839.6463/142: Telegram
The Secretary of State to the Commissioner in the Dominican Republic (Welles)
4. Your 8, February 8, 4 p.m. The contract between the Santo Domingo Water, Light and Power Company and the Dominican authorities provided that the property specified would be sold at a price to be fixed by an expert to be selected by common accord. In fact, however, the Department understands the expert was picked by the Dominican Government and the Company acceded to the choice. The Government wished the Company to advance the cash necessary for the repairs for whatever sum that might be, taking bonds at 90 therefor. As Hunt did not have authority to bind his principals for an indefinite sum he was only willing to pledge himself in the contract to make repairs up to $60,000 although he states the Government repeatedly requested, him not to fix a limit. However, in order to meet the wishes of the Dominican Government as far as possible he signed a letter to the Secretary of the Interior [Page 675] before the conclusion of the contract by which he agreed, should the expert fix the expenditure necessary for repairs at an amount greater than $60,000. to recommend to his principals that they advance the money for this purpose. The expert picked by the Government reported the value of the property in its present condition at $533,012. and fixed the expenditures necessary for the repairs at $323,420. Upon receipt of this information Mr. Hunt, in accordance with his promise to the Secretary of the Interior, recommended to his principals that they advance the money necessary for these repairs. The latter agreed to do so and requested that $951,000. in bonds (equivalent at 90 to $856,432. in cash) of the projected loan issue be held in escrow for the Company to be turned over to it at such time as the expert should state that the necessary repairs had been satisfactorily completed. The Company and Hunt have scrupulously lived up to their agreement. The Government apparently has endeavored to find a technicality in the $60,000. provision for not living up to the agreement. The Government is doubtless surprised that an impartial expert should find the property as valuable as it is but this does not appear to furnish grounds not to carry out its obligations under the contract.
However, in view of the apparent feeling of the Government that the estimate for repairs is too high, the Department stated in its telegram to the Legation of February 6, 1 p.m., that it would be disposed to recommend to the Company to accept $450,000. gold or its equivalent in Dominican bonds at 90 per cent of their par value in full payment of properties described in contract which shall thereupon be transferred to the order of the Dominican Government in their present condition. This was practically the same settlement that the Department had suggested in its telegram No. 7 to the Legation at Santo Domingo of March 8, 1923, 3 p.m.,42 before the property had been appraised and when the bonds were quoted at approximately 85. If the Dominican Government should wish to settle on this basis it would receive the property at $83,000. gold less than its appraised value and telegram No. 8, February 8, 4 p.m., from this Minister would indicate that the President is giving this matter careful consideration.
However, the Department, in view of your telegram and without awaiting the President’s reply, has recommended to the Company that it accept the proposition contained in the penultimate paragraph of the Department’s telegram No. 2, February 6, 1 p.m., to the Legation. The Company has therefore made an offer either “(1) to furnish the sum required to pay the cost of rehabilitation of the properties described in the contract of June 15, 1923, as determined [Page 676] by the experts therein named, provided the Dominican Government shall put in escrow in the hands of its Fiscal Agent under its proposed bond issue $951,000. par value of the bonds agreed to be issued with instructions that the same be delivered to the order of the Liberty Trust Company of Boston, Massachusetts, simultaneously with the delivery to said Fiscal Agent by Dwight P. Robinson and Company, Incorporated, of the certificate provided to be given by said last named company under the terms of Article 5th of said contract; or (2) accept $450,000. gold, or its equivalent in Dominican 5½ per cent bonds at 90 per cent of their par value, in full payment of the properties described in said contract of June 15, 1923, which shall thereupon be transferred to the order of the Dominican Government in their present condition.” Mr. Hunt states that the “above offer is made without prejudice to the rights of my principals under the record of this case as filed in the State Department.”
In view of all the circumstances of this case, the difficulties experienced by the Company in coming to an agreement with the municipalities and with the Government, the fact that Mr. Hunt has already made three trips to Santo Domingo and has negotiated a contract for the settlement of the matter, the Department is not disposed to ask Mr. Hunt to go again to Santo Domingo to try to make another contract. In view of the attitude which the Government has apparently taken on the contract of June 15, 1923, there would appear to be no assurance that a new contract, if made, would be carried out. The Department feels that the two alternative propositions made by the Company offer the basis for a fair and equitable settlement and when it is advised that one of these propositions is accepted it will then be in a position to inform the Legation regarding the proposed bond issue. The Department hopes that you will use your influence to have one of these propositions accepted by the Dominican Government.