that vessel. On the 24th of February, a loan of $1,350,000 was negotiated with the Bankers Commercial Corp., but was not negotiated by the National Tanker Corp. but by the China Trading and Industrial Development Corp., which was a Chinese corporation. Senator MUNDT. And what was the purpose of that loan? Mr. LEECE. To finance the purchase of the Kettleman Hills from the Commission. The agreement was between National and United, but the financing was done by the Chinese corporation. Mr. FLANAGAN. In other words, the money which was obtained to purchase the Kettleman Hills was obtained by the Chinese Trading and Industrial Development Corp.? Mr. LEECE. That is right. This was or We come now to the Trans-World Maritime Corp. ganized as a Delaware corporation on July 31, 1948, and we have the same officers as was the case in Oceanic: Casey, president; Klein, vice president; Mackey, secretary and treasurer. And no stock was issued in that corporation as of that time, as of the date of incorporation. But it was organized apparently for a good reason. In August, American Overseas Tanker Corp. got in touch with the Maritime Commission and now requested that title to the Antelope Hills, one of the three vessels originally allocated, be taken in the name of this TransWorld, and that the Maritime Commission allow them to purchase it on a mortgage basis rather than cash as was originally contemplated. Mr. FLANAGAN. As a matter of fact, the other seven vessels in the Casey group were all purchased for cash, were they not, from the Commission? Mr. LEECE. That is right. Mr. FLANAGAN. And this is the first time that they wanted to purchase it on a mortgage arrangement with the Commission? Mr. LEECE. That is right. The reason for that, as I understand it, is that United had taken care of the financing. At that time the charter market on tankers was down, and they were having considerable financial difficulties and needed this arrangement in order to purchase the vessel. This was agreed to by the Commission, that they would allow them to take title in Trans-World on a mortgage basis; and on January 7, 1949, they entered into a sales contract with Mr. Casey, representing Trans-World, National, and American Overseas; and title to the vessel passed at that time. In the meantime, Mr. Wei had directed a letter to Mr. Casey, on October 11, 1948, in which he advised Casey that the United Tanker Corp. had decided to exercise their stock option as provided for in that earlier agreement that we spoke of in some detail, of January 24, 1948. On that date, they turned over a check of $100,000, and between that date and January 31, 1949, completed the payment of $450,000. Mr. FLANAGAN. In other words, United Tanker Corp. purchased all of the stock of National Tanker for $450,000? Mr. LEECE. That is correct. Mr. FLANAGAN. And that was the same stock that the Casey group originally paid $1,000 for? Mr. LEECE. Paid $1,000 for. That is right. Mr. FLANAGAN. Do we have a list of the stockholders of National Tanker Corp. at the time of the sale? Mr. LEECE. Yes. Senator NIXON. Of course, in addition to the investment in stock at that time, of $1,000 in cash, the corporation then had as an asset what for practical purposes we will call the right to buy three tankers? Mr. LEECE. They had title to three tankers. Senator NIXON. But I mean they had not paid for them yet. Mr. LEECE. No. Senator NIXON. In other words, they had title to the three tankers and the right to pay for them, shall we say. Mr. LEECE. Yes, in these three different corporations I have mentioned, National, Oceanic, and Trans-World. Senator NIXON. And National, through the payment of this consideration of $450,000, in effect was obtaining title to those tankers with the right to pay for them and own them outright? Mr. LEECE. That is right. Mr. FLANAGAN. Regarding the list of stockholders of National at the time of the sale of the stock, to clarify the record, could you indicate here how much was paid per share for the stock and how much they sold it for? Have we got that? Mr. LEECE. Well, it amounts to $450 a share. You had a thousand shares originally at $1 a share, and it was subsequently sold for $450,000. Mr. FLANAGAN. In other words, they paid $1 a share for the stock and sold it for $450 a share? Mr. LEECE. That is correct. Mr. FLANAGAN. And this list indicates the names of the stockholders and the names of the beneficial owners of the stock at the time of the sale? Mr. LEECE. That is right. Mr. FLANAGAN. Will you please put that in the record? Senator HOEY. Does this list here indicate that the various stockholders paid that price? Does it show how much each of these stockholders paid per share? Mr. LEECE. AS to this list, Senator, originally Mr. Casey, Mr. Klein, and Mr. Holmes held the thousand shares. Some time between the date of their original acquisition, in January of 1948, and the sale, in January of 1949, they had distributed their interests in varying amounts to the people represented by this list. Senator HOEY. That is right. But does this indicate how much these people paid for the shares when distributed? Mr. LEECE. No. Senator HOEY. So there is nothing in the record to show whether these people paid more or what they paid for the stock? Mr. LEECE. No. Senator HOEY. The information which you give with reference to the original stock shows the price of it, and then the total, what it was sold for? Mr. LEECE. That is correct. Senator HOEY. But it does not indicate what these various stockholders paid for the stock they received? Mr. LEECE. NO. All we can say is that originally Mr. Casey paid $300 for 300 shares, Mr. Holmes paid $300 for 300 shares, and Mr. Klein paid $400 for 400 shares. 95335-52-5 Senator HOEY. Yes. I mention again the same thing I said before: The publication of this list of stock does not indicate that there is anything adverse as far as the stockholders were concerned, unless something else appears. Senator MUNDT. Is there anything in the books of the corporation which would provide the answer for the chairman's question as to how much, taking one name out of here, G. D. Hawthorne, got? Mr. LEECE. Nothing we have seen, sir. Mr. FLANAGAN. We can get that information from Mr. Casey and Mr. Klein and the other witnesses who will be here, who will know how they handled their own stock interests. Senator NIXON. As I understand it, in some instances, the stock was transferred for services rendered, and in other instances as gifts! Mr. FLANAGAN. That is right, and most of the stock, as far as we know, was turned over to the eventual stockholders as gifts. Senator NIXON. As gifts? Mr. FLANAGAN. Yes. Because as you will notice, many are children and relatives of the various stockholders. Senator HOEY. That was the reason why I was inquiring as to whether anything was here to indicate whether the payments were made. This will be exhibit 17. (The list of stockholders of National Tanker Corp. was marked "Exhibit 17," and will be found in the appendix on p. 683.) Senator HOEY. You may proceed, Mr. Leece. Mr. LEECE. Finally we get down to chart No. 4, and I think probably it is well to preface our discussion of this chart with a little of the background of the Chinese Petroleum Corp., which is identified as a subsidiary of the National Resources Commission of the Chinese Nationalist Government, the China Trading & Industrial Development Corp., also a Chinese corporation, and the United Tanker Corp. Now, our investigation of this entire matter indicates that during 1947, in the latter part of 1947, the Chinese Petroleum Corp. had contracts for the purchase of approximately one-half million tons of oil. Their problem was to transport this oil from the Persian Gulf to China. They had access to only one tanker. The China Trading & Industrial Development Corp. decided that it might be well to either purchase tankers or finance the purchase of tankers by other corporations, and then in turn charter them to the Chinese Petroleum Corp. to take care of their transport problems. Various Chinese nationals then associated with the China Trading & Industrial Development Corp. had previously had some business dealings with Mr. Wasson and accordingly got in touch with Mr. Wasson and solicited his advice as to whether or not it would be possible to secure the tankers required from the Martime Commission. They realized, of course, from a review of the Ship Sales Act, that preference in the sale of tankers was given to United States citizen corporations. China Trading was admittedly a Chinese corporation, so it was decided that a citizen corporation would be organized, the officers of which would not only be United States citizens but people experienced in the tanker business. Those people were Mr. Lenfest, Mr. Sieling, and Mr. Tode, all of whom have had considerable experience as ship engineers and ship operators generally. With this in mind, the United Tanker Corp. was organized, in December of 1947, with the individuals that I have referred to as officers, although Mr. Wei was made secretary and treasurer. In December of 1947, two applications were filed with the Commission requesting tankers, one by China Trading and one by the United Tanker Corp. At that time, it was admitted that China Trading was foreign. It was stated that United claimed to be a citizen corporation, and a request was made of the Commission that they treat these applications in the alternative. If it was decided that China Trading was not to get an allocation of tankers, then the Commission should consider the application of the United Tanker Corp., a citizen corporation. However, as I have indicated, the applications were filed too late. The tankers had all been allocated, and the applications were never acted upon. During this period, on December 11, as a matter of fact, a letter was directed to the Maritime Commission by Mr. Morris, Newbold Morris, directed to Mr. Perry. Mr. Morris refers to the fact that: I am writing to advise you that we have just forwarded today an application to purchase two tankers on behalf of the China Trading & Industrial Development Corp. and also on behalf of United Tanker Corp., the latter organized in the State of Delaware. As you advised on the telephone, when I called the other day, these applications were addressed to the Secretary of the Commission. I am sending these to you personally because I want to keep you informed of the steps we are taking in what I hope will be a successful attempt to bring this means of assistance to the Chinese Government. Mr. FLANAGAN. Will you place that in the record, Mr. Leece? Now, United's application to purchase, I think, is also to be entered as an exhibit, Senator. Senator HOEY. One of them will be 18 and the other 19. (The application to purchase was marked "Exhibit 18," the letter of December 11, 1947, was marked "Exhibit 19," and these documents. will be found in the appendix on pp. 683 and 688.) Mr. LEECE. At this point, I will go generally into the source of funds. Before that, I might say that, failing in the acquisition of these tankers directly from the Maritime Commission, it was decided by the United Tanker Corp. that they would attempt to acquire the stock of citizen corporations which had previously been allocated tankers by the Commission. Mr. FLANAGAN. Or which had obtained tankers from the Commission. Mr. LEECE. Or which had obtained tankers from the Commission. That is right. Senator NIXON. Mr. Leece, at this point: I understand that this application was filed, as you have suggested, in the alternative. Mr. LEECE. That is right. Senator NIXON. Now, the reason for turning down the application to United Tanker, which was the citizen corporation, technically speaking, as I understand it, was because it was filed too late to obtain the tanker. Mr. LEECE. There is no indication, Senator, that it was ever actually acted upon. I imagine probably you could say that it was just allowed to expire. The explanation was that it had been filed too late. Senator NIXON. In other words, there was no indication that the application was being turned down because of a finding that it was not a citizen corporation? Mr. LEECE. No. I will go generally into the source of the funds that United was to use in acquiring the stock of whatever corporations had tankers. The bulk of this money came originally from the Chinese Petroleum Corp., which is referred to as a subsidiary of National Resources Commission. This money was directed to the China Trading & Industrial Development Corp., who in turn used it for the subscription of stock, both preferred and common, in United Tanker Corp. It was turned over by Chinese Petroleum to China Trading as prepaid charter hire, because, of course, it was contemplated that at some future time, if and when tankers were acquired, they would be chartered to this Chinese Petroleum Corp., and the money used was simply prepaid charter hire. Then there was a Mr. D. N. Tjain, a Chinese national, who had been a dominant figure in China Trading, who also contributed certain funds to United. In addition to that, United made use of substantial bank loans in New York, and also another big source of funds was mortgages taken back by the Maritime Commission in their sale of these vessels. Now, as to the stock holdings in United: During the life of the United Tanker Corp., 85,000 shares of common stock have been issued. All but 60 shares of that stock have been purchased by the China Trading & Industrial Development Corp., after which they were turned over to the foundation, China International Foundation, as a gift, just donated. For this stock, China Trading paid roughly $20,000. The remaining 60 shares of this common stock was held by Mr. Lenfest, Mr. Sieling, and Mr. Tode, who were the original officers or directors of the United Tanker Corp. They paid for that stock $2 apiece. There were indications that in September 1948, China Trading gave Lenfest $10,000 for his 20 shares, after which they turned it over to the foundation, and then in January of 1951 Mr. Sieling and Mr. Tode donated the rest of their interest, 20 shares apiece, to the foundation, at which time the United Tanker Corp. paid them $10,000 apiece. Mr. FLANAGAN. So then we find that the three American citizen stockholders, or, putting it this way, the three individuals who held common stock, turned that stock over to the China International Foundation on the payment of $10,000 each? Mr. LEECE. That is correct. Mr. FLANAGAN. And how much did they pay for that stock? Mr. FLANAGAN. Two dollars apiece? Mr. LEECE. That is right. Senator NIXON. And the consideration in each instance was for the transfer of the stock to the charitable corporation, and it was paid by the Nationalist-controlled corporation, the China Trading & Industrial? Mr. LEECE. In the case of Mr. Lenfest, it was, Senator, but in the case of Mr. Sieling and Mr. Tode, United paid the $10,000 to each of those men. |