852.75 National Telephone Co./362

Memorandum of Conversation, by the Chief of the Division of European Affairs (Moffat)

Mr. Frank Page called this morning. I gave him the substance of the first two sections of Mr. Weddell’s telegram no. 99 in which General Franco gave assurances that the I. T. and T. Company would without delay be restored to the possession and control of its properties. I then told Mr. Page that we all of us felt here that it would be a mistake for the I. T. and T. Company to press further on trying to retain the eight company officials. Irrespective of whether or not their cases had been properly adjudicated, nonetheless the Spanish Government did have the right to receive or expel any foreigner. Furthermore now that the log jam seemed to be broken we felt that it was very important to speed up the momentum and if giving the Spaniards their pound of flesh would help this momentum, we believed that it should be done. Mr. Page said that he believed Colonel Behn would agree with this point of view and that as a matter of fact the Company had already been giving a good deal of thought to replacements. He would telegraph Colonel Behn our point of view on this question and would add that he personally entirely agreed.

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We then discussed how the property would be returned to the Company. There were various ways in which this could be done but in essence it amounted to recognizing Colonel Behn’s right to function again as Chairman in charge of Operations, to appoint his own divisional assistants, et cetera. Colonel Behn is now in Madrid and for a while at least Frank Page said that he could fulfill the functions of all the eight employees who were being ousted.

I then took up the question of the stockholders’ meeting. It appears that this has nothing whatsoever to do with the return of the properties. Nevertheless it is important for the following reasons: During the war no interest or dividends were paid to the preferred stockholders or to the bond holders. Furthermore, according to the contract, during such time as the Government had control of the properties, it was obligated to pay the Company eight per cent. Obviously the Company has no illusions that it will obtain this eight per cent. However there will have to be some negotiations between the Company and the Government regarding these and related matters and such negotiations cannot begin until the accounts are in order and properly audited. The reason the stockholders’ meeting became so important was that Colonel Behn wanted to use this as a means of putting pressure on the Government for the return of the property. The Spaniards countered by pointing to the by-laws of the Company which provided that the year-end balance sheet should be submitted to the stockholders before the annual meeting took place. The problem is an important one but it is not tied up with the return of the properties.

Mr. Page was extremely grateful for everything that the Department and the Embassy in Madrid had done and wished to extend his sincere thanks.

Pierrepont Moffat