Foreign Relations 10
No. 825, Vol. III
Papers Relating to the
(In Three Volumes)
Government Printing Office Washington: 1945
The Charge in Liberia (Carter) to the Secretary of State
[Received May 16–10 a.m.]
66. My 65, May 12, noon, last sentence of paragraph (b). After consulting McCaskey and Ross, I am inclined to consider the Fiscal Agents mistaken in failing to forward the loan money on April 1. had made a clear agreement to forward the said sum, and, although I appreciate their unwillingness to risk more good money, especially in view of the violations at present at present of the loan agreement, I do believe that their failure may be made the basis for a charge that they have endeavored purposely to embarrass Liberian finances now and in the approaching crisis. The withholding of this loan money (all of it earmarked) will result in the cessation of the present sanitary work (69) (except for the contribution by the Advisory Commission) and of the Booker T. Washington Institute and in the suspension of road and bridge construction, which, among other things, will cut off the Firestone Plantations from direct communication with this Capital during the rains just now setting in. Withholding this sum is not having any effect upon the Liberian Government’s financial policy since the sum will in no case be available for salary purposes. In suggest that the sum be at once made available to the Liberian Government for the completion of essential road and bridge construction and for the continuation of the sanitary and educational projects mentioned.
The Finance Corporation of America at Cleveland to the Department of State
GENTLEMEN: We enclose to you herewith a copy of a communication dated June 14, 1930 from this company to the National City Bank, New York, Fiscal Agent under the Loan Agreement dated September 1, 1926, between the Government of the Republic of Liberia and this Company.
As the owner of the bonds issued under the Loan Agreement we feel that the security of the bonds has been impaired by the failure of the Liberian Government to perform its obligations under the express terms of the Agreement and by conduct on the part of the Liberian Government which might very properly be interpreted as
(69) pp. 415 ff.
FOREIGN RELATIONS, 1930, VOLUME III
designed to obstruct or defeat the due and proper administration of the Loan.
We feel that unless these breaches are promptly corrected and adequate measures immediately taken to restore the administration of the Loan to its full effectiveness, it is not unreasonable to anticipate the coming about of such an unsatisfactory condition in the financial affairs of the Liberian Government as will result in an incapacity on its part at that time to perform its obligations under the Loan Agreement, a happening we feel sure the Liberian Government will be as anxious to avoid as we are.
We therefore respectfully request your aid in bringing about such action on the part of the Liberian Government as will restore the administration of the Loan to its full effectiveness according to terms of the Agreement.
Finance Corporation of America
By W. P. Belden
The Finance Corporation of America at Cleveland to the National City
Bank of New York
Under date of March 4, 1930 you transmitted to us the request of the Liberian Government that we take up $100,000 face Liberian bonds on April 1, 1930. We replied on March 29 that we would take this request under advisement. As the owner of the bonds of Liberia issued under the Loan Agreement dated September 1, 1926 between the Government of the Republic of Liberia and Finance Corporation of America, we have been seriously disturbed at failure on the part of the Liberian Government to observe and into effect certain of the terms of such Agreement which vitally and detrimentally affects the security of the bonds, and unless adequate and appropriate measures are taken to restore the administration of the Loan to its full effectiveness according to the purposes and terms of the Loan Agreement, Finance Corporation regrets that it must continue to hold under advisement the Government’s request for our acceptance of delivery of bonds.
We have observed that:
1. The Government has refused to make payment of the of the salaries employees of the revenue service, both customs and internal from the funds available and due such employees, in violation of the express terms of Section 1 of Article XIII of the Loan Agreement and has notified the Financial Adviser that it proposes to continue
to refuse to make such payments out of the specifically assigned revenues of the Government in priority to payment of salaries to other employees of the Government not entitled to such Priority under the express terms of Article XIII of the Loan Agreement.
2. The Government has failed to issue a certain Executive Order in the form and manner requested by the Financial Adviser pursuant to authority given by Article XII, paragraph 1 of the Loan Agreement and necessary to carry into effect rules and regulations governing the operation of the Fiscal Service.
3. The Government has failed to formally designate a depositary bank as provided for in Article XVIII of the Loan Agreement.
4. The Secretary of State and the Secretary of the Treasury have failed to compel certain consular officers of the Government to submit an accounting of and pay consular fees into the treasury although their attention has been called to such delinquencies.
5. The Government has failed to diligently or effectively prosecute officers of the Fiscal Service for malfeasance in office, and has failed and refused to institute suit on the bonds of such officers to secure reimbursement of the financial loss so sustained by the Government in revenues specifically assigned to the service of the Loan.
6. The Secretary of the Treasury failed to prepare and submit to the Financial Adviser the budget at the time and in the manner as required by the Loan Agreement, although the Govern-
had been previously notified by the Financial Adviser of the time provided for such preparation and submission, thus delaying hampering the administration of the Fiscal Service of the Loan.
7. The Liberian Government has denied the authority of nomination of an acting Financial Adviser by the President of the United States under the Loan Agreement.(70)
8. Upon remonstrance by American Supervisor of Customs against unlawful shipment of certain labor from Montserrado, the Secretary of the Treasury replied in writing approving and directing such action asserting that “the organic law of this country . . . gives the President the right to set aside or annul any existing acts of the Legislature. No subordinate administrative official in the President’s administration can refuse to comply with his instructions, and when this is done he becomes personally responsible and unanswerable.”
9. The authority of the Financial Adviser over the officers of the Fiscal Service has been repeatedly and openly challenged and a program of obstruction to the service of the Loan has been carried out the Liberian Government; for example:
a. In derogation of the express terms and intent of the Loan Agreement, the Government addressed the Financial Adviser in writing, asserting that the Financial Adviser is a member of and subject to the Treasury Deartment of the Government of Liberia.
b. In derogation of the express terms and intent of the Loan Agreement, the Government addressed a communication from its Solicitor General to the Financial Adviser, asserting that the Supervisor of Internal Revenue is a member of the Treasury Department of Liberia and is subject to the Secretary of the Treasury.
c. From time to time the Government has appointed to the Customs and Internal Revenue Service officials and employees without
(70) See telegram No.33, March 12, 1930, noon, from the Charge in Liberia, p. 461.
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the previous advice of the Financial Adviser as Article IX; and without previous consultation with or the to the Financial Adviser.
d. The Attorney General has continually opposed and failed to comply with Executive Order: No. 3, insofar as it relates to the control of purchases of food for prisoners, though officially his attention has been called to his omission to comply with Executive Order.
e. The salary of one of the foreign Consuls has been increased without notice to, consultation with or approval of the Liberian Legislature or the Financial Adviser.
f. The Secretary of the Interior while also Acting Secretary of the Treasury, after a payroll had been audited by the Auditor and Warrant for such payroll had been signed, mutilated and altered such payroll by crossing out thereon the name of a Department of Interior employee named Labor, and substituted therefore the name of another individual.
g. Following protest by the Financial Adviser to the Government against such unlawful act, the Government subsequently appointed such Acting Secretary of the Treasury to the position of Secretary the Treasury which he now continues to hold.
h. The Secretary of the Treasury stated to a claimant against the Government, prior to a hearing on such claim before the Commission of which the Secretary of the Treasury was a member, that he was in favor of and would vote for such claim but that unable to state what action the Financial Adviser and the American Auditor, the other members of the Claims Commission, would take upon such claim.
i. Despite proof of repeated acts of obstruction to the service of the Loan made by Financial Adviser to the Government against Secretary of the Treasury in the presence of such Secretary of Treasury, of the American Auditor and of the American Supervisor of Customs, and request for relief therefrom, the conduct interference and obstruction by the Secretary of the Treasury in such regard continues.
j. Government officials have failed for more than a year to accept or act upon suggestions of the Financial Adviser that income of the Government was diminishing to the point that it would be insufficient to meet the budget and that steps to reduce expenses should be immediately taken and measures to provide additional revenues should be adopted, which omission to promptly act upon such suggestions has threatened impairment of the security of the Loan.
These instances have compelled us to reach the conclusion before stated.
We acknowledge receipt of your letter of May 16, 1930, transmitting to us a copy of the request of the Financial Adviser to be advised if funds will be available from delivery of Liberian bonds as requested.
A copy of this communication will suffice we feel sure as an answer the inquiry of the Financial Adviser.
We likewise acknowledge receipt of your letter of May 22, 1930 enclosing a copy of a communication to you from the Secretary of the
Treasury of Liberia, dated May 3, 1930 (with memorandum attached April 23, 1930) soliciting your good offices to assist the Government of Liberia in consummating with the Bank of British West Africa a loan of funds for the purpose of meeting the deficit which Secretary advises exists between revenues available and expenditures necessary to meet the Budget for the calendar year 1930, and claiming authority on the part of the Government to conclude such an arrangement under Article XV of the Loan Agreement.
There is no anticipated revenue available to the Government of Liberia for the remainder of this fiscal year sufficient to meet the Budget and liquidate this suggested loan, and therefore Article XV contains no sanction for making such a loan without the of the Financial Adviser which is withheld, in our opinion cause because it seems to us that in the best interest of all parties to the Loan Agreement no expedient should be adopted which would hypothecate the revenues of the Government already pledged to the security of the Loan.
In response to the request of the Secretary of the Treasury that suggest some other way of bringing about relief of the present situation, we respectfully submit the following recommendation:
The 1925 budget of the Liberian Government provided $263,229.20 cover the cost of those functions of the Government which the budget provides shall be paid from unassigned revenues. We believe if on July 1, 1930 the Government would reduce its budget basis of $325,000 for annual expenditures out of unassigned revenues, instead of approximately $450,000 as the 1930 budget now provides, and, in addition would defer approximately $100,000 of current accounts payable from unassigned revenues for payment out the next annual budget, that this would be an effective way for Liberian Government to accomplish its purpose.
Finance Corporation is certain, now that the above facts have been brought to the attention of the Liberian Government, that the Government will promptly remedy the conditions set out above with respect the administration of the Loan Agreement and in this belief.
Finance Corporation is quite willing, in order to avoid embarrassment the Liberian Government meanwhile, and without prejudice to its rights and its position as outlined above, to take up $18,000 face value of bonds immediately for the following specific purposes provided the 1930 budget as follows:
$11,000 being the difference between the $18,000 for special sanitation work appropriated in the budget and $7,000 furnished from other sources for this purpose.
5,000 for the grant of aid to the Booker T. Washington Agricultural & Industrial Institute.
404 FOREIGN RELATIONS, 1930, VOLUME III
We request that a copy of this communication be transmitted you to the Liberian Government and to the Financial Adviser we are filing a copy thereof with the Department of State of the United States.
Finance Corporation of America
By [No signature indicated]
The Charge' in Liberia (Reber) to the Secretary of State
[Received 6:03 p.m.]
104. The Acting Financial Adviser informs me that he has learned from Loomis(71) in London that the British bank has definitely refused to reconsider its decision to withdraw. He then explained that a government treasury under the control of the American fiscal officers will probably be formed in Monrovia. A bill establishing the treasury will be prepared by the Financial Adviser and submitted to Legislature, which convenes the second week of October. McCaskey tells me the President has assured him that fiscal officers' authority over and supervision of the treasury will be complete.
An arrangement with the Dutch “Oostafrikaansche Company” has been proposed whereby its branches throughout the will act as agents in receiving and distributing government funds.
The Acting Secretary of State to the Charge' in Liberia (Reber)
71. Your 104, August 20, 2 p.m. On August 25 or 26 a representative of the Firestone interests is to confer with the Department. If he should not previously receive from the Acting Financial Adviser in Liberia details of the proposed legislation your 104 described, you are requested to summarize it by cable to the Department. In any event you should confidentially comment by cable as to probability of enactment and as to whether finances and disbursements would be subject to the Financial Adviser’s adequate and effective control.
The Department also wishes a cable report by you on these points:
(a) The current political situation, referring especially Government’s stability in the face of its financial difficulties and of
(71) John Loomis, Financial Adviser to Liberia, on leave of absence.
Remember in 1925 Firestone bailed out the government, and loaned them money as stated previously in prior telegrams? Who is paying for Firestone's tax write off on this? Could it be the American people through taxation? Be prepared for what comes next. Shrewd way to skin the cat (American people) again.