Papers Relating to the Foreign Relations of the United States, 1926, Volume II

882.51/1888,1889

Mr. Guy Gary of Shearman & Sterling to the Assistant Chief of the Division of Western European Affairs ( Richardson )

New York, N. Y. , September 25, 1926 .

Dear Mr. Richardson: In accordance with our telephone conversation of this morning, I am enclosing to you, herewith, a printed copy of the proposed Loan Agreement between the Republic of Liberia, of the one part, Finance Corporation of America, of the other part, and The National City Bank of New York, as Fiscal Agent.

Also a copy of a letter to Mr. de La Rue,⁴⁸ transmitting to him, three counterparts of this Agreement, duly executed by the Finance Corporation of America and by The National City Bank of New York, as Fiscal Agent.

I also quote as follows from a personal letter to Mr. de La Rue:

“After myself reviewing the whole subject thoroughly with the clients, I am of the opinion that no mistake has been made in executing the Agreement before sending it forward to you for submission to the Liberian Government. It would be erroneous to infer from this the intention or desire on the part of our clients to force the hand of the Liberian Government by adopting a ‘take it or leave it’ attitude. The simple facts are, however, that the Agreement as it stands affords only the essential safeguards, and that the previous discussions, resulting, through the former texts and through the adoption in great part of the changes desired by the Liberian Legislature, have cleared the ground of all the unessentials, so that the stage of discussion and mutual concession has passed, and we have come by natural steps to a form of agreement which both sides can consider as a whole. This being so, and in view of the distance separating us, it is obviously timesaving and proper to execute it here and send it on to you, so that the Liberian Government will have it before them in concrete and definite shape.”

These two letters and the counterparts of the Agreement, signed as above stated, are in the hands of one of Mr. Firestone’s men who is now on the way to Monrovia where he will deliver them to Mr. Harvey S. Firestone, Jr. It lies with the latter to deliver them to Mr. de La Rue at the proper time, which depends to some extent, of course, upon the outcome of the negotiations which he is now carrying on with the Liberian Government concerning the planting agreement.

I need not rehearse the reasons for thus signing and sending forward the Loan Agreement in the present form, as they are stated in the two before-mentioned letters to Mr. de La Rue; and I hope that you will also conclude that this is the best way to bring matters to a head, with reasonable ground to hope for a successful outcome. However, as I said to you over the telephone, it might complicate the situation very seriously, and a totally wrong construction might be placed upon our clients’ attitude, if it should become known in Monrovia, before Mr. Firestone, Jr., hands the documents and letters to Mr. de La Rue with the proper explanations, that we have sent forward signed contracts in final form. With this thought in mind, we have not even cabled Mr. Firestone, Jr., that signed contracts are on the way. He will receive his information to this effect when the letters and papers reach him by the hand of the messenger who is carrying them. In view of this, and for the benefit of the whole situation, we and our clients will esteem it a great favor if the Department will refrain from cabling advance information to the Legation at Monrovia, and permit Mr. Firestone, Jr., to be the Legation’s first informant. We intend to cable him to this effect as soon as we receive word by cable that the papers have reached him.

I also enclose a copy of a cable received by the National City Bank from Mr. Bussell⁴⁹ inquiring whether an officer of the Finance Corporation was coming to Monrovia. With this, I enclose a copy of a cable from the Bank to Mr. Bussell⁴⁹ which seemed to be as much as could be said under the circumstances.

Yours very truly,

Guy Cary

[Enclosure—Extracts]

Draft Loan Agreement Between the Government of Liberia, the Finance Corporation of America, and the National City Bank of New York ⁵¹

Article VII. The Government agrees that it will forthwith undertake negotiations with the present holders of the external and internal debt of the Republic for the adjustment of such debt and for the settlement of such claims as may be approved by the Financial Adviser hereinafter referred to, and that the Bonds herein provided to be issued by the Government and hereinafter termed “The Loan” shall be charged as a first lien.

On all customs duties of the Republic receivable on and after the date of the execution and delivery of this Agreement by the Government, whether in respect of imports or exports, and

On all other revenues or moneys received for the account of the Government from any source whatever.

Import and export duties of every kind and character whatsoever, head moneys and all other taxes, imposts and revenues of the Republic shall be collected through the customs, postal and internal revenue administration, to be maintained by the Government under the supervision and direction of the Financial Adviser and certain assistants appointed as hereinafter stipulated who shall cooperate with the Treasury, Postal and Interior Department officials in the manner hereinafter prescribed. The Government obligates itself to appoint from time to time during the entire life of the loan the fiscal officers required by the terms of this agreement, who during the life of this agreement, shall supervise, direct and control the collection of the revenues of the Republic from whatsoever source they may arise, and the application thereof to the service of the loan, which shall be administered in accordance with the terms of this agreement under rules and regulations to be made and to become effective for the purpose of carrying out the terms and provisions hereof.

. . . . . . . . . . . . . .

Article IX. The organization of the customs and internal revenue administration of the Republic shall be supervised by the following officers, who shall be nominated by the Financial Adviser, to the President of the Republic of Liberia, (the Financial Adviser having first reported the names of the officers nominated to the Secretary of State of the United States), and shall be by the President of the Republic of Liberia appointed and commissioned to the respective offices with duties as defined in this Instrument. These officers shall hold their appointment during good behavior but shall be subject to removal by the President of Liberia, for cause, or upon the withdrawal by the Financial Adviser, for sufficient cause stated, of his recommendation of such officer or officers.

The auditor and assistant auditor shall be appointed by agreement between the Government and the Fiscal Agent, and the Liberian Assistant Auditor shall be appointed by the President of the Republic of Liberia, to serve during his pleasure.

The officers to be so designated shall be qualified as to education and as to previous experience in similar or analogous positions in foreign service; and the President of the Republic of Liberia, before commissioning them for service hereunder, shall have the right to require satisfactory proof of such qualifications, with the exception only of the Financial Adviser:

1. A Financial Adviser who shall be designated and appointed as hereinbefore stated, at a salary of $12,500. per annum;

2. An official, who shall be designated Supervisor of Customs;

3. An official, who shall be designated Supervisor of Internal Revenue;

4. A bonded Auditor appointed by agreement between the President of the Republic of Liberia and the Fiscal Agent;

5. A bonded Assistant Auditor, appointed by agreement between the President of the Republic of Liberia and the Fiscal Agent;

6. A bonded Assistant Auditor who shall be appointed by the President of the Republic of Liberia.

The officers above mentioned shall perform such duties and employ such persons as may be defined by law or prescribed by the Government, with or upon the advice of the Financial Adviser, and the salaries of said officers, with the exception of the Financial Adviser, shall be fixed from time to time by agreement between the Financial Adviser and the Government, but the total aggregate salaries of said officers, excepting only the Financial Adviser, shall not exceed the total aggregate sum of Thirty-two Thousand Dollars ($32,000); provided, however, that in the event of substantial changes in money values, the salary of the Financial Adviser and the above aggregate total amount for salaries of other officers may be from time to time increased or diminished by agreement between the Government and the Fiscal Agent.

In the absence or during disability of the bonded Auditor, the bonded Assistant Auditor appointed by agreement between the President of the Republic of Liberia and the Fiscal Agent shall act in his place and stead, and he shall be assisted by the bonded Assistant Auditor appointed solely by the President of Liberia. The salary of the bonded Assistant Auditor appointed solely by the President of Liberia is not incorporated herein but is to be determined by the Budget appropriation as made from time to time.

Such salaries paid to the Financial Adviser and the fiscal officers to be appointed as above stated shall include all allowances of any kind or character whatsoever, provided, however, that said officials shall in addition to such salaries be furnished suitable quarters by the Government; should the quarters furnished not be desired, commutation in lieu thereof will be given for the actual expense of quarters not to exceed the sum of eight hundred dollars ($800) annually; shall be furnished suitable medical care and attendance; shall be reimbursed for their actual traveling expenses incurred by them on official duty; and shall receive traveling expenses from the point of departure in the United States at time of appointment or employment, to their post in Liberia and return to the United States on termination thereof; and not more often than once in two years, shall receive their actual traveling expenses by ordinary route to the United States and return.

The Financial Adviser and the officers appointed by virtue of the provisions of this agreement shall be entitled to receive reasonable leaves of absence, cumulative over not more than two years, at full pay.

Article X. 1. The Corporation agrees to purchase from the Government and the Government agrees to sell, at the rate of $900 per bond of $1,000., together with interest accrued thereon from time to time, pursuant to the terms and provisions hereof, and in the manner hereinafter stated, such an amount of said Bonds as will provide funds to be used by the Government for the purpose stated in the preambles hereof, not to exceed, however, the total aggregate amount of $2,500,000, face value of said bonds.

2. Said Bonds shall be certified to by the Fiscal Agent for the purposes of identification, and from time to time delivered to the Corporation, or its nominee, as against payment therefor at the rate above stated, to be credited by the Fiscal Agent, out of moneys provided for that purpose by the Corporation, to the account of the Liberian Government in the City of New York. Said Bonds shall be so certified and delivered from time to time by the Fiscal Agent, at the request of the Secretary of the Treasury of the Government, with the written consent and approval of the Financial Adviser but not otherwise, and payment for said Bonds shall not be called for in excess of the following schedule, to wit:

3. During the calendar year 1927, not to exceed the total aggregate amount of $1,500,000, face value of said Bonds;

4. During the calendar year 1928, not to exceed the aggregate face amount of $500,000. of said Bonds;

5. During the calendar year 1929, not to exceed the aggregate face amount of $500,000. of said Bonds.

If the Government shall fail to call for the full amount of said bonds provided for any one year the uncalled balance thereof shall not be cumulative except with the Corporation’s consent.

If the Government shall desire to issue the additional $2,500,000 face amount of Bonds or any part thereof, it shall first advise with and secure the consent of the Financial Adviser to such proposed issue, but in no case shall any such additional bonds be issued or offered for sale until after December 31, 1930. Such additional bonds shall only be sold in the American financial market, and to or through the Corporation or other responsible American financial concern, bank or bankers, doing business in the United States of America, and the Corporation shall have the preferential right to purchase such bonds on the same terms as may be offered by any such other proposed purchaser.

. . . . . . . . . . . . . .

Article XIII. The revenues and receipts shall be applied by the Government as follows:

1. To the payment, as they arise, of all costs and expenses of collection, application, and administration of the revenues and receipts, including the salaries of the Financial Adviser and the officers appointed hereunder, and the salaries of the employees of the revenue service, both customs and internal, the cost and expenses of maintaining the frontier force, and any other legitimate expenses or obligations incurred under this agreement, and all amounts incident to the service of the loan except as to payments on account of principal and interest, for which provision is hereinafter made.

2. Thereafter to the payment to the depositary on the first day of each month for account of the Government, of such sums as may be necessary to enable the Government to pay as they become due the current administrative expenses of the Government, but not in any year more than the sum set forth as the estimate of current administrative expenses of the Government in the budget and appropriation acts prepared and adopted as hereinbefore provided.

3. Thereafter to the payment to the Fiscal Agent on the dates hereinbefore stated, of an amount equal to the interest to be due and payable on the next semi-annual interest date hereinbefore stated.

4. Thereafter to sinking fund payments provided for in Article V hereof.

5. The remainder thereof shall be applied so far as may be necessary to the payment of any other amounts which the Government may, with the approval of the Financial Adviser be required to pay.

6. The sums that may remain after the payments provided in the first five clauses of this article have been made shall be applied as follows:

Such sums shall be credited by the depositary to an account hereinafter referred to as the reserve account. Moneys in the reserve account shall be applied, in so far as possible, only for the improvement of public education in Liberia and for public works, except that in emergency, declared to be such by the Government, the same may be applied to some purpose not covered by the ordinary budget. Moneys shall be transferred for expenditure from the reserve account by agreement of the Secretary of the Treasury and the Financial Adviser. In case of a disagreement between the Secretary of the Treasury and the Financial Adviser, the question of such transfer shall be referred to the President of Liberia and his decision thereon shall be final. Whenever and for so long a period as the assigned revenues and receipts shall be insufficient to meet the payments required to be made by clauses 1, 2, 3, 4 and 5 of this article, the depositary shall cease paying out the moneys from the reserve account and such funds may be applied by the Government to meet the payments provided in clauses 1, 2, 3, 4, and 5 of this article.

7. At the end of each fiscal year, all unexpended balances of the budget or appropriations shall be reported, together with notation of any commitments or reservations or amounts outstanding in suspense against the same, and the budget for the following year shall take into consideration any outstanding commitments or unadjusted balances, but no sums shall be expended after the close of the fiscal year against the preceding years budget, the purpose being that all expenses for each year shall be budgeted annually.

8. The Government shall make no expenditures, except as hereinbefore provided and for the purposes and in the manner hereinbefore provided, and shall not incur any liability or obligation to make expenditures otherwise. All salaries and expenses incident to the collection, application and administration of the assigned revenues and receipts and maintenance of the frontier force shall be disbursed in accordance with the provisions of this agreement.

9. The Government and the Financial Adviser, or such person as he may designate, and the Auditor shall have the right at any time and from time to time to examine and audit the books and accounts of the depositary in connection with its acts as depositary. Monthly or quarterly statements of such accounts shall be rendered by the depositary to the Financial Adviser and to the Fiscal Agent. A copy of said monthly or quarterly statements shall be furnished by the depositary to the Secretary of the Treasury of Liberia.

10. Agencies or branches of the depositary shall be opened or established at such places in the interior or on the coast of Liberia as the Government, upon the advice of the Financial Adviser, may decide are necessary for the protection of the revenues and receipts, and for their convenient application and administration.

. . . . . . . . . . . . . .

Article XV. Until the Government has repaid the whole amount of the loan and all expenses incident to the service thereof, no floating debt shall be created and no loan for any purpose shall be made, except with the written approval of the Financial Adviser.

. . . . . . . . . . . . . .

Article XXV. In case of dispute between the Government and either of the other parties to this Contract, the matter shall be referred for determination to arbitrators, one of whom shall be appointed by each of the parties to dispute; and, if such arbitrators shall be unable to agree among themselves, the Secretary of State of the United States of America shall be requested to appoint an additional arbitrator. The decision of a majority of the arbitrators so appointed shall be binding and conclusive upon the parties to the dispute.

. . . . . . . . . . . . . .

[Subenclosure—Exhibit A]

[Form of Bond]

No.—

$—

Republic of Liberia

External Forty Year Secured Sinking Fund Seven Per Cent Gold Bond

For value received, the Republic of Liberia (hereinafter referred to as the “Republic”) promises to pay to Bearer, or if the ownership of this Bond be registered, to the registered owner hereof on the first day of January, 1966, the principal sum of . . . . . . . Dollars, and to pay interest thereon from the date hereof at the rate of seven per cent, per annum semi-annually on July 1 and January 1 in each year, until such principal sum is paid; but any such interest falling due at or before the maturity of this Bond shall be paid only upon the presentation and surrender of the attached interest coupons as they severally mature.

Both principal and interest of this Bond are payable at the Head Office of the Fiscal Agent, The National City Bank of New York, in the Borough of Manhattan, City and State of New York, United States of America, in gold coin of the United States of America, of or equal to the present standard of weight and fineness, without deduction for or on account of any taxes, assessments or other governmental charges or duties now or hereafter levied or to be levied by or under the authority of the Republic or any taxing authority thereof.

This Bond is one of a duly authorized issue of $5,000,000, aggregate principal amount, of Bonds of the Republic of Liberia, designated as its “External Forty Year Secured Sinking Fund Seven Per Cent. Gold Bonds” all of like date and maturity and similar tenor, except as to denomination. The terms of issue of the said Bonds are set forth in a certain Loan Agreement, dated as of September 1, 1926, of which a copy is on file with the Fiscal Agent hereinafter mentioned, to which contract reference is made for the terms thereof.

The due and punctual payment of the principal and interest of this Bond and of all sums required by the said contract to be paid on account of the Sinking Fund are secured and guaranteed by a first charge upon all the customs duties and other revenues of the Republic, subject only to a prior charge thereon for expenses of administration.

This Bond may be redeemed at 102 per cent, of the principal hereof through the operation of the Sinking Fund provided for in the said Loan Agreement, on any semi-annual interest date prior to maturity, upon at least sixty days prior notice, published in two daily newspapers of general circulation, in the Borough of Manhattan, City and State of New York.

The Government of the Republic of Liberia hereby certifies and declares that all acts, conditions and things required to be done and performed and to have happened precedent to and in the issuance of this Bond have been done and performed and have happened in strict compliance with the constitution and laws of the Republic.

This Bond shall be transferable by delivery unless registered in the owner’s name at the said Head Office of the Fiscal Agent, such registration being noted hereon. After such registration, no further transfer hereof shall be valid unless made at said office by the registered owner in person or by duly authorized attorney and similarly noted hereon; but this Bond may be discharged from registration by being in like manner transferred to bearer and thereupon transferability by delivery shall be restored. This Bond shall continue to be subject to successive registrations and transfers to bearer, at the option of the holder or registered owner, but no registration shall affect the negotiability of the attached interest coupons, which shall continue to be payable to bearer and transferable by delivery merely.

Bonds of this issue, of the denomination of $500, are exchangeable, at the option of the respective holders thereof, for a like aggregate principal amount of Bonds of this issue, of the denomination of $1,000, in the manner and upon payment of the charges provided in the said contract.

This Bond shall not be valid or obligatory for any purpose until authenticated by the execution by the Fiscal Agent of the certificate indorsed hereon.

In witness whereof, the Republic of Liberia has caused this Bond to be executed on its behalf by its . . . . . . . , and impressed with a facsimile of its seal of State, attested by . . . . . . . , and the attached interest coupons to be executed with the fascimile signature of its Secretary of the Treasury, as of the first day of January, 1926.

[Form of Interest Coupon]

No.—

$—

On the first day of . . . . . . . , 19 . . , unless the Bond herein mentioned shall have been called for previous redemption, the Republic of Liberia will pay to Bearer, at the Head Office of The National City Bank of New York, in the Borough of Manhattan, City and State of New York, . . . . . . . Dollars, in United States Gold coin, being six months’ interest then due on its External Forty Year Secured Sinking Fund Seven Per Cent. Gold Bond, No. . . . . .

[Form of Fiscal Agent’s Certificate]

This is one of the Bonds described in the within mentioned Loan Agreement.

The National City Bank of New York,
as Fiscal Agent,
By . . . . . . .

48. Not printed.
49. Not printed.
49. Not printed.
51. The text of this draft is the same as the text of the agreement ratified by Liberia, p. 574, with the exception of the extracts here printed. Topical notes appearing in the margin of the draft text have been omitted.