841D.51/165
The Secretary of State to Messrs. Frank P. Walsh and John T. Ryan, New York
Sirs: The Department refers to its letter of August 16, transmitting a copy of a note of July 26, 1928 from the Department of External Affairs of the Irish Free State, and to your printed letter in [Page 98] reply of August 22, 1928,13 with which you enclosed a copy (without the exhibits) of the Second Intermediary Report of the Receivers in the Irish bond case filed by them with the Supreme Court of New York on July 20, 1928.
It is observed from this Intermediary Report that in addition to the notices published from time to time in various newspapers throughout the country, the Receivers caused to be mailed to each of the 303,678 subscribers to the loans, notices in the form prescribed by the judgment of the Court on June 17, 1927; that only 120,819 claims covering 127,784 certificates had been filed by the subscribers up to June 30, 1928; that of this number 91,344, or less than one-third of the total number of possible claims, had been passed and allowed by the Receivers; and that the remaining claims received, covering 36,440 certificates have been referred to the Honorable Henry M. Goldfogle, the Referee appointed by the Court, for the determination of disputed questions and questions arising as to the validity of assignments and transfers of certain of the certificates. It appears that the cash on hand was $2,624,860.51; that the total aggregate of claims allowed was $2,077,965 and that the aggregate amount of the remaining 36,440 claims had not been totaled but was estimated to be $866,582.
On the basis of the claims received to the date of the Intermediary Report, and aside from the interest due each bondholder, you state that “the Irish Free State will be required to pay on the principal, to settle its indebtedness to the bondholders who have presented their claims to the Receivers, the insignificant sum of $319,687.49.” This represents less than $3.00 for each certificate.
Paragraph 10 of the Intermediary Report states:
“In view of the fact that the number of claims filed up to and including May 15, 1926, (1928?) the date last set for filing of claims, barely exceeds one-third of the claims outstanding, your Receivers believe that the time for filing claims should be again extended to and including December 31, 1928 and that a further notice should be published in the manner to be directed by this Court calling upon the holders of bond certificates to file their claims on or before said date or be forever barred from participation in the distribution of funds in your Receiver’s hands.”
You state in your letter that upon the report of the Receivers “the Court ordered the time for the filing of claims based on Bond Certificates be extended to December 31, 1928, and that the Receivers give notice of such extension. The Court further directed that the Receivers allow no claims to be filed after that date, and that they make their final report to the Court within a reasonable time thereafter.”
The Department notes your comments regarding statements in [Page 99] the note of the Department of External Affairs of the Irish Free State of July 26, 1928, as well as your suggestions with regard to representations which you would like to have made. Without undertaking to enter into a detailed discussion of the points raised by you, the Department informs you that it does not consider unreasonable the position of the Government of the Irish Free State that it will have to await the final action of the Receivers before taking action looking to the compensation of the bondholders. The Department accordingly would not feel warranted in making further representations on this point at this time. Since the period in which claims can be filed with the Receivers has been extended until December 31 next, or less than three months from now; since the amount which the Irish Free State would be required to pay on the principal to settle its indebtedness to the bondholders who have to date presented their claims to the Receivers is, as you state, comparatively “insignificant”, and since so far only a little over one-third of the total number of subscribers to the loans have indicated any interest in the question of repayment, it is believed that no serious hardship will be suffered in awaiting the final action of the Receivers.
Inasmuch as the note of July 26 last specifically confirms the acknowledgment heretofore made by the Irish Free State of its obligation to repay the bondholders, the Department does not consider that it would be warranted in making further representations on this point.
The Department notes your comments regarding the intimation in the note of the necessity for amendments of the Dail Loans and Funds Act of 1914 in order to facilitate the reimbursement of the subscribers. In this connection it is observed that Paragraph 2 of Section 6 of the Loans and Funds Act provides that:
“The Minister may at any time issue to every subscriber of the external loans or either of them a stock certificate for the sum equal to the amount so subscribed by him.”
Paragraph 3 of Section 6 provides that:
“The Minister may at any time redeem all or any of the stock certificates issued under this Section either
- (a)
- by paying to the holder thereof a sum equal to the nominal amount of the certificate, together with interest on that amount at the rate of five per cent per annum from the date on which the amount aforesaid was fully subscribed to the Loan to the date of redemption, or
- (b)
- by purchasing such certificates for such price as the Minister shall think proper.”
The Act contains no provision for the direct payment of the subscribers to the loans without the issuance of the stock certificates. It would seem, therefore, that as indicated in the note of July 26, an amendment would be necessary if it were desired to obtain direct [Page 100] payment to the subscribers without first issuing such stock certificate. An amendment would also appear to be necessary if it were desired for practical reasons to figure interest from some fixed date rather than from the date on which the amount of each subscription was fully subscribed, as stipulated in Paragraph 3 (a) of Section 6 of the Act. You state that:
“We have long since recognized the amount of detailed labor required to ascertain the exact date of each subscription; and in that respect we desire that the Irish Free State Government be informed that we are prepared to, and are authorized under the law to, agree upon a date certain from which interest can be figured on behalf of all American nationals who have filed their claims with the Receivers in the Bond Action, and thereby constituted themselves parties to said action.”
It seems, therefore, that, although you refer to the Loans and Funds Act as “a perfect piece of legislation”, you are not opposed to proper amendments to the Act, but are desirous that any such amendments should not weaken its force in any way. The Department will be glad to consider any suggestions or comments that you may care to submit with regard to any amendments that may ultimately be proposed.
When the final report of the Receivers is filed the Department, upon being furnished with three duly authenticated copies thereof, will be glad to give consideration to the question of making further representations to the Government of the Irish Free State with regard to the early compensation of the subscribers of the loans.
I am [etc.]
Assistant Secretary
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