Memorandum by the Assistant Secretary of State (White)
Mr. Gann called on the Secretary on Tuesday, February 3. Mr. Miller and Mr. White were also present.
Mr. Gann stated that he came in with an urgent matter, namely a letter to the Secretary from the Dominican Financial Commission in this country regarding a proposal of J. G. White and Company to make a loan of $5,000,000 to the Dominican Republic. Mr. Gann referred to the financial depression that the Republic is going through as well as the devastation from the cyclone. He stated that Ulen and Company had made a proposal to the Dominican Republic which President Trujillo had turned down because it called for the taking over by Ulen and Company of a number of public utilities during the life of the loan, namely 30 years. This is a proposal for a $5,000,000 loan and has no such mortgage feature of public utilities in it.
The Secretary inquired whether this was a straight loan proposal or whether it had any arrangement attached to it with regard to public works construction. Mr. Gann replied that it was a straight loan proposal although J. G. White and Company naturally hoped that they would be given preference on all public works to be undertaken in the future. They feel that in two or three years there will be a large expansion of construction in the Dominican Republic and the syndicate making the loan hope to have a preference on future financing, and the J. G. White and Company hope to be given the construction work on the terms which they outlined in a letter to the President of the Dominican Republic, namely cost plus 12 per cent. Mr. Gann handed the Secretary annexes to the Financial Commission’s letter and certain papers which he stated contain all the information in this connection.
The Secretary asked Mr. Gann in what connection he appeared in the matter and he replied as counsel for the Legation and the Dominican Republic. He said that he had been in New York to help the Financial Commission; that he found the bankers most apathetic as regards loans at this time; that most of the bankers showed no [Page 86] interest in the matter whatsoever, and indicated that they would not be interested for a period of probably two years. Mr. Gann wanted to help in any way he could and in view of this situation he thought that anybody who would find a loan for the Dominicans, as the J. G. White and Company had, should be encouraged. This is a loan of $5,000,000 at 5½ per cent interest for 30 years, bonds to be sold at 90. The Secretary asked what would be paid to the Dominicans. Mr. Gann said that he did not know what this figure would be or if it had in fact been determined. The Secretary said that a loan at 90 to the Dominican Government at this time seemed rather out of the ordinary and for that reason he had inquired whether there were any other features, such as construction, in connection with it. Mr. Gann again said that there were not and he presumed it showed the very high credit of the Dominican Government.
The Secretary said that as he had told Mr. Gann’s brother-in-law, Vice President Curtis, when the latter mentioned the matter to him at Cabinet Meeting one day, there is of course no objection on the part of the Department to the J. G. White and Company; in fact, the Secretary was delighted to have as many reputable companies, such as the White Company, take an interest in the matter—the more, the better.
Mr. Gann indicated that the matter was rather pressing as the Dominican Government needs money and asked for a decision as soon as possible. He said he of course realized that an immediate answer could not be made but would like to have one as soon as possible and stated that he wanted to be very frank with the Secretary; that he would give him all the papers and all the information at his disposal, and he hoped the Secretary would be frank with him.
The Secretary thanked Mr. Gann and said that he would be quite frank. The Secretary said that we had been very much chagrined to hear some months ago, in connection with another loan in another country, that a commission had been paid by the bankers to an intermediary—in this case, to a relative of a high officer of the Government—that of course our relations with the Dominican Republic are somewhat different and on a closer basis than the countries of South America and he wanted to be absolutely sure that everything was above board in the country where we had to look out for the interests of the borrower to be sure there was nothing of this sort. There had been rumors to the effect that something of the sort might be contemplated and he wanted to make inquiry about it because of course we wanted to know before giving consent to any loan. Mr. Gann said that so far as he knew there was nothing of the sort in this transaction. The Secretary suggested to Mr. Gann that he “keep his eye peeled” to see that nothing of this sort went on. Mr. Gann said [Page 87] that he would. The Secretary stated that in any arrangement approved by us the bankers must undertake not to pay such commissions. Mr. Gann also offered to supply any further information that might be required.