922, signed by W. F. Wilson, and it is headed general directions Customs Inquiry-Mr. Mackenzie King re Customs Act: When cases are taken ito court, (have the information laid in the name of the King. However, in seizures under the Customs Act no proceedings in court are to be taken until instructions have been received from me, after receipt here of a full report from you. That was the instruction from the chief preventive officer to the other preventive officers: Q. Was the memorandum dated? A. Yes. It is dated November 23, 1922. Evidently instructions had been sent out year after year in that form. By Hon. Mr. Stevens: Q. 1922? A. 1922. This is the original memorandum that I got at the time. By Mr. Belli: Q. Yes, but this investigation was being undertaken in 1924? A. Yes, exactly. Q. This came to you under what circumstances? A. Just as soon as we received our appointment as customs officers this memorandum came along. I then took the matter up with (the Prime Minister and Mr. Robb and pointed out ito them the fact that if we were waching at the roads, when loads came from the American side, and we got a smuggler with a load of silk, what were we going to do about it if we had to wait and receive instructions from Ottawa. Q. You are now referring ito the memorandum? A. I said the thing was ridiculous. Were we to hold them up on the highway until we could communicate with Ottawa or What were we going to do. After a good deal of discussion the Prime Minister said: "Ignore the whole thing; put them in jail. Any smugglers you get put them in jail." I said, "All right, Sir," so we started out with that intention. By Mr. St-Pere: Q. The Prime Minister told you that, to put them in jail? A. The Prime Minister told us to put them in jail and we were asked to make a weekly report to the department, but I drew their attention to the fact that the half of our time would ibe taken up in making reports, so, I think, Mr. Robb said, "After you make the seizure and have them in jail, then make a report to the department." That is what we did for about six or eight months.


UFA

William Thomas Lucas

United Farmers of Alberta

Mr. LUCAS:

Can the Prime Minister give the date of that interview in his office when Inspector Duncan referred to his inability to make arrests?

Topic:   A. 1925.
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LIB

William Lyon Mackenzie King (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Liberal

Mr. MACKENZIE KING:

I thought it was given in his evidence. It must have been very early in the year, because he says that "just as soon as we received our appointment as customs officers, this memorandum came along." They received their appointments either at the end of 1924 or at the beginning of 1925, and he says that as soon as that occurred the memorandum came along. He goes on to say that he had taken the matter up with the Prime minister and Mr. Robb asking what they would do if they had to wait while they were watching at the roads, and so on. The Minister of Finance reminds me 14011-314J

that it must have been before the opening of navigation in view of the fact that some of the counterfeit bills we were concerned about at the time were landed at St. John, vessels not being able to go up the river. It is difficult to recall the exact date but it would be in January, February or March.

Topic:   A. 1925.
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UFA
LIB

William Lyon Mackenzie King (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Liberal

Mr. MACKENZIE KING:

Yes. The Hon. Mr. Bureau was Minister of Customs then and he was co-operating with the Commercial Protective Association. He knew that these detectives were working with the association and he volunteered the co-operation of the officers of his department. I am glad the hon. gentleman has asked that question because I want the House to understand the situation exactly; and it will never be understood so long as it is approached in the spirit of party animosity and personal bias. The only way by which we can clearly understand the whole matter is to forget for the moment any one particular department and assume that we have an identical situation in some other department of government.

I think I have shown conclusively that the government met the association- in every request it made. We lent them the services of detectives, gave the detectives ample powers, took them into the preventive service, and endeavoured to apprehend everyone who was guilty of any offerre. What position did the government take in relation to Bisaillon? We said that if he was a crook we wanted to arrest, not only himself but all those who were working in conjunction with him. No one man can go very far in this illicit traffic; he is bound to have associates and accomplices. And we were out not for the purpose merely of dismissing one employee, but with the determination to obtain all possible evidence to enable us to stamp out the smuggling business by the most effective means possible. To this end we rendered the association and detectives every conceivable aid the government could afford. That is the point I want to bring home.

Topic:   A. 1925.
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CON

Henry Herbert Stevens

Conservative (1867-1942)

Mr. STEVENS:

If that is the case, why was it that later on in the autumn of 1925, synchronizing with the date of the arrest of the notorious smuggler Cohen, the power of arrest was taken away from officer Knox and other officers while Inspector Duncan retained that power as a member of the government staff? Why was that power which had previously been given taken away from these other men?

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Customs Inquiry-Mr. Mackenzie King

Topic:   A. 1925.
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LIB

William Lyon Mackenzie King (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Liberal

Mr. MACKENZIE KING:

I cannot answer that question inasmuch as I never knew that the power was taken away.

Topic:   A. 1925.
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CON
LIB

William Lyon Mackenzie King (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Liberal

Mr. MACKENZIE KING:

I could surmise a reason for it if I were called upon to give one, tout I do not wish to venture conjectures at this stage. I desire to make the facts clear so that the House will understand the situation regarding the secret service work which was going on at that time. At that time the Commercial Protective Association had three or four detectives working around Bisaillon's office in Montreal- because that is where the investigation was being carried out, according to Inspector Duncan's own statement-and Mr. Sparks came to the government with the suggestion that Bisaillon should be dismissed. I agreed absolutely with him on the basis of his representations but I said, " What we are after, as you know, is evidence upon which we may act with confidence. You have detectives and every assistance you require, and our desire with respect to anyone to be dismissed is to apprehend him in such a manner as will enable us to take definite action which we can justify by clear proof." I repeatedly pointed out that we- could not dismiss Bisaillon on mere hearsay or general allegations, for if we did so we should only be making a martyr of him in the public mind and putting ourselves in a false position. We could not act on general statements. My hon. friend (Mr. Stevens) endeavoured to have it appear that there were charges, one of these was that because of the acquittal of Bisaillon in a certain case we should dismiss him at once. Surely the House will see that the government could not dismiss the man without grounds which it could maintain. Another general charge was that Bisaillon had a house on one side of the border line and another house on the other side, and that these two places were being used by smugglers. In this connection I pointed out to Mr. Sparks that, with his criminal investigators, he could surely ascertain whether any smuggling was going on between the two places and could secure substantial evidence. I said that the government wanted to be perfectly sure of its ground before making an arrest or dismissing this man. We wanted to be in a position to defend our position in parliament. The Hon. Mr. Bureau was Minister of Customs at the time, he took the position with Mr. Sparks-it will not be denied-that if Mr. Sparks could make a charge against Bisaillon the man would be dismissed. But I went a step further. As Prime Minister,

when I saw that there was suspicion in regard to Bisaillon and that a situation might develop in Montreal in consequence, I stated over and over again to Mr. Sparks in my office that all the government wanted was sufficient evidence to justify it in so doing, and I would appoint a royal commission to inquire into the affairs of the Montreal office and smuggling generall}'-.

Topic:   A. 1925.
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?

Some hon. MEMBERS:

Oh, oh.

Topic:   A. 1925.
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June 24, 1926