711.00111 Armament Control/Military Secrets/615

Memorandum by the Chief of the Office of Arms and Munitions Control (Green)

Mr. E. R. Leonard, Manager of Sales of the Bethlehem Steel Company, and Washington representative of the Bethlehem Shipbuilding Corporation, called at my office this morning. He handed me clippings from several newspapers of accounts appearing in the press this morning, in regard to the proposal of the Carp Export and Import Corporation to have the Bethlehem Shipbuilding Corporation prepare plans and assemble material and equipment for a battleship to be constructed in the U. S. S. R. He expressed his displeasure at the garbled accounts of the proposed transaction which had appeared in the press.

I told Mr. Leonard that the Department was as much disturbed by the publicity as he was. I gave him a brief account of how some of the essential facts of the proposed transaction had come to the knowledge of the press, and I said that I strongly suspected that the press had first heard of the proposed transaction from some indiscreet officer in the Navy Department.

Mr. Leonard, who is himself a former naval officer, said that he also had reason to believe that the story had leaked to the press from the Navy Department and that he thought that he could, if he wished, name the officer in the Office of Naval Intelligence who had talked about the proposed transaction to representatives of the press. He [Page 470] said that although Admiral Leahy’s attitude in regard to the whole matter had been entirely correct, there were in the Navy Department a number of officers who were so prejudiced against commercial transactions of any character—and particularly transactions involving the sale of arms—with the U. S. S. R., that they might well have instigated this publicity with the idea that it would make the carrying out of any such transaction as was proposed impossible.

Mr. Leonard said that the Bethlehem Shipbuilding Corporation was in a difficult position. On the one hand, the Carp Export and Import Corporation was insistent that it enter into the proposed contract; on the other hand, while the Navy Department would not state definitely that it objected to the proposed contract under any conditions, nevertheless it laid down such regulations to insure the protection of military secrets that it would be impossible for the Bethlehem Shipbuilding Corporation to draw up plans which would be acceptable to the U. S. S. R. He said that he was still trying to obtain from the Navy Department some definite statement of its objections which he could show to the Carp Export and Import Corporation, in order to explain his company’s unwillingness to enter into the proposed contract.

In order that the position of the Department of State might be entirely clear, I permitted Mr. Leonard to read a copy of the Secretary’s letter of March 26 to the Secretary of the Navy. He said that the crux of the difficulty lay in what was said in the second paragraph of that letter, as the Navy Department was unwilling and probably unable to devise any agreement with the Bethlehem Shipbuilding Corporation which would, in its opinion, safeguard military secrets of interest to the National Defense.

Joseph C. Green