SECRETARY OF STATE'S LETTER RE HAITIAN LOANS Hon. REED SMOOT, DEPARTMENT OF STATE, Washington, February 1, 1932. Chairman Senate Committee on Finance, United States Senate. MY DEAR SENATOR SMOOT: I have received a note dated January 29, 1932, from the Haitian minister to the United States, in which he makes reference to his note of January 15 on the subject of Haitian financing in the United States. A copy of this note, in accordance with his request, was forwarded to you with my letter of January 20. The Haitian minister now informs me that Mr. Georges N. Léger, a Haitian attorney, is coming to Washington, on the suggestion of the Haitian minister, for the purpose of testifying concerning the conditions under which Haitian loans were floated in the United States. The minister requests the Senate Finance Committee to allow Mr. Léger to testify before the committee. I am therefore, transmitting his request for the consideration of the Senate Finance Committee. I inclose a copy of the minister's letter, with a translation. Sincerely yours, [Translation] HENRY L. STIMSON. LEGATION OF THE REPUBLIC OF HAITI, Hon. HENRY L. STIMSON, Secretary of State, Washington, D. C. MR. SECRETARY OF STATE: In continuation of my communication of January 15 relative to the Senate investigation into the foreign loans contracted in the United States, I have the honor to inform your excellency of the arrival in Washington, soon, of Mr. Georges N. Léger, a Haitian attorney. My official position preventing me from appearing before the Senate Finance Committee, Mr. Léger has kindly consented, on my suggestion, to come and testify on the conditions in which the Haitian loans of 1922 and 1925 were placed in the United States. He will be at Washington Monday evening, February 1. I will appreciate it if the Senate Finance Committee will be good enough to arrange to hear Mr. Léger at one of its early sessions, on and after Tuesday, February 2. Knowing the spirit of justice which distinguishes its members, I am sure that the committee will act favorably on this request of mine, which I beg that your excellency will be good enough to transmit to the honorable Senator Reed Smoot. I avail myself of this opportunity to renew to you, Mr. Secretary of State, the assurances, etc., etc. Hon. REED SMOOT, Chairman Senate Committee on Finance, DANTÈS BELLEGARDE. United States Senate. MY DEAR SENATOR SMOOT: I have received a note dated January 29, 1932, from the Haitian minister to the United States in which he makes reference to his note of January 15, on the subject of Haitian financing in the United States. A copy of this note, in accordance with his request, was forwarded to you with my letter of January 20. The Haitian minister now informs me that Mr. Georges N. Léger, a Haitian attorney, is coming to Washington, on the suggestion of the Haitian minister, for the purpose of testifying concerning the conditions under which Haitian loans were floated in the United States. The minister requests the Senate Finance Committee to allow Mr. Léger to testify before the committee. I am, therefore, transmitting his request for the consideration of the Senate Finance Committee. I inclose a copy of the minister's letter, with a translation. Sincerely yours, Hon. REED SMOOT, DEPARTMENT OF STATE, Washington, February 15, 1932. Chairman of the Committee on Finance, United States Senate. MY DEAR SENATOR SMOOT: A copy of the testimony of Georges N. Léger, of Haiti, before the Senate Finance Committee on February 10, which you were good enough to have sent to the department, has been read through and, while it would require an excessively long letter to answer all the points and misstatements which occur in his testimony, I do desire to make certain observations as to the facts disclosed by the department's records with respect to some of the principal points which he raised and which I will ask you to be so good as to have incorporated in the record. On January 20 I transmitted to you a letter dated January 15 from the minister of Haiti, in which he said in substance that in the course of the inquiry being conducted by your committee a statement of extreme gravity was made by the representative of an important New York banking house to the effect that commissions are generally paid to the governments of Latin America contracting loans in the United States and that the exorbitant profits allotted to the syndicates which make these loans thus serve to cover in part these illicit commissions. The minister stated that this is an attack on the honor of all governments that have contracted loans in the United States and it is in particular an attack on the Republic of Haiti. He accordingly asked that the most complete light be thrown on the conditions under which the Haitian loan of 1922 was contracted in the United States and the profits which were made on this occasion by the National City Bank of New York and commissions which may have been paid to persons who participated in the negotiation of this loan. In a subsequent letter dated January 29, which I had the honor to forward to you on February 1, the minister stated that as he himself could not testify he had asked Mr. Léger to come to Washington for this purpose and he would like to have arrangements made for him to testify. A reading of the testimony fails to show that Mr. Leger was concerned with the phase of the matter which was apparently troubling the Haitian minister, as he did not go into the matter of commissions other than to say that Mr. Mitchell of the National City Bank testified of the profit made by his bank. He apparently was not interested in finding out whether any Haitian officials had received commissions which appeared to be the motive behind the minister's two letters under reference. Mr. Leger asserted at very considerable length that the Haitian people had never desired to make a loan in the United States market; that the loan was forced on Haiti by the American Government "for purely political reasons." He also charged the various financial advisers with using bad judgment in connection with the pur chase of Haitian bonds and did not scruple to say that they "made the Haitian Government go into the stock market." This charge is repeated a number of times. He also charges the financial advisers with bad judgment in the purchase of francs for retiring the French debt, and he makes a number of other assertions regarding martial law, the election of President Borno, etc., which will be covered later on in this letter. With reference to Mr. Leger's statement that the loan of 1922 was forced on a reluctant Haiti for political motives, I will set forth the position of Haiti when the American financial reorganization took place, after the signing of the treaty of 1915. The external debt of Haiti in 1915 amounted to 120,912,062 francs, or approximately, in the exchange of that time, to some $24,182,000. The internal debt at the same time was estimated at $7,514,686, or an estimated total debt of $31,696,686. The foreign debt of Haiti arose from three loan issues made in 1875, 1896, and 1910. The issue of 1875 was a 5 per cent loan and the department has no record of the price which the Haitian Government received therefor. It was offered to the public at 86; 19,252,560 francs were outstanding in 1915. The loan of 1896 was a 6 per cent loan, which was offered to the public at 80. Again the department's figures do not show the amount that Haiti received therefor. Of this loan 37,638,500 francs were outstanding in 1915. The 1910 loan was a 5 per cent loan, 64,021,000 francs of which were outstanding in 1915. This loan was sold to the public for 882. The Republic of Haiti received 72.3, less gratuities, etc. Mr. Leger states that, up to the time of the American financial supervision, interest and amortization funds had been paid on all these loans. On page 2141 of his testimony, the following appears: Senator KING. Had your country up to that time failed to meet any of its obligations? Mr. LEGER. Our country had never defaulted on any of its obligations. Mr. LEGER. We had three loans. One was the 1875, one was the 1896, and the other 1910. All were in France. They amounted to, roughly, 120,000,000 francs at that time. And interest and amortization funds had been paid or had been remitted for payment up to July 15, 1915. That is, up to a very few days before the American matter came up. We were not in default on any loans. The facts, according to the information in the department's posses sion are that in 1915 Haiti was in default as follows: On the loan of 1875, the amortization was 12 years in default. In this connection it may also be noted that the interest on this loan, which was originally 8 per cent was adjusted in 1880 to 5 per cent. On the loan of 1896, the amortization was one year in default. Interest guaranteed on the national railway bonds had been in default since August, 1914. The interest guaranteed on the bonds of the P. C. S. Railway was also in default. In this connection I should like to quote from page 8 of the report of the Senate Select Committee Investigating Haitian Affairs (Rept. No. 794, 67th Cong., 2d sess.), submitted on June 26, 1922. It is as follows: It has been stated that the Haitian Government had never defaulted on the service of its foreign debts prior to the American occupation. This statement is not exactly correct, but it is undoubtedly true that it had exerted itself to an extraordinary degree to maintain the service of its foreign debts. Your committee is informed that to do this the Haitian Government had, during the three years immediately preceding the occupation, floated internal loans at the rates of 59, 56, and 47, to a gold value of $2,868,131, had defaulted on salaries, pensions, etc., to the extent of $1,111,280, had borrowed from the Bank of Haiti $1,733,000, had issued fiat paper money, and had borrowed to a very large amount from private individuals at enormous discounts on treasury notes. The Haitian Government had, at the time of the American intervention, totally exhausted its credit both at home and abroad. The amortization of the loan of 1875 was in arrears. A great deal has been made of the fact that after the naval forces took over the administration of the customhouses and after the outbreak of the Great War, there was a time when, despite careful administration, both interest and amortization due on the Haitian debt were unpaid. This is true, but the inability of the Haitian Government and its American advisers to pay was due to the state of anarchy into which the country had fallen and to the inestimable injury to Haitian trade with Europe consequent upon the outbreak of the Great War. There was thus in addition to the defaults mentioned above the further floating indebtedness incurred as set forth in the Senate select committee's report which has just been quoted. Mr. Leger stated that Haiti could have got along without the loan of 1922. The above financial position, as well as the facts brought out in the letter inserted in the record by Mr. Leger of February 15, 1917, from Mr. Ruan, show that the Government was existing merely because the financial adviser was permitting the Haitian Government to use for operating expenses certain of the customs revenues which were allotted to the payment of the outstanding foreign loans and the floating indebtedness above mentioned. Haiti's credit, as stated by the Senate select committee, was exhausted both at home and abroad when our administration took over and the financial adviser could no longer leave unheeded the just demands of Haiti's creditors. Under the American administration a claims commission was set up to adjudicate all outstanding claims and the floating indebtedness against the Government. On January 1, 1922, the financial adviser completely amortized the loan of 1875, and on December 31, 1922, the loan of 1896. The total outstanding indebtedness of Haiti had been increased from 1915 through the nonpayment of interest charges of the 1910 loan and an increase in the floating indebtedness. Haiti's total indebtedness, however, was refunded and consolidated by the issuance of three loans-series A, on October 1, 1922, for $16,000,000; series B, for $5,000,000, of which nearly $756,000 were never issued; and series C, for $2,660,000, or a gross total of $23,660,000. The series A loan was bought from the Haitian Government at 92.137, which it will be noted is 20 points higher than Haiti's last previous foreign loan, namely, the loan of 1910, which was bought at 72.3 less gratuities, etc. This series A issue of 1922 was sold to the public at 962. The department is advised that all these bonds have been distributed to the public. Haiti received from this loan $14,755,253.33. This money was used to retire the 1910 loan, to pay the interest guaranty of the National Railway bonds, the sinking fund guaranty of the National Railway bonds, to pay the indebtedness to the Banque Nationale, and such amounts of the awards of the claims commission as were to be paid in cash. The balance was used for public works. On December 31, 1931, there was outstanding on this loan $10,859,981.52. The series B loan for $5,000,000 was not placed in the American market, but the bonds were used for refunding the internal debt of Haiti and for the partial payment of awards made by the claims |