462.11L5232/887
Memorandum by the Assistant to the American Agent to the Mixed Claims Commission, United States and Germany (Martin)
The German Agent and I had a conference about 11:30 today in relation to the settlement agreement of May 19 between the awardholders and the sabotage claimants.
The German Agent said in substance that he was just in receipt of a cable from Berlin to the effect that after giving full consideration to the terms of this agreement the German Government did not feel that it was in a position to accept the terms thereof unless there was a firm waiver by the awardholders and the sabotage claimants under which (1) the awardholders would give up the entire unpaid balance of their awards now owing; namely, approximately $60,800,000 as of March 31, 1937, this in consideration of their receiving from the sabotage claimants under the terms of the agreement of [Page 356] May 19 some $11,000,000 out of the proceeds of the contemplated awards to the sabotage claimants (the contemplated awards to the sabotage claimants would produce a present theoretical payment to them of about $22,000,000); and (2) that the sabotage claimants would give up all unpaid amounts remaining after the payments on the contemplated awards. This would imply a giving up on the part of Class III sabotage claimants of some $22,300,000.
The German Agent further said that he had had recent conversations with Mr. Morris, representing the awardholders, and Mr. McCloy, representing the sabotage claimants, and had been told by these gentlemen that their clients were not in a position to consider giving up more than about 50% of the unpaid amounts on the above basis. This information the German Agent said he had cabled to the Foreign Office.
The German Agent further said that he had been informally furnished with a copy of the agreement of May 19 on May 21 and had cabled the substance thereof to Berlin and had also forwarded a copy thereof by mail. He also said that he had been furnished with an official copy of the agreement with my letter of May 24. In this situation the German Agent said that Berlin was fully advised as to all the circumstances before they made their recent decision.
In addition to the difficulties heretofore suggested by the German Agent he pointed out to me today the further difficulty arising out of the protests by German nationals against the final consummation of the agreement.
I told the German Agent that late yesterday afternoon I received a letter from Mr. McCloy and that this morning I received a letter from Mr. Morris advising me in substance as he had already been advised informally by the two groups of claimants as to their willingness to waive 50% of the so-called expectancies. This waiver, I said, implied a definite abatement of Germany’s financial obligations to the United States on account of the awards of the Commission in the amount of approximately $41,500,000, which amount, I said, represented to my mind a definite and substantial reduction in Germany’s financial obligations. I further said that it also contemplated a prompt winding up of the Commission that, as I understood, was desired by both Governments.
I pointed out to the German Agent that if the agreement of May 19 were not finally consummated it would mean another year or more of work on the part of the Commission, and that personally I felt satisfied that we would eventually receive a favorable decision that would imply further financial obligations on the part of Germany in an amount in excess of $50,000,000, and that to my mind the consummation [Page 357] of the agreement of May 19 represented a very substantial saving to the German Government.
The German Agent replied to this in a jocular way that of course this was a matter that the two Agents were in disagreement on and suggested that from his study of the awards of the Commission even if we were successful in the sabotage claims the awards would probably be materially under the amount claimed. In support of this he pointed particularly to the situation in the Lusitania claims, where he said the awards in most instances were materially under the amounts claimed. In reply to this I said that of course claims for damages arising out of deaths were on an entirely different basis from claims for damages to property, and said that in our ship claims, that involved property damage only, we in many instances recovered substantially the entire amount claimed. With particular respect to the sabotage claims I said that in the case of the largest single claim our damages are made up of the value of the property destroyed in substantially the amount as fixed by the Interstate Commerce Commission in its valuation of railroad properties; that other large items of this claim represented amounts recovered by various injured parties in court proceedings from the railroad company; that another large claim represented the contract price for the property destroyed; and that in so far as the underwriters were concerned, whose claims represent a substantial item, the damages are merely the out-of-pocket losses of the various underwriters after making deduction for the foreign re-insurance recovered. In this situation I said that I felt confident that if we were eventually successful we would recover substantially the amounts claimed as very few of the items going to make up these amounts are capable of any material reduction.
The German Agent said that he would call Mr. Bonynge in New York and advise him of the situation. He thought it was preferable that he talk directly with Mr. Bonynge in order to avoid any misunderstanding as to just what he was saying. I told him this was perfectly satisfactory to me and suggested that he might call Mr. Bonynge over my telephone. The German Agent, however, said that he had several notes that he would like to refer to in his talk with Mr. Bonynge and would call him up as soon as he returned to his office. The German Agent just called me back and said that on returning to his office he found that it would be impossible for him to call Mr. Bonynge before sometime between 3:30 and 4:00 p.m., Washington time, as he found it necessary to leave the office immediately.
The German Agent then told me that he had had a telephone inquiry from the American Commissioner in relation to the issuance of subpoenas in case the agreement of May 19 was not acceptable to the [Page 358] German Government. He suggested that it would be well for the two of us to see the American Commissioner in order to discuss with him the procedural situation and furnish him with the names and addresses of the parties each side desired be called. I told him this was agreeable to me and that I would see the American Commissioner with him at any time that was convenient to himself and the American Commissioner. The German Agent then said that he would endeavor to make an appointment with the American Commissioner for 11:30 tomorrow. As I gather the German Agent is particularly interested in having the subpoena to Stein51 require him to produce his office record book containing the alleged adverse opinion bearing date June 10, 1931, which opinion was read to the American Agent and certain of the sabotage attorneys at the time these gentlemen called at Stein’s office on or about November 5, 1932.
Following my talk with the German Agent I saw Mr. Moore in the Department of State and told him the substance of the conversation as above noted.
Mr. Moore told me that from his conversations with the German Ambassador he was reasonably well satisfied that the Ambassador wants to close up the work of the Commission and that he is not really interested in extended negotiations for a settlement.
Mr. Moore further suggested that I write Mr. Morris and Mr. McCloy in relation to this matter and ascertain definitely to what extent the various parties in interest are willing to go in giving up their expectancies. This information is desired for use in the note that the Department contemplates writing to the German Ambassador. Mr. Moore also said that he would himself write a letter to Mr. Polk along these lines.
- Elbridge W. Stein, one of the American experts who was a witness in sabotage cases and accused of being in collusion with a German expert to discredit the authenticity of a certain bit of evidence which had been used to favor American claimants.↩