The Vice Consul at Kweilin (Service) to the Ambassador in China (Gauss)40

No. 103

Sir: I have the honor to refer to the Consulate’s despatches Nos. 9441 and 95,42 dated December 30, 1943 and January 6, 1944 respectively on the subject of corruption in business relations between Chinese commercial organizations and the United States Army in Kweilin. Since the submission of these despatches certain developments have taken place in this city which have in part been reported to the Embassy in the Consulate’s airgrams Nos. A–2 and A–5 dated January 9 and January 25 respectively.43 In view of recent occurrences relating to this subject, this despatch is submitted despite the fact that no conclusion has yet been reached in the prosecution by the Governor’s committee of the cases of corruption which were cited by Major R. B. Hodgson to the committee and at an off-the-record press conference with members of the press in Kweilin.

Summary: The Governor’s committee on corruption has arrested representatives of two concerns which had been mentioned by the commanding officer of the Services of Supply in this area as examples of corruption on the part of local merchants in relations with the United States Army. The manager of the Bank of China for [Page 13] Kwangsi Province has taken up the matter of the charges of the S. O. S. against the Kweilin branch of the Bank of China with the Special Delegate of the Ministry of Foreign Affairs here,44 with the obvious intention of obtaining an official statement from either the S. O. S. or this Consulate absolving the bank from any connection with the case. As an alternative, the bank manager, with the cooperation of the Special Delegate, will undoubtedly seek to discredit the personnel45 and organization of the S. O. S. Purchasing Office. The S. O. S. has attempted without success to produce concrete evidence upon which it could base its charges. The Governor’s committee expeditiously handled a case involving the sale of charcoal, the weight of which had been artificially increased by soaking the fuel in water. It is probable that American prestige in this city will be further impaired if evidence cannot be supplied to the Governor’s committee to permit effective action on the three cases which it is investigating at this time.

[Here follows detailed report.]

Respectfully yours,

Richard M. Service
  1. Copy transmitted to the Department by the Ambassador in his despatch No. 2147, February 11; received March 2.
  2. Foreign Relations, 1943, China, p. 187.
  3. Not printed, but see despatch No. 2046, January 20, from the Ambassador in China, p. 7.
  4. Neither found in Department files; for summary statement of airgram of January 9, see third paragraph of despatch No. 2046, January 20, from the Ambassador in China, p. 7.
  5. T. W. Kwok.
  6. i. e., Chinese.