REMISSION OF MITIGATION OF FORFEITURES OR PENALTIES WITH RESPECT TO T2 TANKERS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP57-00384R001100100001-0
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 192
• Document Creation Date: December 16, 2016
• Document Release Date: September 30, 2004
• Sequence Number: 1
• Content Type: REPORT

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APPLICATION
REMISSION OR MITIGATION OF FORFEITURES OR
PENALTIES WITH RESPECT TO
T2 TANKERS
Meacham
Antelope Hills
Kettleman Hills
St. Christopher
Destiny
AND
New London
and
SUPPORTING MEMORANDUM
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INDEX.
PAGE
1. Brief Description of the Corporations and Ves-
sels Referred to in this Application 3
(a) Meacham Corporation 8
(b) United Tanker Corporation 4
(c) National Tanker Corporation 5
(d) Trans-World Maritime Corporation 6
(e) Arctic Tankers, Inc. 6
(f) American Viking Corporation 6
(g) Oceanic Maritime Corporation 7
(h) The China International Foundation, Inc 7
(i) Personnel of United 8
(j) Operators of Vessels 11
2. Organization and Capital Structure of United
Tanker Corporation, and Subsequent Changes
Therein 12
(a) Organization of United 12
(b) Original Capitalization of United 13
(c) Reclassification of Stock of United on
Organization of the Foundation 14
(d) Subordination of Preferred Dividends to
Common Dividends 15
(e) Elimination of Requirement for Certain
Consents of Preferred Stockholders 16
(f) Subsequent changes in Stockholders of
United 17
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3. Application dated December 10, 1947 by United
Tanker Corporation to United States Mari-
time Commission
PAM"
17
4. Arrangements for Chartering of Tankers or
Purchase of Stock Interest in Companies
Acquiring Tankers 19
(a) Investment in American Viking Corpo-
ration 20
(b) Investment in National Tanker Corpo-
ration 23
(1) Arrangements between United and
National 23
(2) Purchase of Kettleman Hills 25
(3) Purchase of Meacham 27
(4) Purchase of Antelope Hills 28
(5) Exercise of Option 29
(c) Investment in Arctic Tankers, Inc 29
5. Financial Difficulties Encountered by United
Tanker Corporation 31
(a) Depressed state of charter market 1948-
1950 31
(b) Financing of purchase of National Tanker
Corporation stock 32
(c) Financing of Antelope Hills 32
(d) Difficulties in connection with charters to
Chinese Petroleum Corporation 33
(e) Transfer of Meacham to Meacham Corpo-
ration and settlement of Chinese Petro-
leum Corporation's claims 36
(f) Default under Antelope Hills mortgage 41
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PAGE
6. Sale of Vessels 44
(a) Kettleman Hills 44
(b) Meacham 44
7. Operation of Vessels 45
(a) Management 45
(b) Chartering 46
(c) Crews 49
8. United States Citizen Control of Meacham Cor-
poration, United Tanker Corporation, and its
Subsidiaries 52
EXHIBITS:
A Affidavit with respect to The China Interna-
tional Foundation, Inc 56
A-1 Certificate of Incorporation of The China
International Foundation, Inc 60
A-2 Biographical data as to certain trustees of
The China International Foundation, Inc. 66
A-3 Letter dated November 30, 1949, addressed
to the Foundation by China Trading 69
B Letter dated December 9, 1947 from National
Resources Commission of China to China
Trading 70
C Application to the United States Maritime
Commission dated December 10, 1947, filed
by United 72
D Opinion, dated February 3, 1948, of Assistant
General Counsel of the United States Mari-
time Commission with respect to citizen-
ship of United 84
E Letter dated April 15, 1948 from Julius J
Rosenberg to United States Maritime
Commission 87
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iv
PAGE
F Agreement dated January 24, 1948 between
United and National Tanker Corporation,
and agreement dated January 24, 1948 be-
tween United and stockholders of National
Tanker Corporation 88
0- Excerpts of hearings held on February 13,
1948 before the House Committee on Mer-
chant Marine and Fisheries 96
H Letter dated May 14, 1948 from Chemical
Bank & Trust Company to Bank of China 97
I Instrument of Guaranty dated September 27,
1949, executed by Bank of China 100
J Affidavit dated November 14, 1951 of repre-
sentative of Chinese Petroleum Corpora-
tion 104
K Letter dated April 27, 1950 from United to
Department of State, and attachments 108
L Chronological record of voyages of vessels 117
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APPLICATION
for
REMISSION OR MITIGATION OF FORFEITURES OR
PENALTIES WITH RESPECT TO THE T2 TANKERS
Meacham, Antelope Hills, Kettleman Hills, St. Christopher,
Destiny and New London.
DEPARTMENT OF JUSTICE,
WASHINGTON, D. C.
Sirs:
This application is filed pursuant to the provisions of
Section 7 of Title 46 of the United States Code for remission
or mitigation of forfeitures or penalties provided for in
laws relating to vessels with respect to the T2 tankers
Meacham, Antelope Hills, Kettleman Hills, St. Christopher,
Destiny and New London on behalf of Meacham Corpora-
tion, United Tanker Corporation ("United"), National
Tanker Corporation ("National"), Trans-World Maritime
Corporation ("Trans-World"), Oceanic Maritime Corpo-
ration ("Oceanic") and Arctic Tankers, Inc. ("Arctic"),
of which corporations I am President, and American Viking
Corporation ("Viking"), of which I am Chairman of the
Board. The occasion for the filing of this application is the
libel filed by the United States against the Meacham in the
United States District Court for the Eastern District of
Virginia seeking the forfeiture of the vessel Meacham for
alleged violations, on grounds of lack of citizenship, of the
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provisions of Section 9 of the Shipping Act of 1916, as
amended, and of certain provisions of the registry laws.
No forfeitures or penalties have been asserted against the
other vessels referred to above. However, because the
factual situation of the Meacham is in some respects similar
to that of the other vessels referred to above, this applica-
tion seeks remission or mitigation of forfeitures or penal-
ties which might be asserted against the other vessels, as
well as those which have been asserted against the Meacham.
The facts set forth herein are based in part upon my own
personal knowledge and in part on records of the corpora-
tions referred to herein, which I have reviewed, and infor-
mation given me by other officers and employees of the
corporations referred to herein. All of the facts set forth
herein are true to the best of ray knowledge, information
and belief.
The grounds upon which this application is made are
that the corporations referred to above have complied with
the applicable provisions of the shipping laws in accord-
ance with the construction placed upon such laws by repre-
sentatives of the United States Maritime Commission
(succeeded on May 24, 1950 by the Department of Com-
merce, Maritime Administrator, and herein called the
"Commission") and believed by the applicants herein to
be correct, and that if there have been any acts which would
constitute violations of such laws, such acts have been taken
in good faith without intent to violate any laws. I believe
that the following review of the present status and past
activities of the corporations and vessels involved will
demonstrate that there have been no violations of law, or,
if there have been any unknowing violations, that it is
appropriate to remit any forfeitures or penalties incurred.
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1.
Brief Description of the Corporations and Vessels
Referred to in this Application.
United and Meacham Corporation are subsidiaries of
The China International Foundation, Inc. (the "Founda-
tion"), a non-profit membership corporation organized for
charitable purposes under the laws of Delaware. All of
the members and trustees of the Foundation are United
States citizens. United owns all of the stock of National,
Trans-World, Oceanic, Arctic and Viking. A private
Chinese corporation, China Trading & Industrial Develop-
ment Corporation ("China Trading") originally provided
substantially all the equity capital for United, but was
never in a position of control, either voting or otherwise.
Prior to June 18, 1948, 75%, and thereafter 100%, of the
voting stock of United was owned by U. S. citizens. Chinese
Petroleum Corporation ("Chinese Petroleum"), a subsidi-
ary of the National Resources Commission of China, an
agency of the Nationalist Government of China, is a sub-
stantial unsecured creditor of Meacham Corporation. The
asserted forfeiture of the Meacham is apparently based on
the past or present alleged financial interest in the vessel
of China Trading and Chinese Petroleum.
(a) Meacham Corporation.
Meacham Corporation was organized under the laws
of Delaware on October 17, 1949. It owns (i) 11,750 shares
of preferred stock, $100 par value, of United Tanker Cor-
poration and (ii) a claim to $1,950,000 deposited in the
Registry of the United States District Court for the Eastern
District of Virginia in connection with the release of the
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vessel Meacham. Meacham Corporation has outstanding
$1,595,000 face amount of unsecured notes held by Chinese
Petroleum, an agency of the Nationalist Government of
China. All of the capital stock of Meacham Corporation
is owned by the Foundation. The directors and officers
of Meacham Corporation are as follows:
Harold C. Lenfest Director and President
Walter II. Siding Director, Vice-President
and Secretary
? Arthur M. Tode Director
C. D. Shia]] Treasurer
C. R. Hartzell Assistant Secretary and
Assistant Treasurer
All of the above persons are citizens of the United States
except C. D. Shiah, who is a Chinese citizen and who is the
United States representative of Chinese Petroleum.
(B) United Tanker Corporation.
United was organized under the laws of Delaware on
December 10, 1947. It owns all of the outstanding capital
stock of National, Trans-World, Viking and Arctic. It also
was the sole stockholder of Oceanic, recently dissolved.
United has outstanding 85,000 shares of common stock,
10 par value, all owned by the Foundation, and 15,300
shares of non-voting preferred stock, $100 par value, of
which 11,750 shares are owned by Meacham Corporation,
referred to above, and 3,550 shares are owned by United
Securities Corporation, a Liberian corporation. I am
informed that the stock of the latter corporation, formerly
held by D. N. Tjian, is now held by China Trading & Indus-
trial Development Corporation (Hongkong) Ltd. (a Hong-
kong corporation organized to take over the foreign assets
and liabilities of China Trading after its officers left China
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because of the Communist occupation). The directors and
officers of United are as follows:
Arthur M. Tode Chairman of the Board
of Directors
Harold C. Lenfest Director, President and
Treasurer
Walter H. Sieling Director, Vice-President
and Secretary
C. R. Hartzell Assistant Secretary and
Assistant Treasurer
All of the above persons are citizens of the United States.
(c) National Tanker Corporation.
National was organized under the laws of Delaware on
January 23, 1948. It is now inactive, having been liqui-
dated in December, 1949. It purchased the Kettleman Hills
from the Commission on April 29, 1948, and the Meacham
from the Commission on May 14, 1948. It transferred the
Kettleman Hills to Oceanic, a wholly owned subsidiary, on
June 15, 1948, and transferred the Meacham to Meacham
Corporation on November 7, 1949. All of the stock of
National is owned by United. The directors and officers
of National are as follows:
Harold C. Lenfest Director, President and
Treasurer
Walter H. Sidling Director, Vice-President
and Secretary
Arthur M. Tode Director
C. R. Hartzell Assistant Secretary and
Assistant Treasurer
All of the above persons are citizens of the United States.
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(d) Trans-World Maritime Corporation.
Trans-World was organized under the laws of Delaware
on July 31, 1948. On January 12, 1949, it purchased the
Antelope Hills from the Commission, which holds a mort-
gage on the vessel now outstanding in the amount of
$991,900. All of the outstanding capital stock of Trans-
World is held by United, and the directors and officers of
Trans-World are the same as those of United.
(e) Arctic Tankers, Inc.
Arctic was organized under the laws of New York on
February 6, 1948. On July 9, 1948, Arctic purchased the
New London from the Commission, which holds a mort-
gage on the vessel now outstanding in the amount of
$904,090. All of the capital stock of Arctic is owned by
United, and the directors and officers of Arctic are the same
as those of United.
(f) American Viking Corporation.
Viking was organized under the laws of Delaware on
December 1, 1944. Viking purchased the St. Christopher
on March 16, 1948, and the Destiny on October 21, 1948,
from the Commission, which holds mortgages on the two
vessels now outstanding in the aggregate amount of
$1,986,225. All of the capital stock of Viking is owned by
United. The directors and officers of Viking are as follows:
Harold C. Lenfest ..... Chairman of the Board
and Treasurer
Olga Konow Director and President
Walter H. Sidling Director, Vice-President
and Secretary
Arthur M. Tode Director
C. It. Assistant Secretary and
Assistant Treasurer
All of the above persons are citizens of the United States.
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(g) Oceanic Maritime Corporation.
Oceanic was organized under the laws of Delaware on
June 11, 1948. It acquired the Kettleman Hills from its
parent company, National, on July 15, 1948, and sold the
Kettleman Hills to Colonial Steamship Corporation, a non-
affiliated corporation, on February 21, 1951. All of the
stock of Oceanic was held by United at the time of the dis-
solution of Oceanic on December 17, 1951, and the directors
and officers of Oceanic at the time of such dissolution were
the same as those of United.
(h) The China International Foundation, Inc.
The Foundation was organized as a charitable member-
ship corporation under the laws of Delaware on June 4,
1948. The Foundation has no capital stock, and under its
certificate of incorporation no part of its net income shall
enure to the benefit of any member, officer, trustee or
employee. The trustees and officers of the Foundation are
as follows:
Newbold Morris
Magnus Gregersen
Edward H. Hume
Arthur M. Tode
Houston H. Wasson
President and Trustee
Trustee
Trustee
Trustee
Secretary and Treasurer
The members of the Foundation consist of Newbold Morris,
Magnus Gregersen, Edward H. Hume, Harold C. Lenfest
and Houston H. Wasson. All members, trustees and officers
are citizens of the United States.
The purposes for which the Foundation was organized
are to further educational, medical and scientific enterprises,
both in the United States and China, by grants in aid to
educational institutions for purposes of general education,
by creating scholarships for the education of Chinese stu-
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dents, by establishing hospitals and public health centers,
by encouraging medical and scientific research and by dis-
seminating scientific and technical knowledge. Attached
hereto as Exhibit A is an affidavit executed by the Secretary
of the Foundation describing its organization and activities.
(i) Personnel of United.
A brief biographical sketch of the officers and directors
of United is as follows:
Harold C. Lenfest graduated from Webb Institute
of Naval Architecture and Engineering in 1918. Mr.
Lenfest subsequently became associated with Bath Iron
Works, and later held positions as follows with the
following firms:
Naval Architect for Fabricated Ship Corporation;
Southeastern Manager for De La Vergne Machine
Company, 1925-1931;
Eastern District Manager, Diesel Engine Division,
American Locomotive Co., 1931-1945;
While associated with American Locomotive Co.,
Mr. Lenfest also acted as Consultant for National
Defense Research Committee on Mechanical
Engineering and Naval Architecture, 1942-1944.
In 1945 Mr. Lenfest became Vice-President in
charge of Enterprise Engine Company's New York
City offices, and in 1946 Mr. Lenfest left that company
to devote his full time to Continental Engineering
Corporation and Continental Equipment Corporation
of which he was President. Mr. Lenfest has had actual
experience at sea and holds the United States Depart-
ment of Commerce license as chief engineer of either
steam or Diesel ships of unlimited tonnage. Continen-
tal Engineering Corporation and Continental Equip-
ment Corporation acted as licensees and agents for
J. Stone & Company, Limited, of London, England,
and for a number of other firms in the sale of marine
and railway equipment. Mr. Lenfest is a member of
the American Society of Mechanical Engineers, the
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Society of Naval Architects and Marine Engineers, the
Institute of Marine Engineers (London) and the Engi-
neers Club of New York. Mr. Lenfest formerly
devoted over one-half of his time, and since November
1, 1951 has been devoting his full time, to the affairs
of United.
Walter H. Siding has been active in the shipping
business since 1905 when he was first employed by the
Metropolitan Steamship Company. He remained with
this company and its successor, Eastern Steamship
Lines, Inc., until 1918 when he was called to Washington
to become Freight Claim Agent of the Shipping Board.
In 1919 Mr. Sidling returned to New York and was
employed for a short period by the Cosmopolitan Line
until he left to become Manager of Walker & Daly,
operators of 28 tankers for the Shipping Board. When
these tankers were laid up in 1922, Mr. Sidling started
his own business as a tanker broker, which he continued
during the period 1924 to 1935 as a member of the firm
of Sidling & Warden, and since 1937 as a member of
the firm of Sidling & Jarvis. In 1942, Mr. Sidling was
called to the War Shipping Administration in Wash-
ington for a brief period to assist in the charter
arrangement of all requisitioned American tankers.
The firm of Sidling & Jarvis became General Agents
and Time Charter Agents for the War Shipping
Administration in 1943 operating 20 American tankers
under G. A. A. and all French and some Panamanian
tankers under T. C. A. After the war Mr. Sieling
engaged in the normal chartering and management of
vessels through Siding & Jarvis Corporation, from
which he retired on February 1, 1951 to devote his
full time to the affairs of United.
Arthur M. Tode is a consulting engineer and is
Honorary President of The Propeller Club of the
United States. He is the founder of the American
Merchant Marine Conference held each year under the
auspices of the Propeller Club. Mr. Tode graduated
from the New York State Maritime Academy in 1912
and has had practical training at sea, holding an
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unlimited license as Chief Engineer for both steam and
Diesel propelled vessels, in both the maritime service
and with the United States Navy. He is Lieutenant
Commander, U. S. N. R., Ret. From 1924 to 1931 he
served as Technical Superintendent of the Marine
Department of the Texas Company, and in this capacity
had charge of the oil tanker operations of that com-
pany. Mr. Tode is a graduate engineer of the United
States Navy Turbine Engineering School, the General
Electric Marine Engineering School, the Sperry Gyro
Compass School, and of the United States Navy Fuel
Oil School. He has had special training in the plants
and laboratories of the Babcock & Wilcox Co., the
Texas Co., McIntosh and Seymour, Combustion Utili-
ties Corporation, and with the Society of Naval Archi-
tects and Marine Engineers, the Maritime Association
of the Port of New York, the United States Naval
Institute, the American Society of Naval Engineers,
the American Society of Military Engineers, and the
American Society of Mechanical Engineers. He is also
a member of the Executive Committee of the American
Merchant Marine Library Association and the Execu-
tive Committee of the United States Coast Guard
Merchant Marine Council. He is a graduate of the
Navy Orientation Course for Naval Reserve Officers,
Columbia University, and a graduate of the Civilian
Orientation Course of the Department of Defense.
In 1949 lie received the Distinguished Public Service
Award of the United States Navy in recognition of his
efforts on behalf of merchant shipping and the United
States Navy. Mr. Tode attends weekly staff meetings
and monthly board meetings of United and is available
at all times for consultation.
C. B. Hartzell was associated with Price Water-
house & Company as an accountant prior to becoming
associated with United. He is a Certified Public
Accountant (N. Y.) and a member of the American
Institute of Accountants.
The following young Chinese engineers who were asso-
ciated with China Trading prior to the organization of
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United in 1947, have since that time devoted all or a por-
tion of their time to the affairs of United.
C. Y. Chen?Graduated from Chiao-Tung Uni-
versity, Shanghai, China with degree of B. S. in
mechanical engineering in 1941. Received Ph. D. in
mechanical engineering from Purdue University in
1943. Was associated with Babcock & Wilcox as a
research engineer in London prior to becoming asso-
ciated with China Trading in 1946.
C. C. Wei?Graduated from Chiao-Tung University
in 1937 with degree of B. S. in electrical engineering.
Was associated from 1937 to 1947 as an engineer with
the National Resources Commission of China, a branch
of the Nationalist Government (corning to the United
States in 1942 as a government official) prior to becom-
ing associated with China Trading. Mr. Wei resigned
as an officer of China Trading in 1949.
Two other young Chinese engineers, who have been
active in the affairs of United since its organization, are:
P. T. Chin?Graduated from Chiao-Tung University
in 1939 with degree of B. S. in electrical engineering.
Received M. S. in engineering from Purdue University
in 1940. Was associated as an engineer with General
Electric Company, The International Electronics Lab-
oratory and York Research Corporation, and was
treasurer of China Motor Corporation prior to his
employment by United.
Darfoon Du?Graduated from Chiao-Tung Uni-
versity in 1941 with degree of B. S. in mechanical engi-
neering. Received M. S. in mechanical engineering
from Purdue University in 1942. Was associated with
Foster Wheeler Corporation and with China Motor
Corporation as an engineer prior to his employment by
United.
(j) Operators of Vessels.
The four tankers now owned by subsidiaries of United
are all operated by Sieling & Jarvis Corporation, 50
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Broadway, New York, N. Y., with which Mr. Sidling was
formerly associated. The officers and crews of all tankers
are United States citizens. Two of the tankers are under
consecutive voyage charters to Gulf Oil Corporation and
the other two tankers are being chartered out on a voyage
to voyage basis, the charterer for the next voyages being
Standard Oil Company of New Jersey, or one of its
subsidiaries.
2.
Organization and Capital Structure of United Tanker
Corporation, and Subsequent Changes Therein.
(a) Organization of United.
In the latter part of November 1947 Houston II. Wasson,
a member of the firm of Post, Morris & Lovejoy, who had
acted as my attorneys since June 1946, told me that he had
been consulted by representatives of China Trading who
desired to charter tankers and were willing to invest the
necessary funds for the purchase of one or more tankers
in a domestic corporation to be managed and controlled by
experienced United States shipping people. Mr. Wasson
asked me if I would be interested, or, if not, if I could
recommend people who would be interested, in organizing
and operating such a corporation. I was interested in the
idea and discussed it with Mr. Walter H. Siding and Mr.
Arthur M. Tode, whom I had known for many years and
who had had a long background in shipping activities. I
introduced them to Mr. Wasson, and was introduced by him
to the representatives of China Trading.
At this time there was a world shortage of tanker trans-
portation. The representatives of China Trading told me
that Chinese Petroleum had contracts for the purchase of
about 500,000 tons of oil at the Persian Gulf, that it bad
available only one 3,000 ton tanker to transport this oil to
China, and had been unable to charter in any tankers.
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I was informed that China Trading wished to finance the
purchase of tankers in order to make them available to
Chinese Petroleum. Attached hereto as Exhibit B is a
copy of a letter dated December 9, 1947 from the National
Resources Commission Of China to China Trading with
respect to China's oil requirements.
United was organized on December 10, 1947, and Mr.
Sidling, Mr. Tode and I were elected by the incorporators
to serve as the first Board of Directors. The first meeting
of the Board was held on the afternoon of December 10th,
at which I was elected President, Mr. Sidling, Vice-Presi-
dent, and Mr. C. C. Wei, Secretary and Treasurer. The
Board authorized the sale of five shares of Class B Stock
each to Mr. Sieling, Mr. Tode and myself at 20 cents per
share, and ten shares of Class A Stock to China Trading
at $200 per share. At a subsequent meeting on January 19,
1948, the issue and sale of additional shares of stock was
authorized and Mr. Sieling, Mr. Tode and I each purchased
five additional shares of Class B Stock, making a total of
ten shares each. I understood that China Trading would
provide, or arrange for, the necessary financing for United
and that Mr. Sidling, Mr. Tode and I would contribute our
experience and knowledge of shipping. At the first meet-
ing of the Board of Directors the filing of an application
to the Commission for the purchase of two T2 type tankers
or, in the alternative, three Liberty-type tankers, was
authorized.
(b) Original Capitalization of United.
The certificate of incorporation of United authorized
two classes of stock, a Class A Stock and a Class B Stock.
The Class A Stock was in substance entitled to receive 90%
of the earnings of United and, on liquidation, after receiv-
ing the amount initially paid in on original issue, the Class
A Stock was entitled to 90% of the remaining assets of
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United. The Class B Stock was entitled to 10% of the earn-
ings and, on liquidation, after the preferential payment to
the Class A Stock, was entitled to receive 10% of the
remaining assets of United. Each holder of Class A Stock
and each holder of Class B Stock was entitled to one vote
per share, but no shares of Class A Stock could be issued
unless, after giving effect to such issue, there would be out-
standing a greater number of shares of Class B Stock than
the number of outstanding shares of Class A Stock. Shares
of Class B Stock under the provisions of the certificate of
incorporation could only be held by citizens of the United
States, These provisions were designed to insure the con-
trol of United by United States citizens. The certificate of
incorporation of United was filed as Exhibit 1 to its appli-
cation to the Commission for the purchase of tankers.
(c) Reclassification of stock of United on Organization of
the Foundation.
On June 18, 1948, the certificate of incorporation of
United was amended to increase the total authorized number
of shares of Class B Stock to 75,000 shares and to authorize
a new class of 25,000 shares of preferred stock, $100 par
value. At a directors' meeting of United held on June 17,
1948, authorizing this amendment, authority was given to
sell the shares of preferred stock authorized to China Trad-
ing and to sell the additional shares of Class B Stock
authorized to the newly created Foundation. The shares
so authorized were subsequently issued, the Class B Stock
being sold for 1N per share and the preferred stock being
issued for $100 per share to China Trading in cancellation
of cash advances previously made by it to United, and
invested by United in tanker owning companies.
Some time prior to the June 17, 1948 meeting of the
Board of Directors of United, I had discussed with our
attorneys and with C. Y. Chen and 0. C. Wei plans for the
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establishment of the Foundation. At this time I was told
that China Trading had devoted a substantial portion of its
profits in China to the establishment of scholarships and
the undertaking of other projects designed to contribute to
the welfare of the Chinese people. I was informed that
China Trading wished any profits which it derived from
its investment in the Class A Stock of United to be applied
to philanthropic purposes, with particular reference to
China, and that it wished to donate its 10 shares of Class A
Stock to form the initial asset of a new foundation to be
controlled and administered by persons in the United States
interested in philanthropic work in China. I was asked if
I and the other directors would be interested in selling our
shares of Class B Stock of United to such a foundation.
The Foundation was organized on June 4, 1948 and I was
elected a member at the initial meeting of the incorporators.
I agreed to sell my shares of Class B Stock to the Founda-
tion for $10,000, the funds for such purchase by the Founda-
tion to be provided by China Trading, and this sale was
later effected. At this time we also discussed the purchase
by the Foundation, with funds provided by China Trading,
of the shares of Class B Stock held by Mr. Tode and Mr.
Sieling. This matter was deferred from time to time, and
subsequently Mr. Sidling and Mr. Tode, who were then
receiving compensation from United, decided to contribute
their shares to the Foundation as a donation.
The effect of the foregoing transactions was to transfer
to the Foundation all of the Class A and Class B Stock
(later reclassified into Common Stock) of United.
(d) Subordination of Preferred Dividends to Common
Dividends.
On August 18, 1949 the certificate of incorporation of
United was amended to reclassify the 10 shares of Class
A Stock and 75,000 shares of Class B Stock outstanding into
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an aggregate of 85,000 shares of common stock. The cer-
tificate of amendment also eliminated one year's accumu-
lated and unpaid dividends on the preferred stock and
provided for the creation of a special prior dividend at
the rate of $2 per share for the common stock, payable
in priority to the dividends on the preferred stock. This
had the result, at the time, of subordinating the preferred
dividend payment of $150,000 per year to which China
Trading was entitled, to the payment of approximately
$170,000 per year to the Foundation as the holder of sub-
stantially all of the common stock. These concessions on
the part of China Trading were in part occasioned by the
difficulties arising from the cancellation of the charters to
Chinese Petroleum, which will be referred to below.
(e) Elimination of Requirement for Certain Consents of
Preferred Stockholders.
On November 4, 1949 the certificate of incorporation of
United was amended to eliminate the requirement for the
consent of the preferred stockholders for the mortgaging
of the property of United or its subsidiaries, the sale of
all or substantially all of its assets or the issuance of long-
term debt. While the preferred stock of United was a
non-voting preferred stock, these consent requirements
had been included as a part of the normal protective provi-
sions to which I believed preferred stockholders were
entitled. Our Washington counsel, Messrs. Radner, Zito
& Donoghue, informed us that the General Counsel for the
Commission, in reviewing the status of United and its
subsidiaries, had suggested the elimination of these provi-
sions to avoid any question as to compliance with the
citizenship requirements of the shipping laws. Accord-
ingly, the certificate of incorporation was amended, as
requested.
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(f) Subsequent Changes in Stockholders of United.
On November 7, 1949, 11,750 shares of preferred stock
of United were transferred by China Trading to Meacham
Corporation and 3,450 shares of preferred stock of United
were surrendered by China Trading to United for retire-
ment. These changes were made at the time of the transfer
of the Meacham to Meacham Corporation, referred to
below.
The remaining 9,800 shares of preferred stock held by
China Trading were subsequently assigned to China Trad-
ing & Industrial Development Corporation (Hong Kong),
Ltd. and by it to United Securities Corporation. During
1951 an aggregate of 6,250 shares of preferred stock held by
United Securities Corporation was purchased by United
Tanker Corporation for retirement at an aggregate price
of $550,000.
3.
Application dated December 10, 1947 by United
Tanker Corporation to United States
Maritime Commission.
On December 10, 1947 I executed on behalf of United
an application to the Commission for the purchase of two
T2 tankers or, in the alternative, three Liberty tankers.
A copy of this application is attached hereto as Exhibit C.
The application pointed out that all of the Class A Stock
of United was held by China Trading which would provide
substantially all of the equity money, and that the remainder
of any funds required would be advanced either by China
Trading or by the National Resources Commission of the
Chinese government or, in part, by the negotiation of com-
mercial bank loans. It was also stated that it was the
intention of United to charter any tanker obtained to the
National Resources Commission or one of its controlled
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corporations to carry oil from Persian Gulf ports to
Shanghai and other Chincze ports. The application
describes the background in the shipping field of Mr. Siding,
Mr. Tode and myself, describes the background of Mr. C. C.
Wei, then Secretary and Treasurer of United, and states
the intention to employ Siding & Jarvis as managing
agents of the vessels. A copy of the certificate of incorpo-
ration of United showing the relative rights of the Class A
Stock and Class B Stock was included as Exhibit 1 to the
application.
I am informed that China Trading filed an application
to purchase tankers from the Commission under Chinese
flag at the same time that United filed its application. I am
also informed that the Chinese Embassy requested the
Department of State to certify to the Commission the neces-
sity of the procurement of two T2 tankers for the National
Resources Commission through China Trading, and that
the Department of State requested the Commission to give
favorable consideration to China Trading's application.
The Commission did not allocate any tankers either to
United on its application or to China Trading. I was
informed that the application of United had been filed too
late, after allocations had already been made or recom-
mended on the basis of earlier applications by others. At
no time did representatives of the Commission indicate
that the application of United was looked upon with dis-
favor because of any citizenship question. On the contrary,
the representatives of United were assured that, if addi-
tional tankers should become available, its application
would be given the most serious consideration.
On February 3, 1948 the then Assistant General Counsel
of the Commission rendered an opinion, after reviewing
United's application, that United complied with the neces-
sary requirements of a citizen of the United States within
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the meaning of Section 2 of the Shipping Act of 1916. A
copy of this opinion is attached hereto as Exhibit D.
When it became apparent that it was unlikely that
United would obtain a direct tanker allocation from the
Commission, United became interested in the possibility
of chartering vessels from companies which had been suc-
cessful in obtaining tanker allocations or in purchasing a
stock interest in such companies.
4.
Arrangements for Chartering of Tankers or Purchase
of Stock Interest in Companies Acquiring Tankers.
United entered into arrangements with Viking, National
and Arctic to assist in the financing of six tankers purchased
from the Commission during the period March 16, 1948 to
January 12, 1949. The funds required to finance the pur-
chase, repair and putting in operation of these vessels, and
premiums and commissions paid in connection with the
acquisition of stock of the tanker-owning companies, approx-
imated $11,100,000. These funds were provided approxi-
mately as follows:
(a) From the U. S. Maritime Commission $4,800,000
(b) From China Trading (including mon-
ies from Chinese Petroleum) $2,170,000
(c) From Chemical Bank $1,900,000
(d) From Bankers Commercial Corpora-
tion $1,350,000
(e) From American Business Credit Cor-
poration $ 500,000
(f) From earnings of United and Viking $ 380,000
Monies provided by China Trading for this purpose thus
represented less than 20% of the total monies required,
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(a) Investment in American Viking Corporation.
Viking is a Delaware corporation which was organized
on December 1, 1944. In December, 1947, when represen-
tatives of United commenced negotiations with Viking, the
directors of that corporation were Olga Konow, President,
Eugene L. Mullaney and Eugene S. Shapiro. Representa-
tives of United were informed that Viking had applied to
the Commission for tankers in April, 1947 and had been
allocated the tanker St. Christopher (ex Skullbar).
On January 12, 1948, Viking entered into an agreement
with United under which United agreed to advance up to
$600,000 to Viking to assist in the financing and placing in
operation of the St. Christopher. It was expected that the
balance of the funds required would be borrowed from a
commercial bank on the security of a first preferred mort-
gage on the vessel. Under the agreement United was to
receive a second preferred mortgage on the vessel to secure
its loan, with interest at three per cent. per annum, and in
addition was to receive half the net earnings derived from
the operation of the vessel over a ten year period.
On January 12, 1948 Viking executed a contract of sale
with the Commission for the purchase of the St. Christopher
and made the necessary deposit of $202,650, with funds
advanced by United. The balance of the funds committed
by United were advanced during January and February.
Negotiations then proceeded with Commercial National
Bank & Trust Company for a loan of $1,200,000 to complete
the funds necessary for the purchase of the vessel. In the
course of these negotiations the Bank requested evidence
of the approval by the Commission of the United States
citizenship of United. It was in connection with this
request that counsel for United obtained the opinion from
the Assistant General Counsel of the Commission dated
February 3, 1948 referred to above (Exhibit D).
On March 9, 1948 Viking, United and Olga Konow
entoted alto a new agreement reciting_ that Viking now
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proposed to finance the purchase of the St. Christopher by
a purchase money mortgage from the Commission of
approximately $1,200,000 instead of through a loan from
the Commercial National Bank & Trust Company. The
agreement provided that the $600,000 already advanced
by United under the agreement of January 12, 1948 would
be applied to the purchase of 6,000 shares of preferred
stock of Viking. Mrs. Konow agreed to subscribe for 2,000
shares of preferred qtock and pay therefor by a note for
$200,000. United agreed to subscribe for 15,190 shares of
common stock at $1 per share, and Mrs. Konow agreed to
subscribe at the same price for such additional shares of
common stock as would bring her total holdings to 15,810
shares.
On March 12, 1948 an addendum was executed to the
purchase contract with the Commission covering the
St. Christopher, providing for the purchase of the vessel
on mortgage terms rather than on cash terms, and Viking
took title to the St. Christopher on March 16, 1948.
While the negotiations with respect to the St. Chris-
topher were proceeding, the Commission allocated to
Viking another vessel, the Destiny (ex Dominguez Hills).
On March 22, 1948 United advanced to Viking the $202,650
required as a deposit on this vessel, the advance being
repaid by Viking on July 7, 1948.
On April 9, 1948 Viking entered into an agreement to
purchase the Destiny from the Commission on mortgage
terms. On April 15, 1948 Julius J. Rosenberg, counsel for
Viking, wrote to a member of the legal staff of the COM-
mission enclosing a copy of the last Certificate of Amend-
ment to the Certificate of Incorporation of Viking, and
advising that 2,000 shares of preferred stock and 15,810
shares of common stock were then held by Olga Konow, and
6,000 shares of preferred stock and 15,190 shares of com-
mon stock were then held by United. Mr. Rosenberg also
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referred to the opinion of the Assistant General Counsel
of the Commission dated February 3, 1948, with respect to
the citizenship of United. A copy of Mr. Rosenberg's letter
of April 15, 1948 is attached hereto as Exhibit E.
Viking completed the purchase of the Destiny from the
Commission on October 21, 1948. In connection with the
purchase United and Wonok Corporation each bought an
additional $100,000 par value of preferred stock of Viking
by delivering to Viking promissory notes in payment
therefor. Wonok Corporation, which I understand was
wholly owned by Mrs. Konow, had previously assumed the
$200,000 note given by her to Viking at the time of the
purchase of the St. Christopher. In January, 1949 United
paid its note to Viking and also, by paying the $100,000 note
of Wonok Corporation, acquired an additional 1,000 shares
of preferred stock of Viking, bringing its total holdings
to 8,000 shares.
Mrs. Konow's ownership of a majority of the common
stock of Viking continued until December, 1949. At that
time, after arm's length negotiations, United purchased
from Mrs. Konow all of her holdings of common stock in
Viking and all of the stock of Wonok Corporation for
$300,000, payable in five annual installments and secured
by the assignment to Mrs. Konow of the second mortgage
then held by United on the Kcttleman Hills. Wonok Cor-
poration was then liquidated. When the Kettlernan Hills
was sold in February, 1951, the second mortgage, and the
balance due Mrs. Konow, were paid.
The acquisition by United of Mrs. Konow's interest in
Viking was reported to representatives of the Commission
shortly thereafter in the course of the conferences with
respect to the Antelope Hills referred to under 5(1) below.
The acquisition was of course reflected in the regular report
filed by Viking with the Commission showing its stock-
holders as at December 31, 1949.
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(b) Investment in National Tanker Corporation.
(1) Arrangements between United and National.
About the middle of January, 1948 United was informed
by Mrs. Konow that she was acquainted with a group which
had been allocated three T-2 tankers by the Commission
and had not yet made the necessary arrangements to finance
the purchase of the tankers. United was interested in
acquiring the use of additional tankers by purchase or
charter, and, at a meeting held on January 19, 1948, the
Board of Directors of United authorized the officers to con-
tinue negotiations both to acquire tankers from the Com-
mission and to effect the purchase or charter of additional
tankers from private concerns. Later in the day on Janu-
ary 19th representatives of United were introduced by Mrs.
Konow to representatives of American Overseas Tanker
Corporation, the company to which Mrs. Konow had
referred.
After negotiations an agreement was entered into on
January 24, 1948 between United and National for the
financing and chartering by United of the three vessels?
Meacham, Kettleman Hills and Antelope Hills. National
had been organized on January 23, 1948 with, I was told,
substantially the same officers, directors and stockholders
as American Overseas Tanker Corporation. The initial
directors of National were Joseph E. Casey, Julius C.
Holmes and E. Stanley Klein, who also constituted the
stockholders of record of the 1,000 shares of capital stock
of National. Mr. Casey was President, Mr. Klein and Mr.
Holmes, Vice-Presidents, and Mr. James G. Mackey, Sec-
retary and Treasurer of National.
On January 22, 1948 American Overseas Tanker Cor-
poration filed an amendment to its original application to
the Commission (filed August 27, 1947) referring to the
allocation to it on December 7, 1947 of the Meacham, the
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Kettleman Hills and the Antelope Hills and requesting per-
mission to take title to these three tankers in the name of
National. On January 26, 1948 the contract of sale with
the Commission was executed by American Overseas Tanker
Corporation for the purchase of the three vessels, providing
that title should be taken by National, and the required
deposit of $607,950 was made with funds advanced by
United.
By the agreement dated January 24, 1948 United agreed
to lend to National the entire cost of purchase of each of
the three tankers. National agreed to charter each tanker
for a term of ten years under a bareboat charter to United
at the rate of $1.20 per dead weight ton per month plus
such additional amount as might be necessary to enable
National to complete the payment of corporate taxes and
interest and expenses. (The final bareboat charter rate,
computed in accordance with the agreement, was at $1.40
per dead weight ton per month.) An additional agreement
was entered into on the same day by which the stockholders
of National gave United an option, exercisable between
September 15, 1948 and October 15, 1948, to purchase all
of the stock of National for a price equal to $150,000 multi-
plied by the number of tankers acquired by National.
Copies of the two agreements of January 24, 1948 are
attached hereto as Exhibit F. In both agreements it was
represented to United that the subject-matter of the agree-
ment had been discussed with members of the Commission,
which had no objections to the carrying out of the agree-
ment. The correctness of these representations is indicated
by the testimony given by Admiral Smith, then Chairman
of the Commission, at hearings held on February 13, 1948
before the House Committee on Merchant Marine and Fish-
eries. Attached hereto as Exhibit G is an excerpt of
Admiral Smith's testimony at these hearings.
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Following the January 24, 1948 agreements with
National and its stockholders, arrangements were made
with Mrs. Konow and Wonok Corporation as follows:
(i)
By letter dated February 3, 1948, United agreed
to pay Mrs. Konow $30,000 per year for five years
for consulting and brokerage services in connection
with the operation and chartering of the Antelope
Hills, the Kettleman Hills and the Meacham and
such other tankers as United might acquire.
(ii) By letter dated February 18, 1948, China Trading
agreed to pay Wonok Corporation $50,000 with
respect to each of the three tankers for its services
in securing possession of the tankers, payable one-
third on delivery of each vessel, one-third six
months later and one-third one year later. The
obligation of China Trading under this agreement
was later assumed by United.
(2) Purchase of Kettleman Hills.
On April 29, 1948 the Kettleman Hills was purchased
by National from the Commission for cash. The Kettleman
Hills had been chartered by National to United under a ten
year bareboat charter, as referred to above, and in turn
chartered by United to China Trading under a time charter
party for a period of twelve months, and chartered by the
latter to Chinese Petroleum under a voyage charter party
for eight- consecutive voyages for the carriage of oil from
Persian Gulf ports to Shanghai. By application dated
March 18, 1948 United had requested the approval of the
Commission under Section 9 of the Shipping Act of 1916
for the charters to China Trading and to Chinese Petroleum
Corporation, specifying the rates of charter hire and fur-
nishing copies of the three charter parties concerned. The
approval of the Commission was granted by Order No.
CH-1133, dated April 26, 1948. By Order No. CH-1594,
dated March 29, 1949, the Commission subsequently granted
approval to the extension of the time charter of the Kettle-
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man Hills for thirteen months and the consecutive voyage
charter for six additional voyages.
The purchase of the _Kaltman Hills by National was
financed by loans from Bankers Commercial Corporation
(a New York bank) and United. Bankers Commercial
Corporation loaned National $1,350,000, charging a 10%
premium and 6% interest on the loan. The loan was
secured by a first preferred mortgage on the Kettleman
Hills, by the assignment of the proceeds from the charters
of the vessel, and by the assignment of three letters of
credit, each in the amount of $200,000, issued by the Bank
of China, New York Agency, and confirmed by Irving Trust
Company, which could be drawn against for payment of
charter hire due from Chinese Petroleum. United and
China Trading guaranteed payment by National of the loan.
United loaned National $365,000 secured by a second pre-
ferred mortgage on the Kettleman Hills. Both mortgages
were recorded in the Office of the Collector of Customs at
Wilmington at the time of the delivery of the bill of sale
to National by the Commission.
On June 15, 1948 the Kettleman Hills was transferred
by National to Oceanic, newly organized as a wholly owned
subsidiary of National. It was thought advisable at this
time to separate the ownership of the Meacham and the
Kettleman Hills to permit more flexibility in any future
financing affecting the vessels. The initial officers and
directors of Oceanic were the same as those of National.
Oceanic assumed the first and second mortgages on the
Kettleman Hills. By Order No. 0-3157, dated June 15, 1948,
the Commission approved the surrender of the document
of the Kettleman Hills in connection with this transfer on
condition that the vessel should be redocume-nted and that
all endorsements necessary should be made on the new docu-
ment to preserve the preferred status of the first mortgage
in favor of Bankers Commercial Corporation and the second
mortgage in favor of United.
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(3) Purchase of Meacham.
The purchase of the Meacham by National from the
Commission on May 14, 1948 followed generally the same
pattern as the Kettleman Hills. There was a similar bare-
boat charter to United, a time charter to China Trading
and a consecutive voyage charter to Chinese Petroleum,
the two foreign charters being approved by the Com-
mission by Order No. CH-1143, dated April 28, 1948, and
extensions thereof being approved by the Commission by
Order No. 011-1595, dated March 29, 1949. The Meacham
was financed by a bank loan from Chemical Bank & Trust
Company, a New York bank, in the amount of $1,900,000,
secured by a preferred mortgage on the Meacham.
National, United and China Trading were joint obligors
on the note. The loan was further secured by the assign-
ment to the Chemical Bank of a letter of credit issued by
the Bank of China, New York Agency, dated May 4, 1948
and expiring August 15, 1949, in the amount of $2,700,000,
which could be drawn against for amounts due from Chinese
Petroleum under its charter, and by the pledge by United
of 2,000 shares of preferred stock of Viking. Chemical
Bank granted to the Bank of China a 49% participation
in its loan, reserving to itself, however, all rights with
respect to the administration and handling of the loan, as
follows:
"It is understood in connection with your partici-
pation in this Loan that, although we may from time
to time communicate with you with respect thereto,
we shall be under no obligation to keep you informed
and that you will be satisfied with such action or
inaction and with such degree of diligence and
attention on our part as may, from time to time,
attend our own interests in the situation, including
the recording or filing or non-recording or non-filing
of any of the various loan papers or documents, as
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we may see fit, our only responsibility in connection
with the subject matter of this letter being not to
act in bad faith, and to turn over to you your pro-
portionate share of the net amounts received or
applied by us on account of principal of or interest
on the Loan.
? ? ?
?
We may make other loans, continue or extend any
existing loans, or otherwise extend credit to or deal
with National Tanker Corporation and United
Tankef Corporation and China Trading & Industrial
Development Corporation, or any of them, and may
grant participation in the present loan to others,
all in the same manner and as freely as though no
participation had been granted to you."
A copy of the letter dated May 14, 1948, by which Chemical
Bank granted the 49% participation to the Bank of China,
is attached hereto as Exhibit IL
(4) Purchase of Antelope Hills.
United encountered difficulties in arranging for the
financing of the third vessel, the Antelope Hills, covered
by its agreement dated January 24, 1948 with National.
Trans-World was organized on July 31, 1948 as a wholly
owned subsidiary of National, and on August 17, 1948
American Overseas Tanker Corporation filed an amend-
ment to its application to the Commission requesting that
the Antelope Hills be sold on a mortgage basis to Trans-
World rather than on a cash basis to National. After con-
siderable delays, Trans-World purchased the vessel on
mortgage terms from the Commission on January 12, 1949.
In order to meet the requirements for purchasing a vessel
on mortgage terms from the Commission, Trans-World
raised $815,000 by the sale of its common and preferred
stock to National, the funds being provided by United.
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(5) Exercise of Option.
United's option to purchase the stock of National was
exercisable between September 15 and October 15, 1948.
United was not in a position to exercise the option at the
prescribed time, and negotiated with the stockholders of
National to effect an extension of the option. By agree-
ment with the stockholders dated October 11, 1948, United
elected to exercise its option at such time as title to the
Antelope Hills had been taken by Trans-World, but not
later than January 31, 1949. United agreed to fix the
option price at $450,000, to pay $100,000 immediately, and
to pay the balance in installments, the last installment being
payable January 31, 1949. As security for its payment of
the option price, it pledged all of the stock of Arctic and
assigned the consecutive voyage charter of the New London
which had been made with Standard Oil Company (New
Jersey). George D. Hawthorne and James G. Mackey, as
escrow agents, were instructed to deliver to United the
stock of National at such time as United had made full
payment of the option price. Payment by United was
finally completed and the stock of National acquired in
January, 1949.
(c) Investment in Arctic Tankers, Inc.
1VIathiasen's Tanker Industries, Inc., a Delaware corpo-
ration, controlled by Captain M. A. Mathiasen, had been
allocated one or more tankers by the Commission. In
February, 1948 representatives of United were approached
by Alexis J. Anderson, a ship broker, who, together with
his associate Leon F. Bergere, had been in contact with
Mathiasen. After negotiations, on February 19, 1948
United entered into agreements providing for the financing
by United of the purchase of the New London by Mathia-
sen's Tanker Industries, Inc., the transfer of the New
London to Arctic, a New York corporation which had been
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incorporated on February 6, 1948, and the purchase by
United of the stock of Arctic by payment of $30,600 to
Berger? and $29,400 to Mathiasen. In addition, a brokerage
commission of $40,000 was to be paid by United to Ander-
son. Mathiasen's Tanker Industries, Inc. warranted in the
February 19, 1948 agreement "that the carrying out of this
agreement is consistent with any representations made by
Mathiasen to the Commission". Pursuant to these agree-
ments, United made an initial advance of $202,650 to
Mathiasen's Tanker Industries, Inc. for deposit with the
Commission. On February 20th, a contract for the sale of
the New London was executed by the Commission and
Mathiasen's Tanker Industries, Inc.
Subsequently United encountered difficulties in financing
the New London and requested Mathiasen's Tanker Indus-
tries, Inc. to convert the purchase from one on a cash basis
to one on a mortgage basis. New agreements were entered
into on May 24, 1948, by which Mathiasen's Tanker Indus-
tries, Inc. agreed to request the Commission to sell the New
London directly to Arctic on a mortgage basis. United
agreed to subscribe to 7,750 shares of preferred stock of
Arctic at $100 per share (with $200,000 payable by note)
and 198 shares of common stock at $10 per share (repre-
senting forty-nine per cent. of the common stock), the bal-
ance of 200 shares being held by Mathiasen. Captain
Mathiasen gave United an option to purchase the 200 shares
of stock of Arctic held by him for $29,400. (Bergere had
previously transferred his stock in Arctic to Mathiasen in
consideration of $30,600 paid by United.) The new arrange-
ments were carried out, Arctic taking title to the New
London on July 9, 1948, and United exercising its option to
purchase the balance of the Arctic common stock on July
23, 1948.
On July 9, 1948 Arctic requested the approval of the
Commission, as mortgagee, of a bareboat charter of the
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New London to United for a period of five years at the
rate of s2.40 per dead weight ton per month. This approval
was required under the terms of the preferred mortgage
held by the Commission. By letter dated September 2,
1948, A. J. Williams, Secretary of the Commission, con-
sented to such bareboat charter to "United Tanker Cor-
poration, a citizen of the United States within the mean-
ing of Section 2 of the Shipping Act 1916, as amended."
5.
Financial Difficulties Encountered by
United Tanker Corporation.
(a) Depressed State of Charter Market 1948-1950.
During the summer of 1948 the charter market suffered
a severe decline. The decline is illustrated by the history
of the St. Christopher, one of the vessels owned by Viking.
The initial voyage of the St. Christopher, which commenced
March 20, 1948, was under a four-consecutive voyage char-
ter to a French charterer at USMC rates, plus 225%. The
next charter of the St. Christopher for a voyage commencing
August 31, 1948 was to an Argentine charterer at USMC
rates, less 20%. The initial charter of the Destiny,
acquired by Viking on October 21, 1948, was to the same
charterer at the same low rate.
I had hoped that the charter rate would rise again
in the winter of 19484949, but little improvement occurred,
and in the summer of 1949 the rate declined even fur-
ther. The first voyage undertaken by the Meacham,
after termination of the Chinese Petroleum charter, was
5 This
to a eharte-re-r at VSNIC rates, less 5%.
Niosige -was trom vsian. Galt to sweaen ana
:
\8-141eR":::A-:T::::ct:le:n-
:":Cll
a e0 0 1-0
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was no substantial improvement in the charter market until
the summer of 1950.
As a result of the decline in the charter market in the
summer of 1948, United found itself in constant difficulties
for lack of funds. It had anticipated the early return out
of earnings of a portion of the cash invested in Viking,
but the decline in earnings of the St. Christopher and the
low earnings of the Destiny made this impossible. Also
the imposition of additional restrictions by the Chinese gov-
ernment on acquisition of dollar exchange by Chinese com-
panies made it difficult for United to obtain any help in
the way of additional funds from China Trading. From
the summer of 1948 on, United was forced to rely primarily
upon earnings and upon short-term loans for financial sup-
port (except to the extent that China Trading's profits
under the Chinese Petroleum charters were automatically
converted into advances to United).
(b) Financing of Purchase of National Tanker
Corporation Stock.
United had been fortunate in concluding a tanker voy-
age charter party dated May 5, 1948 with Standard Oil
Company (New Jersey) for eighteen months consecutive
voyages at USMC rates, plus 50%. Upon acquisition by
Arctic of the New London, United chartered the New Lon-
don from Arctic and placed it under sub-charter to Standard
Oil. In October 1948 United pledged this Standard Oil
charter of the New London to the stockholders of National
in order to obtain an extension of time to pay the option
price, amounting to $450,000, on the National stock.
(c) Financing of Antelope Hills.
The consecutive voyage charter to Standard Oil of the
New London was again used by United in January 1949
to aid in the financing of the ..4nfelope Mils. As sot forth
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above, the Antelope Hills was acquired by Trans-World
from the Commission on January 12, 1949, the Commission
taking back a purchase money mortgage on the vessel in
the amount of $1,220,800. In order to qualify for a mort-
gage loan from the Commission, Trans-World had to
show net worth in the amount of $815,000 prior to its
purchase of the vessel. These funds were raised by Trans-
World by the sale of its common and preferred stock to
National, the funds being advanced to National by United.
In turn, United borrowed $500,000 from American Busi-
ness Credit Corporation, a financing company having offices
at 50 Church Street, New York, N. Y. This loan was
made under an agreement dated January 5, 1949, was
repayable in monthly installment of $50,000 and was secured
by the pledge of the Standard Oil consecutive voyage
charter of the New London and by the pledge of all of
the stock of Arctic. In connection with this loan, China
Trading agreed to subordinate the amounts owed it by
United to the loan from American Business Credit
Corporation.
(d) Difficulties in Connection with Charters to Chinese
Petroleum Corporation.
The Meacham and the Kettleman Hills had each been
chartered by National to United under bareboat charter,
by United to China Trading under twelve-months time
charter, and by China Trading to Chinese Petroleum under
consecutive voyage charter. The charters had been con-
cluded prior to the decline in the charter market in the
amnia of 1948 and the voyage charters were at rates
quivalent to USIVIC rates, plus 52%. Upon the strength
e
oans had. been made by Chemical
k 80ta vattieB l
'Bank & V11St 00raparijr ieri the ea case
se of the Meacha,,,,,,, apa
13ankers Commercial CorpoTation In the et the Kettle-
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In the winter of 1948-1949 the representatives of China
Trading in New York became increasingly concerned over
the developments in China and the serious difficulties
encountered by the Nationalist government. There was an
obvious danger that a new administration in China, at a
time of low charter rates, might criticize the high rate of
charter hire being paid by a Chinese government agency
to China Trading, a Chinese corporation, and forget that
the rate had been a very reasonable rate at the time the
charter party was made in the light of the then prevailing
market conditions. If a communist regime came into power
there was the added danger that China Trading itself
might be seized and the charters repudiated. Accordingly,
after discussion, China Trading and United entered into
an agreement to be effective as of January 2, 1949 by which
China Trading assigned its Chinese Petroleum voyage
charters to United. This had the effect of eliminating the
time charter to China Trading and making United a direct
charterer to Chinese Petroleum.
United agreed to pay China Trading for the assign-
ment of the two charters the amount of $870,000, payable
in installments over a period of twelve months. This
amount was estimated at the time to represent about three-
fourths of the gross profits which China Trading would
have made if the rearrangement had not been effected.
United reserved the right to pay China Trading in shares
of its preferred stock at par if its working capital position
did not permit payment in cash. China Trading guaranteed
the payment by Chinese Petroleum under the consecutive
voyage charter parties.
The agreement between United and China Trading
referred to above, was subject to the prior extension, with
Commission approval, of both the time charters to China
Trading and the consecutive voyage charters to Chinese
Petroleum. Application for the approval by tho
COB:Z:5;
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sion of the extension of such charters was made, and by
orders 011-1594 and 0II-1595, dated March 29, 1949, such
approval was granted to the extension of the time charters
for a period of about thirteen months and the sub-charters
to Chinese Petroleum of the Kettleman Hills for six addi-
tional consecutive voyages and of the Meacham for seven
additional consecutive voyages.
Under these new arrangements a number of additional
voyages were made by both the Meacham and the Kettleman
Hills. In the spring and summer of 1949, however, United
was advised that Chinese Petroleum was no longer able to
obtain dollar exchange with which to purchase oil or pay
charter hire as a result of the cutting off of ECA funds
for this purpose by the United States. The Kettleman Hills
had completed its ninth voyage on June 6, 1949 under the
Chinese Petroleum charter and was approaching Ras
Tanura in the Persian Gulf to load for its tenth voyage
when United was advised that no further payments by
Chinese Petroleum could be made. The Meacham completed
its eleventh voyage on August 6, 1949, and was approaching
the Persian Gulf for its next loading, when United was
advised that no further payments by Chinese Petroleum
could be made.
The termination of operations under the Chinese Petro-
leum charters came at a peculiarly unfortunate time because
of the extremely depressed state of the charter market.
United and China Trading were forced to negotiate with
the banks which had financed the two vessels for a reduction
in amortization payments and an extension of time for
repayment. There also followed protracted negotiations
with Chinese Petroleum in an effort to settle the various
claims between United and China Trading and Chinese
Petroleum. It was in connection with this settlement that
National transferred the Meacham to Meacham Corporation
on November 7, 1949 as will be described below.
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(0 Transfer of Meacham to Meacham Corporation and
Settlement of Chinese Petroleum Corporation's Claims.
The default by Chinese Petroleum under the tanker
voyage charter parties on the Kettleman Hills and the
Meacham presented a difficult problem both to United and,
I am informed, to China Trading. The latter had received
advances from Chinese Petroleum, which at this time
remained unpaid, in an amount of over $1,500,000. China
Trading was in default in the payment to Chinese Petroleum
of both principal and interest on its indebtedness. At this
time I am informed that the officers of China Trading had
left Shanghai, RS a result of the Communist successes in
China, and had been forced to abandon the assets of China
Trading inside China. China Trading had a large invest-
ment in United, but had been unable to obtain the return
of the funds invested because United in turn had its funds
tied up in investments in tanker-owning companies. These
companies, because of the depressed charter market, did
not have earnings sufficient to pay dividends. United and
its subsidiary companies were very much in need of addi-
tional cash. At this time the market value of a United
States flag T2 tanker appeared to be about $1,000,000, and
was later to reach even a lower level.
Consideration was given to the possibility of taking
legal action against Chinese Petroleum for breach of
charter. We were reluctant to institute such action, as we
had had extremely profitable relations with Chinese Petro-
leum and were hopeful that at some future time it would
again be in a position to charter vessels from United on
a profitable basis. In addition, I was informed that any
action against Chinese Petroleum might involve consider-
able delays and the assertion of defenses, such as sovereign
immunity and impossibility of performance. I understand
that Chinese Petroleum also took the position that since
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China Trading was itself in default in the repayment of
advances received, Chinese Petroleum was justified in can-
celling the charter parties as against China Trading. In
addition, I was informed that neither Chinese Petroleum
nor China Trading at this time had any substantial U. S.
dollar assets.
It seemed sound business judgment to attempt to settle
the various inter-company claims without resort to liti-
gation and on a basis which would provide some immediate
cash relief for United. The overall settlement worked out
during the summer of 1949 and finally completed on
November 7, 1949, involved the following transactions:
(1) On August 11, 1949, China Trading agreed to an
amendment to the Certificate of Incorporation of United
which cut off one year's accumulated dividends on the
$2,500,000 par value of six per cent. preferred stock held
by it, and subordinated the current dividend on the pre-
ferred stock to the payment of a prior dividend of $170,000
per year on the common stock (substantially all of which
was held by the Foundation).
(2) On August 26, 1949 United requested Chemical Bank
& Trust Company to accept a payment of $50,000 on Sep-
tember 15, 1949, instead of the $80,000 amount due, and to
extend the balance of the loan in the amount of $580,000
over a period of twenty-nine months, with monthly install-
ments of $20,000. Chemical Bank agreed to this extension
on September 27, 1949 after the Bank of China, New York
agency, by instrument dated September 27, 1949, had
guaranteed against any deficiency from the proceeds of
sale of the Meacham in the event of foreclosure of the
mortgage. A copy of the instrument of guaranty is annexed
hereto as Exhibit I.
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(3) In consideration of the payment of a premium of
$14,400, Bankers Commercial Corporation agreed on Octo-
ber 14, 1949 to permit payment of the balance due under
the Kettleman, Hills mortgage, then in the amount of
$230,000, to be made in monthly installments over an
extended period of twenty-four months.
(4) A new company, Meacham Corporation, was organ-
ized in Delaware as a subsidiary of the Foundation. This
corporation issued $1,595,000 principal amount unsecured
promissory notes to obtain two assets, (a) the vessel
Meacham and (b) 11,750 shares of preferred stock of United.
(a) The Meacham, was acquired by issuing
$420,000 unsecured notes to National, acknowledging
a $20,000 indebtedness on open account, and assum-
ing the mortgage on the Meacham then outstanding
in the amount of $560,000. National then transferred
the notes and indebtedness of Meacham to United in
cancellation of $440,000 of its indebtedness to United.
United transferred the $420,000 note of Meacham
Corporation to China Trading in cancellation of (i)
$75,000 open account indebtedness and (ii) 3,450
shares of preferred stock of United.
(b) Meacham Corporation acquired the 11,750
shares of preferred stock of United by issuing its
unsecured note in the amount of $1,175,000 therefor
to China Trading.
China Trading then assigned both notes in the aggregate
amount of $1,595,000 to Chinese Petroleum in cancellation
of its indebtedness.
(5) United then funded $250,000 of its open account
indebtedness to China Trading by delivering its 3% note
payable in five annual installments. The note provided that
if at any time United was not able to pay any annual install-
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ment in cash it had the option to deliver an equivalent par
value of preferred stock in lieu of cash.
(6) Chinese Petroleum and China Trading by letters
dated November 10, 1949 each agreed to advance up to
$40,000 to Meacham Corporation to enable it to meet its
amortization payments to Chemical Bank. Also, Chinese
Petroleum agreed to advance, if required, the further sum
of $70,000 to Meacham Corporation.
Title to the Meacham was transferred to Meacham Cor-
poration on November 7, 1949. The bill of sale was not
recorded in the Office of the Collector of Customs at Wil-
mington at that time, because the Meacham was trading in
foreign waters. I was informed that Chemical Bank &
Trust Company would not give its required consent to the
surrender of the document of the Meacham and the redocu-
mentation of the Meacham in the name of Meacham Corpo-
ration until the vessel should be in a continental United
States port so that an appropriate endorsement could be
made on the new document of the vessel with respect to
the assumption of the Chemical Bank mortgage by Meacham
Corporation. The Meacham did not return to the United
States until it arrived at Newport News for repairs on
November 1, 1951 preliminary to its sale to Chas. Kurz &
Co., Inc.
The bareboat charter of the Meacham which had been
originally made by National to United was replaced on
November 7, 1949 by a new bareboat charter from Meacham
Corporation to United. The new bareboat charter was for
A period of seven years commencing as of September 19,
1949, at a rate of $2.40 per dead weight ton per month, or
the net income from the operation of the vessel over the
entire seven year period, whichever is less.
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The notes of Meacham Corporation in the aggregate
amount of $1,595,000, which had been assigned to Chinese
Petroleum, were surrendered and replaced by one non-
negotiable note to Chinese Petroleum in the amount of
$1,595,000. The note provided that Meacham Corporation
would not, without the consent of the noteholder, dispose
of its assets or engage in any business other than that of
owning, chartering or operating the Meacham, or incur
indebtedness except in connection with such business.
The note of Meacham Corporation bore interest from
September 19, 1949 at the rate of four per cent. for the first
year and three per cent. per annum thereafter. It was
contemplated that this note to Chinese Petroleum would
be paid, after payment in full of the Chemical Bank mort-
gage, out of any available net income of Meacham Corpo-
ration. Before applying its net income to the payment of
any installment due on the note, Meacham Corporation was
entitled to pay any operating expenses, overhead expenses
not in excess of $15,000, taxes and $25,000 per year for
charitable purposes. If the payment of these items left
income insufficient for payment of any installment due on
the note, such installment was automatically postponed.
The note thus permitted extension of payment of install-
ments until the final maturity of the note on February
15, 1957 "and thereafter for two additional years if nec-
essary, and thereafter on mutually agreeable terms, until
the Corporation has accumulated sufficient net income" to
enable it to pay the installments. These provisions for the
extension of the time of payment of the note prevented
Chinese Petroleum from being in a position to exercise
any financial pressure on Meacham Corporation. Attached
hereto as Exhibit J is a copy of an affidavit executed on
November 14, 1951 by C. D. Shiah, Representative of
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Chinese Petroleum, setting forth its position with respect
to the note.
As a result of the transactions described above, United,
while hurt by the cancellation of the Chinese Petroleum
charters at a time of depressed charter rates, was never-
theless able to survive. It obtained a cancellation of
approximately $90,000 of back dividends on its preferred
stock. It obtained a priority for its common stockholder,
the Foundation, of $170,000 per year over the preferred
stock dividends. It cancelled $75,000 of indebtedness to
China Trading and 3,450 shares of its preferred stock. It
funded $250,000 of open account indebtedness to China
Trading by the issuance of an installment note maturing
over six years, with an option on its part to pay any install-
ment by issuing its own preferred stock. The Foundation,
through Meacham Corporation, retained its equity in the
Meacham and the opportunity for profit in the event of a
rise in value of the vessel. China Trading and Chinese Pet-
roleum agreed to contribute an aggregate of $150,000 to sup-
port the Meacham Corporation during the period of a
depressed charter market. While the Meacham Corpora-
tion had issued its unsecured note in the amount of
$1,595,000, it could defer payment of the note until Febru-
ary 15, 1959 and, perhaps, longer, and in the meantime it
was entitled to pay $25,000 per year to the Foundation.
(f) Default Under Antelope Hills Mortgage.
Trans-World purchased the Antelope Hills from the
Commission on January 12, 1949. The vessel required
extensive repairs, the commencement of which were
deferred until some advantageous charter could be con-
cluded. There seemed to be no point in repairing the
Antelope Hills if, upon the repairs being completed, the
vessel would have to be laid up for lack of business. Unfor-
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innately, the charter market continued to deteriorate and
on August 18, 1949 Trans-World defaulted on the first
payment of amortization on the mortgage held by the Com-
mission. Previously, on August 9, 1949, Trans-World had
requested the Commission either to take back the Antelope
Hills or permit it to be sold to a foreign purchaser. The
Commission rejected these alternative requests on August
25, 1949.
As a result of the default on the Antelope Hills I made
a number of proposals to the Commission, seeking a solution
for our difficulties. I had numerous conferences with rep-
resentatives of the Commission, at which the general cor-
porate and financial picture of United and its other
subsidiaries was discussed, as well as the problems of
Trans-World. On September 9, 1949, in response to a
request from Mr. James L. Pimper of the Commission, our
Washington counsel, Messrs. Radnor, Zito & Donoghue,
submitted a statement. as to the stock ownership of Trans-
World, as to United's ownership, through wholly-owned
subsidiaries, of the KettLeman Hills, the Meacham and the
New London, and as to its holdings of 49% of the common
stock and 8,000 shares of preferred stock of Viking. The
statement also referred to the ownership by the Founda-
tion of the common stock of United, and the ownership by
China Trading of 25,000 shares of preferred stock of United.
Repeated proposals were made to transfer the Antelope
Hills to the Commission at an agreed valuation, to transfer
the vessel to the Commission in cancellation of the mort-
gage and to forfeit the deposit previously made, and even
to transfer the vessel to the Commission in cancellation of
the mortgage and to make an additional payment to the
Commission either in cash or by the addition of one or more
mortgage notes to the existing preferred mortgages on the
Destiny and the St. Christopher. All of these offers were
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rejected by the Commission and on June 21, 1950 the
Antelope Hills was libeled in New Orleans in a suit in the
United States District Court for the Eastern District of
Louisiana to foreclose the mortgage held by the Commission.
Following the institution of the libel action I had a number
of conferences with representatives of the Commission, in
which I proposed a two year partial moratorium on pay-
ments due under the Antelope Hills mortgage. This sug-
gestion was based upon the availability of a two year charter
to Anglo-Iranian Oil Company to assure the payment over
the two year period of the postponed indebtedness. This
proposal too was rejected.
Fortunately, the charter market .began to improve in
the late summer of 1950. On August 7, 1950 United was
able to provide funds for the payment to the Commission
of the amount of the principal and interest then due on the
Antelope Hills mortgage. The foreclosure proceedings
instituted by the United States were dismissed by order
dated August 10, 1950 on motion of the Assistant United
States Attorney. On August 17, 1950 United was able to
borrow an additional $160,000 from Bankers Commercial
Corporation by an extension of the existing first preferred
mortgage on the Kettleman Hills. United was then able
to provide funds with which Trans-World paid the second
installment of principal on its mortgage on August 18, 1950,
and arranged for the repair of the Antelope Hills (partly
on credit from the shipyard) and the placing of the Antelope
Hills in operation. The Antelope Hills was time chartered
by Trans-World to United which, in turn, consecutive
voyage chartered the vessel to Gulf Oil Corporation.
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6.
Sale of Vessels.
(a) Kettleman Hills.
The charter market rose rapidly during the early winter
of 1950-1951. Before the winter was over United had made
some single voyage charters at USMC, plus 200%. As the
charter market rose the market price of tankers also
improved. In November and December 1950 the directors
of -United had many discussions as to the advisability of
selling a tanker in order to pay off some of the obligations
of United and strengthen its financial position. After con-
sidering several proposals we finally accepted an offer made
in January 1951 by Colonial Steamship Corporation, a
non-affiliated corporation, for the Kettlenzan Hills. Title
to the Kettleman Hills was transferred on February 21,
1951.
b) Meacham.
In the spring of 1951 we also had numerous discussions
of the advisability of selling the Meacham. Meacham Cor-
poration was indebted to Chinese Petroleum in the amount
of $1,595,000, plus interest. Meacham Corporation owned
the vessel Meacham, subject to a small residual mortgage
to Chemical Bank & Trust Company, and 11,750 shares of
preferred stock of United. We felt that it would be desira-
ble to sell the Meacham at a price which would permit the
discharge of all of the obligations of Meacham Corporation,
and leave it holding the preferred stock of United. If this
could be accomplished the rearrangement in November 1949
would prove to have been most advantageous to the Founda-
tion as it would end up as the owner, through Meacham
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Corporation, of 11,750 shares of preferred stock of United
free of all indebtedness.
Chinese Petroleum had advised us that it was very much
in need of cash and that, to induce Meacham Corporation
to sell the Meacham and prepay its unsecured note, Chinese
Petroleum would accept $1,500,000 in full settlement of the
$1,595,000 face amount of note and approximately $100,000
of accrued interest.
On June 12, 1951 Meacham Corporation entered into
a contract with Chas. Kurz & Co., Inc. to sell the Meacham
for a price of $1,950,000 for delivery before October 20,
1951 (subsequently extended) at a United States Gulf or
Atlantic coast port. The Meacham arrived at Newport
News on November 1, 1951 for drydock and the completion
of any repairs required to be performed before delivery
under the contract. The repairs had just been completed
and the vessel was ready for delivery to Chas. Kurz &
Co., Inc. when the United States libeled the 1Vleacham in the
pending action.
7.
Operation of Vessels.
(a) Management.
The vessels owned by subsidiaries of United have at all
times been under the management and control of experi-
enced United States citizen operators. The Meacham, the
Kettleman Hills and the Antelope Hills have been operated
by Sidling & Jarvis Corporation from acquisition. This
corporation operated tankers for the War Shipping Admin-
istration during World War II and was specifically
approved as operator by the Commission in its capacity
as mortgagee of the Antelope Hills. Prior to United's
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acquisition of control of Viking, that corporation operated
its own vessels with the specific approval of the Commis-
sion as mortgagee. After United acquired control of
Viking in December 1949 it employed Sidling & Jarvis Cor-
poration as the operator of the St. Christopher and the
Destiny. Mathiasen's Tanker Industries, Inc. operated the
New London until November 10, 1949, when it was replaced
by Sidling & Jarvis Corporation. Both operators had been
specifically approved by the Commission in its capacity as
mortgagee of the New London. The hiring of the crew and
the direction of each vessel was, of course, in the hands of
the operator. Mr. Sidling, Vice-President and a director of
United, was also Vice-President of Sidling & Jarvis Cor-
poration until his resignation in January 1951 to devote
his full time to United. He has at all times been in close
touch with the operations of the vessels.
(b) Chartering.
The chartering of the vessels owned by subsidiaries of
United has been effected mostly through Sidling & Jarvis
Corporation and to some extent through other United
States firms of charter brokers. All long-term charters
have been fixed only after discussions among the directors
of United. Single voyage charters have usually been fixed
by Sieling & Jarvis Corporation or other brokers in con-
sultation with one or more representatives of United.
I believe that the chartering of the tankers owned by
subsidiaries of United has at all times been consistent with
the policies of the United States government. The initial
charters of the Meacham and the Kettlemon Hills to China
Trading, and the sub-charters to Chinese Petroleum, were
specifically approved by the Commission. I understand
that during the period of these charters the policy of the
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United States was further indicated by the action of the
Economic Cooperation Administration in reimbursing
Chinese Petroleum under the provisions of the Foreign
Assistance Act of 1948 for charter hire paid by it. I am
informed that out of the total of $4,450,000 of charter
hire on the two vessels paid by Chinese Petroleum approxi-
mately $3,450,000 was reimbursed or paid by the Economic
Cooperation Administration. In addition, the Economic
Cooperation Administration, I am informed, reimbursed
Chinese Petroleum for the purchase of a substantial portion
of the oil carried on our tankers.
During a part of the period covered by this application
the Commission gave general approval, under its General
Order No. 59, as amended, to any charter to a foreign
charterer of less than twelve months. All foreign charters
by United or its subsidiaries not coming within this general
approval have been submitted to the Commission for spe-
cific approval.
United has received criticisms in the press for charters
made in 1949 to Russian governmental agencies for the
carriage of oil products between Roumania and North
China. These charters were made only after we had been
informed that our State Department had no objections.
In judging the decisions which we reached in the summer
of 1949, it is important to recall our reported governmental
policy at the time. It was on August 5, 1949 that the State
Department released its "China White Paper". On Sep-
tember 8, 1949 Roger D. Lapham, Chief of the ECA Mission
to China during the period May 5, 1948 to June 30, 1949,
made the following recommendations in an address before
the Commonwealth Club of California which received
considerable publicity:
"I do not believe that economic blockade is the
o
Tight approach. Such a policy would give not ice t
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the world that we had, on our own initiative, aban-
doned our Chinese friends. It would give Moscow
a free field in which to operate, and to justify the
oft-repeated statement that American imperialism
is selfish and cares nothing for the welfare of the
Chinese people as a whole. For these reasons I am
opposed to an economic blockade.
? ? ? ? ?
"For the present my recommendations are as
follows:
1. Continue American private business with the
Chinese, as far as it may be possible, in such a way
as not to enhance to any dangerous degree the very
limited war potential of the country."
In June 1949 the London brokerage firm of Stevinson,
Hardy & Co., Ltd. advised our brokers, Messrs. Sieling &
Jarvis, that the Russian Oil Bureau wished to charter a
tanker to carry benzine and/or oil from Constanza to
Shanghai, Tsingtao or Taku Bar.. At this time the Kettle-
man Hills was on its way to the Persian Gulf to report for
loading under the Chinese Petroleum charter, and we had
just been informed that Chinese Petroleum was unable to
obtain funds from the Economic Cooperation Administra-
tion or other sources and would not be able to provide
cargo. About 100 T2 tankers were already laid up for lack
of business, including the Destiny and the St. Christopher
owned by Viking. United was facing severe financial diffi-
culties, and the Russian charter seemed to be the only profit-
able business then available. We realized, of course, that to
take the charter might prove embarrassing to China Trading,
the holder of the preferred stock of United, and to Chinese
Petroleum, an agency of the Nationalist government.
On the other hand, I felt that we had an obligation to our
American creditors to attempt to keep our vessels in oper-
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ation. After considerable discussion, we asked Messrs.
Sidling & Jarvis to submit the matter to the State Depart-
ment, and authorized them, if the State Department
approved, to accept the charter for the Kettleman
Hills. By letter dated June 20, 1949 Sieling & Jarvis
advised us that the State Department had indicated the
absence of any objections to the charter and that Sieling
& Jarvis had thereupon concluded the charter. Subse-
quently, United time-chartered the St. Christopher from
Viking for three months to fill one Russian charter and
made two additional charters for the Kettleman Hills. In
April 1950 representatives of United again discussed the
matter with the Department of State which at this time
questioned the advisability of further charters. I there-
upon advised the Department of State by letter dated
April 27, 1950 that we would make no further such char-
ters without further discussion with the State Department.
No further Russian charters were made. Attached hereto
as Eihibit K is a copy of my letter dated April 27, 1950
to the State Department and the attachments therein
referred to.
Attached hereto as Exhibit L is a schedule of all voyages
made by each of the vessels covered by this application.
(c) Crews.
All of the vessels owned by subsidiaries of United were
originally manned by United States citizen crews. After
the Kettleman Hills and the Meacham had been operating
for a year in the Persian Gulf to Shanghai and Formosa
trade the original articles expired and the United States
crews demanded to be repatriated. It was necessary in the
case of the Meacham?, to sign on a Philippine crew before a
United States Consul at Manila on May 14, 1949 and
repatriate the United States crew. The Philippine crew
continued on the vessel until April 1950 when the members
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requested repatriation while the vessel was at Bremer-
haven. Accordingly, the Philippine crew was repatriated
and a German crew was signed on before the United States
Consul. This crew continued until January 2, 1951 when a
United States crew was flown over to Capetown, South
Africa to replace the German crew.
A similar situation obtained in the ease of the Kettlenian
Hills where the original United States crew, after the
year's articles had expired, had to be repatriated from
Singapore and replaced by a Singapore Chinese crew,
which in turn was replaced by a German crew. On December
19, 1951 a United States crew was flown over to Sweden to
replace the German crew.
The Destiny was laid up in Italy in May of 1949 by
Viking for lack of business. After United acquired control
of Viking the vessel was placed in operation in January
1950 with an Italian crew. On January 2, 1951 the Italian
crew was replaced by a United States citizen crew while
the vessel was at Durban, South Africa.
The United States citizen crew of the St. Christopher
had been signed on for three months (the duration of the
United time charter) when the St. Christopher was taken
out of lay-up in New York in July 1949. At that time
Viking intended to lay-up the vessel in Italy on conclusion
of the time charter. The vessel encountered unexpected
delays and on October 7, 1949, when the articles termi-
nated, the vessel was approaching Singapore for bunkers
on its way to the Persian Gulf. The crew of the vessel
demanded to be paid off and repatriated at Singapore. A
Chinese crew was signed on in Singapore to take the vessel
to the Persian Gulf for loading of a cargo for discharge at
Italy. On November 9, 1949 the vessel arrived at Bari,
Italy and the Chinese crew was repatriated. In the mean-
time, Viking changed its plans for lay-up when it found it
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could fix the St. Christopher for three consecutive voyages
to an Argentine charterer. It accordingly signed on an
Italian crew in Italy in November 1949. The vessel oper-
ated with foreign crew until January 2, 1951 when the entire
crew was replaced with a United States crew at Le Havre.
If United had been in a better financial condition it
might have been able to fly over United States crews to
replace the original United States crews when their articles
expired and they demanded repatriation. Unfortunately,
this coincided with the depressed state of the charter
market during 1949 and 1950, and United could not afford
to do so. Sieling & Jarvis Corporation advised me that
the State Department had confirmed that only the master
of a United States vessel was required to be a United States
citizen when articles were signed in a foreign port. We
at all times had a United States citizen master and super-
vising chief engineer on board each of thefour vessels
affected. The alternative at the time to the use of foreign
crews would have been to lay-up the vessels, as at this time
United States flag tankers were unable to meet operating
expenses with United States crews at the prevailing low
charter rates. I regarded the use of foreign crews as a
necessary, but temporary, expedient to keep the vessels in
operation and to keep United solvent during an extremely
difficult period. As soon as the charter market improved
in the fall of 1950 I began to make plans for the replacement
of the foreign crews with United States citizen crews and
this was done in the case of each of the four vessels in
December 1950 or early January 1951.
The New London and the Antelope Hills have always
operated with United States citizen crews.
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United States Citizen Control of Meacham Corporation,
United Tanker Corporation, and its Subsidiaries.
I have been the President and a director of United and
of Meacham Corporation from their respective commence-
ments of operations. I am one of the original mem-
bers of the Foundation. Prior to the organization of the
Foundation, I was one of the controlling stockholders of
United. Prior to the organization of United I was informed
that China Trading was willing to provide the necessary
equity money for United so that it might receive a return
upon its investment and a profit from the sub-chartering
of vessels to Chinese Petroleum, but that it was not experi-
enced in the shipping business and was content to remain
in the role of an investor, leaving to more experienced
United States shipping people the management and control
of United and any vessels which United might acquire.
There was no suggestion of any kind that I or the other
directors of United would be expected to act as a "front"
for foreign shipping interests. Neither Mr. Tode nor Mr.
Sieling nor I would have been interested in any such
arrangement.
When the Foundation was organized in June 1949 I was
willing to sell my stock, which had a potential but unde-
terminable value, for a profit of $10,000 so that the Founda-
tion might own 100% of the common stock equity in United,
and I was proud to become a member of the Foundation.
The establishment of the Foundation did not alter the
United States citizen control of United.
I have felt it to be my duty as President and a director
of United, and subsequently of its subsidiaries and of
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Meacham Corporation, to see that its affairs were man-
aged in the best interests of the respective companies and
their stockholder, the Foundation, consistent with the pol-
icies of the United States. I believe that, after going
through some very difficult financial times, we have suc-
ceeded in building up an equity of several million dollars
for the Foundation and have acted in conformity with the
policy and the laws of the United States.
I have been grateful for the financial assistance of China
Trading and, through China Trading, of Chinese Petroleum,
an agency of the Nationalist government of China. As
set forth in United's original application to the Commis-
sion in December, 1947, we expected the necessary equity
funds for the acquisition of tankers to be provided by China
Trading or Chinese Petroleum. Representatives of China
Trading were active in arranging the initial financing of
the Kettleman Hills and the Meacham, which depended
upon the charters to China Trading and to Chinese Petro-
leum. United has employed several able Chinese engineers,
two of whom had formerly been associated with China
Trading. I have admired the industry and intelligence
which they have displayed in learning the shipping busi-
ness, and have used their services to the greatest extent
possible. I understand that it does not infringe the law
for a United States shipping company to employ Chinese
personnel, and I cannot believe that it is in any respect
inconsistent with the policy of the United States for a
shipping company to employ and train young Chinese
engineers who are graduates of American universities and
have made this country their home. I am satisfied, however,
that all matters of policy affecting United and its subsid-
iaries or Meacham Corporation have been determined by
their respective boards of directors, and that there has
been no understanding, expressed or implied, by which
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control of these companies has been conferred upon or
permitted to be exercised by any person not a citizen of the
United States.
I swear that the foregoing statements are true to the
best of my knowledge, information and belief. This appli-
cation is filed without prejudice to the position of the
respective companies that no forfeitures have been incurred.
Since no claims have been asserted against any vessels
other than the Meacham, the Department of Justice is
respectfully requested to refer this application to any other
departments of the Government which should be appro-
priately consulted in connection with the mitigation or
remission of any forfeitures or penalties under the ship 'ng
45t.
laws.
Sworn to before me this
Atir-klay of February, 1952.
HAROLD C. LENFEST
Nor ublic.
e.,
L.
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STATE OF NEW YORK, }
SS. :
COUNTY OF NEW YORK,
The undersigned, ARTHUR M. TODE and WALTER H.
SIELING, being duly sworn depose and say that they have
read the foregoing application executed by Harold C.
Lenfest and that the statements therein are true to the best
of their knowledge, information and belief.
Sworn to before me this }
day of February, 1952.
'ARRAHAM KAWNSKY
tronny PUBLTC. TA.1"U OF NEW YOHK
Qual. ' Plad
31. Y., Co. Ciavlz.? A ki Y. :-`0.ftegistiar2
IVLaicla 3ll.
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EXHIBIT A.
Affidavit of Houston H. Wasson,
STATE OF NEW YORK, }
.
88 :
COUNTY OF NEW YORK,
HOUSTON H. WASSON, being duly swona, deposes and
says:
1. I am the Secretary and Treasurer of The China
International Foundation, Inc., a non-prat membership
corporation, incorporated under the laws of the State of
Delaware on June 4, 1948. Attached hereto as Exhibit A-1
is a true and correct copy of the certificate of incorporation
of the Foundation.
2. The Members, Trustees and President of the Foun-
dation have been at all times since its organization, and
are now, citizens of the United States. The present
Members, Trustees and Officers of the Foundation are as
follows:
Magnus Gregersen Trustee and Member
Edward H. Hume Trustee and Member
Harold C. Lenfest Member
Newbold Morris President, Trustee and Member
Arthur M. Tode Trustee
Houston H. Wasson Secretary, Treasurer and Member
Attached hereto as Exhibit A-2 are copies of the
biographical data appearing in "Who's Who in America"
1950-1951 with respect to Dr. Gregersen, Dr. Hume and
Mr. Morris,
3. The initial assets of the Foundation, which were
received as gifts from China Trading & Industrial Develop-
ment Corporation, a Chinese corporation, consisted in 10
shares of Class A Stock of United Tanker Corporation,
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$3,500 in cash, and the purchase price for 74,960 shares of
Class B Stock of United Tanker Corporation (amounting
to $17,496). Attached hereto as Exhibit A-3 is a copy of
a letter dated November 30, 1949 addressed to the Foun-
dation by China Trading & Industrial Development Cor-
poration confirming statements previously made to the
effect that such donations were intended as absolute gifts
and not as gifts in trust. The Foundation has subsequently
received gifts and dividends from Meacham Corporation
and United Tanker Corporation amounting to an aggre-
gate of about $280,000.
4. The principal assets of the Foundation at present
are as follows:
All of the common stock of United Tanker Corporation.
(The Class A Stock and the Class B Stock of
United Tanker Corporation were reclassified
into common stock.)
All of the capital stock of Meacham Corporation.
Approximately $160,000 in cash.
$50,000 in United States bonds.
5. Since its organization the Foundation has made the
following expenditures for charitable purposes:
(a) The Foundation has expended $15,800, and
committed an additional $6,650, to support fellowships
for Chinese graduate students in American univer-
sities conducting research in the fields of nutrition and
insect pest control. Five fellowships were awarded for
the academic year 1951-1952, by a committee consisting
of Dr. Hume, Dr. Gregersen and Mr. Morris, and Dr.
Chih Meng, Director of China Institute in America.
The fellowships are administered by China Institute
in America, which is an organization incorporated
under the University of the State of New York, of
which Henry R. Luce is Chairman and Edwin N. Clark,
President.
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(b) The Foundation has expended $8,250 to support
medical fellowships for the academic year 1951-1952
for Chinese in the public health field recommended to
receive further training at American medical schools.
The awards have been based on recommendations by
the American Bureau for Medical Aid to China, which
administers the fellowships.
(c) The Foundation has expended $12,000, and is
committed to expend an additional $6,000, to support
fifteen fellowships for American students majoring
in Chinese studies during the academic year 1951-1952.
The awards were based upon the recommendations of
a committee consisting of Dr. flu Shih, Dr. Chih Meng
and Mr. IL C. Wong.
(d) The Foundation has expended approximately
$13,800 to finance a vocational survey, conducted by
China Institute in America, of the approximately 5,000
Chinese students, professors, former officials and pro-
fessional men now in the United States.
(e) The Foundation has expended $8,646 to defray
a part of the expenses of the teacher training courses
for the academic year 1951-1952 for New York City
school teachers, conducted under the joint auspices of
the Board of Education of New York City and China
Institute in America.
(f) The Foundation has expended approximately
$3,500 to obtain and ship to Formosa back numbers of
Western periodicals as a donation to National Taiwan
University, to fill the gaps in its periodical library.
The New York Public Library donated spare copies
from its files of a great many periodicals for this pur-
pose, and also approximately 5,000 books. The cost of
the handling and shipping of the periodicals and books
was paid by the Foundation, which also obtained from
various publishers back numbers of periodicals of which
extra copies were not available at the New York Public
Library.
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(g) The Foundation donated $5,000 to China Insti-
tute in America to defray a part of its ordinary
expenses, and donated $1,000 to The Christian Medical
Council for Overseas Work, a Representative Com-
mitee of the Foreign Mission Conference of North
America.
Sworn to before me this
/j4day February, 1952.
,74-c
Houston H. Wasson
/Not ry Public.
'ABRAHAM KAMINSKY
VOTARY PUBLIC, STATE OF NM, 701121
No. 24-7146800
Qua in Kings Co. ,Certs. filed wits
T. Yo Co. Clerk. Eings,andN. Y. Co,Regislelt
Tem erpires Mau:1230.103Z
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EXHIBIT A-1.
CERTIFICATE OF INCORPORATION
of
THE CHINA INTERNATIONAL FOUNDATION, INC.
FIRST: The name of the Corporation is
THE CHINA INTERNATIONAL FOUNDATION, INC.
SECOND: It's principal office in the State of Delaware is
to be located at 317-325 South State Street, in the City of
Dover, County of Kent, Delaware. The name and address
of its resident agent is The Prentice-Hall Corporation Sys-
tem, Inc., 317-325 South State Street, Dover, Delaware.
THIRD: The objects and purposes of the Corporation are:
To promote, foster, encourage and further non-profit,
non-sectarian and non-political educational, medical, phil-
anthropic, humanitarian, scientific and literary enterprises
of all kinds in the State of Delaware, the Republic of China,
and in any other part of the world, including, but not being
limited to:
(a) making grants-in-aid to schools, colleges, uni-
versities, and other similar institutions, formed and to
be formed, to be used for educational purposes, designed
to make general education available and to provide
knowledge and scientific training to the peoples of the
Republic of China in order to improve their condition
both culturally and economically;
(b) creating and maintaining scholarships for the
further education of qualified Chinese candidates and
causing qualified Chinese candidates to be brought to
the United States or any other part of the world for
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additional educational training of any type, character
or description;
(c) establishing and maintaining hospitals and pub-
lic health centers and improving the conditions of
health, sanitation and hygiene of the peoples of the
Republic of China and/or any other part of the world;
(d) encouraging, promoting and fostering medical
and scientific research and development and making the
results of such research and development available to
the peoples of the Republic of China and/or any other
part of the world;
(e) creating and maintaining publications and
adopting other methods for the diffusion and communi-
cation of educational material and scientific, medical
and technical knowledge among the peoples of the
Republic of China and/or any other part of the world.
In furtherance and not in limitation of the general powers
conferred by the laws of the State of Delaware, and of the
objects and purposes herein set forth, it is expressly pro-
vided that the Corporation shall also have the following
powers:
To receive, maintain and administer, directly or indi-
rectly, a fund or funds, and to apply the income and prin-
cipal thereof to the promotion of the purposes herein set
forth.
To found or create new institutions, foundations, trusts
or other appropriate instrumentalities for purposes within
the scope of the Corporation, either under the management
of the Corporation, or in conjunction, collaboration or coop-
eration with other corporations, individuals, memorials,
trusts, foundations, or other entities organized for similar
purposes, and to convey the property and assets of the Cor-
poration, or such part thereof as the Trustees deem desir-
able, to such institutions, foundations, trusts, or other
instrumentalities organized for similar purposes.
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To acquire, receive, purchase, hold, invest and reinvest
in, use and enjoy, and to take by gift, grant, devise or
bequest, real estate, personal property and mixed property
of any kind or description, whether within or without the
State of Delaware, and rights in action, and to grant, bar-
gain and sell, give, exchange, demise, let, lease, sublease,
charter, assign, mortgage, pledge, transfer, and set over the
same at pleasure, and generally to deal therewith as fully
and amply as individual persons can do with their own
property.
In the event that the Corporation shall receive by gift,
grant, devise or bequest any property or funds for which
the donor or testator shall prescribe in his will or instru-
ment of gift a particular purpose within the objects and
purposes above specified, the principal and income thereof
shall be used and applied to such designated purpose.
To borrow money of any person, firm or corporation
and to issue notes or obligations of the Corporation from
time to time, for any of the objects or purposes of the Cor-
poration, and to secure the same by lawful means.
To have one or more offices and to carry on all or any
of its operations and business in any of the states, districts,
territories or colonies of the United States, and in any and
all foreign countries, subject to the laws of such state, dis-
trict, territory, colony or country.
In general to carry on any other lawful operations
within the scope of the purposes hereinbefore set forth,
and to have and to exercise all the powers conferred by
the Laws of Delaware upon corporations formed under the
Act hereinafter referred to, and to do any or all of the
things hereinbefore set forth to the same extent as natural
persons might or could do, provided that no part of the
activities of the Corporation shall be the carrying on of
propaganda, or otherwise attempting to influence legisla-
tion.
FOURTH: The Corporation is not for profit and shall
have no capital stock. The conditions of membership of
the Corporation shall be stated in the By-Laws.
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FIFTH: The names and places of residence of the incor-
porators are as follows:
Name Residence
Winslow M. Lovejoy North Branch, New Jersey.
Houston H. Wasson 59 Greenacres Avenue,
Scarsdale, New York.
Winfield A. Huppuch, II 260 High Street,
Peekskill, New York.
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: The private property of the incorporators,
members and trustees shall not be subject to the payment
of corporate debts.
EIGHTH: The activities and affairs of the Corporation
shall be managed by a Board of Trustees. The number of
trustees which shall constitute the whole board shall be
such as from time to time shall be fixed by, or in the manner
provided in, the By-Laws, but in no case shall the number
be less than three. No person shall be eligible for election
as a trustee who is not a citizen of the United States. The
Board of Trustees originally shall be elected by the incor-
porators and thereafter shall be elected by the members
at the annual meeting of the Corporation to be held on
such date as the By-Laws may provide, and shall hold office
until their respective successors are elected and qualified.
The By-Laws shall specify the number of trustees necessary
to constitute a quorum. The Board of Trustees may, by
resolution or resolutions, passed by a majority of the
whole board, designate one or more committees which,
to the extent provided in said resolution or resolutions or
in the By-Laws of the Corporation, shall have and may
exercise the powers of the Board of Trustees in the man-
agement of the activities and affairs of the Corporation
and may have power to authorize the seal of the Corpora-
tion to be affixed to all papers which may require it; and
such committee or committees shall have such name or
names as may be stated in the By-Laws of the Corporation
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or as may be determined from time to time by resolutions
adopted by the Board of Trustees. The Corporation may
elect such officers as the By-Laws may specify, who shall,
subject to the provisions of the statute, have such titles
and exercise such duties as the By-Laws may provide.
The Corporation may in its By-Laws confer powers
upon its Board of Trustees in addition to the foregoing,
and in addition to the powers and authorities expressly
conferred upon them by statute, provided that the Board
of Trustees shall not exercise any power or authority con-
ferred herein or by statute exclusively upon the members.
No part of the net income of the Corporation shall
inure to the benefit of any member, officer, trustee or em-
ployee of the Corporation; nor shall any such member,
officer, trustee or employee receive or be lawfully entitled
to receive any pecuniary profit from the operations thereof,
except reasonable compensation for services rendered in
carrying out one or more of its purposes. However, the
By-Laws may provide for reasonable compensation to
officers and trustees for attendance at meetings.
NINTH: Meetings of members may be held without the
State of Delaware, if the By-Laws so provide. The books
of the Corporation may be kept (subject to any provision
contained in the statutes) outside of the State of Delaware
at such place or places as may be from time to time desig-
nated by the Board of Trustees.
TENTH: The Corporation reserves the right to amend,
alter, change or repeal any provision contained in this Cer-
tificate of Incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred upon mem-
bers herein are granted subject to this reservation.
WE, THE UNDERSIGNED, being each of the incorporators
hereinbefore named for the purpose of forming a corpora-
tion not for profit and without capital stock, to do business
and carry on its operations both within and without the
State of Delaware, and in pursuance to the General Corpo-
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ration Law of the State of Delaware, being Chapter 65 of
the Revised Code of Delaware, and the acts amendatory
thereof and supplemental thereto, do make and file this
Certificate, hereby declaring and certifying that the facts
herein stated are true and accordingly have hereunto set
our hands and seals the 3rd day of June, 1948.
S/ WINSLOW M. LOVEJOY
(8/ HOUSTON H. WASSON
(L.S.)
(L.S.)
S/ WINFIELD A. HUPPUCH 2D (L.S.)
Sworn to before me this
3rd day of June, 1948.
S/ GLADYS R. NUTTING.
STATE OF NEW YORK, '}
COUNTY OF NEW YORK, ss.:
BE IT REMEMBERED that on this 3rd day of June, A. D.
1948, personally came before me, a notary public for the
State of New York, Winslow M. Lovejoy, Houston H. Was-
son and Winfield A. Huppuch, 2nd, all of the parties to the
foregoing Certificate of Incorporation, known to me per-
sonally to be such, and severally acknowledged the said Cer-
tificate to be the act and deed of the signers respectively and
that the facts therein stated are truly set forth.
Given under my hand and seal of office the day and
year aforesaid.
GLADYS R. NUTTING.
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EXHIBIT A-2.
WHO'S WHO IN AMERICA
1950-1951
GREGERSEN, Magnus Ingstrup, prof. of physiology; b.
Kimballton, Ia., Jan. 27, 1903; s. Rev. Jens Moller and Sofie
(Madsen) G.; A. B., Stanford U., 1923, A. M., 1924; student
Mass. Inst. Tech., 1925-26; Ph. D., Harvard, 1930; m.
Charlotte Kennedy, May 30, 1931; children?Kirsten, Sona,
Carlotta. Austin teaching fellow in physiology, Harvard
Med. Sch., 1925-27; instr. in physiology, 1927-35; prof. of
physiology, U. of Md. Med. Sch., 1935-37; prof. of physiol-
ogy and exec. officer of dept., Coll. of Physicians and Sur-
geons, Columbia, since 1937; consultant in physiology,
Presbyn. Hosp ; president, Am. Bur. Medical Aid to China,
1944; Dalton prof. physiology, 1945. Mem. subcom. on
Shock, Div. MaL Sciences of the Nat. Research Council.
Fellow N. Y. Acad. of Sciences, 1941; asso. fellow New
York Acad. Med., 1946; mem. Am. Physiological Society,
A. A. A. S., Soc. Exptl. Biology and Medicine, Harvey Soc.,
Phi Beta Kappa. Clubs: Hamilton Street (Baltimore),
Wilton Riding. contbr. to Macleod's Physiology in Modern
Medicine, 1938 and 1941, Contbr. to Am. Jour. Physiology.
Home: 25 Claremont Av. Office: College of Physicians and
Surgeons, New York, N. Y.
HUME, Edward Hicks, educator; b. of American parents,
Ahmednagar, India, May 13, 1876; s. Edward Sackett and
Charlotte Elizabeth (Chandler) H.; B. A., Yale, 1897, hon.
M. A., 1912; M. D., Johns Hopkins, 1901; grad. work, U. of
Liverpool, 1901-02; LL. D., Jefferson Med. Coll., 1923, U.
of Hongkong, 1925; m. Lotta Carswell, Sept. 24, 1903;
children?Theodore Carswell (dec.) Charlotte Elizabeth
Margery (dec.), Edward Welch (dec.), Kathrina Joy.
Acting asst. surgeon U. S. P. H. S., Bombay, India, 1903-
05; sr. physician Yale Hosp., Changsha, China, 1906-23;
dean Hunan-Yale Med. College, 1914-27, prof. medicine,
1916-23, clin. prof. medicine, 1923-27; pres. Colleges of Yale-
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in-China, 1923-27; exec. v. p. and trustee N. Y. Post Grad.
Med. Sch. and Hosp., 1928-33, dir., 1931-33. Founder and
organizer Hosp. and Med. Coll. of Yale-in-China, Changsha.
Chmn. Council Med. Edn. of China Med. Assn. 5 Yrs., asst.
editor China Med. Jour. 9 yrs.; trustee Yale-in-China Assn.;
trustee Cheeloo U., Lingnan U., Hua Chung College.
Lecturer on Chinese medical history Johns Hopkins U.
Spl. mem. Nat. Health Adminstrn. of China; special mem.
Council on Med. Missions, China; sec. emeritus Christian
med. council for Overseas Work; mem. program corn. United
China Relief; mem. Bd. Dir. American Bureau for Medical
Aid to China, Assoc. Bds. for Christian Colleges in China;
mem. Bd. Mgrs. Am. Bible Soc. Fellow N. Y. Acad. Medi-
cine; mem. Am. Oriental Soc., A. M. A., Chinese Med. Assn.,
Am. Soc. Tropical Medicine, N. Y. Soc. Tropical Medicine,
Am. Assn. of the History of Medicine, N. Y. Soc. for Medical
History, N. China Br. Royal Asiatic Soc., Phi Beta Kappa,
Psi Upsilon, Sigma Xi. Decorated by Chinese Govt. Order
of Flourishing Grain, 3d class, 1926. Order of The Blue
Jade 1941. Presbyterian. Clubs: Quill, Century (New
York) ; Elihu (Yale). Author: The Chinese Way in Medi-
cine 1940. Doctors East, Doctors West, 1946. Home: 464
Riverside Dr., New York 27, N. Y.
MORRIS, Newbold, lawyer; b. New York, N. Y., Feb. 2,
1902; s. Newbold and Helen Schermerhorn (Kingsland) M.;
grad. Groton Sch., 1921; B. A., Yale U., 1925; LL. B., 1928;
m. Margaret Conley Thaw, Sept. 1925 (divorced) ; children
?Peter, Newbold; m. 2d, Constance Hand Jordan, 1942;
children?Lewis Hand, Frances Learned. Fellow, Bran-
ford College, Yale University; practice of law associated
with Morris & McVeigh, N. Y. City, 1929-33; asst. corp.
counsel and mem. Bd. of Aldermen, City of N. Y. 1934-37;
pres. Council of City of N. Y., 1938-46; now mem. law firm
Post, Morris & Lovejoy. New York City rep. regional office
Civilian Defense; chmn. N. Y. City of War Council; N. Y.
City Police Athletic League; dir. Met. Defense Transport
Com.; ex-officio N. Y. Pub. Library, Museum City of N. Y.
Trustee Hampton Institute (Hampton, Va.), Spence Sch.,
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Buckley Sch., Home for Incurables (Bronx, N. Y.) Memorial
Hosp. for Treatment of Cancer (N. Y. City) ; pres. &
Children's Welfare Fedn., N. Y. City; pres. Henry Street
Settlement, New York City Visiting Nurses Assn. Youth-
builders, Inc. Recipient award of merit, nat. assn. Com-
posers and Conductors, 1943-44. Official representative
New York City W. P. A. Music Project; ehmn. board direc-
tors N. Y. City Centre of Music and Drama; chmn. Presi-
dent's Emergency Famine Com., N. Y. City, 1946-47; mem.
N. Y. City Planning Comm. Trustees Soc. for Relief of
Destitute Blind, World Trade Foundn., Inc. Hon. pres. Nat.
St. George Assn. of Govt. Employees, Bd. dirs. N. Y.
Tuberculosis and Health Assn., Inc. mem. Alpha Delta Phi,
Phi Delta Phi, Scroll and Key. Decorated by General
deGualle with the Order of Officier, French Legion of
Honor, August 1945. Republican. Episcopalian (vestry-
man Trinity Church, Lenox, Mass.) Mason, Elk, K. P.
Clubs: Nat. Golf Links of America (Southampton, L. I. ) ;
Yale, City, National Republican (N. Y. City). Home: 340
East 72d St. Office: 52 Wall St., New York, N. Y.
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EXHIBIT A-3.
(Letterhead of China Trading & Industrial
Development Corporation)
November 30, 1949
The China International Foundation, Inc.,
317-325 South State Street,
Dover, Delaware.
Dear Sirs:
You have requested us to confirm in writing the oral
statements made to your representatives at the times of
our donation to you of certain cash and securities.
We have from time to time contributed to you ten shares
of Class A Stock of United Tanker Corporation, a Dela-
ware corporation, and $3,500.00 in cash. We have also
paid the consideration for shares of Class B Stock of
United Tanker Corporation issued to you. These donations
were made for the purpose of assisting in the creation of
a fund to be applied to the purposes enumerated in your
certificate of incorporation or any amendment thereto. All
of our donations have been intended as absolute gifts and
not as gifts in trust, and in no event are such donations
or their proceeds to revert to China Trading & Industrial
Development Corporation, its successors or assigns.
We understand that in the event of the dissolution of
your Foundation, your Trustees would file a bill for instruc-
tions with the appropriate court so that the funds repre-
sented by or resulting from our donations would be devoted
to the objects most nearly akin to the general charitable
purposes expressed in your certificate of incorporation.
Very truly yours,
CHINA TRADING & INDUSTRIAL
DEVELOPMENT CORPORATION
C. Y. CHEN
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EXHIBIT B.
THE NATIONAL RESOURCES COMMISSION OF CHINA
OFFICE IN U. S. A.
Ref. No. 05925
111 Broadway
December 9, 1947 New York 6, N. Y.
Rector 2-7893
China Trading & Industrial Development Corporation
52 Wall Street
New York 5, N. Y.
Dear Sirs:
In answer to your inquiry as to the current require-
ments of China for oil of all types, we wish to advise you
as follows:
In order to enable China to meet its minimum industrial
and war requirements, it is necessary for China to make
arrangements to obtain approximately 1,000,000 tons of oil
per year. At present China has contracts from sources in
the Arabian Gulf for approximately 500,000 tons of oil per
year. However, China has been able to obtain only one
3,000 ton tanker to transport this oil from the Arabian
Gulf to Chinese ports. China has also made every effort
to obtain approximately 500,000 tons of oil in the United
States, but, so far, as a result of the short supply of oil and
the oil tanker shortage in the United States, it has been
unable to obtain any assured source of supply.
It is in view of this extremely urgent situation that the
National Resources Commission is anxious to cooperate
with you in every way to facilitate your acquisition from
the United States Maritime Commission of tankers which
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we understand you will make available to us on terms which
we have discussed with you for the transport of oil from
the Arabian Gulf to Chinese ports.
Very truly yours,
NATIONAL RESOURCES COMMISSION OF CHINA
AV C. D. Shiah
C. D. Shiah, Chief
Technical Department
CDS aml
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EXHIBIT C.
APPLICATION TO PURCHASE
War-built Vessels
Filed by
UNITED TANKER CORPORATION
a citizen of United States of America
The undersigned hereby offers to purchase the war-built
vessels hereinafter described (herein called the "war-
built vessels") at the statutory sales price, in accordance
with the provisions of the Merchant Ship Sales Act of 1946,
Public Law 321, 79th Congress, 2nd Session, approved
March 8, 1946 (herein called the "Act"), and the rules and
regulations prescribed by the -United States Maritime Com-
mission (herein called the "Commission"), sections 299.1
to 299.91, inclusive, of General Order 60, published in the
Federal Register (herein called the "regulations"), which
the applicant agrees shall be binding in all transactions in
connection with this application. Applicant also agrees
that any amendment or modification of the rules and regu-
lations shall be binding in all transactions approved by the
Commission after the date of publication of such amend-
ment or modification in the Federal Register.
In order to induce the Commission to act favorably on
this application, the applicant submits in support thereof
the following information:
A. As to the applicant: Its citizenship and affiliations.
1. Exact name.
UNITED TANKER CORPORATION.
2. Form or type of organization.
Corporation.
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31 State or other sovereign power under the laws of
which organized.
Delaware.
4. Address of principal executive offices and of impor-
tant branch offices, if any.
317-325 South State Street, Dover, Delaware.
5. A brief description of (a) the shipping business of
the applicant; and (b). any other business activities of the
applicant during the preceding eight years. If within such
period the applicant has acquired the business of another
person or has been reorganized, there should be included a
brief description of such acquisition or reorganization.
Applicant was incorporated in December, 1947, and
has engaged in no business activities except for the filing
of this application. The President and the directors of
applicant are United States citizens who have had long
experience in the shipping business and allied fields, as set
forth in answer to item 9. A majority of the stock of appli-
cant is, and will at all times be, held by United. States citi-
zens. Substantially all of the capital of the applicant will
be contributed by China Trading & Industrial Development
Corporation, a Chinese corporation engaged in the export
import business as set forth in answer to item 6. It is the
intention of the applicant, if this application is granted,
to charter the tankers obtained to the National Resources
Commission of the Chinese Government or one of its con-
trolled corporations to carry oil from Persian Gulf ports
to Shanghai and other Chinese ports, and arrangements
have been made with the National Resources Commission
to this effect.
6. A list of (a) all subsidiaries, (b) parent company,
and. (c) all other affiliated interests of the applicant,
together with an indication of the nature and extent of the
business transacted for the past eight years by each. This
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information may be furnished in the form of a chart, indi-
cating clearly the relationships between the persons named,
and the nature and extent of control.
Applicant has no subsidiaries. All of the Class A
Stock of the applicant is held by China Trading & Industrial
Development Corporation which will provide substantially
all of the capital of the corporation.
China Trading & Industrial Development Corpora-
tion is a limited liability company incorporated in China
with its head office at 131 Museum Road, Shanghai, China,
and with branch offices in New York, London, Bombay and
Canton. It was organized in 1944, and has capital of
$1,000,000,000 Chinese currency (pre-war value). It is
engaged generally in exporting and importing oil products,
steel products, industrial chemicals, and other commodities
and raw materials. It acts as the agent for the Paragon Oil
Company in shipping oil to China. During 1946 the total
volume of business of China Trading & Industrial Develop-
ment Corporation amounted to approximately $8,000,000
(U. S. currency). China Trading & Industrial Development
Corporation has a subsidiary, I:lung-Shin Dyestuff & Chem-
ical Company which owns and operates a dye factory in
China.
China Trading & Industrial Development Corpora-
tion is affiliated with Chung-Yuan Steamship Company of
China, which is one of the leading private Chinese steam-
ship companies with a capital of approximately $1,200,000
(U. S. currency), and now operating five steamships.
China Trading & Industrial Development Corpora-
tion is also affiliated with the Chung-Yuan Paper Manufac-
tory in China, which has capital of approximately $3,000,000
(U. S. currency) and during the last eight years has had
gross revenues aggregating approximately $40,000,000
(U. S. currency).
7. The following information with respect to each officer
and director of the applicant:
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Name and Address
Harold C. Lenfest,
30 Church Street,
New York, N. Y.
Walter H. Sidling,
74 Trinity Place,
New York, N. Y.
Arthur M. Tode,
17 Battery Place,
New York, N. Y.
Chung-Ching Wei,
52 Wall Street,
New York, N. Y.
75
Capital
Office Nationality shares owned
President and Director United States 5 shares
citizen Class B
stock
Vice-President and United States 5 shares
Director citizen Class B
stock
Director United States 5 shares
citizen Class B
stock
Secretary and Treasurer Chinese citizen None
8. Applicant represents that he is a citizen of the United
States.
B. As to the management of the applicant.
9. A brief description of the principal business activities
during the past eight years of each director and each prin-
cipal executive officer of the applicant, if requested.
Harold C. Lenfest, Director and President, gradu-
ated from Webb Institute of Naval Architecture and Engi-
neering in 1918. Mr. Lenfest subsequently became associ-
ated with Bath Iron Works, and later held positions as fol-
lows with the following firms:
Naval Architect for Fabricated Ship Corpora-
tion;
Southeastern Manager for De La Vergne
Machine Company, 1925-1931;
Eastern District Manager, Diesel Engine Divi-
sion, American Locomotive Co., 1931-1945;
While associated with American Locomotive Co.,
Mr. Lenfest also acted as Consultant for National
Defense Research Committee on Mechanical Engi-
neering and Naval Architecture, 1942-1944.
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In 1945 Mr. Lenfest became Vice-President in charge of
Enterpriee Engine Company's New York City offices, and
in 1946 Mr. Lenfest left that company to devote his full time
to Continental Engineering Corporation and Continental
Equipment Corporation, of which he is President. Mr.
Lenfest has had actual experience at sea and holds the
United States Department of Commerce license as chief
engineer of either steam or Diesel ships of unlimited ton-
nage. Continental Engineering Corporation and Continen-
tal Equipment Corporation act as licensees and agents for
J. Stone & Company, Limited, of London, England, and for
a number of other firms in the sale of marine and railway
equipment. Mr. Lenfest is a member of the American
Society of Mechanical Engineers, the Society of Naval
Architects and Marine Engineers, the Institute of Marine
Engineers (London), and the Engineers Club of New York.
Walter IL Sidling, Director and Vice-President, is
a member of the firm of Siding & Jarvis which was organ-
ized in March, 1937. As a member of the firm of Sieling &
Jarvis, and of predecessor firms, Mr. Sidling since 1922 has
been active in the shipping business as ship brokers, man-
agers and agents. During the war the firm of Siding &
Jarvis managed up to twenty-two tankers, and at present
manages seven tankers, for the Maritime Commission.
Sidling & Jarvis have also managed ships for private
companies.
Arthur M. Tode, Director, is a consulting engineer,
and is Honorary President of the Propeller Club of the
United States. In this capacity he has been closely con-
nected with the annual American Merchant Marine Confer-
ences held each year under the auspices of the Propeller
Club. Mr. Tode graduated from the New York State Mari-
time Academy in 1912 and has had practical training at sea,
holding an unlimited license as Chief Engineer for both
steam and Diesel propelled vessels. From 1922 to 1929 be
served as Technical Superintendent of the Marine Depart-
ment of the Texas Company, and in this capacity had charge
of the oil tanker operations of that company.
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Mr. Tode is a graduate engineer of the United States
Navy Turbine Engineering School, the General Electric
Marine Engineering School, the Sperry-Gyro-Compass
School and of the United States Navy Fuel Oil School. He
has had special training in the plants and laboratories of the
Babcock & Wilcox Company, the Texas Company, McIntosh
& Seymour, Combustion Utilities Corporation, and with the
United States Shipping Board.
Mr. Tode is a member of the Society of Naval Archi-
tects and Marine Engineers, the Maritime Association of
the Port of New York, the United States Naval Institute,
the American Society of Naval Engineers, the American
Society of Military Engineers, and the American Society of
Mechanical Engineers. He is also a member of the Execu-
tive Committee of the International Committee for Safety
of Life at Sea, the Executive Committee of the American
Merchant Marine Library Association, and the Executive
Committee of the United States Coast Guard Merchant
Marine Council.
Chung-Ching Wei, Secretary and Treasurer, for the
last year has acted as Vice-President of China Trading &
Industrial Development Corporation, serving in its New
York office. Mr. Wei graduated from Chiao-Tung Univer-
sity in 1937, with the degree of B. S. in electrical engineering
and was in the employ of the National Resources Commis-
sion of China prior to his becoming Vice-President of China
Trading & Industrial Development Corporation.
10. The name and address of each other organization
engaged in shipping activities with which any person named
in answer to the preceding item has any present substantial
business connection, the name of such person and, briefly,
the nature of such connection, if requested.
None, except as stated in answer to item 9.
11. The name and address of any person who is now act-
ing or within the past eight years has acted as managing
or operating agent of the applicant or in any similar
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capacity and, briefly, the general terms of any agreement
with reference thereto, if requested.
Applicant intends to employ Messrs. Sidling & Jarvis,
74 Trinity Place, New York 6, N. Y., as managing agents of
the vessels for which application is herein made, upon their
usual terms. No form of agreement has been entered into.
C. As to the war-built vessels.
12. Applicant offers to purchase, at the statutory sales
prices, as determined by the Commission, the war-built ves-
sels designated in items 13 and 14, or the alternative vessels
designated in item 15.
13. If specific vessels are applied for, as distinguished
from any one or more of a given type, the names of the
vessels must be given under this item.
No specific vessels applied for.
14. If applicant is willing to accept any one or more
vessels of a given type or designation, as distinguished from
particular vessels, the type or designation of the vessels
desired should be set forth as follows:
Applicant applies for two tankers of type T2, Com-
mission's designation T2-SE-A1.
If no T2 tankers are available applicant applies for
three tankers of type E02, Commission's designation
Z-ET1-S-03.
15. If more than one vessel is applied for, state whether
applicant will buy any one or more if all are not available
for sale to him by placing an "X" or the appropriate num-
ber, as the case may be, in the proper space below. In the
absence of any indication, it will be assumed that the
applicant is willing to accept all or any of the vessels.
(a) All only ( ).
(b) All or any (x).
(c) Any but not less than
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D. Terms and conditions of sales.
16. If the application is approved by the Commission,
the applicant agrees to execute a contract of sale in form
prescribed by the Commission. State what portion of the
purchase price (not less than 25 percent of the statutory
sales price) applicant agrees to pay not later than upon
delivery of the vessels.
Applicant agrees to pay 100% of the statutory sales
price not later than upon delivery of the vessels applied for.
17. Furnish full details as to the manner in which the
applicant proposed to obtain the am-bunt needed to defray
the purchase price of the vessels (that is, at least 25 percent
of the purchase price). The applicant should also furnish
full details of any proposed security issue, including names
of underwriters.
China Trading & Industrial Development Corpora-
tion will pay applicant for shares of its Class A stock an
amount at least equal to 25% of the statutory sales price of
the vessels applied for plus sufficient working capital to
cover pre-operating and operating expenses of the vessels
for a period of at least sixty days. The remainder of the
funds required by applicant will be advanced to it either by
China Trading & Industrial Development Corporation, or
by the National Resources Commission of the Chinese Gov-
ernment, or, in party, by the negotiation of a commercial
bank loan.
18. If this application is approved by the Commission,
state whether or not applicant intends to apply to the Com-
mission, pursuant to Section 9 or Section 37 of the Shipping
Act of 1916, for approval to transfer or place under foreign
registry or flag the vessels referred to above after appli-
cant has purchased them. If applicant intends to apply
for such approval, state to what foreign registry or flag.
Applicant intends to operate the vessels applied for
under American registry, and has no intention of applying
for approval to transfer such vessels to any foreign registry.
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19. Does applicant propose to trade in old vessels for
an allowance of credit on the purchase price of a war-built
vessel? If so, is application contingent thereon? State
date of application for determination for allowance of credit
if filed.
Not applicable.
E. Preference.
20. A statement showing the extent to which losses and
requisitions of the applicant's prewar tonnage have been
overcome and other information in support of request for
preference.
Not applicable.
F. Supplemental information.
21. A brief description of the general character and
location of the principal property of the applicant, other
than vessels, employed in its business.
No other property.
22. (a) A list of vessels owned by the applicant, includ-
ing (1) name; (2) gross tonnage; (3) net tonnage; (4) dead-
weight tonnage; (5) bale capacities; (6) year built; (7)
type; (8) speed; (9) registry; and (10) identification of
route or service on which operated.
(b) Information similar to that specified in (2) as
to any vessels chartered to and operated by the applicant.
None.
23. Briefly, the general terms of each charter for opera-
tion (a) of vessels owned by the applicant and chartered
by it to other persons, and (b) of vessels chartered by the
applicant from other persons.
Not applicable.
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24. Full details concerning the services, routes, or lines
on which vessels owned or chartered by the applicant are
now operated, including ports of call, terminal and dock
facilities at all such ports, frequency of sailings per year,
description of services and voyages, and names of vessels
segregated according to services, routes, or lines.
Not applicable.
25. Type and kind of cargo now carried in the trade
served as stated in the answer to item 24, information as
to how the service or line may be developed for carrying
additional types and kinds of cargo, and any factors influ-
encing cargo expectations for the future. If the war-built
vessel is to be a combination passenger and freight vessel,
state also, by classes, the passenger accommodations and the
number of passengers carried and any factors influencing
traffic expectations for the future.
Not applicable.
26. Information similar to that called for by the two pre-
ceding items with respect to any new service, route, or line
which the applicant proposes presently to establish.
Applicant proposes to use the tankers applied for to
carry oil from Persian Gulf ports to Chinese ports for the
Chinese Government.
27. Identification of the service, route, or line described
in answer to item 24 or item 26, on which the applicant pro-
poses to operate the war-built vessel, brief description of
passenger accommodations, and statement of type and kind
of cargo to be carried by the war-built vessel. Any special
requirements of such service, route, or line and the manner
in which they may be met by the use of the war-built vessel
should be discussed briefly. Any changes in existing ser-
vice, routes, or lines which the applicant proposes to make
in connection with the use of the war-built vessel should
also be indicated.
See answer to item 26.
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28. A statement as to whether or not the war-built ves-
sel is to be used to replace a vessel now operated by the
applicant and, if so, the name of such vessel and the pro-
posed disposition to be made of it by the applicant.
Not applicable.
G. As to exhibits furnished.
29. A list of exhibits, properly identified, which shall
include at the time of original filing, the following:
Exhibit I?A copy of the Certificate of Incorpora-
tion of the applicant or other organization papers, includ-
ing all amendments thereto presently in effect.
Filed herewith.
Exhibit II?A copy of the by-laws or other govern-
ing instruments of the applicant, including all amendments
thereto presently in effect.
Filed herewith.
Exhibit III?A copy of (1) a balance sheet as of a
date within six months of the date of filing the application
with the Commission, (2) a brief statement of the nature of
any substantial changes in the financial condition of the
applicant or the results of its operations since the date of
the balance sheet required hereunder, and (3) profit and loss
statements for the three fiscal years preceding the date of
such balance sheet and the three fiscal years ending in 1939,
1940 and 1941. If during the period covered by such profit
and loss statements, the applicant succeeded to the business
and assets of another person, the statements furnished
should reflect the operations of such predecessor or prede-
cessors for that part of such period preceding the date of
acquisition.
Not applicable.
Exhibit IV?A copy (specimen if available) of each
form of bonds or notes included in the funded debt of the
applicant and a copy of each indenture or other instrument
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under which such securities were issued, including all
amendments thereto presently in effect.
Not applicable. ?
UNITED TANKER CORPORATION
(Name of applicant)
By HAROLD C. LENFEST
ATTEST:
C. C. WEI.
December 10, 1947.
(Date)
STATE OF NEW YORK
COUNTY OF NEW YORK
I, HAROLD C. LENFEST, being duly sworn, depose and
say that I am the President of UNITED TANKER CORPORATION,
the applicant on whose behalf I have executed the fore-
going application; that the applicant is a citizen of the
United States within the meaning of section 2 of the Ship-
ping Act, 1916, as amended (U. S. C. Title 46, sec. 802),
and section 905 (c) of the Merchant Marine Act, 1936, as
amended (U. S. C. Title 46, sec. 1244) ; that this applica-
tion is made for the purpose of inducing the United States
Maritime Commission to take the action requested herein,
pursuant to the provisions of the Merchant Ship Sales
Act of 1946, and particularly to section 4 thereof; that I
have carefully examined the application and all documents
submitted in connection therewith and, to the best of my
knowledge, information and belief, the statements and rep-
resentations contained in said application and related doc-
uments are full, complete, accurate and true.
HAROLD C. LENFEST
Subscribed and sworn to before me, a Notary Public
in and for the State and County above named, this 10th
day of December, 1947.
My commission expires
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EXHIBIT D.
UNITED STATES MARITIME COMMISSION
WASHINGTON
February 3, 1948.
Messrs. Post, Morris & Lovejoy
52 Wall Street
New York 5, N. Y.
Dear Sirs:
In reply to your telegram of February 2, 1948, advising
that a question has been raised as to the citizenship of
your client, -United Tanker Corporation, and requesting our
opinion in the matter, I wish to advise that in my opinion
the United Tanker Corporation is a citizen of the United
States within the meaning of Section 2 of the Shipping
Act of 1916, as amended.
I have examined the application to purchase as filed by
the United Tanker Corporation, the Certificate of Incor-
poration and the By-Laws thereof, and find from the evi-
dence submitted therein that the United Tanker Corpora-
tion is a citizen of the United States within the meaning of
Section 2 of the Shipping Act.
The application to purchase of the United Tanker Cor-
poration, advises:
"The President and the Directors of applicant
are United States citizens who have had long experi-
ence in the shipping business in allied fields. * * *
The majority of the stock of applicant is, and will
at all times be, held by United States citizens.
"All of the Class A stock is held by China Trad-
ing and Industrial Development Corporation which
provides substantially all of the capital of the corpo-
ration.
"The President and Managing Directors are citi-
zens of the United States.
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"Applicant has filed a deposition signed by its
President that it is a citizen within the meaning of
Section 2 of the Shipping Act of 1916, as amended,
and that statements made in the application to pur-
chase were made for the purpose of inducing United
States Maritime Commission to sell to it warbuilt
vessels."
An examination of the Certificate of Incorporation of
the United Tanker Corporation as submitted by the firm of
Post, Morris & Lovejoy, 52 Wall Street, New York, N. Y.,
discloses that the Corporation was incorporated under the
laws of the State of Delaware on the 9th day of December,
1947. Article 4 of said Certificate of Incorporation
provides:
"The total number of shares of all classes of stock
which the Corporation shall be authorized to issue is
2,000 shares, of which 1,000 shares will be Class A
stock, par value $100 per share, and 1,000 shares
shall be Class B stock, without par value."
Paragraph (e) of Article 4 provides:
"No shares of Class A stock may be issued or
sold by the Corporation unless, after giving effect
to such issuance and sale, there shall be outstanding
a greater number of shares of Class B stock than
the number of outstanding shares of Class A stock."
Paragraph (f) provides:
"All shares of Class B stock of the Corporation
are to be held by each stockholder upon condition
that he will not sell, transfer or otherwise dispose
of any of such shares except to a citizen of the United
States within the meaning of Section 2 of the United
States Shipping Act of 1916, as amended."
In other words, the Certificate of Incorporation pro-
vides that the majority of the outstanding stock shall at all
times be held by citizens of the United States and that there
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shall be no sale of the Class B stock to anyone who is not a
citizen of the United States.
The Corporation, itself, is prohibited from selling Class
B stock to aliens and from placing itself in a position
wherein an alien may,acquire the majority of the outstand-
ing stock.
An examination of the By-Laws of the Corporation
reveals that in Article II thereof, there is recited the state-
ment "no person shall be eligible for election as a director
who is not a citizen of the United States", and to the effect
that the President must be a director.
Thus, in my opinion, the necessary requirements of a
citizen of the United States within the meaning of Section 2
of the Shipping Act of 1916, as amended, are complied with
by the United Tanker Corporation, and the corporation
must be considered as one within the meaning of the Act.
Very truly yours,
FRANCLS B. GOERTNER,
Assistant General Counsel.
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EXHIBIT E.
April 15, 1948
Arthur Tarantino, Esq.
United States Maritime Commission
Department of Commerce Building
Washington 25, D. C.
Dear Mr. Tarantino:
In accordance with your request there is enclosed here-
with a copy of Certificate of Amendment of American
Viking Corporation certified by the Secretary of State of
the State of Delaware filed in that office March 11, 1948.
Pursuant to said certificate there have been issued the
following shares:
2,000 shares of 6% Preferred Stock, par value
$100.00 per share, having no voting rights, issued to
Olga Konow, an American citizen;
6,000 shares of 6% Preferred Stock, par value
$100.00 per share, having no voting rights, issued to
United Tanker Corporation, a citizen of the United
States within the meaning of Section 2 of the Shipping
Act of 1916, as amended;
15,810 shares of Common Stock, par value $1.00 per
share, having voting rights, issued to Olga Konow, an
American citizen;
15,190 shares of Common Stock, par value $1.00 per
share, having voting rights, issued to United Tanker
Corporation, a citizen of the United States within the
meaning of Section 2 of the Shipping Act of 1916, as
amended.
With respect to United Tanker Corporation, may I
respectfully refer you to letter of Mr. Francis B. Goertner,
Assistant General Counsel, to Messrs. Post, Morris & Love-
joy, attorneys for United Tanker Corporation, dated Feb-
ruary 3, 1948.
Very truly yours,
Signed by JULIUS J. ROSENBERG
Enclosure
cc: Mrs. Olga Konow
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EXHIBIT F.
NATIONAL TANKER CORPORATION
521 Fifth Avenue (Room 1111)
New York 17, N. Y.
January 24, 1948.
United Tanker Corporation
317-325 South State Street
Dover, Delaware
Dear Sirs:
We wish to confirm the agreement between us as follows:
1. National Tanker Corporation (hereinafter called
"National") represents as follows:
(a) National was organized on January 22, 1948
under the laws of the State of Delaware, and pro-
poses to take title from the United States Maritime
Commission to three T-2 tankers, namely, the S.S.
Meacham, the S.S. Kettleman Hills and the S.S.
Antelope Hills (hereinafter called the "Tankers").
National has outstanding one thousand (1,000)
shares of capital stock registered in the names of the
stockholders listed on Schedule A hereto. National
has no assets except the sum of $1,000 paid in on its
capital stock, and National has no liabilities.
National proposes to execute or cause to be executed
contracts with the Maritime Commission for the pur-
chase of the Tankers on or about January 26, 1948.
(b) Representatives of National have discussed
informally with three members of the Maritime Com-
mission the subject matter of this agreement and
have been advised informally that the Maritime
Commission has no objections to the carrying out of
this agreement.
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2. United agrees to.lend to National the entire cost of
purchase by National of each of the three tankers, estimated
to be approximately $2,000,000 per tanker. The cost of
purchase is understood to include all expenses which neces-
sarily will be incurred in the acquisition of each tanker, and
also in the conditioning, outfitting and furnishing of each
tanker, but shall not include any commissions or attorneys'
fees payable by National or any expenses of any kind
incurred by National prior to the date hereof. Of the
amount to be advanced to National by United, $202,650 will
be advanced with respect to each tanker simultaneously
with the execution of the contract of sale of such tanker and
the remainder of the cost of purchase of each tanker will be
advanced as required by the Maritime Commission.
3. All advances made by United to National shall be
evidenced by notes or bonds of National payable to United
or its assigns and to be secured by a Preferred Ship Mort-
gage or Mortgages on the tanker with respect to which the
advance or advances are made, and by an assignment of all
monies to become due under the bareboat charter referred
to below, except for such monies as must be retained by
National to pay necessary corporate taxes and expenses.
At the option of United the Preferred Ship Mortgage or
Mortgages shall be either directly to United or to a United
States bank or trust company or other United States citi-
zen. The notes or bonds will bear such interest rate or rates
and have such maturities (not exceeding ten years) and such
other terms and conditions as United may approve. The
Preferred Ship Mortgage or Mortgages shall be delivered
to United by National promptly upon the registration of
each tanker in the name of National and shall be in form and
substance satisfactory to United.
4. National agrees to charter each tanker for a term of
ten years under a bareboat charter to United in usual form
at the rate of $1.20 per deadweight ton per month, plus such
additional amount as may be necessary to enable National
to complete the payment of corporate taxes and interest
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and expenses. To secure the performance of the obligations
and commitments by United under this bareboat charter
contract, such contract shall contain the provision that
United agrees to deposit, simultaneously with the delivery
of tankers to National, an amount equivalent to $150,000
multiplied by the number of tankers acquired by National
pursuant to the provisions of this agreement. Such deposit
as provided for herein shall be made with and to an escrow
agent satisfactory to United, or at United's election, shall
be in the form of an irrevocable Letter of Credit, or a bank
guarantee, in favor of the escrow agent in such aforesaid
amount. Such security is to be maintained by United for a
period of one (1) year from the date of delivery of the
tankers, or until such earlier time as National shall give its
consent in writing to the termination of such security.
5. At the request of United, National agrees to arrange
to have each tanker moved to a shipyard or elsewhere for
drydocking and/or inspection, and representatives of
United shall be entitled to inspect such tanker and either
to accept or reject each such tanker at the time of such
inspection. If any tanker is rejected by United, National
shall return to United any advances theretofore made by
United with respect to such tanker, less all amounts, if any,
owing by National to the Commission for such drydocking
and inspection and the movement of such vessel to drydock
or for inspection and returning it to its previous location,
and all other necessary expenses in connection therewith.
6. National agrees that, without the written consent of
United, which shall not be unreasonably withheld, it will
not during the period from the date of this agreement until
the expiration of the period of the bareboat charter or
charters and until all monies due United under this agree-
ment have been paid:
(a) Engage in any business whatsoever other
than that of chartering the Tankers to United.
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(b) Voluntarily create, incur, assume or suffer
to exist any mortgage, pledge or other encumbrances
upon any of its properties or assets whether now
owned or hereafter acquired, except mortgages,
pledges or encumbrances to United.
(c) Voluntarily create, incur or assume any lia-
bility for borrowed money except to United.
(d) Assume, guaranty, endorse or otherwise
become liable in connection with the obligation of any
person, firm or corporation.
(e) Enter into any merger or consolidation, or
sell, assign, transfer, mortgage, pledge or hypothe-
cate its interest in this contract.
(f) Use any of the funds of National for purpose
of paying compensation, or enter into contracts of
any kind.
(g) Issue or sell additional shares of stock,
declare any dividends, or make any payments of any
kind.
7. National agrees that, during the period from the date
of this agreement until the expiration of the period of the
bareboat charter or charters and until all monies due United
under this agreement have been paid, the Assistant Treas-
urer of National shall be a person satisfactory to United,
and all checks drawn by National shall bear the counter-
signature of such Assistant Treasurer.
8. Simultaneously with the delivery to National by the
Maritime Commission of the bill of sale for each tanker,
and the bareboat charter of such tanker to United by
National, United agrees to pay to a payee to be designated
by National the sum of $8,333.33 as reimbursement for
expenses incurred with respect to each such tanker.
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9. United represents that it is a corporation duly organ-
ized under the laws of the State of Delaware, that its presi-
dent and directors are United States citizens, that the
holders of the majority of its stock are United States citi-
zens and that this representation will continue to be true
and correct during the life of this contract. United further
represents that the statements made as to its citizenship and
as to its officers, directors and stockholders in the applica-
tion dated December 10, 1947, filed by -United with the
Maritime Commission, a copy of which has been furnished
to National, are true and correct as of the date hereof.
10. This contract may be terminated by United at its
option by written notice delivered to National at its office at
521 Fifth Avenue, New York (Room 1111) if within 20 days
from the date hereof a contract of purchase for the Tankers
duly executed by the Maritime Commission has not been
received. Upon such termination National will, at the
request of United, promptly notify the Maritime Commis-
sion of its rejection of the tankers and thereafter diligently
take all necessary steps to obtain the refund of all sums
therefore advanced by United, and repay such sums, upon
receipt thereof, to United, less expenses, if any, incurred
with the consent of United.
11. Neither United nor National shall be under any lia-
bility to the other for failure to carry out the provisions of
this agreement, if performance of this agreement is ren-
dered impossible by action of the Maritime Commission or
the United States Government or by events beyond the con-
trol of either party; provided, however, that if performance
of this contract is rendered impossible National will, at the
request of United, promptly take all necessary steps to
enforce any rights which it may have for damages or com-
pensation or recovery of amounts paid to the Maritime
Commission or expenses incurred, and, upon receipt thereof,
repay United for any advances theretofore made to National
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by United, less expenses, if any, incurred with the consent
of United.
12. It is understood that under the present requirements
of the United States Maritime Commission any tankers
chartered to United under the provisions of this agreement
must be operated in the coastwise or nearby foreign trade
until May 1, 1948, as per the attached letter marked
"Exhibit B".
Will you kindly confirm that the foregoing correctly sets
forth the agreement between us by signing and returning
the enclosed copy of this letter.
Very truly yours,
NATIONAL TANKER CORPORATION
By E. STANLEY KLEIN
Vice Pres.
Confirmed: January 24, 1948.
UNITED TANKER CORPORATION
By HAROLD C. LENFEST
Pres.
SCHEDULE A.
Stockholders of National
Tanker Corporation
Number
of Shares
Joseph E. Casey
300
Julius C. Holmes
300
E. Stanley Klein
400
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NATIONAL TANKER CORPORATION
521 Fifth Avenue (Room 1111)
New York 17, N. Y.
January 24, 1948
United Tanker Corporation
317-325 South State Street
Dover, Delaware
Dear Sirs:
We wish to confirm the agreement between us as follows:
1. The undersigned represent that they are the holders
of all of the outstanding shares of stock of National Tanker
Corporation (hereinafter called "National"), and that said
stockholders ratify and approve the attached agreement
between National and United Tanker Corporation (herein-
after called "United"), which is attached hereto as Exhibit
A. The undersigned stockholders further represent that
their representatives have discussed informally with mem-
bers of the Maritime Commission the subject matter of this
agreement and have been advised informally that the Mari-
time Commission has no objections to the carrying out of
this agreement.
2. In consideration of your execution of the attached
agreement between United and National, simultaneously
with the execution of this agreement, the undersigned here-
by grant to United an irrevocable option to purchase all of
the stock of National at any time after September 15, 1948,
but not later than October 15, 1948, for a price equal to
$150,000 multiplied by the number of tankers acquired by
National pursuant to the provisions of the attached agree-
ment.
3. To facilitate the exercise of such option by you, the
undersigned agree to deposit all of the shares of stock of
National in escrow in transferable form with an Escrow
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Agent satisfactory to you, such deposit to be made imme-
diately upon the execution of this agreement. The Escrow
Agent is hereby irrevocably instructed to deliver said stock
to you upon your payment to the Escrow Agent at any time
after September 15, 1948, but not later than October 15,
1948, of the option price by certified check.
Will you kindly confirm that the foregoing correctly sets
forth the agreement between us by signing and returning
the enclosed copy of this letter.
Very truly yours,
E. STANLEY KLEIN
JOSEPH E. CASEY
JULIUS C. HOLMES
By JAMES G. MACKEY
As Attorney in Fact.
Confirmed: January 24, 1948.
UNITED TANKER CORPORATION
By HAROLD C. LENFEST
Pres.
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EXHIBIT G.
Excerpts of hearings held on Friday, February 13, 1948,
before the House Committee on Merchant Marine and
Fisheries in connection with House Resolution No. 36.
"Mr. Bradley. Now, with relation to the general
sale of tankers to Americans, some little time ago I
reported to the Commission the fact that I under-
stood that certain tankers which were bought by
American firms were being disposed of surrepti-
tiously to Chinese citizens. Do you know anything
about that? I do not want you to bring out anything
which is confidential, but I merely want you to state
what you know about it.
Admiral Smith. One company, under the Ameri-
can flag, called the American Overseas Tankers, pre-
viously bought five tankers under the Panama flag
and recently three under the American flag, and they
have chartered them under the American flag to a
so-called United Tankers, which operates between
the Persian Gulf and Shanghai and Chinese ports.
It flies the American flag and is something slightly
over 50 percent American-owned, but I understand
it is Chinese capital.
Now, I understand they have placed in their con-
tract an operation (option) for the charterer at the
end of 1 year to purchase those three ships.
Mr. Bradley. At the end of 20 years/
Admiral Smith. At the end of 1 year. It is still
American-flag operation, of course.
The other one, American Viking, my assistant has
been to New York and has seen that contract, and
that is merely a voyage charter to the same company,
but has no such option agreement in it. That is, it is
a clean contract, and the American Viking is using
these tankers as anybody else does.
Mr. Bradley. If the option is exercised, does that
mean the tanker would go foreign as far as the flag
is concerned?
Admiral Smith. No, sir; it would go to this com-
pany, which is only slightly 50-percent American-
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EXHIBIT H.
CHEMICAL BANK & TRUST COMPANY
165 Broadway
New York 15, N. Y.
FOREIGN DEPARTMENT
Bank of China
New York Agency
40 Wall Street
New York 5, N. Y.
May 14, 1948
Attention: Mr. Tith-Yueh Lee, Manager
Re: S/T "Meacham"
Dear Sirs:
We are enclosing a signed copy of a letter dated May
13, 1948, constituting the Loan Agreement between National
Tanker Corporation and United Tanker Corporation and
China Trading & Industrial Development Corporation on
the one hand and Chemical Bank & Trust Company on the
other. There are also enclosed (or will subsequently be
forwarded to you) copies of the various relevant papers
listed in the schedule attached hereto.
You have requested us to extend to you a 49% partici-
pation in the principal amount of $931,000.00 in our
$1,900,000.00 loan to the above mentioned companies under
the said Loan Agreement. We hereby confirm to you such
participation effective May 14, 1948, subject to your signing
the acceptance appearing below on the carbon copy hereof
and returning the same to us.
The said participation is extended subject to the follow-
ing terms and conditions:
1. We make no representation with regard to and shall
in no way be responsible for the validity, genuineness
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or effect of the said Loan Agreement or any paper
or document therein referred to or listed in the said
schedule of papers, or heretofore or hereafter deliv-
ered to you in connection therewith, nor for the
accuracy of any statements in the said Loan Agree-
ment, or in any such paper or document.
2. It is understood in connection with your participa-
tion in this Loan that, although we may from time
to time communicate with you with respect thereto,
we shall be under no obligation to keep you informed
and that you will be satisfied with such action or
inaction and with such degree of diligence and atten-
tion on our part. as may, from time to time, attend
our own interests in the situation, including the
recording or filing or non-recording or non-filing of
any of the various loan papers or documents, as we
may see fit, our only responsibility in connection
with the subject matter of this letter being not to
act in bad faith, and to turn over to you your pro-
portionate share of the net amounts received or
applied by us on account of principal of or interest
on the Loan.
3. You shall be responsible to us for your pro-rata
share of any expenses or liabilities incurred by us
in connection with the said Loan Agreement and/or
the loan made pursuant thereto.
4. We may make other loans, continue or extend any
existing loans, or otherwise extend credit to or deal
with National Tanker Corporation and United
Tanker Corporation and China Trading & Industrial
Development Corporation, or any of them, and may
grant participation in the present loan to others,
all in the same manner and as freely as though no
participation had been granted to you.
If the foregoing is in accordance with your understand-
ing, kindly endorse your acceptance on the carbon copy
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of this letter and its attached schedule ad return the same
to us.
Very truly yours,
CHEMICAL BANK & TRUST COMPANY
By C. E. ROBERT CLUKIES (signed)
Authorized Signature
Enclosures
We acknowledge receipt of the enclosures described in
the foregoing letter and accept the participation therein
mentioned on the terms and conditions therein specified.
BANK OF CHINA
By T. Y. LEE, Manager (signed)
Authorized Signature
Dated: May 14, 1948.
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EXHIBIT I.
GUARANTY OF BANK OF CHINA
To induce the Chemical Bank & Trust Company to
execute the notation on the foot of a letter dated September
27, 1949, addressed to it by National Tanker Corporation,
United Tanker Corporation and China Trading & Indus-
trial Development Corporation (together hereinafter called
the Borrowers), a copy of which is attached hereto and the
form of which we hereby approve, we the undersigned Bank
of China hereby guarantee the repayment to the Chemical
Bank & Trust Company of the outstanding principal, inter-
est and expenses of the loan therein referred to which it
made to the Borrowers on May 14, 1948, and as collateral
security for the payment of our guaranty, we hereby pledge
to Chemical Bank & Trust Company $350,000. face amount
of United States Treasury 2-1/4% bonds due December 15,
1962-1959.
The rights of the Chemical Bank & Trust Company
under this guaranty shall not be affected or prejudiced by
its failing to obtain new assignments of charter hires
and/or freight moneys under any charter party or freight
engagements entered into 'by all or any of the Borrowers
or by its failing to notify us of any default of the Borrowers
or its granting any further leniency or extension of time
to the Borrowers. We hereby waive notice of acceptance
of and demand for payment under this guaranty and of
extension of credit to the Borrowers, presentment and
demand for payment by the Borrowers, protest and notice
to us of dishonor or default of the Borrowers, and all other
notices to which we might otherwise be entitled.
If and when the Chemical Bank & Trust Company shall
notify us in writing that it has called its said loan because
the Borrowers have defaulted in paying in accordance with
their said letter dated September 27, 1949, or under any
provision of the said loan agreement, loan note, mortgage
or other security, we shall immediately exercise one or the
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other of the two following alternatives, namely: (1) pay to
the Chemical Bank & Trust Company the full amount of
the then outstanding principal, interest and expenses of
the said loan in exchange for an assignment without
recourse by it to us of the evidence of said loan and the
security therefor and the cancellation of the pledge of
securities given as collateral security for our within guar-
anty; (2) notify the Chemical Bank & Trust Company that
we prefer that it endeavor to collect the loan indebtedness
due it by resorting to whatever remedies are available to
it against the Borrowers and/or the security for the loan
and if and when we shall subsequently receive written
notice from the Chemical Bank & Trust Company stating
that the steam tanker " MEACHAM " has been sold under a
judgment or decree of foreclosure of the mortgage thereon
held by the Chemical Bank & Trust Company or under the
power of sale as provided in said mortgage and that the
proceeds of such sale have been applied as provided in
said mortgage and that notwithstanding such application
the sale proceeds were insufficient to pay in full all of the
Borrowers mortgage indebtedness to the Chemical Bank
& Trust Company as provided in said mortgage and speci-
fying the exact amount of the insufficiency or deficiency
then due to the Chemical Bank & Trust Company, we will
immediately upon receipt of such notice pay to the Chem-
ical Bank & Trust Company 51% of the amount of the
insufficiency or deficiency therein specified assuming that
such insufficiency or deficiency represents only unpaid bal-
ance of principal and unpaid interest but if such insufficiency
or deficiency also comprises some unpaid expenses incurred
by the Chemical Bank & Trust Company in connection with
the loan and/or its enforcement, we will pay to it a sum
of money equal to 100% of any unpaid balance of such
expenses incurred by it and interest thereon at the rate
of 6% per annum for the period from the date when such
expenses were paid or incurred up to the date of our pay-
ment, plus 51% of the unpaid balance of loan principal and
loan interest accrued to the date of our payment. Upon
our making such payment to the Chemical Bank & Trust
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Company, all its rights under this guaranty and all our
rights under our loan participation agreement with it dated
May 14, 1948, shall be deemed satisfied and released. In
the event we select alternative (2), we appreciate that in
the nature of the case the Chemical Bank & Trust Company
may encounter considerable, practicable and/or legal diffi-
culties in enforcing its rights and remedies under the said
mortgage and it is specifically agreed that in so far as this
guaranty is concerned, the rights of the Chemical Bank &
Trust Company hereunder shall not be prejudiced by the
lapse of any period of time whatsoever or any period of
time that might otherwise be considered unreasonable in
length and that we shall not be entitled to the surrender
of the securities pledged by us as collateral security for
this guaranty until such time as we shall have made full
payment to the Chemical Bank & Trust Company as pro-
vided in this guaranty and particularly as above provided
under alternative (2). Upon our making such payment to
the Chemical Bank & Trust Company as above provided,
we shall be entitled to receive from the Chemical Bank &
Trust Company an assignment by it to us, without recourse
against it, of any evidence of said loan then remaining in
its possession and all of the then remaining security there-
for then remaining in its possession and all of the then
remaining rights, if any, of Chemical Bank & Trust Com-
pany in, to and under said remaining security and all its
then remaining rights, if any, against the said Borrowers.
PROVIDED HOWEVER, that notwithstanding anything to
the contrary hereinbefore stated, this guaranty shall cease
and determine when and if the Borrowers or any of them
shall have become legally free to charter the "MEACHAM"
to someone other than Chinese Petroleum Corporation and
shall have entered into a written long term non-cancellable
charter party extending beyond January 14, 1952, which
the Chemical Bank & Trust Company and the Bank of
China, New York Agency, shall have approved in writing
as being satisfactory to them and the charter hire whereof
shall have been validly assigned to the Chemical Bank &
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Trust Company by instrument in writing accepted by it
and notified to and accepted by such long term charterer.
This guaranty is, and shall be deemed to be, a contract
entered into under and pursuant to the laws of the State
of New York and shall be in all respects governed, con-
strued, applied and enforced in accordance with the laws of
said State; and no defense given or allowed by the laws
of any other State or country shall be interposed in any
action hereon unless such defense is also given or allowed
by the laws of the State of New York.
New York, N. Y., 27th day of September, 1949.
BANK OF CHINA
By T. Y. LEE
Authorized Signature.
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EXHIBIT J.
Affidavit of C. D. Shiah.
IN TUE
UNITED STATES DISTRICT COURT,
FOR TrrF: EASTERN DISTRICT OF VIRGINIA,
NORFOLK DIVISION.
UNITED STATES OF AMERICA,
Libelant,
V.
Tanker Meacham and her tackle
apparel, furniture, equipment, etc.,
in, rem.
STATE OF NEW YORK,
SS. :
COUNTY OF NEW YORK,
Admiralty No. 7477.
Affidavit.
C. D. SHIAll, being duly sworn deposes and says:
I am the representative in the United States of Chinese
Petroleum Corporation, which is a wholly owned subsidiary
of a department of the Nationalist Government of China.
My attention has been called to the fact that the United
States Government has commenced proceedings in this
Court seeking to forfeit the American tanker Meacham. I
have been advised that the United States Government con-
tends that control of Meacham Corporation, owner of the
tanker Meacham, was conferred upon certain Chinese inter-
ests. Apparently one of the principal claims of the Govern-
ment in this connection is that Chinese Petroleum Corpora-
tion "controlled" Meacham Corporation as a result of a
certain promissory note which was given by Meacham
Corporation to Chinese Petroleum Corporation. The pur-
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pose of this affidavit is to call to the Court's attention the
provisions of this note from which it can readily be seen
that Chinese Petroleum Corporation most clearly did not
and could not control the debtor corporation. A copy of the
note is annexed hereto and marked Exhibit "A".
I wish to call the Court's particular attention to certain
more important provisions in the note. The note was
payable in installments over a period of over seven years.
More than this, however, the position of Chinese Petroleum
Corporation was particularly weak in that not only was the
note in essence an income note but could, it would seem, be
extended by the debtor more or less indefinitely. In this
connection the note provides:
"If the net income of the Corporation, as herein-
after defined, shall be insufficient to permit the pay-
ment in full of the installment or installments of this
note coming due in such year, the due date of the
unpaid deficiency of such installment or installments
shall be extended from year to year, if necessary,
until the final maturity of this note on February 15,
1957, and thereafter for two additional years if
necessary, and thereafter on mutually agreeable
terms, until the Corporation has accumulated suf-
ficient net income, as hereinafter defined, to enable
it to pay such installment or installments."
It is difficult to see how a creditor who is in such a
weak position as a holder of a note containing such provi-
sions as the above could possibly be said to "control" the
debtor corporation.
I understand that the United States Government has
called attention to the fact that the vessel Meacham could
not be sold without the approval of the payee of the note.
Such a provision in no way places control of the debtor
corporation in the bands of the creditor. It is one of the
routine and common provisions in loans designed to give
some measure of safety to the creditor and to prevent the
squandering or dissipation of the debtor's assets. In other
words the obvious purpose of such a provision is to prevent
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the debtor from disposing of its principal asset at a
ridiculous price and thus in effect avoiding its obligation
to repay a loan. It in no way places any control in the
hands of the creditor over the Meacham Corporation nor
does it enable it to dictate the Corporation's policies or the
operations of the vessel. Of course, once the note was paid
in full Chinese Petroleum Corporation would have no
further claim of any kind whatsoever against the vessel's
owner, the Meacham Corporation.
Chinese Petroleum Corporation does not now and never
has owned or had any interest in any stock of Meacham
Corporation or of any corporation affiliated with or in any
way related to Meacham Corporation. In short, I wish to
emphasize that there was no agreement or understanding
whatsoever by which control of Meacham Corporation
was conferred upon or permitted to be exercised by Chinese
Petroleum Corporation or any employee or respresentative
thereof and that control of the corporation was not in fact
exercised by said Chinese Petroleum Corporation or any
employee or representative thereof.
C. P. SHIAH
Sworn to before me this 14th
day of November, 1951. }
GERALD HERMAN
GERALD HERMAN
Notary Public, State of New York
No. 24-6866850
Qualified in Kings County
Cert. filed with Kings and N. Y. Co.
Clerks and Registers Offices
Term Expires March 80, 1952
Exhibit A.
Note.
(Opposite Er)
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the debtor from disposing of its principal asset at a
ridiculous price and thus in effect avoiding its obligation
to repay a loan. It in no way places any control in the
hands of the creditor over the Meacham Corporation nor
does it enable it to dictate the Corporation's policies or the
operations of the vessel. Of course, once the note was paid
in full Chinese Petroleum Corporation would have no
further claim of any kind whatsoever against the vessel's
owner, the Meacham Corporation.
Chinese Petroleum Corporation does not now and never
has owned or had any interest in any stock of Meacham
Corporation or of any corporation affiliated with or in any
way related to Meacham Corporation. In short, I wish to
emphasize that there was no agreement or understanding
whatsoever by which control of Meacham Corporation
was conferred upon or permitted to be exercised by Chinese
Petroleum Corporation or any employee or respresentative
thereof and that control of the corporation was not in fact
exercised by said Chinese Petroleum Corporation or any
employee or representative thereof.
C. P. SHIAH
Sworn to before me this 14th
day of November, 1951. }
GERALD HERMAN
GERALD HERMAN
Notary Public, State of New York
No. 24-6866850
Qualified in Kings County
Cert. filed with Kings and N. Y. Co.
Clerks and Registers Offices
Term Expires March 80, 1952
Exhibit A.
Note.
(Opposite Er)
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EXHIBIT K.
Department of State,
-Washington, D. C.
Dear Sirs:
April 27, 1950.
We \vish to advise you with respect to the chartering of
certain vessels operated by this Corporation to In-tssian
Governmental agencies for carrying oil products between
Roumania and the Far East.
In June, 1949, the London brokerage firm of Stevinson,
llardy & Co., Ltd., 155 Fenchurch Street, London, advised
our brokers, Messrs. Siding & .larvis, that the Russian oil
bureau wished to charter a tanker to carry benzine and or
kerosene from Constanza to Shanghai, Tsingtao or Taku
Bar. We authorized ,lessrs. Sieling & Jarvis to accept the
charter for the K011rman ii Ils subj('ct to first obtaining
clearance from the State Department. We enclose a copy
of a letter dated June 20, 1949, from Siding & Jarvis to
this Corporation advising us or the making- of the charter
and confirming that the State Department had indicated the
absence of any objection to this charter. We also enclose
a copy or a letter dated _Nugust 1949, from Sieling &
Jarvis Corporation to the Slate Department referring to the
prior conversations and to the possibility of future charters.
Since the original charter or th,, kotti.Lian &
Jarvis have arranged for us a charter of the Chris/0_
phcr. which loaded kerosene at Constanza on August 11,
1949, for discharge at Dalily, and subsequently loaded a
cargo or crude oil on September 25, 191,9, at Vladivostok
for dischard-e at Gensan. Siding & Jarvis also arranged
additional charters for the lictilrfrmin Hills, one for loading
kerosene at Col:stanza on December 29, 1949, for discharge
at Tsingtao, and one for loading clean petroleum products
at Constanza on April 22, 1950, for llischarge at Dalny.
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As a United States corporation we do not wish to take
any action inconsistent with the foreign policy of our coun-
try. We understand that in a conference with our counsel
on April 26, 1950 your representatives indicated that they
questioned the advisabiilty of our making further charters
of our tankers to engage in the type of business referred to
above under present circumstances. Accordingly, we will
refrain from making similar charters in the future without
further discussion of the matter with your representatives.
In addition to the shipments of petroleum products
referred to above, the Kettleman Hills also loaded vegetable
oil at Dalny on September 6, 1949 for discharge .at Nak-
hodka. While this type of business may be regarded as
falling in a somewhat different category from that described
above, we will also advise you prior to undertaking any
further charters of this kind.
We are enclosing a schedule showing in detail the cargo
carried under the charters referred to. We are also enclos-
ing a memorandum from Sidling & Jarvis Corporation
listing certain other vessels which we understand have
engaged in similar trade.
Very truly yours,
-UNITED TANKER CORPORATION
By HAROLD C. LENFEST
Enclosures
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SIELING & JARVIS
Tanker Brokers & Agents
Managing & Operating
74 Trinity Place
New York 6, N. Y.
United Tanker Company
48 Wall Street,
New York 5, New York
S/T "Kettlemon. Hills"
Gentlemen:
Agents and
General Agents
for
U. S. Maritime
Commission
June 20, 1949
We confirm our telephone conversation of Friday, June
17, in which we advised that we had chartered the above
named vessel to the official Russian oil bureau as follows:
12,000 tons, 10% more or less Owner's option,
Benzine and/or Kerosene
Laydays June 28?Cancelling July 5
Constanza, Roumania to Shanghai, Tsingtao, or
Taku Bar
Rate $15.00 per ton on intake quantity
192 hours, for loading or discharging
$2,000.per day demurrage, half breakdown
Full freight payable in advance on signing Bills of
Lading
Chamber of Shipping War Clause
New Jason Clause
Both-to-Blame Collision Clause
Paramount Clause
Charterers' Agents at both ends
Any increase in warrisk insurance rate over and
above that prevailing on May 17, to be for Charterers'
account
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If vessel discharges at Taku Bar, discharge will
be accomplished in the Roads
Roumanian Export Tax on freight for Charterers'
account
Usual Russian clauses as attached
Otherwise London form of Charter Party as
attached
5% address commission payable in Moscow and
21/2% brokerage to Sieling & Jarvis for division with
Stevinson, Hardy & Company, Ltd., London
We confirm that on Thursday, June 16, we communi-
cated with the State Department in Washington and were
informed by Mr. Faulk of the Shipping Department that
the State Department had no objection to this vessel being
chartered to the Russians for discharge in North China.
We have asked our London friends to ascertain if addi-
tional cargo can be obtained and loaded for Owners' account
for discharge in Siam, either at Constanza or in a Persian
Gulf port where vessel would proceed for bunkers.
Very truly yours,
SIELING 8L JARVIS
By s/ D. B. JARVIS
(David B. Jarvis)
DBJ :DH
Ems.
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SIiLi NC & JARVIS CORPORATION
Tanker Brokers & Agents
Managing & Operaling
74 Trinity Place
NO \V York 6, N. Y.
Department of State
Shipping Department
Washington, 1). C.
Attn: Mr. Falk
(lentlemen:
August 18, 1949
On or about June 15, 1949, our Mr. David B. Jarvis had
a telephone conversation with Mr. Falk in which we were
assured that there would be no objection to our chartering
a U. S. fla tanker to load a cargo of petroleum products in
Coustanza for discharge in North China, under charter to
S. S. R.
L. S. ._\lanitime Commission, Bureau of Law, are ques-
tioning t In authority of Mr. Falk to give us sucli assurance,
also our sagacity in not obtaining the assurance in writing.
1,Ve contend that, as a slopping firm, we could not be
expected to consult with any department other than the
Shipping Department. Mr. Jarvis sought to discuss the
matter with Mr. Sangstad or Mr. John Mann, but was
referred to Mr. Falk.
So far as requesting written assurance is concerned, our
telephone conversation made it obvious that there was no
real reason for obtaining. the assurance, and it did not enter
our mind to ask for anything in writing. Furthermore, our
relations with personnel in the State Department have
always given us confidence that any verbal assurance was
as good as a written One.
Sirwe obtaining the above assurance, we have made other
charters with various bureaus of U. S. S. R. and, naturally,
will continue to do business with them until, as intelligent
citizens of the United States of America, we are on notice
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that to do so will harm our nation in any way, or, until we
are notified by you or other competent authority to desist.
We are from time to time being questioned by other gov-
ernment bureaus, as well as Naval Intelligence, in regard
to the vessels involved in this trade. We are, of course,
making available all information in our possession.
The first of these vessels, the "Kettleman Hills", is due
to arrive at Dalny on August 21 to discharge her cargo of
Gasoline. We are presently in constant communication
with the vessel by radio and will be until the vessel arrives
in port when, as usual, the ship's station will be shut down.
Very truly yours,
SIELING & JARVIS CORPORATION
By DAVID B. JARVIS
DBJ:D11
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0
CD
a.
Tharterer
10JUSNEFTEEXPORT
XPORTCHLEB, LTD.
0JUSNEFTEEXPORT
g0JUSNEFTEEXPORT
a0JUSNEFTEEXPORT
g0JUSNEFTEEXPORT
0
0
0
0
Ship's Name
Voyage No.
Cargo
Loading
Discharging
Kettleman Hills #11
13024.748 tons Ethylated Benzine, 70 ON sp.
7/20/49
8/26/49
gr. 0.727, API 63.1 at 76F
Constanza
Dalny
Kettleman Hills #12
6667.84 tons peanut oil sp. gr. 0.912
9/6/49
9/24/49
5071.64 tons soyabean oil sp. gr. 0.916 at 79F
Dalny
Nakhodka
St. Christopher #11
118,638.48 bbls or 14902.7 tons refined Kero-
8/11/49
9/13/49
sene at 76?F
Constanza
Dalny
St. Christopher #12
11291.338 tons crude oil sp. gr. 0.8630 at 62?F
9/25/49
9/28/49
Vladivostok
Gensan
Kettleman Hills #14
10,111.34 tons Kerosene 42 API 0.815 sp. gr.
1/4/50
2/5/50
at 42?F
Constanza
Tsingtao
Kettleman Hills #16
14517 tons Ethylated Benzine, 70 ON, API
4/22/50
Enroute to
60.8 at 59?F
Constanza
Dalny
1008 tons Lubricating Oil (AVTOL)18) API
21.9 sp. gr. 0.922 at 107?F
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Telephone: Whitehall 3-0420
Night and Holiday Phones
Boulevard 8-0646
Bayshore 1056
Elizabeth 2-4632
Cable Address: Tanksteam
Boo Code
Oil Cargo and
Bunker Sales
SIELING & JARITIS CORPORATION
Tanker Brokers & Agents
Managing & Operating
74 Trinity Place
New York 6, N. Y.
April 27, 1950
MEMORANDUM TO THE DEPARTMENT OF STATE
Our office records show that SOYUSNEFTEEXPORT, the
present Charterers of the Kettleman Hills, had offices in
Shanghai and Harbin as early as 1926.
When Shanghai became short of Petroleum Products
and it was reported that Gasoline was selling for $1.25 per
gallon, perhaps it was only natural for a company that had
been established there since 1926 to make every effort to
ship in Petroleum Products. We know numerous oppor-
tunists here in New York who were trying to do the same
thing but failed, because they were not established concerns
or could not obtain the product and transport on terms
favorable to making a profit.
Our office records show that since June 1949, tanks ves-
sels have discharged Petroleum Products in Dalny and
Tsingtao as follows:
Discharging
Flag
Name
Tonnage
Grade Cargo
Port
Nor.
Beauregard
11,500
Dalny
Nor.
Arnica
6,500
Dalny
Dan.
Kate Maersk
9,000
Dalny
U. S.
Kettleman Hills
13,000
Motor Gasoline
Dalny
U. S.
St. Christopher
15,000
Kerosene
Dalny
Pan.
Loideste
11,000
Diesel Oil ( ?)
Tsingtao
U. S.
Kettleman Hills
10,000
Kerosene
Tsingtao
U. S.
Kettleman Hills
14,000
Motor Gasoline
enroute Dalny
1,000
Lub Oil
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Our records show that all of the above vessels loaded at
Constanza except the Loideste which loaded at Trinidad
and proceeded to Tsingtao via the Panama Canal, bunker-
ing in the United States port of San Pedro.
We might mention that. from our experience we have
noted that this business has all the appearance of normal,
commercial transactions. 'When we were negotiating for
the last charter, we had private information that the U. S.
tanker Herrimae was offering to the Russians in competi-
tion with us. We secured the business because we were able
to load earlier than the Herrimac? although there was some
indication that the Russians preferred our vessel, probably
because of previous good experience.
SIELING & JARVIS CORPORATION
DBJ :1)11
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I>
0
19 5/29/50 7/ 7/50
Voyage
No.
1
2
3
4
5
6
7
8
9
10
11
12
Started
5/10/48
6/7/48
7/24/48
9/ 7/48
10/20/48
11/30/48
1/12/49
2/22/49
4/ 3/49
5/12/49
6/21/49
8/ 6/49
Dates
Ended
6/ 7/48
7/24/48
9/ 7/48
10/20/48
11/30/48
1/12/49
2/22/49
4/ 3/49
5/12/49
6/21/49
8/ 6/49
9/20/49
9/20/49 10/15/49
13 10/15/49 11/21/49
14
15
16
11/21/49
12/24/49
2/ 2/50
12/24/49
2/ 2/50
3/13/50
17 3/13/50 4/17/50
18 4/17/50 5/29/50
no
CA
...4 20
CD 21
CD 22R.P.
(04
co 22
P.
23 23
CD 24
CD
A 25
?a
CD25R.P.
CD 25
?.%
O 26
CD
CD 27
CD 27A
A
CD 2713 R. P.
7/ 7/50
9/ 6/50
10/29/50
11/22/50
1/ 4/51
2/25/51
4/24/51
5/ 1/51
5/ 8/51
7/5/51
9/ 3/51
10/21/51
11/ 2/51
9/ 6/50
10/28/50
11/21/50
1/ 4/51
2/25/51
4/24/51
4/30/51
5/ 7/51
7/ 4/51
9/ 2/51
10/20/51
11/ 1/51
12/ 6/51
EXHIBIT L
CHRONOLOGICAL RECORD OF VOYAGES OF S/T Meacham
5110/48-12/6/51
From
Everett, Wash.
Shanghai
Shanghai
Kaoshiung
Kaoshiung
Kaoshiung
Kaoshiung
Kaoshiung
Kaoshiung
Kaoshiung
Amoy
Kaoshiung
Ports
Loading
Long Beach, Cal.
Ras Tanura
Ras Tanura
Fahaheel
Ras Tanura
Ras Tanura
Ras Tanura
Ras Tanura
Ras Tanura
Ras Tanura
Ras Tanura
Ras Tanura
To
Shanghai
Shanghai & Kaoshiung
Shanghai & Kaoshiung
Shanghai & Kaoshiung
Shanghai & Kaoshiung
Shanghai & Kaoshiung
Shanghai & Kaoshiung
Shanghai & Kaoshiung
Amoy & Kaoshiung
Amoy
Amoy & Kaoshiung
Nynashamn
Nynashamn for New Castle-on-Tyne, England for repairs
Tyne Ras Tanura Bari
Bari
Genoa
Rotterdam
Bari
Rotterdam
Bari
Donges
San Lorenzo
Fawley for Falmouth
Fawley
Pt. Eliz.-Capetown
San Lorenzo
Nynashamn
Falmouth
Falmouth
La Plata
Nynashamn
Swansea
Newport News
Ras Tanura
Ras Tanura
Ras Tanura
Ras Tanura
Ras Tanura
Ras Tanura
Bandar Mashur
Ras Tamara
for repairs
Abadan
Bandar Mashur
Bandar Mashur
(Ballast for repairs)
(Repair Period)
Bandar Mashur
Mena-al-Ahmadi
Mena-al-Ahmadi
(Ballast for repairs)
(Repair Period)
Fiumicino-Genoa
Rotterdam
Bari
Rotterdam
Bari
Donges
La Plata & San Lorenzo
Fawley
Pt. Eliz.-Capetown
La Plata & San Lorenzo
Nynashamn
Falmouth
Falmouth
La Plata
Nynashamn
Swansea
Newport News
Newport News
* Reference to any intermediate bareboat or time charters is omitted.
Voyage charterer*
Chinese Petroleum Corp.
A. Johnson & Co.
Stockholm, Sweden
Azienda Nazionale Idrogenozione
Combustible, Rome
Permolio, SPA of Milan
Overseas Tanker Corp.
Azienda Nazionale Idrogenozione
Combustible
Overseas Tanker Corp.
Azienda Nazionale Idrogenozione
Combustible, Rome
Raffineries Francaise Petroles
De L'Antlantique
Anglo-Iranian Oil Co. Ltd.
CI
Anglo-Iranian Oil Co. Ltd.
it
Anglo-Iranian Oil Co. Ltd.
Standard Vacuum Oil Co.
117
Rate
$15.30 per ton
$14.364 "
it
$14.896 per ton
$14.364 per ton
$14.364 "
$13,0416 "
$12.616 "
$13.0416 "
USMC less 55%
USMC less 40%
USMC less 35%
USMC less 25%
USMC less 35%
USMC less 30%
USMC less 41%
USMC less 35%
S71/3 per ton
S53/9 "
S38/6 per ton
S67/9 "
S59/3 "
S64/9 per ton
S59/3
USMC plus 50%
Voyage
No.
Started
9/21/50
10/ 4/50
10/17/50
11/ 3/50
11/29/50
1/12/51
1/25/51
2/17/51
3/10/51
4/27/51
5/21/51
6/24/51
7/23/51
9/ 2/51
9/ 4/51
9/ 8/51
9/19/51
9/28/51
10/ 6/51
10/18/51
Dates
Ended
10/ 4/50
10/17/50
11/ 3/50
11/29/50
1/12/51
1/25/51
2/17/51
3/10/51
4/26/51
5/20/51
6/23/51
7/22/51
9/1/51
9/ 3/51
9/ 7/51
9/18/51
9/27/51
10/ 5/51
10/17/51
11/12/51
11/13/51 12/26/51
12/27/51 2/ 2/52
2/ 3/52
CHRONOLOGICAL RECORD OF VOYAGES OF S/T Antelope Hills
9/21/50-2/2/52
From
Jacksonville
New York
Everett
Marcus Hook
Berre
Philadelphia
Philadelphia
Genoa
Le Havre
Philadelphia
Genoa
Genoa
Sidon
Philadelphia
New York
Jacksonville
_Jacksonville
iuston
Ifouston
Norfolk
1,;,itterilam
Swansea
Philadelphia
Port
Loading
Tampico
Arnim), Bay
Ingleside
Mamanol
Mena-al-Ahmadi
llarbor Isl.
Puerta La Cruz
Sidon
Mena-al-Ahmadi
Amuay Bay
Bahrein
Ras Tanura
Mena-al-Ahmadi
Girard Point
Ballast fr repairs)
( Repair Period)
Tampico
['mimic?
..1ruha
.Fampico
Mena-al-A hmadi
Puerto la Cruz
Las Piedras
To
New York
Everett
Marcus Hook
Berre (Marseilles)
Philadelphia
Philadelphia
Genoa
Le Havre
Philadelphia
Genoa
Genoa
Sidon
Philadelphia
New York
Jacksonville
Jacksonville
IIeuston
,uston
Norfolk
itterdain
Swansea
Philadelphia
I liiladelphia
Rei.ereuee to any intermediate Imr..baat cr timr charters is oinitted.
118
Voyage Charterer*
Paragon Oil Company
Esso Shipping Company
Sun Oil Company
The Anglo-Saxon Petroleum Co. Ltd.
Gulf Oil Corp.
The Atlantic Refinery Co.
Standard Italo Americana Petrol.
S,oconv-Vacuu!ri Oil Co., Inc.
Gulf Oil Corp.
Permolio SPA
"Aquila" Societa per 1zioni Teenico
dust rink
Gulf Oil Corp.
Gulf Oil Corp.
Gulf Oil Corp.
Rate
USMC less 5%
USMC plus 25%
USMC plus 40%
$6.75 per ton
USMC less 27V2%
l-SMC plus 150%
USMC plus 35%
USMC plus 110%
USMC less 2712%
USMC plus 135%
USMC plus 130%
USMC less 27%
USMC less 27%.2%
USMC flat
Gissel Corp. of Panama, S. A. I 5.MC plus 37I/17i.,
( Corp. of Panama, S. A. USMC plus 371/2%
Military Sea TranT ,rtati,,n Service USM C plus 25%
Hamburger Mineralolwerke USMC phis 6214%
Ernst June:
(;ulf Oil Corp.
Gulf ()il tjorp.
USMC j.lm.s 22',ro
USMC plus 22V2.%
119
CHRONOLOGICAL RECORD OF VOYAGES OF Sir Kettleman Hills
5/4/48-2/22/51
0.
0
CD
. .
0
70
-0
tri
Voyage
No.
1
2
3
4
6
8
9
10
11
12
13 R. P.
13
14
15
15 R.P.
16
17
18
19
20
20 R. P.
20
21
22A.
Dates
Ports
Voyage Charterer*
Petroleos Me.xicanos
Chinese Petroleum arporation
CC
di
Sojusnefteexport
Exportchleb
Overseas Tankship Corp.
Sojusnefteexport
Anglo American Oil
Sovfracht
Hamburger Mineralolwerke
id
Svenska Gulf Oil Co.
Rate
$0.272727 per barrel
$18.20 per ton
$14.364 per ton
CC
CI
IS
C
$12.464
it
$15.50
U
$6.50
LISMC less 30%
$18.50 per ton
S60/3 "
$15.50 "
USMC less 35%
USMC less 35%
USMC less 35%
USMC plus 75%
USMC plus 95%
-0
-0
CD
a.
-n
73
CD
FD"
-a.
73
-0
co
73
-
Started
5/ 4/48
5/22/48
7/ 9/48
8/24/48
10/ 6/47
11/19/48
12/29/48
2/ 9/49
3/20/49
4/29/49
6/ 6/49
8/27/49
9/24/49
11/ 4/49
12/19/49
2/ 9/50
3/26/50
4/5/50
5/30/50
7/17/50
9/10/50
10/26/50
10/28/50
11/18/50
12/23/50
2/21/51
Ended
5/22/48
7/ 8/48
8/24/48
10/ 6/48
11/19/48
12/29/48
2/ 9/49
3/20/49
4/29/49
6/ 6/49
8/27/49
9/24/49
11/ 4/49
12/19/49
2/ 9/50
3/26/50
4/ 5/50
5/30/50
7/17/50
9/10/50
10/26/50
10/27/50
11/17/50
12/22/50
2/20/51
2/22/51
From
Norfolk
Havana
Shanghai
Takao
Takao
Takao
Takao
Takao
Takao
Takao
Kaoshiung
Dalny
Nakhodka
Hong Kong
Antwerp
Tsingtao
Isle of Grain
Isle of Grain
Dalny
Hamburg
Hamburg
Stadsand
Newcastle
Newcastle
Malmo
Malmo
Loading
Tampico
Tampico
Ras Tanura
Ras Tanura
Ras Tanura
Ras Tanura
Ras Tanura
Ras Tanura
Ras Tanura
Ras Tanura
Constanza
Dalny
(Repair at Hong Kong)
Bahrein
Constanza
Abadan
(Under Repairs)
Constanza
Ras Tanura
Ras Tanura
Ras Tanura
(Ballast for repairs)
(Under Repairs)
Trinidad &
Puerto La Cruz
Trinidad &
Puerto La Cruz
(Delivery)
To
Havana
Shanghai
Shanghai & Takao
Shanghai & Takao
Shanghai & Takao
Shanghai & Takao
Shanghai & Takao
Shanghai & Takao
Shanghai & Takao
Takao
Dalny
Nakhodka
Hong Kong
Antwerp
Tsingtao
Isle of Grain
Dalny
Hamburg
Hamburg
Hamburg
Newcastle
Gothenberg & Malmo
Gothenberg & Malmo
Copenhagen
* Reference to any intermediate bareboat or time charters is omitted.
Approved For Release 2004/10/12 : CIA-RDP57-00384R001100100001-0
120
CHRONOLOGICAL RECORD OF VOYAGES OF S/T St. Christopher
3/20/48-1/23/52
Voyage
No.
2
3
Dates
Ports
Voyage Charterer'
Compagnie Francaise de Raffinage
it
Rate
USMC plus 225%
a
Started
3/20/48
4/19/48
6/ 2/48
Ended
4/19/48
6/ 2/48
7/16/48
From
Mobile
Le Havre
La Mede
Loading
Puerto La Cruz
Fahaheel
Ras Tanura
To
Le Havre
La Mede
I.e IIavre
4
7/16/48
8/31/48
I.e Havre
Ras "Fatima
I.a Mede
USMC plus 225%
6
8/31/48
11/10/48
11/10/48
12/21/48
Ta Mede
La Plata
Puerto La. Cruz
. \ ruba
La I'lata
Buenos Aires
Yacimentos Petroliferos Fiscales
tt
USMC less 20%
USMC flat
12/21/48
1/13/49
Buenos Aires
Aruba
New York
Paragon Oil Co. Inc.
USMC less 10%
1/13/49
3/11/49
New York
Puerto La Cruz
.a Plata
Anglo-Saxon Petroleum Co. Ltd.
$6.40 per ton
9
3/11/49
4/12/49
La Plata
Puerto La Cruz
I.a Plata
Yaciznentos Petroliferos Fiscales
USMC less 71'2%
10
4/12/49
5/12/49
La Plata
Puerto La Cruz
La Plata
ITSMC less 18%
11-p-1
5/12/49
5/2S/49
La Plata
Ballast for repairs)
Brooklyn, N. Y.
11 R.P.
5/29/49
7/10/49
N CU: York
Vutler Repairs)
11
7/11/49
9/13/49
New York
Constanza
Dairen
Snjusnefteexport
$15.50 per ton
12
9/13/49
9/28/49
Dairen
Viadivostock
Gen3an
$ 3.75 per ton
13
9/28/49
11/13/49
Gensan
Ras Tanura
Bari
Azienda Nazionale
USMC less 551/2%
Idrogenozione Combustible
14 R. P.
14
11/13/49
1/ 8/50
1/8/50
2/17/50
Cenoa
(omoa
Under Repairs)
Pre; Tanura
Leghorn
if
USMC less 22%
15
2/17/50
4/ 9/50
Leghorn
Ras Tanura
Leghorn
USMC less 35%
16
4/ 9/50
5/19/50
Leghorn
I ashur
Le I lam:
aupagnie Franeaise de Raffinage
USMC less 40%
17
5/19/50
6/28/50
1.cght)rn
Ras Tanura
Bad
A zienda Nazionale
Idrogenozione Combustible
USMC: less 41%
18
6/28/50
3/5/50
Bad
Anivay
Fiumicino & Gen, a
Permolio S. P. A.
USMC less 40%
19
3/5/50
9/ 8/50
Genoa
Ras Tanura
Bari
Stanic Industria Petrolifere
USMC less 34%
20
9/ 8/50
10/10/50
Bari
Ras Tanura
Fiumicino-Genoa
Permolio S. P. A.
US-MU less 15%
21
10/10/50
11/18/50
Genoa
Ras Tanura
I I Iavre
Compagnie Francaise de Raffinage
LTS.N1(2 plus 25%
22
11/18/50
1/ 4/51
Pe Havre
Fal,aheel
Ifavre
Compagnic Francaise Os Raffinage
USMC plus 49%
23
1/ 4/51
3/14/51
Lc I las re
Iatidar Mzisluir
1.a Plata
Anglo-Iranian Oil Co. Ltd.
So,S, 3 per toll
24
3/15/51
4/1/51
La Hata
Durban
24 R. P.
1/ 2/51
4(15/51
Near Dnrhan
1:,:pair Period)
Durban
24 R. P.
4/16/51
5/31/51
Darlyin
Pepair Period)
Durban
24 R. P.
6/1/51
6/19/51
1) urban
Repair Period)
Durban
24
6/20/51
7/ 4/51
1)1irly,in
Kuwait
24
7/5/51
7/31/51
Kinvait
z
Le Tlavre
Compagnie Francaise de Ra nage
USMC plus 35%
25
8/1/51
8/ 2/51
1 Havre
Brest
25 It P.
8/ 3/51
8/ 8/51
Brost
Repair Period)
Brest
25
8/ 9/51
8/11/51
Brest
Algiers
25 R. P.
8/12/51
8/22/51
Algiers
Repair Period)
Algiers
95
8/23/51
1010/51
A Igiers
Mena-al-Ahmadi
Philadelphia
G101 Oil Corporation
USMC plus 22T/2%
26 R. P.
10/11/51
11/ 5/51
Philadelidna
epairs)
Baltimore
26
11/ 6/51
11/17/51
Baltimore
1..1.1:e Charles
Panlsboro
Swony- Vacuum Oil Co.
USMC plus 25%
27
11/18/51
12/ 9/51
Paid?horo
. \ raba
Bremmerhaven
Esso Petroleum Company
USMC plus 157%
28
12/10/51
1/23/52
1.1z-creme-haven
Pas Tanura
Fawley
Esso Petroleum Company
LISMC plus 182T/2%
* Reference to any intermediate barcheat or time charters is omitted.
Approved For Release 2004/10/12 : CIA-RDP57-00384R001100100001-0
Approved For Release 2004/10/12 : CIA-RDP57-00384R001100100001-0
121
CHRONOLOGICAL RECORD OF VOYAGES OF S/T Destiny
10/21/48--2/12/52
Voyage
No.
Dates
Ports
Voyage Charterer*
Rate
Started
Ended
From
Loading
To
1
2
3
10/21/48
11/18/48
12/22/48
11/18/48
12/22/48
1/26/49
Baltimore
Buenos Aires
La Plata
Aruba
Puerto La Cruz
Aruba
Buenos Aires
La Plata
Buenos Aires
Yacimentos Petroliferos Fiscales B. A.
if
id
USMC less 20%
USMC flat
USMC plus 2TA%
4
1/26/49
3/21/49
Buenos Aires
Abadan
Swansea
Anglo-Iranian Oil Co. Ltd.
56 Shillings per ton
5
3/21/49
5/ 6/49
Swansea
Ras Tanura
Rotterdam
Joint Export Import Agency
USMC less 22%
Frankfurt-on-Main
6
5/6/49
1/19/50
Rotterdam
Lay up period
Genoa
7
1/20/50
2/21/50
Genoa
Ras Tanura
Bari
Azienda Nazionale Indrogenozione
Combustible
USMC less 26%
8
2/21/50
3/ 6/50
Bari
Tripoli
Trieste
"Aquila" Societa Tecnico-Industriale
USMC less 31%
9
3/ 6/50
4/13/50
Trieste
Bandar Mashur
Le Havre
Compagnie Francaise de Raffinage
USMC less 40%
10
4/13/50
5/20/50
Le Havre
Ras Tanura
Genoa
Permolio S. P. A.
USMC less 38%
11
5/20/50
6/24/50
Genoa
Ras Tanura
Leghorn
Azienda Nazionale Indrogenozione
USMC less 35%
Combustible
12
6/24/50
8/ 8/50
Leghorn
Abadan
Swansea
Anglo-Iranian Oil Co. Ltd.
S 57/6 per ton
13
8/ 8/50
9/23/50
Swansea
Bandar Mashur
Nynashamn
S 62/? "
14
9/24/50
12/17/50
Nynashamn
Bandar Mashur
River Plate
?
S 68/3 "
15
12/17/50
2/17/51
River Plate
Mena-al-Ahmadi
Philadelphia
Gulf Oil Corp.
USMC less 272%
16 R. P.
2/17/51
3/ 2/51
Philadelphia
(Repair Period)
Jacksonville
16
3/ 2/51
3/13/51
Jacksonville
Aruba
Baltimore
Panama Transport Co.
USMC plus 170%
17
3/14/51
4/ 6/51
Baltimore
Puerto La Cruz
Genoa
Amonima Petroli Italiana
USMC plus 120%
18
4/ 7/51
4/16/51
Genoa
Tripoli
Augusta, Sicily
Socony-Vacuum Oil Co., Inc.
USMC plus 170%
19
4/17/51
5/27/51
Augusta, Sicily
Mena-al Ahmadi
Philadelphia
Gulf Oil Corp.
USMC less 271/2%
20
5/28/51
6/25/51
Philadelphia
Magpetco
Buenos Aires
Ultrama, S. A. P. A.
USMC less 5%
21
6/26/51
8/21/51
Buenos Aires
Mena-al-Ahmadi
Philadelphia
Gulf Oil Corp.
USMC less 271/2%
22
8/22/51
9/13/51
Philadelphia
Baytown
Donges
Raffineries Francaise de Petrole
USMC plus 10%
De'L'Atlantique, S. A.
23
9/14/51
10/ 6/51
Donges
Sidon
Donges
Compagnie Francaise de Raffinage
USMC plus 49.9%
24
10/ 7/51
11/22/51
Donges
Mena-al-Ahmadi
Swansea
Gulf Oil Corp.
USMC less 27%%
25
11/23/51
1/ 9/52
Swansea
Mena-al-Ahmadi
Le Havre and Rouen
Gulf Oil Corp.
USMC less 27%%
26
1/10/52
1/31/52
Rouen
Las Piedras
Philadelphia
Gulf Oil Corp.
USMC less 25%
27 R. P.
2/1/52
2/12/52
Philadelphia
(Repair Period)
Baltimore
* Reference to any intermediate bareboat or time charters is omitted.
0- 1.00001.001. 1.00t1178?00-L9dCltl-VI3 : ZI?/01?/1700Z eseeieu JOd peACLICIdV
Approved For Release 2004/10/12 : CIA-RDP57-00384R001100100001-0
122
CHRONOLOGICAL RECORD OF VOYAGES OF S/T New London
7/9/48-219/52
Voyage
No.
Ports
Voyage Charterer*
Rate
Started
Dates
Ended
?
From
Loading
To
1
7/ 9/48
7/22/48
New York
Harbor Isl.
New York
Esso Standard Oil Co.
USMC plus 50%
2
7/23/48
8/ 6/48
New York
Avondale
Everett, Mass.
3
8/ 7/48
8/19/48
Everett, Mass.
Corpus Christi
Baltimore
id
4
8/20/48
8/31/48
Baltimore
13oytown
Jacksonville
"
di
5
9/1/48
9/11/48
Jacksonville
Corpus Christi
New York
6
9/12/48
9/24/48
New York
Baton Rouge
Pt. Everglades
..
.,
7
9/25/48
10/ 6/48
Pt. Everglades
Aruba
Portland, Me.
11
di
8
10/ 7/48
10/19/48
Portland
Avondale
Baltimore
il
II
9
10/20/48
10/31/48
Baltimore
Corpus Christi
Baltimore
"
10
11/ 1/48
11/15/48
Baltimore
Cartagena
New York
di
11
11/16/48
12/ 8/48
New York ?
Aruba
Rio De j a nein.) & Santos
id
12
12/ 9/48
12/29/48
Rio De Janeiro
Puerta La Cruz
Portland, Me.
li
id
id
13
12/30/48
1/13/49
Portland
Puerta La Cruz
New York
14
1/14/49
1/25/49
New York
Beaumont
New York
II
15
1/26/49
2/ 8/49
New York
Corpus Christi
New York
it
df
lb
21 9/49
2/22149
New York
Puerta La Cruz
I 'ort land
fd
17
2/23/49
3/7/49
Portland
Beaumont
New York
18
3/ 8/49
3/21/49
New York
Aruba
Portland
id
di
19
3/22/49
4/12/49
Portland
Aruba
Recife & Belem
20
4/13/49
4/23/49
Belem
Caripito
New York
di
ii
21
4/26/49
5/17/49
New York
Aruba
Avonmouth
.,
?
')/
..,-
5/18/49
6/ 6/49
Avonmouth
Caripito
I Ialifax
id
a
23
6/7/49
6/20/49
Halifax
Aruba
New York
a
a
24
6/21/49
7/14/49
No.v York
Aruba
t 'openhagen
25
7/15/49
8/14/49
Copenhagen
Amuay Bay
I .e Havre
"
?
26
8/15/49
8/29/49
Le Havre
Caripito
Aruba
27
8/30/49
9/12/49
Aruba
Caripito
New York
?
28
9/13/49
9/27/49
New York
Corpus Christi
New York
fl
29
9/28/49
10/ 9/49
New York
Aruba
Charleston
dd
30
10/10:49
19/21/49
Cliarleston
Anmay Bay
Everett, Mass.
If
Reference to any intertm2iate bar. boat. 9 r time ci arter Is omitted.
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Voyage
No.
Dates
Ports
Voyage Charterer*
Rate
Started Ended
From
Loading
To
31
10/22/49
11/ 6/49
Everett
Caripito
New York
Esso Standard Oil Co.
USMC plus 50%
32-A
11/ 7/49
11/23/49
Jacksonville?Repair
32
33
34
11/23/49
12/ 5/49
1/28/50
12/ 5/49
1/27/50
3/25/50
Jacksonville
Philadelphia
Philadelphia
Puerta La Cruz
Kuwait
Mena-al-Ahmadi
Philadelphia
Philadelphia
Philadelphia
Gulf Oil Corporation
d4
USMC less 35%
tf
35
3/26/50
4/17/50
Philadelphia
Cardon
Las Palmas
Anglo-Iranian Oil Co. Ltd.
S 25/6 per ton
36
4/18/50
5/23/50
Las Palmas
Ras Tanura
Leghorn
Order of Azienda Nazionale
USMC less 35%
Idrogenozione Combustible
37
5/24/50
7/ 7/50
Leghorn
Kuwait
Philadelphia
Gulf Oil Corporation
USMC less 35%
38
7/ 8/50
7/10/50
Philadelphia
Girard Pt.
Deepwater Pt.
$.06 per bbl.
39
7/11/50
8/1/50
Deepwater
Caripito
Genoa
Ballestrena, Tuena & Canepa
USMC less 45%
40
8/ 2/50
9/10/50
Genoa
Bandar Mashur
Swansea
Anglo-Iranian Oil Co. Ltd.
55 S per ton
41
9/11/50
10/29/50
Swansea
Mena-al-Ahmadi
Philadelphia
Gulf Oil Corporation
USMC less 35%
42
10/30/50
12/ 2/50
Philadelphia
Las Piedras
Destrehan
Pan-Am Southern Corp.
USMC plus 65%
43
12/ 3/50
12/12/50
Destrehan
Pt. Arthur
Marcus Hook
Paragon Oil Company
USMC plus 40%
44
12/13/50
12/26/50
Marcus Hook
Las Piedras
Destrehan
Pan-Am Southern Corp.
USMC plus 50%
45
12/27/50
1/ 7/50
Destrehan
Corpus Christi
New York
Paragon Oil Company
USMC plus 55%
46
1/ 8/51
1/29/51
New York
Amuay Bay
Le Havre
Panama Transportation Company
USMC plus 60%
47
1/30/51
3/20/51
Le Havre
Mena-al-Ahmadi
Philadelphia
Gulf Oil Corporation
USMC less 35%
48
3/21/51
4/ 4/51
Philadelphia
Puerta La Cruz
Marcus Hook
Sinclair Refining Co.
USMC plus 200%
49
4/5/51
4/18/51
Marcus Hook
Puerta La Cruz
Marcus Hook
Sinclair Refining Co.
USMC plus 200%
50
4/18/51
5/10/51
Philadelphia
Aruba
Stanlow
The Anglo-Saxon Petroleum Co. Ltd.
USMC plus 140%
51
5/11/51
6/28/51
Sanlow
Mena-al-Ahmadi
Philadelphia
Gulf Oil Corporation
USMC less 271/270
52
6/29/51
7/25/51
Philadelphia
Amuay Bay
Harburg
Panama Transport Corp.
USMC plus15%
53
7/26/51
9/ 8/51
Harburg
Ras Tanura
Le Havre
Compagnie Francaise de Raffinage
USMC plus 25%
54
9/ 9/51
10/23/51
Le Havre
Mena-al-Ahmadi
Heysham (U. K.)
Gulf Oil Corporation
USMC less 271/2%
55
10/24/51
12/20/51
Heysham
Mena-al-Ahmadi
Philadelphia
Gulf Oil Corporation
USMC less 271A%
56
12/21/51
12/24/51
Philadelphia
Ballast
Jacksonville
The Texas Company
USMC plus 200%
5612.P.
12/25/51
1/5/52
Jacksonville
(Repair Period)
Jacksonville
Repair Period
56
1/ 6/52
1/18/52
Jacksonville
Puerto La Cruz
Portland, Me.
The Texas Co.
USMC plus 200%
57
1/19/52
2/ 9/52
Portland
Aruba
Shelhaven
Anglo-Saxon Petroleum Co.
USMC plus 185%
* Reference to any intermediate bareboat or time charters is omitted.
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MEMORANDUM
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INDEX.
PAGE
Introductory Statement 1
I. There has been no violation of Section 9 of the
Shipping Act of 1916 3
(A) Analysis of Section 9 of the Shipping Act
of 1916 4
(1) Prerequisites of forfeiture under
Section 9 5
(a) The transfer must be to a person
not a citizen 6
(b) The transfer must be of a vessel
or interest therein 14
(c) The transfer must be without the
approval of the Commission 18
(d) The transfer must be made by a
United States citizen 19
(2) Section 9 of the Shipping Act of 1916
must be strictly construed as a penal
statute 20
(3) Section 9 of the Shipping Act of 1916
is unconstitutional 24
(a) Section 9 constitutes a depriva-
tion of property without due
process of law 24
(b) Section 9 is invalid as an attempt
to delegate legislative power to
the Commission 24
(B) United Tanker Corporation and Meacham
Corporation have at all times been United
States citizens within the meaning of Sec-
tion 2 of the Shipping Act of 1916
28
(1) United Tanker Corporation 28
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PAGE
(2) Interest held by China Trading &
Industrial Development Corporation 31
(3) The China International Foundation,
Inc. 32
(4) Meacham Corporation 33
(0) The tanker-owning subsidiaries of United
Tanker Corporation have at all times been
United States citizens 34
(D) All transactions subject to the provisions
of Section 9 of the Shipping Act of 1916
have received the requisite approval of
the United States Maritime Commission 36
(1) Original acquisition of vessels 37
(2) Subsequent transfers of vessels 37
(3) Mortgages of vessels 38
(4) Charters of vessels 39
(5) Transfers of stock or securities of
tanker-owning companies 40
IT. There has been no violation of the provisions
of the Registry Statutes.. 43
(A) Under the registry statutes the national-
ity of the stockholders of a domestic cor-
poration is not material 44
(B) Any misstatement in the registry oath
of facts not required by law is immaterial 49
(C) If any misstatements were made to obtain
the registry of the vessels, the misstate-
ments were made innocently 51
III. If any technical violations of law have
occurred, which is denied, they should be dis-
regarded in view of the mitigating circum-
stances 52 ?
Appendix A 58
Appendix B 59
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MEMORANDUM
Submitted
IN SUPPORT OF APPLICATION FOR REMISSION OR MITI-
GATION OF FORFEITURES OR PENALTIES WITH
RESPECT TO THE T2 TANKERS Meacham, Antelope Hills,
KettZeman Hills, St. Christopher, Destiny AND New London.
Introductory Statement.
The libel filed by the United States on November 9,
1951 in the United States District Court for the Eastern
District of Virginia seeks the forfeiture of the vessel
Meacham, then owned by Meacham Corporation, for alleged
violations, on grounds of lack of citizenship, of the pro-
visions of Section 9 of the Shipping Act of 1916, as amended,
and of certain provisions of the registry statutes. The
Meacham was one of six U. S. flag T2 tankers sold by the
United States Maritime Commission (succeeded on May
24, 1950 by the Department of Commerce, Maritime Admin-
istrator, and herein called the "Commission") at the
statutory sales price fixed by Congress to companies
financed by United Tanker Corporation ("United"), a
Delaware corporation. The facts as to the acquisition and
ownership of the Meacham are somewhat similar to the
facts involved in the acquisition and ownership of the other
vessels referred to above. Accordingly, the accompanying
Application (the "Application") seeks remission or mitiga-
tion of any forfeitures or penalties which might be asserted
against the other vessels as well as the Meacham, and this
memorandum will discuss questions of law and fact which
may be common both to the Meacham and the other vessels.
United was organized in December 1947 to engage in
the tanker business. Its controlling stock has at all times
been held by United States citizens experienced in the
shipping business. Substantially all of its equity capital
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was supplied by China Trading & Industrial Development
Corporation ("China Trading"), a Chinese corporation,
not experienced in the shipping business. China Trading
was interested in financing a company from which it could
charter tankers for recharter to Chinese Petroleum Corpo-
ration ("Chinese Petroleum"), a subsidiary of National
Resources Commission of China, a branch of the Nation-
alist Government of China. All of these facts were
disclosed at the time to the Commission when United applied
to it to purchase tankers. The Commission informed
United that the available tankers had been allocated to
earlier applicants.* The Commission raised no question as
to the United States citizenship of United. On the contrary
the Assistant General Counsel for the Commission gave his
opinion that United was a United States citizen within the
meaning of Section 2 of the Shipping Act of 1916, as
amended.
United then sought to charter tankers from, or invest
in the stock of, more successful applicants. The arrange-
ments made by it were fully disclosed to the Commission.
The charters made by United of two of the tankers to
China Trading and to Chinese Petroleum were specifically
approved by the Commission. The tankers were oper-
ated by United States citizen shipping firms specifically
approved by the Commission.
During the difficult times of 1949-1950, when United
was losing money from the operation of tankers in an
unprofitable tanker market, the Commission, knowing all
the facts, repeatedly refused to take back one of the
Section 299.2 of General Order 60 of the Commission under
the Merchant Ship Sales Act of 1946 provided "All citizen appli-
cations received by the Secretary within a given calendar month
shall be given preference over all applications received by the Secre-
tary in any subsequent calendar month."
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tankers in cancellation of a mortgage held by the Com-
mission. Now the United States, having been paid the
full statutory sales price fixed by Congress for the
Meacham, seeks in effect to be paid twice by forfeiting
the vessel, in shocking disregard of the past actions of the
Commission upon which United and Meacham Corporation
were entitled to rely.
This memorandum will show: (1) that there has been
no violation of Section 9 of the Shipping Act of 1916, as
amended; (2) that there has been no violation of the pro-
visions of the registry statutes; and (3) that if any tech-
nical violations have occurred, which is denied, they should
be disregarded in view of the mitigating circumstances,
including reliance upon advice from representatives of the
Commission, full disclosure of facts to such representatives,
and complete compliance with the purpose and intent of the
relevant statutes.
I .
There has been no violation of Section 9 of the
Shipping Act of 1916.
In demonstrating that there has been no violation of
Section 9, this memorandum will (A) analyze the provisions
of Section 9, (B) establish that United and Meacham Cor-
poration have at all times been United States citizens within
the meaning of Section 2 of the Shipping Act of 1916, as
amended, (C) establish that the tanker owning subsidiaries
of United have also at all times been United States citizens,
and (D) establish that all transactions subject to the pro-
visions of Section 9 have received the requisite approval
of the Commission.
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(A) Analysis of Section 9 of the Shipping Act of 1916.
Section 9 of the Shipping Act of 1916, as amended (46
U. S. C. 808) provides as follows:
"Any vessel purchased, chartered, or leased from
the United States Maritime Commission, by persons
who are citizens of the United States, may be regis-
tered or enrolled and licensed, or both registered
and enrolled and licensed, as a vessel of the United
States and entitled to the benefits and privileges
appertaining thereto; Provided, That foreign-built
vessels admitted to American registry or enrollment
and license under this chapter, and vessels owned
by any corporation in which the United States is a
stockholder, and vessels sold, leased, or chartered
by the commission to any person a citizen of the
United States, as provided in this chapter, may
engage in the coastwise trade of the United States
while owned, leased, or chartered by such a person.
Every vessel purchased, chartered, or leased
from the commission shall, unless otherwise author-
ized by the commission, be operated only under such
registry or enrollment and license. Such vessels
while employed solely as merchant vessels shall be
subject to all laws, regulations, and liabilities govern-
ing merchant vessels, whether the United States be
interested therein as owner, in whole or in part, or
hold any mortgage, lien, or other interest therein.
Except as provided in section 1181 of this title,
it shall be unlawful, without the approval of the
United States Maritime Commission, to sell, mort-
gage, lease, charter, deliver, or in any manner trans-
fer, or agree to sell, mortgage, lease, charter, deliver,
or in any manner transfer, to any person not a citizen
of the United States, or transfer or place under
foreign registry or flag, any vessel or any interest
therein owned in whole or in part by a citizen of the
United States and documented under the laws of the
United States, or the last documentation of which
was under the laws of the United States.
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Any such vessel, or any interest therein,
chartered, sold, transferred, or mortgaged to a per-
son not a citizen of the United States or placed under
a foreign registry or flag, or operated, in violation of
any provision of this section shall be forfeited to the
United States, and whoever violates any provision
of this section shall be guilty of a misdemeanor and
subject to a fine of not more than $5,000, or to
imprisonment for not more than five years, or both."
Attached hereto as Appendix A is a compilation showing
the original language of the 1916 Act, together with the
amendments made in 1918, 1920 and 1938.
Section 9 provides in substance that any U. S. flag vessel,
or any interest therein, shall be forfeited to the United
States if it has been transferred, mortgaged or chartered
without the approval of the Commission by a United States
citizen to a person not a United States citizen. The lan-
guage of Section 9 is analyzed under (1) below to determine
the prerequisites of forfeiture. It will be shown under (2)
below that the language must be strictly construed, since
Section 9 is penal in nature. It will be shown under (3)
below that, by its sweeping delegation of power to the
Commission and its denial of the right of alienation of
property, Section 9 is unconstitutional.
(1) Prerequisites of forfeiture under Section 9.
A vessel may only be forfeited under Section 9 if all
of the following four elements are established:
(a) The transfer must be to a person not a citizen;
(b) The transfer must be of a vessel or interest therein;
(c) The transfer must be without the approval of the
Commission;
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(d) The transfer must be made by a United States
citizen. Unless all four of the above elements are present
there is no ground for forfeiture under Section 9.
(a) The transfer must be to a person not a citizen.
The definition of citizen for the purpose of Section 9 of
the Shipping Act of 1916 is contained in Section 2 of the
Act and, in the case of a corporation, rests primarily upon
the control of the corporation by United States citizens.
Section 2 (46 U. S. C. 802) provides as follows:
'(a) Within the meaning of this chapter no cor-
poration, partnership, or association shall be deemed
a citizen of the United States unless the controlling
interest therein is owned by citizens of the United
States, and, in the case of a corporation, unless its
president and managing directors are citizens of
the United States and the corporation itself is organ-
ized under the laws of the United States or of a
State, Territory, District, or possession thereof,
but in the ease of a corporation, association, or
partnership operating any vessel in the coastwise
trade the amount of interest required to be owned by
citizens of the United States shall be 75 per centum.
(b) The controlling interest in a corporation
shall not be deemed to be owned by citizens of the
United States (a) if the title to a majority of the
stock thereof is not vested in such citizens free from
any trust or fiduciary obligation in favor of any per-
Ben not a citizen of the United States; or (b) if the
majority of the voting power in such corporation is
not vested in citizens of the United States; or
(c) if through any contract or understanding it is
so arranged that the majority of the voting power
may be exercised, directly or indirectly, in behalf of
any person who is not a citizen of the United States;
or, (d) if by any other means whatsoever control of
the corporation is conferred upon or permitted to
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be exercised by any person who is not a citizen of
the United States.
(c) Seventy-five per centum of the interest in a
corporation shall not be deemed to be owned by citi-
zens of the United States (a) if the title to 75 per
centum of its stock is not vested in such citizens free
from any trust or fiduciary obligation in favor of
any person not a citizen of the United States; or
(b) if 75 per centum of the voting power in such
corporation is not vested in citizens of the United
States; or (c) if, through any contract or understand-
ing it is so arranged that more than 25 per centum
of the voting power in such corporation may be
exercised, directly or indirectly, in behalf of any per-
son who is not a citizen of the United States; or
(d) if by any other means whatsoever control of any
interest in the corporation in excess of 25 per centum
is conferred upon or permitted to be exercised by
any person who is not a citizen of the United States."
Attached hereto as Appendix B is a compilation showing
the original language of Section 2 of the Shipping Act of
1916 and the changes effected by the various amendments
thereto.
Section 2 originally provided that no corporation
should be deemed a citizen of the United States unless
"the controlling interest therein" is owned by citizens and
the president and the managing directors are citizens and
the corporation is organized under the laws of the United
States or of a State. Subsequent amendments expanded the
language of Section 2 in order to prevent any possible eva-
sion of its provisions. However, the legislative history of
the amendments makes it clear that no substantive change
was intended in the underlying concept of the statute.
Congress was concerned in maintaining unquestioned con-
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trol of American shipping in the hands of United States
citizens so that all U. S. flag vessels would be available to
the United States in time of national emergency. Congress
was not concerned in preventing the investment of foreign
capital in United States shipping if such investment did
not defeat the control in the hands of United States citizens.
House Report No. 568 accompanying H. R. 12100,
ordered printed May 15, 1918, summarized the reason for
the new legislation and the effect of the amendment to Sec-
tion 2 of the Shipping Act which added present paragraph
(b) to Section 2, as follows:
" ? ? The new legislation is rendered necessary
by the dearth of tonnage created by the unrestricted
submarine warfare of the Imperial German Govern-
ment. As a consequence of this shortage there has
been during the past two years a systematic, deter-
mined, and resourceful effort on the part of foreign
financial interests to buy up and take from under
the American flag the vessels of the American mer-
chant marine. * ? *"
?
?
?
"Section 2 of the bill amends section 2 of the
shipping act by setting forth more in detail under
what circumstances a corporation is deemed to be
a citizen of the United States within the meaning
of the act. Under the present law a corporation,
partnership, or association is not a 'citizen' unless
'the controlling interest therein is owned by citizens
of the United States.' This phrase has been elabo-
rated to include every possible device by which
foreign interests could obtain control in law or fact
over corporations formed under American law."
In the debates in the House of Representatives (65th Con-
gress, 2d Session, June 5-28, 1918; Congressional Record,
Vol. 56), J. W. Alexander, Chairman of the Committee on
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Merchant Marine and Fisheries, made the following state-
ment:
"Now, if I had the time I would explain just in
what respects we amend the shipping act under the
provisions of H. R. 12100. Section 2 of the shipping
act is amended by adding at the end of the first para-
graph a provision the purpose of which is to further
safeguard our Government and insure the control
of ships being built in American shipyards, to pre-
vent foreign interests, under any sort of device or
contract or trust agreement, to get control of our
shipping. The same is true as regards our ship-
yards. The committee were impressed with the
importance of so hedging these great interests with
legislation that all the resources of this country might
be utilized and made effective in the building of
ships and retaining to ourselves the control of all
our great shipbuilding interests. In other words,
during this crisis, when one of the great problems
confronting us is to build ships quickly and in large
numbers and make them available to transport our
troops and supplies and munitions to Europe, pro-
vide food and munitions of war for our allies, it
should be placed beyond the power of any foreign
government to hamper us or get control in any way
of our ships or of our shipbuilding industries" (p.
8026).
In. the course of these debates Mr. Robbins described the
reference in the amendment to "a majority of the stock"
as meaning "majority control of the stock which controls
the company". Mr. Robbins said:
"What I conceive to be a very important feature
of this bill, Mr. Chairman, is that provision by which
they seek to prevent the control of a shipping com-
pany, or a ship even, under section 2 from passing
into foreign hands. As I understand this section
and the explanation that the gentleman gave of it,
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it relates only to the majority interest of the stock
of the company. The minority may be held by for-
eigners. This inhibition only works against the
majority control of the stock which controls the
company ? ? s." (p. 8029).
Mr. Saunders described the purpose of the amendment
as follows:
"In other words, by the wording of this amend-
ment such a situation is intended to be brought to
pass that by no possible legal legerdemain can any
arrangement be made by which the controlling inter-
est may be in the hands of some other person or
persons than citizens of the United States, and at
the same time the corporation continues to be a
citizen of the United States. I rather think the
original act accomplished this result, but there were
certain subtle suggested possibilities under the exist-
ing law that caused the committee to report the
amendment under consideration, as a corrective for
these possibilities" (p. 8032).
In the hearings before the Committee on Commerce of
the United States Senate (65th Congress, 2d Session) on
the 1918 amendment, Gerard C. Henderson, an attorney on
the legal staff of the United Slates Shipping Board, made
the following statement to the effect that the amendment
probably would not change the existing law:
"Section 2 of the bill probably does not change exist-
ing law. Existing law says that a corporation shall
not be deemed a citizen of the United States for the
purposes of this act, unless it is substantially con-
trolled by citizens of the United States, or words to
that effect. Section 2 of the bill amplifies that some-
what?
Senator It makes it more definite.
Nelson (inter-
posing)
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Mr. Henderson It makes it more definite, so as to
be certain that the ingenuity of
lawyers cannot find a way out of
the simpler statement in the pres-
ent shipping act. There is no
change of policy there, but merely
a better drafted provision."
The Merchant Marine Act of June 5, 1920 amended
Section 2 of the Shipping Act of 1916 by adding the present
paragraph (c) and the last clause in paragraph (a) requir-
ing 75% of the interest in a corporation to be owned by
United States citizens for purposes of the coastwise trade.
The bill as originally introduced provided that "all the
stock and securities" of a corporation must be owned by
United States citizens for purposes of coastwise trade and
75% for purposes of foreign commerce. This was opposed
on the floor of the Senate, and the bill as finally passed left
the pre-existing law unchanged except for the additional
requirement of a 75% interest for purposes of the coast-
wise trade.
In the course of the Senate debates on the 1920 amend-
ment (66th Congress, 2d Session, May 4-May 24, 1920, Vol.
59) the question was raised as to what would happen in
the event of the acquisition by an alien through inheritance
of stock in a corporation owning a United States vessel reg-
istered for coastwise trade. In order to guard against this
contingency Senator King introduced an amendment pro-
viding that in such a case the stock acquired by the alien
should have no voting power. This amendment was agreed
to by the Senate but omitted from the final legislation. It
is significant that the proposal was not to prevent the alien
from retaining a financial interest in the corporation or
from receiving dividends but merely to insure that the alien
would not acquire control of a voting interest.
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The legislative history of Section 2 of the Shipping Act
of 1916 contains no specific discussion of the necessary
stock ownership of a corporation with several classes of
stock. It is significant, however, that the ?reference to "a
majority of the stock" is part of a definition of "control-
ling interest" and that Congress rejected an amendment
which would have required all of the stocks and securities of
a corporation to be owned by United States citizens. The
reference to 75% of the interest should be construed in the
same way, the difference being in percentage rather than
in nature of interest. As stated by Senator Jones on the
floor of the Senate on June 4, 1920:
"s ? ? Some people, however, on the outside
have raised the question as to the meaning of the
words 'controlling interest', which are found in the
section relating to the ownership of stock in shipping
corporations. The term is used just the same as it
is used. in the present shipping act, and I do not
think there can be any question about the construc-
tion that should be given to it. I know that the com-
mittee understood it to mean actual bona fide
American ownership of a majority of the stock of
corporations doing business in the foreign trade
and 75 per cent in the coastwise trade. I am satisfied
that that is the understanding that the Senate has
with reference to that language and that provi-
sion. ? ? ?ff
The intent of the Shipping Act of 1916 would thus seem
to require the reference to stock ownership to be construed
to mean ownership of voting stock. This does not render
surplusage the additional requirements of Section 2 that
a majority or 75% of the voting power must be vested in
citizens and that a majority or 75% of the voting power
must not be exercised through any contract or understand-
ing on behalf of a non-citizen. Without these two adcli-
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tional requirements it would be possible for a citizen to
own a majority or 75% of the voting stock but to give an
irrevocable proxy to a non-citizen, or to enter into a con-
tract to vote his stock in accordance with directions received
from a non-citizen.
The language of Section 2 of the Shipping Act of 1916,
as amended, is also significant for its omissions. It requires
the president and managing directors to be citizens of the
United States. It does not prohibit a citizen corporation
from having other non-citizen officers or employees. It
prohibits control on the part of a non-citizen, but it does
not prohibit the investment of foreign capital in a citizen
corporation or the giving to a foreign investor of the
normal safeguards of a creditor or investor.
In this connection the case of American Union Line, Inc.,
v. Oriental Navigation Corporation, 239 N. Y. 207 (1924) is
of interest. A United States citizen held as trustee the
stock of American Union Line to be delivered to another
United States citizen upon the settlement by the latter of
his indebtedness to a Danish corporation. The Court of
Appeals held that the existence of the indebtedness by the
stockholder to the Danish corporation did not preclude the
possibility of American Union Line's being considered a
citizen within the meaning of the Shipping Act. The Court
said:
"' Under these circumstances, we think it
became a question of fact and judgment for the
governmental boards to decide whether plaintiff
came within the meaning of the statute that 'no cor-
poration ' shall be deemed a citizen of the
United States unless the controlling interest therein
is owned by citizens of the United States,' and the
War Board might have found that under that stat-
ute this stock, in the hands of a citizen and going
to a citizen and simply held as security for the pay-
ment of indebtedness to an alien, was 'owned by a
citizen of the United States' * "" (p. 216).
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It is therefore clear from the legislative history of
Section 2 of the Shipping Act of 1916, as amended, that the
requirements of citizen ownership of stock relate to owner-
ship of the voting stock of a corporation, not to the owner-
ship of each class of stock. Congress was concerned with
preventing foreign control of U. S. shipping. It has never
been the policy of the United States to prevent the invest-
ment of foreign capital in this country, and Congress
rejected a proposal in 1920 to require "all the stock and
securities" of a ship owning corporation to be owned by
United States citizens. Certainly there is no more reason
to prohibit alien ownership of a non-voting preferred stock
than to prohibit alien ownership of notes or bonds. If
United States citizens own the controlling stock of a corpo-
ration in the requisite percentages, the corporation is a
United States citizen within the meaning of the Shipping
Act of 1916, as amended.
(b) The transfer must be of a vessel or interest therein.
Section 9 of the Shipping Act of 1916, as amended,
requires the approval of the Commission only for the trans-
fer of "any vessel or any interest therein". It does not
require approval for the transfer of shares of stock of a
corporation owning a vessel. Similarly, the language as to
forfeiture provides only for the forfeiture of "any such
vessel, or any interest therein" and not for the forfeiture
of any stocks or securities. This limitation of the restric-
tions in Section 9 to "any vessel or any interest therein"
must have been intentional, since the Act of July 15, 1918
which amended Section 9 of the Shipping Act of 1916 also
added Section 37 of that Act in its present form, applicable
only in time of national emergency, which specifically
requires the approval of the Commission for transfers of
the controlling interest or a majority of the voting power
in a corporation owning a vessel, and specifically provides
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that any stocks, bonds or other securities transferred in
violotion of the restrictions of the section should be for-
feited (46 U. S. C. 835). Section 37 came into effect again
in December, 1950 when the President declared a national
emergency, but was not in effect at the time of the trans-
action with which this memorandum is concerned.
The distinction between an interest in a vessel and an
interest in the stock of a corporation owning a vessel had
been well established in the law long before the enactment
of the Shipping Act of 1916 and its subsequent amendments.
In the English case of The Queen v. Arnaud and Powell,
9 Q. B. 806 (1846) involving the registry of a British vessel
owned by a British corporation which had alien stock-
holders, Lord Denman emphasized the distinction as
follows:
"The individual members of the corporation, no
doubt, are interested, in one sense, in the property
of the corporation, as they may derive individual
benefit from its increase, or loss from its destruction;
but in no legal sense are the individual members
the owners. If all the individuals of the corpora-
tion were duly qualified British subjects, they could
not register the vessel in their individual names
as owners, but must register it as belonging wholly
to the corporation as owner."
"It was contended that the effect might be to
defeat the object and policy of the Navigation laws
in this respect. The individual members of the
British Corporation might, either originally or by
transfer, be all foreigners. Such does not appear to
be contemplated or provided for by the act in ques-
tion. If it be casus omissus, and evil consequences
arise, they may be remedied by the interference of
the legislature, as the case stands, it seems to
us that the British corporation is to all intents the
legal owner of the vessel, and entitled to the registry,
and that we cannot notice any disqualification of an
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individual member which might disable him, if owner
from registering the vessel in his own name" (p.
816).
The decision in the Arnaud case has been followed in the
United States both in the opinions of the Attorney Gen-
erals and in the decisions of the courts under the registry
statutes, as will be shown under Point II below, it has
long been held that an oath as to absence of foreign interest
in a vessel may properly be made if the vessel is owned
by a domestic corporation, even though all the stock of the
domestic corporation is owned by foreigners.
The legislative history of the 1918 and 1920 amendments
to Section 9 of the Shipping Act of 1916 shows clearly that
Congress was aware that Section 9 imposed no penalty on
the transfer to a non-citizen of stock in a corporation
owning a U. S. flag vessel. Thus in the debates in the
House of Representatives at the time of the passage of
the 1918 amendment (65th Congress, 2d Session, June 5-28,
1918, Congressional Record, Vol. 56), Mr. Robbins stated:
" ? * ? This inhibition only works against the
majority control of the stock which controls the
company. If this company owns ships how are you
going to enforce that provision/ There is no pro-
vision in this bill that works a forfeiture of the
charter. There is no provision here that renders
null and void the transfer of the stock" (p. 8029).
In the hearings which had been called on the 1918 amend-
ment before the House Merchant Marine and Fisheries
Committee, 65th Congress, 2d Session, in April 1918, Mr.
Burling, General Counsel for the United States Shipping
Board, made the following statement with respect to the
proposed addition of Section 37, applicable only during
national emergency, and restricting the transfer of stock
in corporations owning vessels:
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"* * * You see the original act prohibited a ship
from being transferred to a corporation which is
owned abroad, but there is nothing in the act to
prevent foreigners from coming in and buying all
the stock. You can organize a corporation the stock
of which is owned by Americans, and as soon as it
is organized you can go to work and have that stock
transferred to foreigners and thereby defeat the
spirit of the law, and this forbids that any such
stock shall be so transferred."
In the course of the debates in the Senate on the 1920
amendment (66th Congress, 2d Session, May 4-May 24,
1920, Congressional Record, Vol. 59), Senator King and
Senator Jones engaged in the following colloquy:
"Mr. King. Suppose a case where a foreigner
is an heir to an American who owns a certain block
of stock in a coastwise boat, and under the laws of
distribution that alien received the stock. What
becomes of the stock? Is it forfeited/ What provi-
sions are there in the bill to penalize the corpora-
tion, if it is to be penalized, for permitting some alien
to remain the owner of stock in the corporation?
Mr. Jones of Washington. There are no penaliz-
ing provisions. There are no penalizing provisions
in the law now and as it has existed ever since we
had a Shipping Board. We have made no change
in that particular.
Mr. King. How would the provision be enforced,
if there is any enforcement of the provision, restrict-
ing the ownership to all Americans?
Mr. Jones of Washington. I will say that I do not
know just how it would be done. I think probably
the Shipping Board would make some rules and
regulations under which they would seek to control
the issuance of stock to aliens, or something of that
kind; but there is no penalty.
Mr. King. It is just a sort of a naked fulmina-
tion?
Mr. Jones of Washington. Really, that is about
it.,,
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Following this colloquy, Senator King introduced his
amendment to provide that shares of stock acquired by an
alien by intestate or involuntary succession should lose
their voting power. There would have been no purpose in
this proposed amendment if the result of the acquisition
of stock by an alien was the automatic forfeiture of either
the stock itself or the vessel owned by the corporation.
The foregoing review of the legislative history of Sec-
tion 9 makes it clear that, except during time of national
emergency when Section 37 comes into operation, there is
no restriction upon the transfer to a non-citizen of stock
of a corporation owning U. S. flag vessels.
(c) The transfer must be without the approval of the Com-
mission.
A vessel may be transferred, mortgaged or chartered
to a non-citizen if the approval of the Commission has been
obtained. The statute does not prescribe the form or man-
ner in which such approval should be given. It has been
the custom in connection with charters to foreign char-
terers to rely upon the approval of the appropriate official
of the Commission given by telephone or telegram.
The act of the Commission itself in executing a bill of
sale to a vessel being sold by it would obviously establish its
approval of the sale although, as indicated below, Section
9 does not contemplate the necessity of the Commission's
approving its own acts. As stated in The fielori, 24 F. 2d
710 (W. D. Wash., 1928)
"? ' The government of the United States is
the principal, and it would appear rather anomalous
to require the government to give consent to itself to
do an act which it itself inspired, for its use ? '"
(p. 712).
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(d) The transfer must be made by a United States citizen.
Section 9 applies only to the transfer of a vessel by a
citizen as defined in Section 2 to a person not a citizen.
The original acquisition of the vessels discussed in this
memorandum was from the Commission itself. In so far
as concerns Section 9 of the Shipping Act it is immaterial
whether the corporations acquiring the vessels were citizens
or non-citizens.
Congress intended the forfeiture provisions of Sec-
tion 9 to relate only to transactions between private par-
ties, not to transactions to which the United States itself
was a party. Section 9 was never intended as a limitation
upon the powers of the United States to dispose of vessels.
Accordingly, the United States was not included in the
definition of "citizen", and the provisions of Section 9
therefore do not apply to its transactions.
The Northern No. 41, 297 Fed. 343 (District Court,
S. D. Fla., 1924) established the principle that the United
States, acting through the Commission, is not a citizen.
In this case the Court, while upholding the right of
the United States to take the benefit of the Ship Mortgage
Act as the holder of a preferred mortgage, held that the
United States was not itself a citizen. The Court, after
quoting Section 2 of the Shipping Act of 1916, as amended,
made the following statement:
"The section was amended by the Act of July 15,
1918, by adding the last paragraph relating to the
control of corporations. The first paragraph nega-
tively defines what corporations, partnerships, or
associations are citizens. The word 'citizen', as
applied to the individual, is not attempted to be
defined by the act. Therefore I take it that the word
'citizen', as used in subdivision (5) of subsection D,
was used by Congress in its ordinarily understood
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meaning. The Standard Dictionary defines 'citizen'
to moan:
'A member of a nation or sovereign state,
especially of a republic; one who owes allegiance
to a government and is entitled to protection from
it.
Tested by this definition, the -United States, as
a body politic, cannot be a citizen of the "United
States ?
This case was followed with approval by the District Court
for the Southern District of New York in its decision in
The Southern Cross, 24 Fed. Supp. 91 (1938).
Under what appears to be the theory of the Meacham
libel Section 9 would be similarly inapplicable to the subse-
quent transfer to the Meacham. by National Tanker Cor-
poration to Meacham Corporation in November 1949. At
this time both National Tanker Corporation and the
Meacham Corporation were controlled by the same inter-
ests. Obviously if National Tanker Corporation and
Meacham Corporation were both citizens as defined in Sec-
tion 2, no forfeiture arises under Section 9. Further, even
if both National Tanker Corporation and Meacham Cor-
poration are regarded as failing to meet the citizenship
requirements of Section 2, which is denied, nevertheless
the transfer would not violate the provisions of Section 9.
It would be a transfer from one non-citizen to another
non-citizen which does not fall within the restrictions of
Section 9 of the Shipping Act of 1916, as amended.
(2) Section 9 of the Shipping Act must be strictly con-
strued as a penal statute.
The penalty of forfeiture prescribed by Section 9 is a
heavy one not to be imposed unless there has been a clear
violation of the literal meaning of the statute. The courts
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have properly refused to expand the scope of such penal
statutes beyond the strict meaning of their language. In the
case of The Helori, 24 Fed. 2d 710 (W. D. Wash., 1928)
the United States sought to forfeit The Helori, under
Section 9 on grounds of citizenship. Under Section 9 as
it then existed, prior to the 1938 amendment, the prohibi-
tion against transfer applied only to vessels documented
under the laws of the United States. The Helori had
originally been documented under the laws of the United
States, but it became undocumented upon being sold to
the United States Navy. The Navy then sold The Helori
to a California corporation which, without documenting
the vessel, sold it to a Canadian corporation. The Court
held that there had been no violation of Section 9, and
rejected the argument that the vessel should be deemed
to be still documented because there had been no formal
approval by the Shipping Board of the surrender of its
registry upon its original sale to the Navy. The Court
said:
"Section 8146r(6), C. S. (46 USCA ?840), pro-
viding any vessel registered, etc., under the laws of
the United States shall be deemed to continue to be
a documented vessel until such registry is sur-
rendered with the approval of the Shipping Board,
can have application only to vessels engaged in com-
merce, all-inclusive, or for pleasure. The Shipping
Board is an agency of the government of the United
States, and the navy is an arm of the government
of the United States. The government of the United
States is the principal, and it would appear rather
anomalous to require the government to give con-
sent to itself to do an act which it itself inspired, for
its use. The intent of the Congress, obviously, from
the consideration of the several statutory provisions,
was that, since vessels purchased or owned by the
United States for naval service were excluded from
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the registry provision, no approval of the Shipping
Board to a surrender of the registry certificate was
required for a vessel purchased for use in the navy"
(p. 712).
The strict interpretation given Section 9 of the Ship-
ping Act was recognized at the time of its amendment in
1938. House Report No. 2168, accompanying H. R. 10315,
ordered printed April 20, 1938, summarized the effect of
the amendment in this regard as follows:
"Section 43: Thus section amends section 9 of
the Shipping Act, 1916, as amended. Section 9 of
the Shipping Act, 1916, deals with the requirement
of securing the permission of the Commission before
an owner of a vessel documented under the laws of
the United States can transfer that vessel to foreign
registry. As the section is worded in the present
law, it may be possible for an owner to surrender
the documents of the vessel or arrange to have them
surrendered and sell the vessel to an alien, without
first securing the consent of the Commission. The
amendment is designed to prevent possible evasions
and to require the permission of the Commission in
all cases of transfer to foreign registry."
The Courts have similarly rejected liberal construction
of forfeiture provisions of the registry laws. In United
States v. Worthington, 117 Fed. 2d 936 (C. C. A. 9th 1941),
the United States attempted to forfeit a vessel for alleged
fraudulent use of a certificate of registry in violation of
46 U. S. C. 60. The Court said:
"Still we think that the vessel cannot be forfeited
under the provisions of Section 60, as the essence of
this section is that the registry has been fraudulently
obtained or used.
The statute is highly penal, and cannot be so
liberally construed. See Rederiaktiebolaget Nor-
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stjernen v. United States, 9 Cir., 1932, 61 F. 2d 808,
812. Use of the vessel for purposes other than
authorized by the registry is not necessarily a fraud-
ulent obtaining nor use of the certificate of registry."
The above holding was cited with approval in The
Snapper King, U. S. v. Flechas, 127 Fed. 2d 461 (C. C. A.
5th 1942) where the Court said:
"* * * to forfeit a vessel worth $15,000 for carrying
passengers on two separate and unconnected occa-
sions, under conditions here shown, would be so
drastic as to shock the conscience. We will not
attribute any such intention to Congress."
Similarly, in the case of United States v. Hamilton, 26
Fed. Cas. No. 15,289, at 91 (C. C. D. Ore., 1879), the United
States brought suit to forfeit the value of a schooner on
the ground of a false oath to the effect that no subject of
any foreign power was directly or indirectly, by way of
trust, confidence, or otherwise, interested therein, or in
the profits or issues thereof. In fact, one-half of the
vessel was owned by a subject of Great Britain. In hold-
ing that the amount of penalty must be fixed by the value
of the vessel at the moment of the commission of the ille-
gal act, the Court stated:
"This is a penal statute and therefore not to be
construed so as to include 'cases other than those
which clearly appear to have been intended by the
legislature, and are fairly included in the language
used to express such intention,' however much they
may appear to be within the reason or what is called
the equity of it; U. S. v. Mattock [Case No. 15,744] ;
U. S. v. Hartwell, 6 Wall. [73 U. S.] 391." (p. 92).
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(3) Section 9 of the Shipping Act of 1916 is unconstitu-
tional.
(a) Section 9 constitutes a deprivation of property without due
process of law.
Section 9 prevents a United States citizen from freely
disposing of a U. S. flag vessel to any person not a United
States citizen without the approval of the Commission.
The restriction is not limited to time of war or national
emergency, and applies not only to vessels purchased from
the Commission but to all vessels documented under U. S.
flag. The restriction imposed by the statute upon the free-
dom of alienation of property raises a question as to
whether Section 9 results in a deprivation of property
rights without due process of law, in violation of the Fifth
Amendment of the Constitution. This memorandum will
not attempt to review the many cases in which invasions
of property rights have been struck down as unconstitu-
tional. However, the question involved is an obvious and
a serious one.
(b) Section 9 is invalid as an attempt to delegate legislative
power to the Commission.
Section 9 purports to give the Commission absolute
power to approve or disapprove the transfer of a vessel
to a non-citizen. Yet the statutes nowhere prescribe any
standard for the Commission's guidance. The Merchant
Marine Act of 1920 and the Merchant Marine Act of 1936
contain some general statements of policy to the effect
that it is necessary for the national defense and for the
growth of its foreign and domestic commerce that the United
States have a merchant marine to carry a portion of its
commerce and to serve as a naval and military auxiliary
in time of war or national emergency, and to be owned and
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operated by United States citizens. This general state-
ment of objective provides no adequate criterion to guide
the determination of the Commission in deciding in a par-
ticular case whether to approve or disapprove a proposed
foreign transfer.
In the case of Panama Refining Co. v. Ryan, 293 U. S.
388 (1935), the Supreme Court held unconstitutional legis-
lation authorizing the President to prohibit the transporta-
tion of oil in interstate and foreign commerce. Chief Justice
Hughes described the relevant portion of the statute and
the problem presented as follows:
"Section 9 (c) is assailed upon the ground that
it is an unconstitutional delegation of legislative
power. The section purports to authorize the Presi-
dent to pass a prohibitory law. The subject to which
this authority relates is defined. It is the trans-
portation in interstate and foreign commerce of
petroleum and petroleum products which are pro-
duced or withdrawn from storage in excess of the
amount permitted by state authority. Assuming for
the present purpose, without deciding, that the Con-
gress has power to interdict the transportation of
that excess in interstate and foreign commerce, the
question whether that transportation shall be pro-
hibited by law is obviously one of legislative policy.
Accordingly, we look to the statute to see whether
the Congress has declared a policy with respect to
that subject; whether the Congress has set up a
standard for the President's action; whether the
Congress has required any finding by the President
in the exercise of the authority to enact the prohibi-
tion."
Chief Justice Hughes in words which can be applied almost
exactly to Section 9 of the Shipping Act of 1916, then
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described the shortcomings of Section 9 of the National
Industrial Recovery Act as follows:
" a * It establishes no criterion to govern the
Prpident's course. It does not require any finding
by the President as a condition of his action. The
Congress in section 9 (c) thus declares no policy as
to the transportation of the excess production. So
far as this section is concerned, it gives to the Presi-
dent an unlimited authority to determine the policy
and to lay down the prohibition, or not to lay it down,
as he may see fit. And disobedience to his order is
made a crime punishable by fine and imprisonment."
Section 9 of the Shipping Act of 1916, as amended,
establishes no criterion to govern the course of the Com-
mission. It does not require any finding by the Commission
as a condition of its action. Congress has declared no policy
as to when approval could be given or withheld, and the
Commission is given unlimited authority to determine the
policy and to lay down the prohibition, or not to lay it
down as it may see fit. Any disobedience to the Commis-
sion's order is made a crime punishable, not only by fines
and imprisonment, but by forfeiture of the offending vessel.
The case of Panama Refining Co. v. Ryan was followed
in the Schechter case, 295 U. S. 495 (1935) holding invalid
as an unconstitutional delegation of legislative powers the
provisions of the National Industrial Recovery Act author-
izing the President to prescribe codes of fair competition.
More recent cases involving war powers have upheld
statutes where the administrative standards have been
more carefully prescribed. In no case, however, has the
doctrine of unconstitutional delegation of legislative power
been denied or overruled. In Yaks v. United States, 321
U. S. 414 (1944) upholding the constitutionality of the
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Emergency Price Control Act, Chief Justice Stone
described the legislative function as follows:
"* * * The essentials of the legislative function
are the determination of the legislative policy and
its formulation and promulgation as a defined and
binding rule of conduct?here the rule, with penal
sanctions, that prices shall not be greater than those
fixed by maximum price regulations which conform
to standards and will tend to further the policy which
Congress has established. These essentials are pre-
served when Congress has specified the basic condi-
tions of fact upon whose existence or occurrence
ascertained from relevant data by a designated
administrative agency, it directs that its statutory
command shall be effective. It is no objection that
the determination, of facts and the inferences to be
drawn from them in the light of the statutory stand-
ards and declaration of policy call for the exercise
of judgment, and for the formulation of subsidiary
administrative policy within the prescribed statu-
tory framework * "" (p. 667).
Chief Justice Stone then found that the Act contained
sufficient standards:
"The standards prescribed by the present Act,
with the aid of the 'statement of the considerations'
required to be made by the Administrator, are suffi-
ciently definite and precise to enable Congress, the
courts and the public to ascertain whether the
Administrator, in fixing the designated prices, has
conformed to those standards. Compare Kiyoshi
Hirabayashi v. United States, supra, 320 U. S. at
page 104, 63 S. Ct. at page 1387, 87 L. Ed. 1774.
Hence we are unable to find in them an unauthorized
delegation of legislative power " *" (p. 668).
Section 9 of the Shipping Act of 1916 contains no stand-
ards. It follows from the opinion of Chief Justice Stone
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quoted above that Section 9 of the Shipping Act of 1916
constitutes an unauthorized delegation of legislative power
to the United States Maritime Commission.
The absolute and unlimited discretion given the Com-
mission by Section 9 makes appropriate the following
statement by Mr. Justice Douglas in his dissenting opinion
in U. S. v. Wunderlich:
"Law has reached its fnest moments when it has
freed man from the unlimited discretion of some
ruler, some civil or military official, some bureaucrat.
Where discretion is absolute, man has always
suffered. At times it has been his property that has
been invaded; at times, his privacy; at times, his
liberty of movement; at times, his freedom of
thought; at times, his life. Absolute discretion is
a ruthless master. It is more destructive of freedom
than any of man's other inventions." (U. S.
Supreme Ct., 20 Law Week 4018, Nov. 27, 1951.)
(B) United Tanker Corporation and Meacham Corporation
have at all times been United States citizens within
the meaning of Section 2 of the Shipping Act of 1916.
(1) United Tanker Corporation,
As set forth in the accompanying Application, United
was organized on December 10, 1947 under the laws of the
State of Delaware. Its President and Directors have at all
times been citizens of the United States, with long experi-
ence in the field of American shipping. The Chairman of
the Board, Arthur M. Tode, was the founder of the Amer-
ican Merchant Marine Conference held each year under the
auspices of the Propeller Club. Both he and Harold C.
Lenfest, President, have had practical training at sea,
holding unlimited licenses as chief engineer for both steam
and diesel propelled vessels. Walter H. Sidling, Vice-
President, has been active in the shipping business since
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1905, and the firm of Sieling & Jarvis, of which he was
formerly a member, operated tankers for the War Shipping
Administration during World War II.
The original certificate of incorporation of United pro-
vided for two classes of stock, a Class A Stock and a Class
B Stock. All of the Class B Stock was issued to Messrs.
Lenfest, Sieling and Tode who thus acquired at all relevant
times up to June 18, 1948 75% of the voting power of
United. The Class B Stock was also entitled to 10% of
any dividends declared. The Class A Stock of United was
initially issued to China Trading, entitling it to 90% of
the earnings of the corporation declared as divdends, and
25% of the voting power.
On December 11, 1947 both China Trading and United
filed applications to the Commission for the purchase of
T2 tankers. The applications pointed out the interest of
China Trading in United and the fact that the tankers
applied for were intended to be devoted to the transporta-
tion of oil from the Persian Gulf to China under charter
to the National Resources Commission, a branch of the
Nationalist Government of China, or one of its controlled
corporations. The application of United listed as its sec-
retary and treasurer, Mr. C. C. Wei, a Chinese citizen,
associated with China Trading, and pointed out that the
funds required by United were expected to be received
either from China Trading as payment for shares of Class
A Stock or as a loan, or from the National Resources Com-
mission or from commercial banks. While these applica-
tions were not acted upon by the Commission they formed
the basis for the subsequent opinion rendered by the Assist-
ant General Counsel of the Maritime Commission on Febru-
ary 3, 1948 to the effect that United was a citizen of the
United States within the meaning of Section 2 of the Ship-
ping Act of 1916, as amended. A copy of this opinion is
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attached as Exhibit D to the application accompanying this
memorandum.
The original capitalization of United remained as
described above until June 18, 1948, the funds required
for the financing of the acquisition of tankers being pro-
vided in part by China Trading, in part by commercial
banks and in part by the Commission. On June 18, 1948,
the certificate of incorporation of United was amended to
authorize 25,000 shares of a new class of preferred stock,
par value $100 per share, and to increase the authorized
shares of Class B Stock to 75,000 shares, 100 par value.
At this time 61,000 shares of Class B Stock were issued
and sold to The China International Foundation, Inc., (the
"Foundation"), a Delaware corporation, described below,
and China Trading accepted in cancellation of advances
previously made 20,300 shares of the new preferred stock.
At the same time China Trading donated to the Founda-
tion 10 shares of Class A Stock, which had been initially
issued to it, representing all of the outstanding Class A
Stock. Subsequently, the Foundation acquired by pur-
chase or donation the shares of Class B Stock originally
issued to Messrs. Lenfest, Siding and Tode. The funds
for the purchase of shares of Class B Stock by the Founda-
tion were provided by China Trading.
Subsequently, China Trading acquired additional shares
of preferred stock bringing its total holdings to 25,000
shares, and the Foundation, with funds provided by China
Trading, acquired additional shares of Class B Stock. The
Class A and Class B Stock were reclassified into one class
of common stock on August 18, 1949, all of the presently
outstanding 85,000 shares of common stock being held by
the Foundation. The certificate of incorporation of United
requires that shares of common stock may only be held by
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citizens of the United States within the meaning of Sec-
tion 2 of the Shipping Act of 1916, as amended.
On November 7, 1949, 3,450 shares of the preferred
stock of United were surrendered by China Trading for
cancellation, and 11,750 shares of such preferred stock
were sold to Meacham Corporation, a wholly-owned sub-
sidiary of the Foundation. From this date on China Trad-
ing, or its assignees, held a minority of the outstanding
preferred stock of United which, by successive purchases
commencing in the spring of 1951, has now been reduced
to 3,550 shares, representing less than 25% of the outstand-
_
ing preferred stock.
75% of the voting stock of United until June 18, 1948,
and 100% of the voting stock thereafter, has been held by
citizens of the United States. Of the funds expended in
connection with the acquisition and placing in operation of
the six tankers financed by United, less than 20% were
provided by China Trading. The president and directors
of United have at all times been United States citizens.
There has been no trust or fiduciary obligation in favor
of any person not a citizen nor by any contract or under-
standing or any other means has control of United been
exercised on behalf of or conferred upon or permitted to be
exercised by any person who is not a citizen of the United
States.
(2) Interest held by China Trading & Industrial Develop-
ment Corporation.
China Trading purchased ten shares of Class A Stock
of United on original issue for $2,000, which it later donated
to the Foundation. It advanced substantial funds to United
(largely from advances received from Chinese Petroleum)
to assist in financing its investments in tanker-owning
corporations and subsequently received shares of non-
voting preferred stock in satisfaction of these advances.
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Moneys advanced by China Trading represented less than
20% of the cost of the six tankers financed by United.
China Trading's interest in United has been that of an
investor. It was willing to make substantial advances to
United involving a high degree of risk in order to make
it possible for it to charter two vessels, the Meacham and
the Kettleman Hills, from United, which it could in turn
recharter to Chinese Petroleum at a substantial profit.
Two former employees of China Trading became
employees of United, C. Y. Chen and C. C. Wei. Both
were able young graduates of engineering schools with no
prior shipping experience. Dr. Chen and Mr. Wei and
several other young Chinese engineers employed by United
have rendered valuable and useful services to it under the
direction of the Board.
(3) The China International Foundation, Inc.
The Foundation now owns all of the stock of Meacham
Corporation, and, directly or through Meacham Corpora-
tion, all of the Common Stock and over 75% of the pre-
ferred stock of United. The Foundation was incorporated
on June 4, 1948 as a charitable membership corporation
under the laws of the State of Delaware. The Foundation
has no capital stock, and under its certificate of incorpora-
tion no part of its net income shall enure to the benefit of
any member, officer, trustee or employee. Its president,
trustees and members have at all times been United States
citizens.
The purposes for which the Foundation was organized
are to further educational, medical and scientific enter-
prises both in the United States and China by grants in
aid of educational institutions, by creating scholarships,
by establishing hospitals and public health centers, by
encouraging medical and scientific research and by dis-
seminating scientific and technical knowledge. Its income
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has consisted in gifts amounting to approximately $23,000
(including original cost of shares of stock received) from
China Trading and gifts and dividends from Meacham Cor-
poration and United amounting to about $280,000. Exhibit
A to the accompanying Application describes some of the
philanthropic projects undertaken by the Foundation.
The original donations from China Trading to the
Foundation were made as absolute gifts and not as gifts
in trust. While the Foundation has from time to time
awarded scholarships to Chinese students as well as to
American students and made gifts to Chinese institutions,
such as the University of Formosa, the Foundation is not
subject to any "trust or fiduciary obligation in favor of
any person not a citizen of the United States" as those
terms are used in Section 2 of the Shipping Act of 1916.
These terms in Section 2 are intended to prohibit the ordi-
nary type of trust where there is an alien beneficiary who
has power to enforce the terms of the trust and the per-
formance by the trustees of their duties under some trust
instrument, and thus may exercise some controlling influ-
ence upon the trustees. The Foundation is under no obli-
gation or trust in favor of any potential Chinese donee.
Its only obligation or trust is to apply its funds to the
philanthropic purposes set forth in its certificate of incor-
poration. Enforcement of this obligation or trust rests
with the Attorney General of the State of Delaware.
(4) Meacham Corporation.
This corporation was organized on October 17, 1949
under the laws of the State of Delaware, and, on November
7, 1949, took title to the Meacham, as set forth in the accom-
panying Application. Its entire capital stock is now and
has always been owned by the Foundation. Its president
and directors are now and have always been United States
citizens. Its unsecured note in the amount of $1,595,000
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is held by Chinese Petroleum, an agency of the Nationalist
Government of China. The position of Chinese Petroleum
was purely that of an investor. Payment of the note could
be postponed by Meacham Corporation to 1959 or longer if
its income was insufficient to meet its installments. Thus,
as set forth in Exhibit J to the Application, Chinese Petro-
leum was in no position to exert financial pressure on
Meacham Corporation.
(C) The tanker-owning subsidiaries of United Tanker Cor-
poration have at all times been United States citizens.
The accompanying Application describes the organiza-
tion of National Tanker Corporation, its subsidiaries,
Oceanic Maritime Corporation and Trans-World Maritime
Corporation, and the organization of American Viking Cor-
poration and Arctic Tankers, Inc. All of the stock of these
corporations was ultimately acquired by United. If, as has
been shown above, United meets all of the requirements
of a United States citizen under Section 2 of the Shipping
Act, it follows that its various subsidiaries were also
citizens. However, even on the assumption that United
was not initially a citizen, the citizenship of the companies
referred to at the time of acquisition of vessels would not
have been affected.
National Tanker Corporation was organized in January
1948 as a Delaware corporation. Its president, its directors
and its stockholders were United States citizens. On Jan-
uary 24, 1948 it agreed to execute bareboat charters of the
Meacham, the Kettlemon Hills and the Antelope Hills to
United in consideration of financing of the acquisition of
the vessels. United represented that the statements made
as to its citizenship in its application filed with the Com-
mission dated December 10, 1947 were true and correct
and that its president and directors and the holders of a
majority of its stock were United States citizens and would
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continue to be such during the life of the contract. The
stockholders of National Tanker Corporation on the same
day gave United an option to purchase their stock, exer-
cisable between September 15 and October 15, 1948. The
option was based upon the representations by United as to
its citizenship. If the representations had not been correct
the stockholders of National Tanker Corporation could
have refused to deliver their stock to United in January,
1949 at the time of final payment by United under the
extended option agreement. In other words, during the
period January 24, 1948 to January, 1949, the stock of
National Tanker Corporation was owned by three U. S.
citizens, and was not subject to the option unless the repre-
sentations made by United as to its citizenship were correct.
It follows that during the period when the Meacham, the
Kettleman Hills and the Antelope Hills were acquired from
the Commission, and on June 15, 1948 when the Kettleman
Hills was transferred by National Tanker Corporation to
its wholly owned subsidiary Oceanic Maritime Corporation,
National Tanker Corporation and its subsidiaries were
citizens within the meaning of the Shipping Act of 1916,
as amended, regardless of whether or not United was a
citizen.
The New London was purchased by Arctic Tankers,
Inc. from the Commission on July 9, 1948. At this time a
majority of the common stock of Arctic Tankers, Inc. was
held by M. A. Mathiasen, a United States citizen, and
United held a minority of the common stock and all of the
non-voting preferred stock of Arctic Tankers, Inc. United
also held an option dated May 24, 1948 by which it was
entitled to purchase all of the stock held by Mathiasen.
The option agreement provided, however, that the exercise
of the option must be supported by proof of citizenship of
United. If United had not been a United States citizen
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Mathiasen could have refused to agree to the exercise of
the option by United on July 23, 1948 and could have
retained a majority of the common stock. Accordingly,
on the date of acquisition of the New London by Arctic
Tankers, Inc. from the Commission, the citizenship of Arc-
tic Tankers, Inc. did not depend upon the citizenship of
United.
American Viking Corporation purchased two vessels
from the Commission, the St. Christopher and the Destiny.
A majority of the common stock of American Viking Cor-
poration was at all times owned by Olga Konow, a United
States citizen, until December 1949. There was no contract
or understanding or option relating to these shares of stock,
but such shares were sold to United as a result of arm's
length bargaining in December 1949. Prior to this time,
United had held a minority of the common stock and a
majority of the non-voting preferred stock of American
Viking Corporation. Thus during the period from the
acquisition of the vessels in 1948 to December 1949 the
citizenship of American Viking Corporation did not depend
upon the citizenship of United.
(D) All transactions subject to the provisions of Section 9
of the Shipping Act of 1916 have received the requi-
site approval of the United States Maritime Commis-
sion.
In analyzing Section 9 this memorandum has pointed
out that the approval of the Commission is required only
if a United States flag vessel, or an interest therein, is
transferred, mortgaged or chartered by a United States
citizen to a person not a United States citizen. Against
the background of these requirements, the transactions
affecting transfers of vessels, or of stock in corporations
owning vessels, will be briefly summarized below:
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(1) Original acquisition of vessels.
All of the vessels referred to in this memorandum were
originally acquired by bill of sale from the Commission.
These transactions did not require a separate approval
from the Commission because (a) the acquiring company
was in each case a citizen, and (b) regardless of the citizen-
ship of the acquiring company, Section 9 was not intended
to apply to acts of the United States, since the United
States is not included in the definition of a "citizen".
Assuming, however, that approval was required, the act of
the Commission in delivering the bill of sale, with notice of
all relevant facts, was itself a sufficient act of approval.
(2) Subsequent transfers of vessels.
The Kettleman Hills was transferred by National
Tanker Corporation to its wholly-owned subsidiary, Oceanic
Maritime Corporation, on June 15, 1948. This transfer
did not require approval from the Commission because (a)
both transferor and transferee were citizens; and (b) if
the transferee were to be regarded as not a citizen, then
its parent, the transferor, must also not have been a citizen.
In other words Section 9 prohibits only a transfer by a
citizen to a non-citizen. In the case of a transaction between
parent and subsidiary both companies must fall into the
same category. If both ,are citizens there is no violation.
If neither are citizens there is no violation. In any event
the approval of the Commission may be implied from the
Commission's act in approving the surrender of the docu-
ment of the Kettleman Hills by Order No. 0-3157, dated
June 15, 1948, on condition that the vessel be redocumented
with all endorsements necessary to preserve the preferred
status of the preferred mortgages on the vessel.
The Meacham was transferred by National Tanker Cor-
poration to Meacham Corporation on November 7, 1949.
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At this time both companies were direct or indirect sub-
sidiaries of the Foundation, and the analysis in the pre-
ceeding paragraph applies. If both companies were citizens
there was no violation of Section 9. If neither were citizens
there was no violation.
(3) Mortgages of vessels.
Four of the vessels, namely, the St. Christopher, the
Destiny, the New London and the Antelope Hills, have been
mortgaged only to the Commission. The act of the Com-
mission in accepting the mortgages as a part of the pur-
chase price of the vessels is presumably a sufficient
approval by the Commission, for the purposes of Section
9 of the Shipping Act of 1916, as amended, assuming that
any approval was required. As set forth under I (A) (1)
(d) above, Section 9 does not apply to transactions involv-
ing the United States.
The other two vessels were mortgaged to private banks.
Tho Meacham was mortgaged to Chemical Bank & Trust
Company, a New York bank, which is a citizen within the
meaning of Section 2 of the Shipping Act of 1916, as
amended. Its citizenship is not affected by its transfer of
a minority participation in the mortgage to the Bank of
China since Chemical Bank & Trust Company retained all
of the powers of the mortgagee. Under the Ship Mortgage
Act the citizenship of a trustee under a mortgage is con-
sidered to be the citizenship of the mortgagee (46 U. S. C.
911). By analogy the citizenship of Chemical Bank & Trust
Company which, with respect to the Bank of China par-
ticipation, had all of the powers of a trustee, would seem
to be determinative. (Collier Advertising Service v. Hud-
son River Day Line, 14 F. S. 335, D. C. S. D. N. Y. 1936).
The Kettleman Hills was mortgaged by National Tanker
Corporation to Bankers Commercial Corporation as first
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mortgagee and to United as second mortgagee. The exist-
ence of both mortgages was recognized, and impliedly
approved, at the time of the transfer of the Kettleman Hills
to Oceanic Maritime Corporation by Order No. 0-3157,
dated June 15, 1948 of the Commission which approved the
surrender of the vessel's document on the condition, among
others, that
"The vessel shall be redocumented under the laws
of the United States and that all endorsements
necessary and proper to preserve the preferred status
of all preferred mortgages thereon, if any, be made
upon the new document when issued, with particular
reference to that first preferred mortgage dated
April 29, 1948 in favor of Bankers Commercial Cor-
poration, New York, N. Y. and that second preferred
mortgage dated April 29, 1948 in favor of United
Tanker Corporation, New York, N. Y."
(4) Charters of vessels.
The Meacham and the Kettleman Hills were both bare-
boat chartered by National Tanker Corporation to United,
time chartered by United to China Trading, a Chinese
corporation, and consecutive voyage chartered by China
Trading to Chinese Petroleum, a Chinese corporation
which was an agency of the Nationalist Government of
China. Applications were filed by United, as chartered
owner, for the requisite approvals under Section 9 of both
the time charters and the consecutive voyage charters on
both vessels. By Orders No. C11-1133 and 011-1143, issued
in April 1948, the Commission gave the requested approvals.
An extension of the charter parties on both vessels was
subsequently approved by the Commission by Orders
CH-1594 and 011-1595, dated March 29, 1949. The bare-
boat charter from National Tanker Corporation to United
was filed with the Commission as well as the time charters
and voyage charters. While the Commission's orders did
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not specifically approve the bareboat charters, since the
Commission regarded United as a citizen, the approval of
the charters by United to China Trading necessarily implies
approval of the bareboat charters.
The New London was bareboat chartered by Arctic
Tankers, Inc. to United for a period of five years. On
July 9, 1948, the day Arctic Tankers, Inc. took title to the
New London from the Commission, it filed an application
for approval of the bareboat charter to United. This
approval was required under the terms of the preferred
mortgage on the New London held by the Commission.
By letter dated September 2, 1948 the Secretary of the
Commission gave the required consent to such bareboat
charter and described United as "a citizen of the United
States within the meaning of Section 2 of the Shipping Act
1916, as amended".
From time to time vessels have been chartered to
foreign charterers. During a part of the period since the
acquisition of the vessels such charters, if for a relatively
short period of time, came within the general approval
contained in General Order No. 59 of the Commission. In
cases where such foreign charters did not come within
General Order No. 59 application for approval has been
filed with the Commission and the requisite approval
obtained. The Commission would have had no jurisdic-
tion to grant these approvals if it had not regarded the
vessels as being owned by citizens of the United States with-
in the meaning of Section 2 of the Shipping Act of 1916,
as amended.
(5) Transfers of stock or securities of tanker-owning companies.
In analyzing the provisions of Section 9 of the Shipping
Act of 1916, as amended, this memorandum has pointed out
the distinction between transfers of stocks or securities
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of tanker-owning companies and transfers of a vessel or
an interest therein. Only the latter requires the approval
of the Commission under Section 9. Assuming for the pur-
poses of discussion, however, that the transfer of stock of
a company owning a vessel also requires approval under
Section 9 the knowledge on the part of the Commission
of the various transfers of stock and the investment of
foreign capital here involved and its acquiescence in such
transfers would seem to amount to approval.
In the January 24, 1948 agreement between United and
National Tanker Corporation providing for the acquisition
and financing of the vessels Meacham, Kettleman Hills and
Antelope Hills, and in the stock option agreement of the
same date between United and the stockholders of National
Tanker Corporation, the representation was made by
National Tanker Corporation and its stockholders that the
subject matter of the agreements had been discussed with
members of the Commission and that the Commission had
no objections to the carrying out of the agreements. The
correctness of these representations is indicated by the
testimony of Admiral Smith, then Chairman of the Com-
mission, on February 13, 1948 before the House Committee
on Merchant Marine and Fisheries, a copy of which is
annexed to the accompanying application as Exhibit G. The
subsequent sale by the Commission of the three vessels to
National Tanker Corporation or its subsidiary, Trans-World
Maritime Corporation, with full knowledge on the part of the
Commission of the existence of the option through which
United later acquired the stock of National Tanker Corpo-
ration, indicates the approval by the Commission of the
acquisition of such stock.
The Commission was also familiar at the time with the
investment by United in the preferred stock and minority
common stock of American Viking Corporation. The hold-
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ings of United in American Viking Corporation were spe-
cifically enumerated in a letter dated April 15, 1948 from
counsel for American Viking Corporation to a member of
the legal staff of the Commission (Exhibit E to the accom-
panying Application). The subsequent acquisition by
United of the balance of common stock of American Viking
Corporation, and the acquisition by United of the stock
of Arctic Tankers, Inc. were reflected in reports filed by
the respective companies with the Commission. On Sep-
tember 9, 1949 counsel for United transmitted to the Com-
mission a statement listing the then stockholders of United
and referring to the ownership by United, through wholly-
owned subsidiaries, of the Kettleman Hills, Meacham and
the New London (as well as the Antelope Hills) and its
investment in 49% of the common stock and 8,000 shares
of preferred stock of American Viking Corporation, the
corporation owning the St. Christopher and the Destiny.
During the discussions with representatives of the Com-
mission of the problems created by the default on the
Antelope Hills mortgage a proposal was made to increase
the mortgage notes on the Destiny and the St. Christopher
in connection with the settlement of the default on the
Antelope Hills. At this time the representatives of the
Commission were of course aware of the acquisition by
United of the controlling stock of American Viking Corpo-
ration. On August 10, 1950 the foreclosure proceedings
instituted in connection with the Antelope Hills mortgage
were dismissed on motion of the Assistant United States
Attorney upon the remedying of the default. At this time
the Commission had full knowledge of the holdings by
United in all of its tanker-owning subsidiaries. If the
Commission had regarded the acquisition by United of the
stocks of its subsidiaries as causing those subsidiaries to
cease to be citizens within the meaning of Section 2 of the
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Shipping Act of 1916, it would have had the right to fore-
close on the mortgages of the New London, the Destiny,
the St. Christopher and the Antelope Hills. Instead of
taking any such action it caused the pending foreclosure
proceedings under the Antelope Hills mortgage to be dis-
missed.
II.
There has been no violation of the provisions of
the Registry Statutes.
The Meacham libel alleges violation of 46 U. S. C. 60
which provides for forfeiture whenever a certificate of
registry "is knowingly and fraudulently obtained or used
for any vessel not entitled to the benefit thereof"; of 46
U. S. C. 21 and 33 which provide for forfeiture if any of
the matters of fact alleged in the oath taken to obtain the
registry "which are within the knowledge of the party so
swearing are not true"; and of 46 U. S. C. 41 which pro-
vides for forfeiture for failure to report the sale or trans-
fer of any United States flag vessel "in whole or in part,
by way of trust, confidence, or otherwise, to a subject or
citizen of any foreign prince or state." The grounds
alleged for the violations of Sections 60, 21 and 33 are that
James G. Mackey, Secretary of National Tanker Corpora-
tion, executed a false oath when he swore "that no subject
or citizen of any foreign prince or state, directly or indi-
rectly, by way of trust, confidence, or otherwise, was inter-
ested therein, or in the profits or issues thereof."
It has already been shown that Meacham Corporation,
United and its tanker-owning subsidiaries have at all times
been citizens of the United States under the strict require-
ments of Section 2 of the Shipping Act of 1916, as amended.
Even if it were held that the tanker-owning companies did
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not meet the strict requirements of Section 2 of Shipping
Act of 1916, as amended, it would not follow that there had
been any violation of the registry statutes. The provisions
of the registry statutes referred to in the Meacham libel
have been in existence for many years going back in sub-
stance to the Act of December 31, 1792. They were not
changed by the Shipping Act of 1916, as amended. It is
clear that a corporation may register a vessel as a United
States flag vessel under the registry statutes, even though
the corporation is not a citizen as defined by Section 2 of
the Shipping Act of 1916, as amended. It is also clear
that a corporation may not be a citizen as defined by Sec-
tion 2 but still does not become a subject of a foreign
prince or state. To the extent that the required oath for
registry of a vessel included statements of fact not required
by law, any misstatements of such facts (which is denied)
were immaterial, as indicated under (B) below. Moreover,
forfeiture under Sections 60, 21 and 33 of Title 46 depend
upon elements of fraud or knowing misstatements, which
are not present here.
(A) Under the registry statutes the nationality of the stock-
holders of a domestic corporation is not material.
Under the registry statutes in existence prior to the
enactment of the Shipping Act of 1916, and which that act
did not purport to change, it was clear that a domestic
corporation was entitled to register a United States flag
vessel without regard to the ownership of the stock of the
domestic corporation by aliens. Section 20 of Title 46
provides that for the purpose of registering a vessel owned
by any incorporated company, an officer or agent of the
company "shall swear to the ownership of the vessel with-
out designating the names of the persons composing the
company." Section 15 of Title 46 provided that register
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for vessels owned by any incorporated company might be
issued in the name of the president or secretary; "and
such register shall not be vacated or affected by sales of
any shares of stock in such company." Substantially sim-
ilar language was contained in the Act of March 3, 1825
which first made provision for registry of vessels owned by
corporations.
The legislative history of the registry of vessels owned
by corporations was reviewed by the court in the case of
Steaua Romana Societate, etc. v. Woodman, 2 F. Supp.
303 (D. C. E. D. Pa. 1931). In this case in 1914 a Rouma-
nian company transferred a vessel to a Delaware company,
the stock of which was held by a United States citizen
under an oral agreement of trust to hold such stock for
the benefit of the Roumanian company. The vessel was
out of the United States and obtained a provisional Amer-
ican registry from an American Consul by the filing of
an affidavit in the required form. After the war the
United States citizen denied the existence of the trust and,
in this action, alleged as a defense that such a trust would
be unenforceable as a fraud upon the registry laws of the
United States. The court upheld the validity of the trust
and of the registry of the vessel as a United States flag
ship, as follows:
"Second Conclusion of Law: No fraud upon the
ship registry laws of the United States was involved
in the provisional registry of the Steaua Romana in
Bremen or her subsequent transfer to the American
flag.
Discussion: As has been noted, the special affi-
davit of the vendee for the issue of provisional regis-
try by consuls contains a statement that: 'There
is no agreement or understanding reserving to the
vendor, or for his benefit, any interest in the vessel,
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or its operation, or right or voice or control therein.'
The defendant's contention is that this clause should
be construed broadly, to cover an interest in the
stock of a vendee corporation, such as the plaintiff
acquired at the time of the transfer of the Steaua
Romana. If the absence of such interest was a legal
prerequisite to transfer and the affidavit was intended
to cover that point, then the affidavit was false and
the obtaining of provisional entry was a fraud and
the plaintiff's ease, necessarily depending upon the
the transaction, must fall.
But a review of the navigation laws of the United
States and the construction given them by depart-
mental practice leaves no doubt whatever that this
term in the affidavit was inserted solely for the pur-
pose of insuring a clear and unencumbered title in
the American corporation which was to become the
owner of the vessel, and that if such corporation was
one created under the laws of the United States or
of any state thereof the vessel was legally entitled
to American registry without regard to who owned
the stock either directly or indirectly.
The original Navigation Act of September 1, 1789
(1 Stat. 55) provided that no ship could be registered
or enrolled unless it was owned by a citizen or citi-
zens of the United States. Even an American owner
of ships living abroad could not obtain registry unless
an agent or partner in an American firm was in busi-
ness in the country of his residence. By the Act of
December 31, 1792 (1 Stat. 289, ?4 [46 ITSCA ?19]),
a vessel owned by a citizen domiciled in a foreign
country was given the right of registry provided the
owner take an oath, 'That there is no subject or citi-
zen of any foreign prince or state, directly, or
indirectly, by way of trust, confidence, or otherwise,
interested in such vessel, or in the profits or issues
thereof.' The requirement for this particular state-
ment in the oath (originally intended only for citizens
living abroad) was by the courts extended to all
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cases of registry by American citizens and was incor-
porated in all oaths for that purpose.
Neither of the two acts referred to made any
provision for the registry of vessels owned by cor-
porations. The Act of March 3, 1825 (4 Stat. 129),
admitted vessels owned by corporations to registry
upon an oath to be taken by the president or secretary
as to the ownership of the vessel, 'without designat-
ing the names of the persons composing such com-
pany.' Section 4 (46 TJSCA ?254). A further
requirement that the oath should contain a statement
that `no part of such steamboat or vessel has been,
or is then, owned by any foreigner or foreigners,'
was removed by the repeal in 1858 of the fifth section
of the act. (4 Stat. 129; 11 Stat. 313.)
This legislation was codified in the Revised Stat-
utes, and substantially as stated (subject to the
amendment by the Act of June 24, 1902, c. 1155, ?1,
32 Stat. 398 [46 ITSCA ?20], which so far as corpo-
rations are concerned re-enacted the provisions of
the Revised Statutes as to the oath), was in force on
October 31, 1914. It will be observed that the oath
required in order to obtain registration was as to
the absence of any foreign interest in such vessel,
and in case of a corporation as to the ownership of
the vessel without designating the names of the per-
sons composing the company.
On July 11, 1911, the Attorney General had
rendered an opinion to the Department of Com-
merce in which the law was carefully reviewed and
fully and clearly discussed. The precise question
involved was the enrollment in the coasting trade of
a vessel owned by a New York corporation, most if
not all of the stock of which was owned by Canadians.
The opinion, however, relates to registry as well as
enrollment and reaches the conclusion that, 'a vessel
belonging to a domestic corporation is entitled to
registry, or enrollment, even though some stock of
the company be owned by aliens" (pp. 310-311).
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Attorney General Brewster in 1884 (17 Treas. Dec. 187)
and Attorney General Wickersham in 1911 (29 Op. Atty.
Gen. 188) both concluded that under the registry statutes it
was permissible for aliens to own stock in a United States
corporation which owned a vessel. The distinction drawn
between ownership of an interest in a vessel and ownership
of stock of a corporation which owns a vessel, has also been
recognized by the British courts. See opinion of Lord Den-
man in The Queen v. Arnaud it Powell, 9 Q. B. 806 (1846).
The United States Supreme Court has recognized the dis-
tinction in relation to other facts in the cases of Humphreys
v. McKissock, 140 U. S. 304 (1891) and in United States v.
Delaware ce Hudson Co., 213 U. S. 366 (1909).
The regulations of the Bureau of Customs for the docu-
mentation of vessels defined the word "citizen" as follows
(19 C. F. R. 3.19) :
"Citizenship; documentation. (a) Whenever used
in this part, the word 'citizen' includes the plural as
well as the singular. Unless the context requires a
different meaning, it means:
? ? a ? ? ?
(3) In the case of a corporation, one which is
incorporated under the laws of the United States or
of one of the States, and of which the president and
all the managing directors are citizens of the United
States. If no directors are authorized to act as man-
aging directors, all the directors of the corporation
shall be considered to be managing directors for the
purpose of this paragraph.
a art)
The regulations specifically contemplate the possibility that
a vessel may be documented as a vessel of the United States,
even though owned by a corporation not a citizen as defined
in Section 2 of the Shipping Act:
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"(c) A vessel, although owned by a corporation
which is not a citizen as defined in section 2 of Ship-
ping Act, 1916, as amended, may be documented as a
vessel of the United States if the sale or transfer to
the corporation was not in violation of section 9 or
37 of the Shipping Act, 1916, as amended (46 U. S. C.
808, 835), and if the corporation is a citizen as defined
in paragraph (a) (3) of this section."
(B) Any misstatement in the registry oath of facts not
required by law is immaterial.
In order to register a vessel it is customary for an officer
or agent of a corporate owner to subscribe to an oath on
Customs Form 1259. This form contains a statement to
the effect that the president and managing directors of
the corporation are citizens of the United States and that
no subject or citizen of any foreign prince or state is
directly or indirectly by way of trust, confidence, or other-
wise, interested therein or in the profits or issues thereof.
These are the statements required by the registry statutes.
In addition the form contains several paragraphs para-
phrasing the language of Section 2 of the Shipping Act
with respect to the ownership by citizens of 75% of the
interest in the corporation. These provisions are unneces-
sary in order to obtain the registry of the vessel. They
serve as a guide to the Bureau of Customs as to whether
a notation should be made on the register of the vessel
indicating that the vessel may or may not engage in coast-
wise trade. Since these statements are unnecessary in
obtaining a registry, a misstatement contained in these
provisions would not constitute a ground for forfeiture of
the vessel. Thus in the Stectiva case cited above, the Court
stated:
"* * * He of course had no right to prescribe any
oath which the law did not authorize, and, in view
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of the existing law, it is clear that the oath actually
required was not intended to disclose ultimate stock
ownership by way of trust or otherwise in the cor-
poration which took over the vessel" (p. 312).
Similarly, in the case of The Acorn, 1 Fed. Cas. No. 29
at 52 (D. C., E. D. Mich. 1870), the United States claimed
a forfeiture on the ground that the person taking the oath
was not a citizen, and that there were subjects of a foreign
prince or state, directly or indirectly, by way of trust, con-
fidence, or otherwise, interested in the vessel or in the
profits or issues thereof. In this case by an act of Con-
gress approved April 25, 1866, the Secretary of the Treas-
uray was directed to issue an American enrollment
and license to the bark Acorn, among a large number of
other vessels named in the act. The Court held that the
act was mandatory in its terms, that no oath was required
to register the vessel and. that, therefore, the validity of
the oath actually made was no ground for forfeiture:
"* * * I hold, therefore, that no oath to obtain
enrollment and license was necessary in this case,
and hence that the oath which was made, and upon
the alleged falsity of which a forfeiture is predi-
cated, was extra-judicial, void, and of no effect. The
provisions of law, therefore, declaring a forfeiture
in such cases, have no application to this case. * * *"
There have been similar holdings under perjury statutes
to the effect that a misstatement of fact in an oath not
required by law does not constitute perjury. In Shelton v.
United States, 165 Fed. 2d, 241 (U. S. App. D. C. 1947)
Associate Justice Prettyman referred approvingly to
"the doctrine that an administrative officer cannot
add to the content of an oath prescribed by statute
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so as to make falsification of the additional infor-
mation perjury."
In Patterson v. United States, 181 Fed. 970 (C. C. A.
9th 1910) another case involving perjury, the Court said,
referring to a requirement by the Patent Office:
"* * * Granted that such a requirement can be
legally made by rule of the department in order to
determine whether or not the applicant was alone
entitled to the patent applied for, or only in conjunc-
tion with some one else, it by no means follows that
the department can by any rule or regulation add any
word or words to the statutory oath, making that a
crime which Congress did not make such. The law is
thoroughly well settled that crimes in such matters
are such only as the statutes have defined and
declared. '
In the instance in hand, the statute has defined
the matters the wilful false swearing to which is
made to constitute the crime of perjury. Whether or
not an applicant is the 'sole' inventor of the thing
claimed is not among the elements of the crime
denounced by the statute. Therefore false swearing
in respect to that matter cannot be a crime" (p. 973).
These cases make it clear that even if there had been a
misstatement in the prescribed oaths as to stock ownership
of the corporations acquiring vessels (which there was not)
the vessels were nevertheless entitled to U. S. registry and
are not subject to forfeiture under the provisions of the
registry statutes.
(C) If any misstatements were made to obtain the registry
of the vessels, the misstatements were made innoeently.
In order to establish a forfeiture under 46 IT. S. C. 60
the Government must establish that the certificate of regis-
try for a vessel was "knowingly and fraudulently obtained
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or used." In order to establish a forfeiture under 46 U. S.
C. 21 and 33 the Government must establish that matters of
fact alleged in. the oath "withM the knowledge of the party
so swearing are not true." James G. Mackey in the ease
of the National Tanker Corporation vessels, Olga Konow
in the case of the American Viking Corporation vessels and
Captain M. A. Mathiasen in the case of the Arctic Tankers,
Inc. vessel, were all familiar with the facts set forth in the
December 10, 1947 application of United to the Commission
as to the investment of Chinese capital in United, and the
existence of a controlling interest on the part of United
States citizens. They were also familiar with the opinion
of the Assistant General Counsel of the Commission holding
on these facts that -United was a United States citizen.
Certainly they were not guilty of fraud or intentional mis-
statement in relying upon the opinion of the Assistant
General Counsel of the United States governmental agency
entrusted with the administration of the shipping laws.
Therefore, no forfeiture can be established under these pro-
visions of the registry statutes.
If any technical violations of law have occurred,
which is denied, they should be disregarded in view of
the mitigating circumstances.
United and its tanker-owning subsidiaries have acted
openly and honestly, with full disclosure of material facts
to the Commission, and in reliance upon advices from rep-
resentatives of the Commission that there was full com-
pliance with the applicable laws of the United States.
United's initial application to the Commission dated
December /0, 1947 disclosed fully the financial interest of
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China Trading, the fact that a person associated with China
Trading would serve as the secretary and treasurer of
United, and the fact that it looked to China Trading or to
subsidiaries of National Resources Commission of China as
the sources of capital to finance the acquisition of vessels.
At no time did representatives of the Commission indicate
that the application was looked upon with disfavor because
of any citizenship question. On the contrary, they advised
that tankers were not being allocated to United only
because the available supply was exhausted by earlier
applications. Representatives of the Commission assured
United that, if additional tankers should become available,
its application would be given the most serious consid-
eration.
When United was unsuccessful in obtaining tankers
directly from the Commission it sought to obtain tankers
by purchase or charter from companies which had suc-
cessfully made applications to the Commission, or to
purchase shares of stock of such companies. Before con-
summating the purchase of any share of stock of a tanker-
owning company, and before the acquisition of any vessel
by a company later to become a United subsidiary, United
sought and obtained a confirmatory opinion from the then
Assistant General Counsel of the Commission to the effect
that it complied with the requirements of Section 2 of the
Shipping Act of 1916, as amended.
United entered into agreements dated January 24, 1948
providing for the chartering of three tankers, Meacham,
Kettleman Hills and Antelope Hills, for a ten-year period
from National Tanker Corporation, and for the acquisition
of an option to purchase all of the capital stock of National
Tanker Corporation. These transactions did not require
the approval of the Commission, but in order to be sure
that the members of the Commission had no objections to
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these transactions United insisted upon representations in
the agreements of January 24, 1948 to the effect that the
subject matter of the agreements had been discussed with
members of the Commission and that the Commission had
no objections thereto. The truth of these representations
is established by the testimony of Admiral Smith on
February 13, 1948, a copy of which is annexed as EThibit
G to the accompanying Application.
As indicated in the original application of United to
the Commission, dated December 10, 1947, the Meacham
and the KettZeman Hills were then sub-chartered under
time charter to China Trading which in turn consecutive
voyage chartered the vessels to Chinese Petroleum, an
agency of the Nationalist Government of China. The three
charters in connection with each vessel were submitted to
the Commission and the two foreign charters specifically
approved by the Commission prior to the sale of the vessels
to National Tanker Corporation. The subsequent transfer
by National Tanker Corporation of the Kettlemon Hills
to its wholly-owned subsidiary, Oceanic Maritime Corpo-
ration, was reported to the Commission which specifically
approved the surrender of the document of the vessel in
connection with the transaction.
The original interest of United in American Viking
Corporation was fully set forth in a letter dated April 15,
1948 from Julius J. Rosenberg to a member of the
legal staff of the Commission. This was shortly after the
purchase by American Viking Corporation of the St.
Christopher and prior to its purchase of the Destiny from
the United States Maritime Commission. The Commission
took back preferred mortgages on both vessels and has
continued to hold such mortgages, knowing of United's
interest in the vessels.
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Before agreeing to finance the acquisition by Arctic
Tankers, Inc. of the New London from the Commission
and obtaining an option to purchase the stock of Arctic
Tankers, Inc., United required a representation from M. A.
Mathiasen that the carrying out of the agreement "is con-
sistent with any representations made by Mathiasen to
the Commission". Prior to the exercise by United of its
option to purchase the stock of Arctic Tankers, Inc. an
application was made to the Commission for approval of
a five year bareboat charter of the New London to United.
The Commission, as preferred mortgagee, approved the
bareboat charter referring to United as a citizen within
the meaning of Section 2 of the Shipping Act of 1916.
As a result of the default by Trans-World Maritime
Corporation under the preferred mortgage on the Antelope
Hills held by the Commission, a full review was made by
the representatives of the Commission of the facts regard-
ing United, its stockholders and its tanker-owning sub-
sidiaries. In letters to the Commission in September 1949
full information was given as to the Foundation, its hold-
ings of common stock in United, the preferred stock interest
in United then held by China Trading, and United's hold-
ings of stock in its subsidiary companies and in American
Viking Corporation. In the spring of 1950 United's acqui-
sition of the remaining stock interest in American Viking
Corporation was disclosed to representatives of the Com-
mission. With full knowledge of the facts, the Commission
refused to take back the Antelope Hills in cancellation of
the mortgage and, after prolonged negotiations and the
final remedying of the default, the foreclosure proceedings
instituted under the mortgage were dismissed in August
1950.
The legislative history of the Shipping Act of 1916, and
the amendments thereto, indicates that Congress was
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primarily interested in making certain that physical con-
trol and operation of U. S. flag vessels should always be
in the hands of United States citizens so that the vessels
would be available to the United States in times of national
emergency. The actual operation of the vessels with which
this memorandum is concerned has been at all times in the
hands of experienced American operators specifically
approved by the Commission. The vessels acquired by
National Tanker Corporation, or its subsidiaries, have been
operated by Siding & Jarvis Corporation which was spe-
cifically approved as operator by the Maritime Commission
in its capacity as mortgagee of the Antelope Hills. American
Viking Corporation was specifically approved by the Com-
mission as operator of the St. Christopher and the Destiny,
until replaced by Siding & Jarvis Corporation at the time
of United's acquisition of the controlling stock interest in
American Viking Corporation. Mathiasen's Tanker Indus-
tries, Inc. operated the New London with specific approval
of the Commission until replaced by Siding & Jarvis
Corporation.
The foreign capital originally invested in United has
been largely repaid. Chinese Petroleum holds $1,595,000
face amount of unsecured notes of Meacham Corporation,
which can be discharged out of the proceeds of the sale of
the Meacham upon the remission or dismissal of the for-
feiture proceeding. The only other foreign interest con-
sists of $355,000 par value of preferred stock held by United
Securities Corporation, a Liberian corporation, being the
remainder of the preferred stock originally issued to China
Trading. When these two investments on the part of foreign
corporations have been repaid, United and its subsidiaries
will be wholly owned by the Foundation, a Delaware mem-
bership corporation, whose trustees are United States
citizens of prominence and of unquestioned integrity. The
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equity held by the Foundation in terms of modern values
of tankers will be something in excess of $4,000,000. The
only other financial interest in the tankers will be mort-
gages held by the Commission in the amount of approxi-
mately $4,000,000.
The record is clear that the vessels referred to in this
memorandum have been purchased and operated in good
faith in reliance upon advice from the Commission, and
under actual control and operation by United States
citizens. If the investment of foreign capital in corporations
owning U. S. flag vessels is per se a violation of the shipping
laws, contrary to the opinion of the former Assistant Gen-
eral Counsel of the Commission, then admittedly a viola-
tion has unwittingly occurred. On the facts as shown,
however, it is submitted that even on this interpretation of
the law complete justice will be done by the remission of
any penalties or forfeitures upon the complete elimination
of all foreign investment in United and its subsidiaries.
Certainly, it would not be equitable for the United States,
after having received the full statutory sales price of the
vessels in question, to receive a windfall by keeping the
purchase price and taking back the vessels, because of the
reliance of the owning companies in good faith upon the
opinions received from the representatives of the United
States at the time of purchase of such vessels.
This memorandum and the accompanying Application
are submitted without prejudice to the position of Meacham
Corporation, United Tanker Corporation and its sub-
sidiaries, that no violations of law have been committed or
forfeitures or penalties incurred.
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Key:
Underscoring?language deleted or changed in next amendment.
Broken underscoring?language deleted but not in next amendment.
CAPITALS?language added and appearing for the first time.
[ ]?language in brackets previously used but in different context or position.
1916 Act
That any vessel purchased, chartered, or leased from the
board may be registered or enrolled and licensed, or both
registered and enrolled and licensed, as a vessel of the
United States and entitled to the benefits and privileges
appertaining thereto: Provided, That foreign-built vessels
admitted to American registry or enrollment and license
under this Act, and vessels owned, chartered, or leased by
any corporation in which the United States is a stockholder,
and vessels sold, leased, or chartered to any person a citizen
of the United States, as provided in this Act, may engage
in the coastwise trade of the United States.
Every vessel purchased, chartered, or leased from the
board shall, unless otherwise authorized by the board, be
operated only under such registry or enrollment and license.
Such vessels while employed solely as merchant vessels
shall be subject to all laws, regulations, and liabilities gov-
erning merchant vessels, whether the United States be
interested therein as owner, in whole or in part, or hold
any mortgage, lien, or other interest therein. No such
vessel, without the approval of the board, shall be trans-
ferred to a foreign registry or flag, or sold; nor, except
under regulations prescribed by the board, be chartered or
leased.
When the United States is at war, or during any national
emergency the existence of which is declared by proclama-
tion of the President, no vessel registered or enrolled and
licensed under the laws of the United States shall, without
the approval of the board, be sold, leased, or chartered to
any person not a citizen of the United States, or transferred
to a foreign registry or flag. No vessel registered or
enrolled and licensed under the laws of the United States,
or owned by any person a citizen of the United States,
except one which the board is prohibited from purchasing,
shall be sold to, any person not a citizen of the United
States or transferred to a foreign registry or flag, unless
such vessel is first tendered to the board at the price in good
faith offered by others, or, if no such offer, at a fair price
to be determined in the manner provided in section ten.
Any vessel sold, chartered, leased, transferred, or oper-
ated in violation of this section shall be forfeited to the
United States, and whoever violates any provision of this
section shall be guilty of a misdemeanor and subject to a
fine of not more than $5,000 or to imprisonment of not more
than five years, or both, such fine and imprisonment.
APPENDIX A
Section 9, Shipping Act, 1916 as amended
1918 Act
That any vessel purchased, chartered, or leased from the
board may be registered or enrolled and licensed, or both
registered and enrolled and licensed, as a vessel of the
United States and entitled to the benefits and privileges
appertaining thereto: Provided, That foreign-built vessels
admitted to American registry or enrollment and license
under this Act, and vessels owned, chartered, or leased by
any corporation in which the United States is a stockholder,
and vessels sold, leased, or chartered to any person a citizen
of the United States, as provided in this Act, may engage
in the coastwise trade of the United States WHILE
OWNED, LEASED, OR CHARTERED BY SUCH
A PERSON.
Every vessel purchased, chartered, or leased from the
board shall, unless otherwise authorized by the board, be
operated only under such registry or enrollment and license.
Such vessels while employed solely as merchant vessels
shall be subject to all laws, regulations, and liabilities gov-
erning merchant vessels, whether the United States be
interested therein as owner, in whole or in part, or hold
any mortgage, lien, or other interest therein. No such
vessel, without the approval of the board, shall be trans-
ferred to a foreign registry or flag, or sold; nor, except
under regulations prescribed by the board, be chartered or
leased.
No vessel DOCUMENTED under the laws of the
United States or owned by any person a citizen of the
United States OR BY A CORPORATION ORGAN-
IZED UNDER THE LAWS OF THE UNITED
STATES, OR OF ANY STATE, TERRITORY, DIS-
TRICT, OR POSSESSION THEREOF, except one
which the board is prohibited from purchasing, shall be sold
to any person not a citizen of the United States or trans-
,-
terred to OR PLACED UNDER a foreign registry or flag,
unless such vessel is first tendered to the board at the price
in good faith offered by others, or, if no such offer, at a fair
price to be determined in the manner provided in sec-
tion ten.
Any vessel sold, chartered, leased, transferred TO OR
PLACED UNDER A FOREIGN REGISTRY OR
FLAG, or operated, in violation OF ANY PROVISION
of this section shall be forfeited to the Untied States, and
whoever violates any provision of this section shall be guilty
of a misdemeanor and subject to a fine of not more than
$5,000, or to imprisonment for not more than five years,
or both.
1920 Act
That any vessel purchased, chartered, or leased from the
board, BY PERSONS WHO ARE CITIZENS OF
THE UNITED STATES, may be registered or enrolled
and licensed, or both registered and enrolled and licensed,
as a vessel of the United States and entitled to the benefits
and privileges appertaining thereto: Provided, That for-
eign-built vessels admitted to American registry or enroll-
ment and license under this Act, and vessels owned by any
corporation in which the United States is a stockholder,
and vessels sold, leased, or chartered BY THE BOARD
to any person a citizen of the United States, as provided in
this Act, may engage in the coastwise trade of the United
States while owned, leased, or chartered by such a person.
Every vessel purchased, chartered, or leased from the
board shall, unless otherwise authorized by the board, be
operated only under such registry or enrollment and
license. Such vessels while employed solely as merchant
vessels shall be subject to all laws, regulations, and liabil-
ities governing merchant vessels, whether the United States
be interested therein as owner, in whole or in part, or hold
any mortgage, lien, or other interest therein.
IT SHALL BE UNLAWFUL TO SELL, TRANS-
FER OR MORTGAGE, OR, EXCEPT UNDER REG-
ULATIONS PRESRIBED BY THE BOARD, TO
CHARTER, ANY VESSEL PURCHASED FROM
THE BOARD OR [documented under the laws of the
United States to any person not a citizen of the United
States,] OR TO PUT THE SAME under a foreign reg-
istry or flag, WITHOUT FIRST OBTAINING THE
BOARD'S APPROVAL.
Any vessel [chartered, sold,] transferred or MORT-
GAGED TO A PERSON NOT A CITIZEN OF THE
UNITED STATES or placed under a foreign registry or
flag, or operated, in violation of any provision of this section
shall be forfeited to the United States, and whoever violates
any provision of this section shall be guilty of a mis-
demeanor and subject to a fine of not more than $5,000,
or to imprisonment for not more than five years, or both.
58
1938 Act
Same
(By the 1936 Act the word "Commission" was inserted
in place of the word "board".)
Same
(By the 1936 Act the word "Commission" was inserted
in place of the word "board".)
EXCEPT AS PROVIDED IN SECTION 611
OF THE MERCHANT MARINE ACT, 1936, AS
AMENDED, it shall be unlawful, without THE AP-
PROVAL OF THE UNITED STATES MARITIME
COMMISSION, to sell, [mortgaged LEASE, [charter,]
DELIVER, OR IN ANY MANNER TRANSFER,
OR AGREE TO SELL, MORTGAGE, LEASE,
CHARTER, DELIVER, OR IN ANY MANNER
TRANSFER, [to any person not a citizen of the United
States,] OR TRANSFER OR PLACE UNDER foreign
registry or flag, any vessel OR ANY INTEREST
THEREIN OWNED IN WHOLE OR IN PART BY
A CITIZEN OF THE UNITED STATES AND [doc-
umented under the laws of the United States], OR THE
LAST DOCUMENTATION OF WHICH WAS
UNDER THE LAWS OF THE UNITED STATES.
Any SUCH vessel, OR ANY INTEREST THEREIN,
chartered, sold, transferred, or mortgaged to a person not
a citizen of the United States or placed under a foreign
registry or flag, or operated, in violation of any provision
of this section shall be forfeited to the United States, and
whoever violates any provision of this section shall be
guilty of a misdemeanor and subject to a fine of not more
than $5,000, or to imprisonment for not more than five
years, or both.
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Key: Capitals?Language
added and appearing
for first time.
1916 Act
That within the meaning of this Act no corporation, partnership,
or association shall be deemed a citizen of the United States unless
the controlling interest therein is owned by citizens of the United
States, and, in the case of a corporation, unless its president and
managing directors are citizens of the United States and the corpora-
tion itself is organized under the laws of the United States or of a
State, Territory, District, or possession thereof.
(d) The provisions of this Act shall apply to receivers and trus-
tees of all persons to whom the Act applies, and to the successors
or assignees of such persons.
APPENDIX B
Section 2, Shipping Act, 1916, As Amended
1918 Act
That within the meaning of this Act no corporation, partnership,
or association shall be deemed a citizen of the United States unless
the controlling interest therein is owned by citizens of the United
States, and, in the case of a corporation, unless its president and
managing directors are citizens of the United States and the corpora-
tion itself is organized under the laws of the United States or of a
State, Territory, District, or possession thereof.
THE CONTROLLING INTEREST IN A CORPORATION
SHALL NOT BE DEEMED TO BE OWNED BY CITIZENS
OF THE UNITED STATES (A) IF THE TITLE TO A
MAJORITY OF THE STOCK THEREOF IS NOT VESTED
IN SUCH CITIZENS FREE FROM ANY TRUST OR FIDU-
CIARY OBLIGATION IN FAVOR OF ANY PERSON NOT
A CITIZEN OF THE UNITED STATES; OR (B) IF THE
MAJORITY OF THE VOTING POWER IN SUCH CORPO-
RATION IS NOT VESTED IN CITIZENS OF THE UNITED
STATES; OR (C) IF THROUGH ANY CONTRACT OR
UNDERSTANDING IT IS SO ARRANGED THAT THE
MAJORITY OF THE VOTING POWER MAY BE EXER-
CISED, DIRECTLY OR INDIRECTLY, IN BEHALF OF ANY
PERSON WHO IS NOT A CITIZEN OF THE UNITED
STATES; OR, (D) IF BY ANY OTHER MEANS WHATSO-
EVER CONTROL OF THE CORPORATION IS CONFERRED
UPON OR PERMITTED TO BE EXERCISED BY ANY PER-
SON WHO IS NOT A CITIZEN OF THE UNITED STATES.
(cl) The provisions of this Act shall apply to receivers and trus-
tees df all persons to whom the Act applies, and to the successors
or asignees of such persons.
59
1920 Act
(a) That within the meaning of this Act no corporation, part-
nership, or association shall be deemed a citizen of the United States
unless the controlling interest therein is owned by citizens of the
United States, and, in the case of a corporation, unless its presi-
dent and managing directors are citizens of the United States and
the corporation itself is organized under the laws of the United States
or of a State, Territory, District, or possession thereof, BUT IN
THE CASE OF A CORPORATION, ASSOCIATION, OR
PARTNERSHIP OPERATING ANY VESSEL IN THE
COASTWISE TRADE THE AMOUNT OF INTEREST
REQUIRED TO BE OWNED BY CITIZENS OF THE
UNITED STATES SHALL BE 75 PER CENTUM.
(b) The controlling interest in a corporation shall not be deemed
to be owned by citizens of the United States (a) if the title to a
majority of the stock thereof is not vested in such citizens free from
any trust or fiduciary obligation in favor of any person not a citizen
of the United States; or (b) if the majority of the voting power in
such corporation is not vested in citizens of the United States; or
(c) if through any contract or understanding it is so arranged that
the majority of the voting power may be exercised, directly or indi-
rectly, in behalf of any person who is not a citizen of the United
States; or, (d) if by any other means whatsoever control of the
corporation is conferred upon or permitted to be exercised by any
person who is not a citizen of the United States.
(C) SEVENTY-FIVE PER CENTUM OF THE INTEREST
IN A CORPORATION SHALL NOT BE DEEMED TO BE
OWNED BY CITIZENS OF THE UNITED STATES (A) IF
THE TITLE TO 75 PER CENTUM OF ITS STOCK IS NOT
VESTED IN SUCH CITIZENS FREE FROM ANY TRUST
OR FIDUCIARY OBLIGATION IN FAVOR OF ANY PER-
SON NOT A CITIZEN OF THE UNITED STATES; OR (B)
IF 75 PER CENTUM OF THE VOTING POWER IN SUCH
CORPORATION IS NOT VESTED IN CITIZENS OF THE
UNITED STATES; OR (C) IF, THROUGH ANY CON-
TRACT OR UNDERSTANDING, IT IS SO ARRANGED
THAT MORE THAN 25 PER CENTUM OF THE VOTING
POWER IN SUCH CORPORATION MAY BE EXERCISED,
DIRECTLY OR INDIRECTLY, IN BEHALF OF ANY PER-
SON WHO IS NOT A CITIZEN OF THE UNITED STATES;
OR (D) IF BY ANY OTHER MEANS WHATSOEVER CON-
TROL OF ANY INTEREST IN THE CORPORATION IN
EXCESS OF 25 PER CENTUM IS CONFERRED UPON OR
PERMITTED TO BE EXERCISED BY ANY PERSON WHO
IS NOT A CITIZEN OF THE UNITED STATES.
(d) The provisions of this Act shall apply to receivers and trus-
tees of all persons to whom the Act applies, and to the successors
or assignees of such persons.
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