Foreign Relations of the United States: Diplomatic Papers, 1943, The British Commonwealth, Eastern Europe, the Far East, Volume III

394.1153/33

Memorandum by the Chief of the Special Division (Keeley)⁹

[Washington,] July 9, 1943.

The Department’s 1833 of July 23, 1942 to Bern, replying to reports that Japanese authorities at Shanghai were liquidating American enterprises without permitting the interested persons to have access to the books and files thereof, stated upon the basis of Mr. Hackworth’s memorandum of June 20, 1942¹⁰ of his conversations with Treasury and the Alien Property Custodian that in the liquidation of Japanese enterprises in the United States Japanese nationals were permitted:

1. Either the custody of their records or access to them;

2. To collect their debts;

3. To settle any outstanding obligations.

The reply of the Japanese Government, transmitted in Bern’s 338 of January 15, 1943, took issue with that statement and levied the following charges concerning the treatment accorded by American authorities to Japanese companies in this country:

[Here follows summary of the Japanese Government’s charges.]

The Japanese reply was forwarded to the Treasury Department and the Alien Property Custodian. In its reply of February 24, 1943¹¹ the Treasury Department stated:

1. In the vast majority of cases Japanese managerial personnel was available and was authorized to take charge of liquidation proceedings under the general supervision of Treasury’s Foreign Funds Control;

2. Where such managerial personnel was under detention, liquidation was for the most part carried out under Treasury supervision by attorney-in-fact selected and appointed by such personnel;

3. Where the owner of a Japanese enterprise could not be located, a member of his family was requested to perform the liquidation under Treasury supervision;

4. However, large Japanese banks were placed under direct Government supervision and therefore constituted an exception to the foregoing procedure.

In a letter dated April 30, 1943,¹¹ it was stated by the Office of the Alien Property Custodian that in the case of businesses in liquidation under the jurisdiction of the Custodian:

1. Former Japanese managers were not permitted access to the books and records;

2. They were not permitted to take part in liquidations;

3. However, the records of such businesses are being carefully preserved for their eventual return, should this be permitted by any subsequent treaty.

It thus appears that we are not in a strong position to rebut the Japanese Government’s allegations, although failure to reply would no doubt be taken as tacit acknowledgment of our culpability in the matter. SD¹² would be grateful for your suggestions concerning the course of action that should be taken.¹³

J[ames] H. K[eeley]

9. Addressed to the Office of the Legal Adviser, the Division of Far Eastern Affairs, the Foreign Funds Control Division, and the Office of Assistant Secretary Long.
10. Not printed.
11. Not printed.
11. Not printed.
12. Special Division.
13. In a memorandum of November 13 to the Special Division, the Legal Adviser stated that the letter of April 30 from the Alien Property Custodian “more or less confirms the contention made by the Japanese Government” and “in view of the lapse of time since those contentions were advanced I suggest that the matter be allowed to rest.” (394.1153/34) This suggestion was generally agreed to by the interested Departmental offices.