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of the United States concurs, in the construction that all these rights were given us solely for the purpose of enabling us to construct, maintain, and operate the canal. It is not the motive that governed the conferring of those rights, but the extent of the rights necessary to enable us to secure this common object, that has been in controversy.

After this statement I shall be glad to confer with these gentlemen. I appreciate the honor of having this official communication with them, and I am glad to proceed with the consideration of the three points, or other points, that they have mentioned. I wish to further emphasize that the last thing in the world that President Roosevelt and Secretary Hay have in mind is to injure the feelings of the people of the Republic of Panama by asserting a power which shall affect their national pride. Although we may desire to hold in reserve the right to exercise certain powers in the treaty, I wish these people to credit us with the greatest sincerity when we say that we are anxious not to exercise any power but that which we deem absolutely essential to the common object of both nations.

Upon completion of Secretary Taft's remarks, the meeting adjourned for submission of written memoranda by President Amador containing suggestions as to needed provisions on the three points named, to wit, the revenues, the posts, and the ports.

SECRETARY OF STAte, Washington:

• EXHIBIT 6.
[Confidential.]

PANAMA, December 2, 1904.

After much effort and discussion, can arrange matters satisfactorily by Executive order repealing Dingley tariff and directing no importations shall be permitted at terminal canal ports except articles under Section XIII of treaty, and articles in transit across Isthmus, and coal and fuel for seagoing vessels, Panama agreeing to reduce ad valorem rate of duty from 15 to 10 per cent and consular fees to 60 per cent of present rates, and both parties agreeing to complete free trade between Zone and Republic.

Postal differences can be arranged by use of Panama stamps properly crossed with Zone marks, authorities paying 40 per cent of face value stamps and Panama agree that rate between Panama and United States of America shall be reduced to 2 cents gold.

Separate ports to be maintained as at present, with entries and clearances by proper officials of the respective Governments, but reciprocal arrangement mutually benefiting to be permitted for use of facilities of one port by vessels cleared for the other under suitable regulations not affecting complete administrative, judicial, and police jurisdiction by each Government over maritime harbor of its respective ports. Complete and immediate sanitary and quarantine jurisdiction is to be secured to Zone authorities over harbors of Panama and Colon.

Provisional geographical delimitation of cities and harbors Colon and Panama between Davis and Panama authorities to remain in force.

Coinage and currency agreement already signed to be immediately executed. Order contains clause reciting that its provisions and fulfillment of its conditions shall not be regarded as restrictive construction of rights of either Government under treaty. This order will secure all the duties for the Republic and will give it also some income from post. The duties might be secured to the Republic not by restriction of character of importations at terminal canal ports, as above, but by imposing a higher duty in canal ports than in Panama ports on all but excepted articles-say 50 per cent increase; but whichever be the method, the prohibition of certain importations in the one case or the imposition of higher duty the other must, in order to effect purpose, apply to importations from United States of America into Zone, and the question is, Which is preferable? I prefer the former.

Please submit matters to President of the United States and advise me of your conclusion on this and other points as soon as practicable.

Exceptions as to coal and fuel importations made for the benefit of shipping and because it is impracticable to have coal pockets anywhere except at canal ports. The order is of course revocable at will, and its operations can be suspended by Panama by refusal to continue compliance with any of its conditions, but I believe from conference that, adopted, it will continue satisfactory basis of relations between parties until opening of canal. Presume objection will be made that American

manufacturing interests are not protected by this order from competition with world oh material and machinery for canal. If Congress wishes to secure that business solely to American merchants and manufacturers, it should do it by direct limitation on purchases and contracts of the Canal Commission and not by indirect method of duties, which can not but work inconvenience and hardship to Republic-to Panams and its merchants, as well as to Zone and its inhabitants.

TAFT, Panama:

TAFT.

STATE DEPARTMENT, December 3, 1904.

Have received your telegram of the 2d, and it has been submitted to the Presi dent of the United States. Your action and suggestion cordially approved.

HAY.

#55. Testimony of William Nelson Cromwell before the Senate Committee on Interoceanic Canals Regarding the Payment of $40 million to the French New Panama Canal Company and the Payment of $10 million to the Republic of Panama, February 26, 1906 (Excerpts)*

COMMITTEE ON INTEROCEANIC CANALS,

UNITED STATES SENATE,

Washington, D. C., Monday, February 26, 1906. The committee met at 2 o'clock p. m. (no session having been held on Saturday last).

Present: Senators Millard (chairman), Platt, Kittredge, Dryden, Knox, Morgan, Taliaferro, and Simmons.

TESTIMONY OF WILLIAM NELSON CROMWELL, ESQ.

Mr. CROMWELL was duly sworn and testified as follows:

The CHAIRMAN. Mr. Cromwell, we wanted you to come before this committee to-day, knowing, of course, your familiarity with this enterprise from its beginning. I will ask you first to give the stenographer your name and residence.

Mr. CROMWELL. My name is William Nelson Cromwell; my residence is 12 West Forty-ninth street, New York City.

The CHAIRMAN. And your business?

Mr. CROMWELL. My occupation is that of a lawyer, a member of the firm of Sullivan & Cromwell, New York City; my age is 52 years. The CHAIRMAN. Now, Mr. Cromwell, be kind enough to proceed and give us a statement of your connection with this enterprise from its beginning as nearly as you can.

Mr. CROMWELL. Mr. Chairman, I observe from the testimony before the committee that it is a matter of interest upon your part to more definitely learn the facts concerning certain subjects relating to Panama Canal affairs with which I have had anything to do since the purchase of the canal by the United States, and I thank you for the opportunity. My law firm, Sullivan & Cromwell, have been the general counsel of the Panama Railroad Company for over twelve years and of the New Panama Canal Company for nine years.

Senator MORGAN. Beginning at what dates?

Mr. CROMWELL. Will you permit me, Senator, to read the state

ment, and then

Senator MORGAN. Do you not remember the dates?

Mr. CROMWELL. The dates were 1893 and 1896, respectively.

My law firm, Sullivan & Cromwell, have been the general counsel of the Panama Railroad Company for over twelve years, and of the New Panama Canal Company for nine years. We never had any connection with the so-called De Lesseps Company, which failed in 1889. In May, 1904, 1, representing the New Panama Canal Company, and

U.S. Senate, Committee on Interoceanic Canals, Hearings. Providing for an Investigation of Matters Relating to the Panama Canal, cited last, Vol. II, pp. 1041-1044. See also U.S. Senate, Committee on Interoceanic Canals, Refusal of William Nelson CromWell to Answer Certain Questions... Extracts from the Hearings on Interoceanic

Canals. 59th Congress, 1st Session, Senate Document No. 457. TC774. U6 1906j.

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Judges Day and Russell, representing Attorney-General Knox, uon summated in Paris the transfer to the United States of the property and concessions of the canal company, and of over 98 per cent of the capital stock of the railroad company. In consideration for this transfer the United States paid to the canal company the sum of $40,000,000. This sum was paid by the United States through Messrs. J. P. Morgan & Co., as their agents, into the Bank of France, at Paris. By agreement the entire expense of the transmission of this sum to France through said bankers was borne and paid by the New Panama Canal Company. The amount of said expense was $35,790, and was paid to J. P. Morgan & Co., as their only compensation."

Of the $40,000,000 thus paid by the United States Government, $25,000,000 was paid to the liquidator of the old Panama Canal Company, under and in pursuance of an agreement entered into between the liquidator and the new company, which agreement was authorized by the French courts; and of this sum the liquidator has already distributed $24,000,000 to the security holders and creditors of the old French company.

Senator MORGAN. How much was paid?

Mr. CROMWELL. Twenty-five million dollars was paid; $24,000,000 was distributed.

Senator MORGAN. What was the sum? You say 25 per cent; of what amount?

Mr. CROMWELL. I am not talking about 25 per cent; I am talking about dollars.

Senator MORGAN. Oh, yes.

Mr. CROMWELL (continuing his statement). Which agreement was authorized by the French courts, and of this sum the liquidator has already distributed $24,000,000 to the security holders and creditors of the old French Company. Of the balance of $15,000,000 paid to the New Panama Canal Company, $12,000,000 have already been distributed among its stockholders, and the remainder is now being held awaiting final distribution and payment, and will, in due time, be applied to the cost and expenses of liquidation, the payment of any indebtedness, and for a further dividend to its stockholders. Senator TALIAFERRO. There is $3,000,000?

Mr. CROMWELL. In the summer of 1904-
Senator TALIAFERRO. I asked a question.

Mr. CROMWELL. Oh, certainly, sir.

Senator TALIAFERRO. There is three millions of dollars.

Mr. CROMWELL. Three million dollars; yes, sir.

Senator TALIAFERRO. Who holds that money?

Mr. CROMWELL. The New Panama Canal Company, in its treasury. The New Panama Canal Company, sir, is in liquidation under judicial procedure and accountable to the court for all of its funds.

In the summer of 1904, after the transfer to the United States, I was appointed general counsel for the Republic of Panama and legal adviser to its fiscal commissioners, who were appointed to invest as a permanent fund $6,000,000 of the amount paid by the United States to the Republic of Panama.

From the outset President Roosevelt manifested a keen interest in this investment by the Panama Republic, and expressed to me his earnest hope that the funds would be wisely and judiciously invested so as to secure the prosperity of that country, and he urged upon me

to use my best endeavors to that end. I communicated his views to the Panama Government, and the fiscal commissioners afterwards called upon him with me and expressed their grateful appreciation of his interest and their accord with his views. Several months were devoted by the commissioners and their counsel to the investment of these funds, and the result is a just source of pride to the Panama Government and all concerned.

With regard to the disposition of the $10,000,000 paid by the United States Government in May, 1904, to the Republic of Panama, I am permitted by the Government of the Republic to furnish a statement of the disposition of said moneys, certified by Mr. J. D. de Obaldia, its minister to this country, which is as follows:

Memorandum of the general disposition by the Republic of Panama of the $10,000,000 paid by the United States to its fiscal agents, Messrs. J. P. Morgan & Co., May 8-20,

1904.

Investinent in 32 first mortgages upon improved real estate in the city of New York at 41 per cent interest, all recorded in the name of the Republic.

$790,000 41 per cent bonds of the Panama Railroad Company in vaults of J. P. Morgan & Co., fiscal agents...

Cash on deposit to credit of the Republic with New York Trust Com

pany, $575,000; and Morton Trust Company, $575,000, under certifi-
cates of deposit at 3 per cent interest per annum
These items are all there now, gentlemen.

Cash on deposit with Bankers' Trust Company, of New York, as trustee
of gold-reserve fund equal to 15 per cent of the Panama coinage of
4,000,000 pesos under the agreement respecting the parity of gold
with silver, bearing interest at 3 per cent per annum..
Cash on deposit to credit of Republic with J. P. Morgan & Co., fiscal
agents, and Bankers' Trust Company, at New York, at 2 per cent
per annum....

Cash on deposit at London with Comptoir National di Escompte to
the credit of the Republic of Panama..

Cash on deposit to credit of Republic at 2 per cent interest with bankers at Panama under contract with Panama Government, dated August 16, 1905 (Gaceta Oficial No. 149)...

Cash invested by Panama Republic under law 74 of 1904 in establishing the Banco Hipoticario at Panama (a national bank).....

By law 52 of 1904, there was appropriated "from the payment on account of the canal" the sum of 3,250,000 pesos ($1,625,000 gold) for the construction of public works in the seven provinces as follows:

Province of Panama

Province of Colon

Province of Chiriqui.

Province of Cocle

Province of Los Santos.

Province of Veraguas.

Province of Bocas del Toro....

other improvements to date...

[blocks in formation]

225,000

$5,165,500.00

634,343.75

1,150,000.00

$300,000.00

71, 280.62

632, 690.00

150,000.00

500,000.00

Of this sum there has been expended in public buildings, roads, and

By drafts of Panama Government on Messrs. J. P. Morgan & Co., fiscal agents, from time to time...

Expenses of fiscal commissioners for accountants, cables, postage, etc..

573,000.00

622, 615. 52 570.11

10, 000, 000. 00

From this statement it will be seen that the Panama Government to-day holds intact 88,800,000 of this amount, of which $5,165,500 is invested per cent first mortgages upon improved real estate in the city of New York, $834,343.75 in the 44 per cent gold bonds of the Panama

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