Foreign Relations of the United States, 1958–1960, Vietnam, Volume I

131. Telegram From the Ambassador in Vietnam (Durbrow) to the Department of State¹

Saigon, April 7, 1960—7 p.m.

2884. Reference: Embassy despatch 267,² and Embassy telegram 2622.³ Using agreement grant GVN $4.6 million additional counterpart for mil budget contained Icato 1665⁴ as excuse, I asked see Diem to pass on this info and took occasion discuss in detail increasing number reports of alleged Can Lao shady activities which adding to dissatisfaction Diem regime. Following short summary conversation (details by pouch⁵):

Told Diem had considerable difficulty convincing Washington need for additional contribution mil budget and added it might prove difficult obtain adequate aid FY61 if disturbing reports continue re alleged corrupt practices Can Lao party. I then said I wished to speak frankly and as friend about this delicate matter. I pointed out several congressional visitors last year had received disturbing reports re Can Lao activities and I had recently received report some members Congress still concerned about these reports (Usher’s letter to me March 29th⁶). Using as background excellent detailed study⁷ … on Can Lao financial activities giving several documented cases and some alarming allegations from responsible sources, I gave Diem in some detail facts most these cases.

Before I went into full details Diem interjected rather firmly neither Can Lao nor MNR parties engaged in any corrupt activities but on contrary they charged with and are effectively running down corrupt activities which come GVN attention. Diem added if I gave him names and details he would investigate immediately. I did not reply. Diem added reports we had heard formed part of organized campaign of calumny by GVN opposition groups, disgruntled businessmen and Communists. I replied this may be true, but unfortunately reports of party corrupt activities persist and are growing in number. Added these reports came in many cases from responsible Vietnamese citizens and foreign businessmen. I continued whether reports true or not more and more people hearing and believing them and it apparent this one of reasons for growing discontent among various segments of population.

During the course more than hour I outlined in detail reports such as lowering military morale due alleged political promotions, political favoritism, granting licenses, tribute paid to party to obtain rice exports, party created shortages in bicycle tires and charcoal which created black market from which party profited and allegations that building permits and permission establish any worthwhile enterprise allegedly required payment to party before permission granted. I added had recently heard two cases of alleged cancellations of contracts involving foreign investment, i.e., contract with Singapore firm exploiting phosphates Paracels Islands and contract with French concern to rebuild and operate Heip Hao sugar refinery. Reports we received indicated party involved both cases. I emphasized if these reports true our efforts induce further foreign investment could be nullified.

In reply Diem readily gave ostensibly plausible “explanations” re allegations, insisting throughout our conversation reports unfounded. In course this defense Diem brought up continuing allegations against his brother Nhu and his wife and reports Nguyen Van Buu (Diem’s brother Can’s business manager) was also involved illegal transactions. I said we also had heard many alarming reports about these three and later reminded Diem that Buu was involved in under invoicing cassia shipments (my letter to Parsons May 12, 1959⁸). Although he had admitted Buu involved in cassia deal Diem told me I was wrong in calling it Can Lao affair. Diem stated categorically allegations against Nhus and Buu completely unfounded. He then gave me same cassia explanation he gave Gardiner May 8, 1959.⁹

On several occasions during conversation, after thanking him for his explanations, I reiterated it most unfortunate that whether allegations true or not, more and more people believing them and suggested in his and GVN’s interest it imperative that firm steps be taken immediately to squash these reports. Diem did not make any suggestions except to state people spreading rumors are so ruthless and unscrupulous it difficult stop them. Finally Diem stated maybe some of rumors arise from fact some time ago he organized ONR [MNR?] “industrialist and businessmen’s section”. This section created to assist legitimate businessmen to expedite requests for various action bogged down in different ministries and give other assistance. Diem emphasized, however, this section assisted all comers and not just favorites. He added this group often ran into shady transactions which they turned down or denounced, which perhaps gave impression they favoring only special interests. I ended this part of conversation by reiterating need eliminate all activities which might give rise these persistent reports which as long as they continue will be most harmful to GVN.

Comment: Although I spoke most frankly and in considerable detail about these reports Diem did not take offense and readily gave me “explanation” of each allegation. Whether Diem’s explanations are correct or not, and I am inclined believe the party or individuals therein are involved in many shady practices, I was able to let Diem know that we have fairly solid information about these matters. On the assumption that maybe he has been given these “explanations” and believes them, I cited chapters and verse without giving sources, and added that if party itself was not involved in corrupt activities it is quite possible that members of the party are engaging in such activities allegedly in name of the party. I hope that this frank exposé will cause Diem to delve further into these matters and perhaps take corrective measures.

I have sent this outline summary conversation by telegraph with thought in mind that Dept may care bring up this subject with Thuan and thus re-enforce our efforts to try bring about healthier political atmosphere here (Embtel 2857¹⁰).

Have just learned from member of staff who saw Ladejinsky day after talk with Diem, that latter spent entire breakfast period seventh giving same “explanations” he had given me sixth. Apparently Diem is disturbed that either we know too much or he has not been given straight story.

Durbrow

1. Source: Department of State, Central Files, 751K.00/4–760. Secret; Limit Distribution. Sent also to CINCPAC for PolAd; repeated for information to Vientiane, Phnom Penh, and Bangkok.
2. Document 111.
3. Document 114.
4. Not found.
5. Despatch 345 from Saigon, April 13. (Department of State, Central Files, 751K.00/4–1360)
6. Not found.
7. Memorandum from the Office of the Special Assistant to Durbrow, April 5, attachment to covering letter from Durbrow to Parsons, May 5. (Department of State, Saigon Embassy Files: Lot 65 F 115, 350.1 Political Parties—Can Lao)
8. Not found.
9. Documentation not found.
10. In telegram 2857, April 4, the Embassy reported that both Vu Van Thai and Vice President Tho suspected that Thuan had been a party to several “shady deals” either acting alone or in conjunction with the Can Lao Party. (Department of State, Central Files, 851K.392/4–460)