Archives
1940.12.17.Eastern Provinces.Note de recommandations
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Recommendations with regard to Eastern Provinces Administration Ltd.
1. It is to no advantage to have the Company's holdings on behalf of its clients under the control of both the American and the Canadian Governments. As Eastern Provinces is a Canadian Corporation, it is in any event under Canadian control and, therefore, our object should be to free the Company as quickly as possible from American control.
2. With regard to the physical safekeeping of the funds and securities the following has to be considered:
a) Mr. Boyd's opinion is that the American Courts would give sufficient guarantee against seizure of any kind. If this is so, the originally intended scheme with Boston Corporation being the creditor of Eastern Provinces, would have been completely safe, even in case all cash and securities would physically have been held in Canada.
b) In connection with the securities held in London, we have to expect considerable difficulties as London insists on certificates of ownership.
c) American officials have repeatedly publicly stated that Washington might seize French holdings in the United States against French liabilities including war loans from the last war. On the other hand, in Canada no unfriendly statement has been made or unfriendly act carried out as far as French interests are concerned. This is not to be anticipated in view of the very large French Canadian population.
d) I understand that Professor Doriot wants to keep the Boston Corporation out of this whole scheme and to use it for other purposes.
My recommendation would be to establish another American Corporation which would perform the part which was intended for the Boston Corporation. In this case Mr. Boyd should resume his recent conversations with Washington where he explained that the Canadian Custodian was already controlling these funds and he should inform the American Authorities that with the consent of the Canadian Custodian the funds and securities would be transferred to an American Corporation to be established as above said for this purpose.
This solution would also settle the important problem of Eastern Provinces' liability towards its clients, a problem which is particularly important in view of the unsatisfactory letters of indemnity which were drafted in Europe.
The Company to be established would automatically receive the income from the Administration in Montreal and would pay out of this income expenses and management fees to Eastern Provinces. It could also be under contract with the Boston Corporation and procure an income to this latter company.
The new company itself should not show any income.
The cash and securities could remain In the States but I would propose that in this case a considerable part of both the cash and securities should be transferred to one of the Canadian Banks in New York where they would still be under American Jurisdiction and where the new Company could still protect its interest through American Courts. If Mr. Boyd feels safe about this protection even all of the cash and securities could be transferred to Canada or one of the Canadian Banks in New York. I feel sure that in this case a maximum of collaboration from the Canadian Authorities could be expected. We should also try to get the support of the Canadian Authorities for the transfer from London of securities and cash now held by M. Samuel & Co.
3. Eastern Provinces should have a letter of indemnity from Fininvest and from the new Company.
4. A duplicate of the list with the names should be kept by somebody to be appointed by Mr. Doriot.
5. The numbered accounts should be divided into two Groups:
Group A, Accounts to be left unchanged;
Group B, Accounts to be administered at our discretion. In the case of Group B accounts, a small committee should be appointed to make decisions with regard to changes in the existing investments. In the case of Group B, it might also be decided to invest from time to time cash and allocate the investments to the various accounts of the Group.
6. I think that in order to cover the administration costs, a commission of 1/2% per year should also be charged on the cash balances. On this basis we could expect an approximate yearly income from both cash and securities of roughly $20,000.-, without any revenue from investments of cash.
7. For every account that is closed we should charge a closing commission of 1/2% of the value of the cash and securities held for the respective account, except of course in cases where it is felt that this would cause a hardship.
8. "Imafiza" had followed the practice to invest, in accordance with the usual banking practice, part of the cash deposited with them by clients, but made the mistake of investing mostly in the same countries from which the funds sought refuge. Apparently a considerable amount of money had been lost by investments in France and Holland made in disregard of the war risk. If we would decide to make any investments on such a basis, the above mentioned Committee should handle them too and certain principles should be laid down to guide it.
Recommendations with regard to Eastern Provinces Administration Ltd.
1. It is to no advantage to have the Company's holdings on behalf of its clients under the control of both the American and the Canadian Governments. As Eastern Provinces is a Canadian Corporation, it is in any event under Canadian control and, therefore, our object should be to free the Company as quickly as possible from American control.
2. With regard to the physical safekeeping of the funds and securities the following has to be considered:
a) Mr. Boyd's opinion is that the American Courts would give sufficient guarantee against seizure of any kind. If this is so, the originally intended scheme with Boston Corporation being the creditor of Eastern Provinces, would have been completely safe, even in case all cash and securities would physically have been held in Canada.
b) In connection with the securities held in London, we have to expect considerable difficulties as London insists on certificates of ownership.
c) American officials have repeatedly publicly stated that Washington might seize French holdings in the United States against French liabilities including war loans from the last war. On the other hand, in Canada no unfriendly statement has been made or unfriendly act carried out as far as French interests are concerned. This is not to be anticipated in view of the very large French Canadian population.
d) I understand that Professor Doriot wants to keep the Boston Corporation out of this whole scheme and to use it for other purposes.
My recommendation would be to establish another American Corporation which would perform the part which was intended for the Boston Corporation. In this case Mr. Boyd should resume his recent conversations with Washington where he explained that the Canadian Custodian was already controlling these funds and he should inform the American Authorities that with the consent of the Canadian Custodian the funds and securities would be transferred to an American Corporation to be established as above said for this purpose.
This solution would also settle the important problem of Eastern Provinces' liability towards its clients, a problem which is particularly important in view of the unsatisfactory letters of indemnity which were drafted in Europe.
The Company to be established would automatically receive the income from the Administration in Montreal and would pay out of this income expenses and management fees to Eastern Provinces. It could also be under contract with the Boston Corporation and procure an income to this latter company.
The new company itself should not show any income.
The cash and securities could remain In the States but I would propose that in this case a considerable part of both the cash and securities should be transferred to one of the Canadian Banks in New York where they would still be under American Jurisdiction and where the new Company could still protect its interest through American Courts. If Mr. Boyd feels safe about this protection even all of the cash and securities could be transferred to Canada or one of the Canadian Banks in New York. I feel sure that in this case a maximum of collaboration from the Canadian Authorities could be expected. We should also try to get the support of the Canadian Authorities for the transfer from London of securities and cash now held by M. Samuel & Co.
3. Eastern Provinces should have a letter of indemnity from Fininvest and from the new Company.
4. A duplicate of the list with the names should be kept by somebody to be appointed by Mr. Doriot.
5. The numbered accounts should be divided into two Groups:
Group A, Accounts to be left unchanged;
Group B, Accounts to be administered at our discretion. In the case of Group B accounts, a small committee should be appointed to make decisions with regard to changes in the existing investments. In the case of Group B, it might also be decided to invest from time to time cash and allocate the investments to the various accounts of the Group.
6. I think that in order to cover the administration costs, a commission of 1/2% per year should also be charged on the cash balances. On this basis we could expect an approximate yearly income from both cash and securities of roughly $20,000.-, without any revenue from investments of cash.
7. For every account that is closed we should charge a closing commission of 1/2% of the value of the cash and securities held for the respective account, except of course in cases where it is felt that this would cause a hardship.
8. "Imafiza" had followed the practice to invest, in accordance with the usual banking practice, part of the cash deposited with them by clients, but made the mistake of investing mostly in the same countries from which the funds sought refuge. Apparently a considerable amount of money had been lost by investments in France and Holland made in disregard of the war risk. If we would decide to make any investments on such a basis, the above mentioned Committee should handle them too and certain principles should be laid down to guide it.