Summaries of Telephone Conversations

Washington, D. C. CO SUMMARY August 15, 1945 12:35 PM CORCORAN to the Chinese Ambassador, "I wanted to talk to you. It has to do with the Chinese Military Mission. General SHANG SHEN employed an American, ARNOLD KIEHN, as a liaison man with the armies in China. There was some holding-up with the passport. TOM CONNALLY, SENATOR LEE, SENATOR PEPPER, and Secretary of State combined to break a prejudice which GREW had against KIEHN on the grounds that he had cheated the Japanese somewhere in his career in the Far East. GREW refused him a passport but it has been issued. PEPPER wants to be sure that KIEHN gets to go to China with the Mission. Ambassador says, "I will talk to General SHANG." CORCORAN says, '(Speaker SAM) RAYBURN also was on our side. GREW has now changed his mind. He said that KIEHN had smuggled some yen in on the Japs and we thought that was a good reason to let him go. We want him to go as originally planned. Agreed. 12:45 PM CORCORAN to TIM MOONEY. "I settled that affair in Providence on this basis: You and I get 25,000 right away and $5,000 more a piece for two years. Is that all right with you?" TIM says yes. "The last is provided that there is no criminal prosecution?" CORCORAN says, "Yes. We will know in two weeks. Now there is another one. You know about these tax-exempt corporations. There is one in Newark called the Robinson Foundation which gives earnings to charity. There is no doubt about it but the trick is the same as the Nebraska power thing which WORTH CLARK told you about. An investment manager picks up a business and sells it to the fund and the fund takes the corporation and dissolves it. The broker and seller capitalize on the tax exemption and that racket has been played on that foundation in two cases. Because of that in Connecticut they are thinking of knocking off the rating of the company as a charitable institution. Of course, the promoter pays the capital gains tax so technically there is no evasion except that tax-paying income is taken out of circulation. Connecticut and Newark are looking at it as a test case. The question is whether we want this case as a test case or let some other one be the test case. Do we?" TIM says, "There are lots of others they could have picked. Gimbels and Allied Stores. I am not afraid of it as you have a precedent in the Sansburgs Home Company by the Tax-court itself. If CORCORAN says, "We want to avoid any publicity in this case itself." TIM says, "As long as there is no question that it is charitable, I do not think there has been evasion. The ultimate destination is raised by other than subscriptions. There would be no payment of taxes if there were individual taxes." TIM said that the "Bureau" is not going to take as a test case any outfit in which it can be shown that they have utilized every dollar that they have made for charitable purposes. He said that what they will probably do is try to get legislation taxing that part of the income exempt under "116" (not clear) which is earned income in transactions that are competing with other industrial companies. TIM said that if, in this case, it can be shown that all the income has been disposed of for charitable or educational purposes, he did not think that the Bureau would have a leg to stand on. CORCORAN said that there is one salary, $12,000 a year, and the corporation's income is $400,000 a month. CORCORAN said that one of the things that may be bad about this thing is that when the manager buys the company, then he'll sell it to the foundation